Fire Hydrant of Freedom
Politics, Religion, Science, Culture and Humanities => Politics & Religion => Topic started by: Crafty_Dog on April 13, 2009, 09:25:45 AM
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We kick off a new thread with a NY Slimes propaganda account:
Plan to Change Student Lending Sets Up a Fight
By DAVID M. HERSZENHORN
Published: April 12, 2009
WASHINGTON — The private student lending industry and its allies in Congress are maneuvering to thwart a plan by President Obama to end a subsidized loan program and redirect billions of dollars in bank profits to scholarships for needy students.
The plan is the main money-saving component of Mr. Obama’s education agenda, which includes a sweeping overhaul of financial aid programs. The Congressional Budget Office says replacing subsidized loans made by private banks with direct government lending would save $94 billion over the next decade, money that Mr. Obama would use to expand Pell grants for the poorest students.
But the proposal has ignited one of the most fractious policy fights this year.
Because it would make spending on Pell grants mandatory, limiting Congressional control, powerful appropriators are balking at it. Republicans say the plan is proof that Mr. Obama is trying to vastly expand government. Democrats are divided, with lawmakers from districts where lenders are big employers already drawing battle lines.
At the same time, the private loan industry, which would have collapsed without a government rescue last year, has begun lobbying aggressively to save a program that has generated giant profits with very little risk.
“The administration has decided that it wants to capture the profits of federal student loans,” said Kevin Bruns, executive director of America’s Student Loan Providers, a trade group that is fighting Mr. Obama’s plan.
To press its case, the nation’s largest student lender, Sallie Mae, has hired two prominent lobbyists, Tony Podesta, whose brother, John, led the Obama transition, and Jamie S. Gorelick, a former deputy attorney general in the Clinton administration.
For lenders, the stakes are huge. Just last week, Sallie Mae reported that despite losing $213 million in 2008, it paid its chief executive more than $4.6 million in cash and stock and its vice chairman more than $13.2 million in cash and stock, including the use of a company plane. The company, which did not receive money under the $700 billion financial system bailout and is not subject to pay restrictions, also disbursed cash bonuses of up to $600,000 to other executives.
Sallie Mae said that executive compensation was lower in 2008 than 2007 and that the stock awards were worthless in the current market.
Critics of the subsidized loan system, called the Federal Family Education Loan Program, say private lenders have collected hefty fees for decades on loans that are risk-free because the government guarantees repayment up to 97 percent. With the government directly or indirectly financing virtually all federal student loans because of the financial crisis, the critics say there is no reason to continue a program that was intended to inject private capital into the education lending system.
Under the subsidized loan program, the government pays lenders like Citigroup, Bank of America and Sallie Mae, with both the subsidy and the maximum interest rate for borrowers set by Congress. Students are steered to the government’s direct program or to outside lenders, depending on their school’s preference.
Private lenders say they still provide valuable service, marketing, customer relations, billing, default prevention and collection of delinquent loans. The lenders say the budget savings could be achieved without ending their role and are pushing to keep the system in place, including an arrangement approved by Congress last year by which they are paid to originate loans but can resell them to the government.
Martha Holler, a spokeswoman for Sallie Mae, said the company wanted a compromise. “To be clear, there are those who are fighting to preserve the historic financing structure for federal student loans,” she wrote in an e-mail message following up on a telephone interview. “Sallie Mae is not among them. In fact, we support constructive alternatives that would generate a similar level of taxpayer savings to achieve the administration’s important goals.”
Lenders are also emphasizing the jobs they provide.
Sallie Mae’s chief executive, Albert L. Lord, held a town-hall-style meeting last week at the company’s loan center in Wilkes-Barre, Pa., with two Democrats, Senator Bob Casey and Representative Paul E. Kanjorski, to announce the return of 2,000 jobs that were sent overseas in 2007.
Mr. Lord, in his opening speech, insisted that Mr. Obama’s proposal offered new opportunities, but he said he would fight to keep the current system mostly intact.
“We can either meet or beat the budget savings that are in the president’s budget with the exact same system that we have got working now with maybe a few tweaks,” he said.
But to preserve a profitable role for private lenders and still achieve Mr. Obama’s savings seems extremely difficult if not impossible; initial projections put forward by Sallie Mae could reach only 82 percent of the president’s goal over five years.
Last year, to keep education financing from drying up, Congress expanded the government’s role, including the repurchase of loans, which Sallie Mae and some other lenders say should be mandatory going forward.
“When you add that all up, a very legitimate question to ask is why do we even need private lenders,” said Representative Timothy H. Bishop, Democrat of New York and a former provost of Southampton College.
For Mr. Bishop and many other education advocates, Mr. Obama’s plan to expand the existing direct loan program used by more than 1,500 schools is obvious and long overdue.
But the administration has a fight on its hands.
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“The president’s proposal,” Representative Allen Boyd, Democrat of Florida, said in a floor speech, “could be detrimental to thousands of employees who serve in the current student loan industry throughout this country, 650 of which are located in Panama City, Florida.”
In some states, student loans are administered by quasi-governmental agencies that benefit the same as private lenders. To appeal to these states, the administration has proposed $500 million a year for financial literacy programs and other services the agencies provide.
Political opposition may be harder to overcome.
Representative Howard P. McKeon of California, the senior Republican on the education committee, said Democrats should not cut out lenders. “A government-run, one-size-fits-all program is not the answer,” he said.
But some lawmakers have no sympathy for an industry now kept afloat by taxpayers.
“If the banks complain that they are getting cut out,” said Representative Barney Frank, Democrat of Massachusetts, “too bad.”
At the Wilkes-Barre event, Mr. Lord of Sallie Mae acknowledged his industry’s reliance on the government. “I don’t see private capital financing student loans, certainly any time soon,” he said.
Even as lenders fight the president’s plan, Sallie Mae and others are bidding for work that will remain if it is adopted — contracts for loan servicing and other back office operations.
The president’s plan would use the money from direct lending to help increase Pell grants and make them mandatory, with annual increases tied to inflation, providing a much-needed measure of certainty for students. That would limit Congressional control over the grants, an idea appropriators are not keen on, but the White House and Congressional leaders say they are open to negotiation.
Anticipating a ferocious legislative battle, Representative George Miller, Democrat of California and chairman of the education committee, is weighing all options.
“Chairman Miller’s priority is to make our federal student loan programs as reliable, sustainable and efficient as possible for students, families and taxpayers,” his spokeswoman, Rachel Racusen, said.
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Barney Frank's track record as a financial analyst is, shall we say, mixed. The House Financial Services Chairman said for years that a collapse of Fannie Mae and Freddie Mac would pose zero risk to taxpayers. For most people, a mistake of that magnitude would trigger introspection, if not humility. But not the sage of Massachusetts. He's cooking up another fantastic subsidy -- and like the last one, he swears taxpayers won't feel a thing. In his words, "it would cost the federal government zero." Uh oh.
AP
Barney Frank.
Mr. Frank believes state and local governments are paying too much when they issue debt because rating agencies don't give them the ratings Mr. Frank feels they deserve. So last year he pushed a bill to effectively force Standard &Poor's, Moody's and Fitch to raise their ratings on municipal bonds, but the legislation got sidetracked amid the financial turmoil. Now Mr. Frank is back, bigger than ever.
He'd like to create what he calls an FDIC-like federal insurance program for municipal bonds. Jurisdictions issuing debt would pay premiums into the insurance fund, and in return the federal government would guarantee the debt against default. Private companies already insure municipal bonds -- companies such as MBIA, Ambac and Berkshire Hathaway. And you may recall that last year the big bond insurers caused considerable angst when their exposure to mortgage-related debt called into question their ability to meet their muni-bond obligations. MBIA, in response, recently fenced off its muni-bond business from its other obligations.
If Mr. Frank really believes that state and local governments have been forced to overpay for this insurance, one has to assume his federal program would charge lower premiums and so undercut its private-sector competitors. The government can charge low premiums without putting taxpayers on the hook, he argues, because the risk of default is so low.
Or is it? The payment history of municipal bonds seems to support Mr. Frank. But then the triple-A ratings assigned to many mortgage-backed securities were also based on backward-looking models that failed to anticipate today's housing bust. The muni-bond performance record is also mostly the history of uninsured bonds. But the very existence of insurance can change the behavior of the policyholder or beneficiary -- watch Barbara Stanwyck and Fred MacMurray in the 1944 classic "Double Indemnity." If a state or locality knows someone else will make bondholders whole, they are far more likely to default than an uninsured issuer would be.
Many states and localities have run up huge pension and health-care obligations to retirees that will come due over the next few decades. And many of those obligations were underfunded even before the bottom fell out of the stock market. When those bills hit, cities will have to choose among raising taxes, cutting benefits or stiffing bondholders. In some states, such as New York, retiree benefits are constitutionally protected, and taxes are already chokingly high. So stiffing the bond insurers will look pretty attractive.
None other than Warren Buffett devoted several pages in his latest Berkshire Hathaway shareholder letter to precisely this kind of risk: "When faced with large revenue shortfalls, communities that have all of their bonds insured will be more prone to develop 'solutions' less favorable to bondholders than those communities that have uninsured bonds held by local banks and residents."
He continues: "Losses in the tax-exempt arena, when they come, are also likely to be highly correlated among issuers. If a few communities stiff their creditors and get away with it, the chance that others will follow in their footsteps will grow. What mayor or city council is going to choose pain to local citizens in the form of major tax increases over pain to a far-away bond insurer?" This goes double if the insurer is Uncle Sugar.
Mr. Buffett concludes: "Insuring tax-exempts, therefore, has the look today of a dangerous business -- one with similarities, in fact, to the insuring of natural catastrophes. In both cases, a string of loss-free years can be followed by a devastating experience that more than wipes out all earlier profits."
The difference, in this case, is that bond insurance, and especially federal bond insurance, would have helped create the "natural" catastrophe by encouraging jurisdictions to rack up obligations that taxpayers would be forced to make good on down the road. As for Mr. Frank's contention that muni-bond insurance is too expensive, Berkshire Hathaway is charging two and three times historical rates -- and Mr. Buffett is still worried.
One Fannie Mae debacle ought to be enough for any career, but Mr. Frank wants taxpayers to double down on his political guarantees. There are currently some $1.7 trillion in municipal bonds held by the public, and Barney thinks we can insure them at "zero cost." Considering the source, and the potential size of the bill, someone in Congress needs to sound the alarm
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A horrifying explanation of where the Harvard prof. who chairs the congressional oversight committee THINKS where we are w/ TARP. In two parts:
http://www.thedailyshow.com/video/index.jhtml?videoId=224261&title=elizabeth-warren-pt.-1
http://www.thedailyshow.com/video/index.jhtml?videoId=224262&title=elizabeth-warren-pt.-2
Think they should change the acronym they discuss from P/PIP to Private/Public Investment Mishandled Program or P/PIMP
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One of the scariest parts of all these is the meme that it was deregulation instead of govt meddling (the FMs, the CRA, negative interest rates, etc) that laid the groundwork for all this (see e.g. the professor's conclusion) has become accepted truth
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One of the scariest parts of all these is the meme that it was deregulation instead of govt meddling (the FMs, the CRA, negative interest rates, etc) that laid the groundwork for all this (see e.g. the professor's conclusion) has become accepted truth
Yeah, and that more government intervention is the cure, as though the current government intervention has proved effective.
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Senator Feinstein's husband cashes in on crisis
On the day the new Congress convened this year, Sen. Dianne Feinstein introduced legislation to route $25 billion in taxpayer money to a government agency that had just awarded her husband's real estate firm a lucrative contract to sell foreclosed properties at compensation rates higher than the industry norms.
Mrs. Feinstein's intervention on behalf of the Federal Deposit Insurance Corp. was unusual: the California Democrat isn't a member of the Senate Committee on Banking, Housing and Urban Affairs with jurisdiction over FDIC; and the agency is supposed to operate from money it raises from bank-paid insurance payments - not direct federal dollars.
Documents reviewed by The Washington Times show Mrs. Feinstein first offered Oct. 30 to help the FDIC secure money for its effort to stem the rise of home foreclosures. Her letter was sent just days before the agency determined that CB Richard Ellis Group (CBRE) - the commercial real estate firm that her husband Richard Blum heads as board chairman - had won the competitive bidding for a contract to sell foreclosed properties that FDIC had inherited from failed banks.
About the same time of the contract award, Mr. Blum's private investment firm reported to the Securities and Exchange Commission that it and related affiliates had purchased more than 10 million new shares in CBRE. The shares were purchased for the going price of $3.77; CBRE's stock closed Monday at $5.14.
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second post of morning:
The following hints of further excrement storms about to hit the fan. Combine with bad news in the Euro banking pipeline, and I find myself wondering if we have not yet seen the bottom in the market.
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U.S.: A Death at Freddie Mac
Stratfor Today » April 22, 2009 | 2102 GMT
Alex Wong/Getty Images
A man walks on the grounds of Freddie Mac headquarters in McLean, Va., on April 22Summary
The acting chief financial officer of the U.S. government-backed Federal Home Loan Mortgage Corporation (also known as “Freddie Mac”), David Kellermann, was found dead in his home April 22. Kellermann’s death — which police are calling an apparent suicide — raises many questions about what Kellermann knew and how his death will affect the future of Freddie Mac.
Analysis
Related Link
The Financial Crisis in the United States
David Kellermann, the acting chief financial officer of the U.S. government-backed Federal Home Loan Mortgage Corporation (also called “Freddie Mac”) was found dead on April 22. Police in Vienna, Va., have said the death may be a suicide. According to reports from media quoting unnamed police sources, Kellermann was found hanged in the basement of his home. The details on Kellermann’s death are still forthcoming and until an official autopsy is conducted the exact cause of death, and circumstances surrounding it, will remain unknown.
Kellermann was named a senior vice president and acting chief financial officer at Freddie Mac in the September 2008 government-initiated shake up. Prior to holding those posts he was the principal accounting officer and corporate controller — essentially the main accountant — for the mortgage giant. He was one of the longest-tenured members of the current, and government-revamped, Freddie Mac executive board and had worked for the institution for 16 years.
Freddie Mac is a government-created and state-sponsored institution designed to supplement the secondary market for U.S. mortgages. It buys mortgages from banks that issued them to consumers, often packaging them into blocks and then chopping those blocks into securities that investors buy and resell. The idea behind government-sponsored enterprises like Freddie Mac is to generate demand in a secondary market, and thus to increase the overall pool of money available for U.S. mortgage lending.
However, many of the mortgage tranches that were packaged into securities were precisely the sort of assets at the root of the financial meltdown that became the subprime mortgage crisis. Freddie Mac and its sister institution the Federal National Mortgage Association (also known as “Fannie Mae”) own almost half of the approximately $12.1 trillion U.S. market for residential mortgages and securities. Because of their unwieldy size and growing instability, the government stepped in and took the two institutions under conservatorship in September 2008 to prevent a complete meltdown of the financial system.
Part of the government’s plan for Freddie Mac was to take over the institution, replace the leadership and start sifting through the incomprehensible maze of packaged mortgages that were sold to investors as mortgage backed securities. With Kellermann’s death, however, this task — which was already approaching Sisyphean proportions — becomes most likely impossible.
Kellermann was not an outside appointee; he was promoted from within and represents the core institutional memory of Freddie Mac. Most importantly, he represents the accounting institutional memory, which means that he not only most likely knew about all of the bad decisions that were made regarding securitization, but also knew of them as they were being made. Under any circumstances, in any organization, the loss of a person of Kellermann’s stature would be crippling; under the circumstances at Freddie Mac, it is catastrophic.
The death of Freddie Mac’s most important accounting and financial employee now puts the government’s plans for Freddie Mac’s continued existence into question. Assets held by Freddie Mac are still very valuable; only a small percentage of the entire mortgage market is actually non-performing (although defaults are rising due to the effects of the recession) and far from all of that is in foreclosure, so there is a lot of value left in the institution. Without possession of first-hand knowledge to trace back and unwind the process through which securities were created, there would be little point in maintaining Freddie Mac as a single institution. It could get broken up by the government and sold in pieces, letting private investors sift though much smaller chunks of the mess on their own time.
What this would mean for the mortgage market is at present unclear. With total assets of $2.2 trillion, Freddie Mac would be the biggest institution the U.S. government has ever dismantled. But the real kicker is that this would be just the prelude to an even bigger unwinding. Everything that has beset Freddie Mac has also plagued its sister company, Fannie Mae — which has $3.11 trillion in total assets and is also in conservatorship.
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http://www.reason.com/blog/show/133067.html
In Bailouts End Responsibilities
Jesse Walker | April 23, 2009, 1:53pm
As we sort out the disaster that was Bank of America's TARP-funded purchase of Merrill Lynch, read this remarkable passage from the testimony that bank CEO Kenneth Lewis gave to New York's attorney general:
Q: Wasn't [treasury Secretary Hank] Paulson, by his instruction, really asking Bank of America shareholders to take a good part of the hit of the Merrill losses?
Mr. Lewis: What he was doing was trying to stem financial disaster in the financial markets from his perspective.
Q: From your perspective, wasn't that one of the effects of what he was doing?
Mr. Lewis: Over the short term, yes, but we still thought we had an entity that filled two big strategic holes for us and over long term would still be an interest to the shareholders.
Q: So isn't that something that any shareholder at Bank of America who had less than a three-year time horizon would want to know?
Mr. Lewis: The situation was that everyone felt like the deal needed to be completed and to be able to say that, or that they would impose a big risk to the financial system if it would not.
Q: When you say "everyone," what do you mean?
Mr. Lewis: The people that I was talking to, [Fed Chairman Ben] Bernanke and Paulson.
Q: Had it been up to you would you made the disclosure?
Mr. Lewis: It wasn't up to me.
Q: Had it been up to you.
Mr. Lewis: It wasn't.
Q: Why do you say it wasn't up to you? Were you instructed not to tell your shareholders what the transaction was going to be?
Mr. Lewis: I was instructed that "We do not want a public disclosure."
Q: Who said that to you?
Mr. Lewis: Paulson.
If you believe one of the causes of the crisis is the principal agent problem -- what happens when a company's representatives act more for themselves than for the organization's long-term interests -- then this should be yet another alarming moment. The government pressured a corporation's chiefs to take a very risky move while keeping the company's nominal owners in the dark. The end result was a big bailout for Bank of America (and a big payday for Merrill Lynch executives).
Don't think for a second that this was an enormous aberration. At a time when many of us are looking for ways to make owners more responsible for a company's fortunes, public policy is pushing us in the opposite direction: The government has been shielding companies from the consequences of their actions, and it has been inserting itself into their internal policies. The effect is to shift both fiscal liability and decision-making authority into the hands of the state, leaving owners even further removed from the risks being taken in their name.
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http://www.reason.com/blog/show/133185.html
House Approves Federal Hate Crime Expansion Bill
Jacob Sullum | April 29, 2009, 5:46pm
Today, on a party-line vote, the House of Representatives approved the Local Law Enforcement Hate Crimes Prevention Act, a.k.a. the Matthew Shepard Act. The bill, which President Obama supports, would add offenses committed "because of" a victim's actual or perceived gender, sexual orientation, gender identity, or disability to the list of "hate crimes" that can be prosecuted under federal law. It also would remove a provision limiting such prosecutions to cases where the victim was participating in a "federally protected" activity such as education or voting. The new federal nexus requirement is so laughably accommodating that it might as well have been left out. A violent crime against a victim selected for one of the mentioned reasons can be federalized if it "occurs during the course of, or as the result of, the travel of the defendant or the victim...across a State line or national border"; if the defendant "uses a channel, facility, or instrumentality of interstate or foreign commerce"; if "the defendant employs a firearm, explosive or incendiary device, or other weapon that has traveled in interstate or foreign commerce"; if the crime "interferes with commercial or other economic activity in which the victim is engaged at the time of the conduct"; or if the crime "otherwise affects interstate or foreign commerce."
Aside from the usual problems with hate crime laws, which punish people for their ideas by making sentences more severe when the offender harbors politically disfavored antipathies, this bill federalizes another huge swath of crimes that ought to be handled under state law, creating myriad opportunities for double jeopardy by another name. The changes would make it much easier for federal prosecutors who are displeased by an acquittal in state court to try, try again, as they did in the Rodney King and Crown Heights riot cases. They simply have to argue that the crime was committed "because of" the victim's membership in one of the listed groups. As four members of the U.S. Civil Rights Commission point out in a recent letter opposing the bill (noted by Hans Bader), that description could apply to a wide range of ordinary crimes:
Rapists are seldom indifferent to the gender of their victims. They are virtually always chosen "because of" their gender. A robber might well steal only from women or the disabled because, in general, they are less able to defend themselves. Literally, they are chosen "because of" their gender or disability."
If all rape and many other crimes that do not rise to the level of a "hate crime" in the minds of ordinary Americans are covered by LLEHCPA, then prosecutors will have "two bites at the apple" for a very large number of crimes.
The text of the bill is here. I criticized the proposed expansion of federal hate crime law in a 1998 column. More on that subject here. I explored the more general problems with hate crime laws in a 1992 Reason article. I slammed the Rodney King and Crown Heights do-overs here and here. In 2004 William Anderson and Candice Jackson decried the federalization of crime.
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This could go in more than one thread:
Geopolitical Diary: Chrysler Files for Bankruptcy
May 1, 2009
U.S. President Barack Obama announced Thursday that automaker Chrysler filed for Chapter 11 bankruptcy, allowing it to restructure its debts and consolidate profitable assets into a new company. At the heart of the deal is an agreement with Italian carmaker Fiat, which will take an initial 20 percent stake in Chrysler. Fiat has an option to increase its holdings to 35 percent if certain performance criteria are met (such as bringing a fuel-efficient engine family to the U.S.-manufactured Chryslers and allowing Chrysler to use its global distribution network), and it could become Chrysler’s majority owner by 2016. As part of the bankruptcy deal, the U.S. government will take an 8 percent stake in the automaker, while the Canadian federal and Ontario provincial governments together will take a 2 percent stake.
Chrysler has 54,000 employees, and that – combined with the ramifications for the U.S. automotive supplier industry, particularly in the manufacturing states of the Midwest – makes the company’s fate a deeply political issue within the United States. But the impact of the bankruptcy will be felt in other countries also. In fact, the U.S. plan for Chrysler hinges on a transfer of technology from Europe, meant to help the beleaguered company learn the ways of small and efficient automobile manufacturing. The irony is that Chrysler intends to keep Jeep and Dodge — neither of which are considered small or efficient — as the core assets of its new fleet.
A further irony is that Chrysler has turned to the Italian automaker Fiat, which has had financial difficulties of its own, for manufacturing and business acumen. In Europe, Fiat’s vehicles have suffered decades of image problems, depressing the price that the Turin-based company can ask for its cars. Furthermore, Fiat went through exceedingly difficult times in 2003 and 2004, when (again ironically) it was General Motors that was nearly forced to bail the company out. By 2005, Fiat was in such dire straits that it exercised an option to sell its car division to the American manufacturer, forcing GM to buy it at market price. But GM was so wary of Fiat’s enormous debt and unimpressed by the car division that it chose to pay a $2 billion penalty instead of taking ownership.
Further questions arise over the impact that the Chrysler bankruptcy will have on U.S. neighbors Canada and Mexico. For Canada, the key is Ontario’s manufacturing sector, which accounts for 42,000 assembly and 75,000 auto parts supplier jobs. Having suffered heavy job losses in both sectors in 2007 and 2008, the minority Conservative government cannot allow further economic hardship to strike in Ontario — the government already has faced multiple challenges from the Canadian Liberal Party during its tenure.
For Mexico, the matter is more than political: It is a matter of life and death. The auto-manufacturing sector employs roughly 450,000 people — 100,000 in Ciudad Juarez alone. Juarez is at the center of a drug war that has pitted the Mexican army and federal law enforcement against several cartels, which also are battling each other for control over key drug transshipment points into the United States. Massive layoffs in the automotive sector would create a large pool of disaffected but able-bodied people, who would be great recruits for the cartels. The situation also could widen the rift between the notoriously rebellious and independent-minded residents of Chihuahua and the federal government in Mexico City, complicating efforts by federal law enforcement to conduct operations in Juarez.
The financial burden of a potential collapse of the automotive sector would only add to several economic and social problems that Mexico faces. Mexico is suffering from the impact of swine flu, substantial decline in remittances from emigrants living abroad and low prices for its energy exports — which the government depends on for about 40 percent of tax revenue. Added to this would be the cost of a program that obligates the government to pick up one-third of autoworkers’ salaries when companies suspend factory operations.
The implications of the U.S. auto industry developments for Mexico and Canada will not be clear until the situation regarding GM – which also has been faltering — is resolved. A restructuring plan for GM as well as Chrysler could add to the implications for auto suppliers in the United States and its immediate neighbors in North America. But GM has a much more extensive network than Chrysler does outside of North America — with significant operations in Europe (Austria, Belgium, France, Germany, Poland, Russia, Spain, Sweden and the United Kingdom), South America (Argentina, Brazil, Chile, Colombia, Ecuador and Venezuela), Africa (Egypt and South Africa), Asia (China, India, Indonesia, Japan, Korea and Thailand) and Australia. The possibility of a GM bankruptcy has already soured relations between the Obama administration and the German government, which refuses to rescue GM’s Opel division. That issue has had political ramifications, months ahead of the German election in September.
Given GM’s global reach, the potential collapse of that company, following the Chrysler bankruptcy filing, would cause shock waves for a number of countries and leave their governments to deal with the domestic effects. And that might sour the Obama administration’s relations with some key allies in the future.
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Just wanted to offer my street knowledge as an inner city landlord that the conversion rate to trade EBT dollars (government paid cash card) for real currency is 50 cents on the dollar. The card spends like cash but is limited to items like groceries; important things like cigarettes require real money. Unfortunately the taxpayer pays double. Just like tax loopholes and campaign finance laws, money finds a way.
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May 5, 2009
Job Corps: An Unfailing Record of Failure
by David B. Muhlhausen, Ph.D.
WebMemo #2423
During his Presidential radio address to the nation on April 18, 2009, President Barack Obama declared that:
In the coming weeks, I will be announcing the elimination of dozens of government programs shown to be wasteful or ineffective. In this effort, there will be no sacred cows, and no pet projects. All across America, families are making hard choices, and it's time their government did the same.[1]
President Obama is correct to call for wasteful and ineffective programs to be placed on the chopping block. One such program is Job Corps, a job-training program for disadvantaged youth. The federal government spends about $1.5 billion per year on Job Corps and scientific evaluations have demonstrated that the federal government gets little in return on its investment. Based on this evidence, President Obama and Congress should move to eliminate this wasteful and unproductive program.
Evaluations of Job Corps
A recent impact evaluation of Job Corps ("2008 outcome study"), published in the December 2008 issue of the American Economic Review, is a follow-up to previous evaluations of the program.[2] The 2008 outcome study is based on a randomized experiment—the "gold standard" of scientific research—to assess the impact of Job Corps on participants compared to similar individuals who did not participate in the program.[3]
For a federal taxpayer investment of $25,000 per Job Corps participant,[4] the 2008 outcome study found:
Compared to non-participants, Job Corp participants were less likely to earn a high school diploma (7.5 percent versus 5.3 percent);[5]
Compared to non-participants, Job Corp participants were no more likely to attend or complete college;[6]
Four years after participating in the evaluation, the average weekly earnings of Job Corps participants was $22 more than the average weekly earnings of the control group;[7] and
Employed Job Corps participants earned $0.22 more in hourly wages compared to employed control group members.[8]
If Job Corps actually improves the skills of its participants, then it should have substantially raised their hourly wages. However, a $0.22 increase in hourly wages suggests that Job Corps does little to boost the job skills of participants.
Other impact evaluations of Job Corps have found similar results. In 2001, The National Job Corps Study: The Impacts of Job Corps on Participants' Employment and Related Outcomes ("2001 outcome study"), measured the impact of Job Corps on participants' employment and earnings.[9] While the 2001 outcome study found some increases in the incomes of participants, the gains were trivial. For example, compared to non-participants, the estimated average increase in the weekly incomes of all participants over four years was never more than $25.20.[10]
Another evaluation, The National Job Corps Study: Findings Using Administrative Earnings Records Data ("2003 study"), was published in 2003, but the Labor Department withheld it from the general public until 2006.[11] The 2003 study found that Job Corps participation did not increase employment and earnings. Searching for something positive to report, the 2003 study concludes that "There is some evidence, however, of positive earnings gains for those ages 20 to 24."[12]
Why Withhold the 2003 Study?
Based on survey data, the 2001 cost-benefit study contained in the 2001 outcome study assumed that the gains in income for participants will last indefinitely, a notion unsupported by the literature on job training.[13] But included in the 2003 study is a cost-benefit analysis that directly contradicts the positive findings of the 2001 cost-benefit study.
The 2003 study used official government data, instead of self-reported data, and used the more reasonable assumption that benefits decay, rather than last indefinitely.[14] Contradicting the 2001 cost-benefit study, the 2003 study's analysis of official government data found that the benefits of Job Corps do not outweigh the cost of the program. Even more damaging, the 2003 study re-estimated the 2001 cost-benefit study with the original survey data using the realistic assumption that benefits decay over time. According to this analysis, the program's costs again outweighed its benefits.
Is Job Corps Worth $1.5 Billion Per Year?
Some argue that Job Corps is worth $1.5 billion per year because there is "some evidence" of positive income gains for those aged 20 to 24.[15] This belief is based on the findings that these participants had consistently higher annual incomes from 1998 to 2001 than non-participants of similar age.[16] But this conclusion is questionable. In 1998, participants aged 20 to 24 experienced an average increase in annual income of $476 that, by traditional scientific standards, is statistically significant, meaning that the income gains are very likely attributable to Job Corps. For the remaining years, the income gains were positive, ranging from $429 to $375, but statistically insignificant, meaning that the findings cannot be attributed to participation in Job Corps. Thus, it cannot be concluded that Job Corps consistently raised the incomes of participants aged 20 to 24.
By the logic of the 2003 study, a stronger case can be made that Job Corps consistently reduced the incomes of female participants without children. In 1998 and 1999, childless female participants earned $1,243 and $1,401 less, respectively, than similar non-participants.[17] These findings are statistically significant, suggesting that Job Corps had a harmful effect. In 2000 and 2001, the earnings of childless female participants were still beneath those of their counterparts, but the differences are statistically insignificant, indicating that the declines in income are not attributable to Job Corps—just like most of the income gains for participants aged 20 to 24 in the 2003 study.
A Predictable Failure
The findings of the 2008 outcome study are not surprising because previous research has consistently found Job Corps to be ineffective at substantially increasing participants' wages and moving them into full-time employment.[18]
The 2001 outcome study revealed that Job Corps had little impact on the number of hours worked per week. During the course of the study, the average time participants spent working each week never rose above 28.1 hours.[19] Average participants never worked more than two hours longer per week than those in the control group.[20]
Job Corps does not provide the skills and training necessary to substantially raise the wages of participants. Costing $25,000 per participant over an average participation period of eight months, the program is a waste of taxpayers' dollars.
An Ideal Candidate for the Budget Chopping Block
Given the program's poor performance and President Obama's call for "the elimination of dozens of government programs shown to be wasteful or ineffective," Job Corps is an ideal candidate for the budget chopping block.
David B. Muhlhausen, Ph.D., is Senior Policy Analyst in the Center for Data Analysis at The Heritage Foundation.
[1]President Barack Obama, "Weekly Address: President Obama Discusses Efforts to Reform Spending, Government Waste; Names Chief Performance Officer and Chief Technology Officer" Office of the Press Secretary, The White House, April 18, 2009, at http://polfeeds.com/item/Weekly-Address-President-Obama-Discusses-Efforts-to-Reform-Spending-Government-Waste-Names-Chief-Performance-Officer-and-Chief-Technology-Officer (May 4, 2009).
[2]Peter Z. Schochet, John Burghardt, and Sheena McConnell, "Does Job Corps Work? Impact Findings from the National Job Corps Study," American Economic Review, Vol. 98, No. 5 (December 2008), pp. 1864–1886.
[3]Ibid.
[4]Job Corps serves about 60,000 new participants each year with an annual appropriation of approximately $1.5 billion.Thus, the average cost per participant is about $25,000. See Schochet et al., "Does Job Corps Work?" p. 1864.
[5]Schochet et al., "Does Job Corps Work?" p. 1871.
[6]Ibid.
[7]Ibid., p. 1872.
[8]Ibid.
[9]Peter Z. Schochet, John Burghardt, and Steven Glazerman, National Job Corps Study: The Impacts of Job Corps on Participants' Employment and Related Outcomes (Princeton, N.J.: Mathematica Policy Research, Inc., June 2001).
[10]Ibid., p. 130.
[11]Erik Eckholm, "Job Corps Plans Makeover for a Changed Economy," The New York Times, February 20, 2007, at http://www.nytimes.com/2007/02/20/washington/20jobcorps.html?_r=1&ref=us&oref=slogin (May 4, 2009), and Peter Z. Schochet, Sheena McConnell, and John Burghardt, National Job Corps Study: Findings Using Administrative Earnings Records Data: Final Report (Princeton, N.J.: Mathematica Policy Research, Inc., October 2003).
[12]Schochet et al., National Job Corps Study: Findings Using Administrative Earnings Records Data: Final Report, p. 70.
[13]Pedro Carneiro and James Heckman, "Human Capital Policy," National Bureau of Economic Research Working Paper No. 39495, February 2003.
[14]Schochet et al., National Job Corps Study: Findings Using Administrative Earnings Records Data: Final Report.
[15]Ibid., p. 70.
[16]Ibid., Table III.5, p. 66.
[17]Ibid., Table III.5, p. 67.
[18]Schochet et al., National Job Corps Study: The Impacts of Job Corps on Participants' Employment and Related Outcomes.
[19]Ibid., p. 127.
[20]Ibid.
http://www.heritage.org/Research/Economy/wm2423.cfm
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http://news.yahoo.com/s/ap/20090508/...a_slain_police
Obama to cut slain officers program by nearly half
WASHINGTON – The Obama administration wants to cut almost in half a benefits program for the families of slain police and safety officers.
The president's proposed budget calls for cutting the Public Safety Officers' Death Benefits Program from $110 million to $60 million.
The Justice Department insisted no one would lose benefits.
"Any family member who is eligible for benefits under this program will receive them," said Justice Department spokeswoman Melissa Schwartz.
Budget documents say the reduction is being made because "claims are anticipated to decrease," apparently because the number of officers killed in the line of duty has been decreasing.
The proposal is being made just days before Attorney General Eric Holder is expected to attend ceremonies in Washington honoring slain officers.
"It makes us kind of nervous. While we aren't panicking, it certainly has increased our concern, coming a week before National Police Week," said Suzie Sawyer, executive director of Concerns of Police Survivors, a group taking part in next week's events.
Sawyer said as long as the number of police and safety officers killed doesn't increase too much, the amount of money offered in the budget could be enough. And she noted that in the past, the government has found more money for the program when it needed more, such as following the Sept. 11, 2001 terror attacks.
The program pays benefits of more than $300,000 to the survivors of a safety officer killed in the line of duty.
There were 133 police officers killed in the line of duty last year, the lowest amount since 1960, according to the National Law Enforcement Officers Memorial Fund.
The group said killings of police officers are up 21 percent so far in 2009, compared to the same period the year before.
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Glenn Beck reported last night that spending on devices to detect radioactivity for our harbors has been cut :roll: :x :cry:
Obama unveiled a budget Thursday with a 2010 price tag of $3.5 trillion financed with $1.2 trillion of new debt. For domestic agencies, that's a 9.3% spending hike over last year.
AP
Mr. Obama and his advisers know the public won't accept gigantic governmental expansions without at least some effort to pare the waste in Washington. So they scrubbed "line by line" through this historically huge budget and identified $16.7 billion of budget savings. This is less than a penny, about 0.47 cents, of savings out of every dollar Uncle Sam will spend this year. And these aren't real savings that will reduce debt, because Congress has already fixed the budget totals. Thus, each dollar saved from the African Development Foundation gets reallocated to some other foreign aid program.
To be fair, most of the 121 program "terminations, reductions and savings" that the President recommends make good sense, and we wish Congress godspeed in eliminating them. By all means have done with the Denali Job Training program (savings of $3 million) and USDA Public Broadcasting Grants ($5 million), and payments to high-income farmers ($58 million).
But Mr. Obama's war on government waste looks like a war on paper clips. Three-quarters of the cuts come from the national defense budget, not domestic agencies. Of the 10-year savings of $71 billion in entitlement programs -- now with a mind-numbing $62.9 trillion unfunded liability over the long-term -- one-third of the cutbacks aren't cuts at all. They are tax increases, mostly on the oil and gas industry.
One cut gives the word "savings" new meaning. The Obama budget will "save" taxpayers $290 million a year by increasing the IRS enforcement agency budget by $890 million. "Targeted enforcement resources more than pay for themselves," says the budget, in the first case of dynamic scoring by the Democrats since the Kennedy Administration.
Mr. Obama has scoffed at critics who complain these savings are inconsequential. "I guess that's considered trivial," he explained. "Outside of Washington [$17 billion] is still considered a lot of money." Yes, Mr. Obama himself signed a budget bill with 9,000 earmarks costing more than $13 billion and then justified the expenditure by declaring these levels of waste minor in the grand scheme of things.
We now live in a time when tens of billions of dollars has become a blip or rounding error in the federal budget. The Administration has said it's time to take action in reducing America's "$12 trillion American Express bill." We agree, but at this pace, with $16.7 billion of savings a year and even assuming no new debt, it will take centuries to pay off Uncle Sam's credit card.
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An article from CNN highligting the fact that the state department can't afford to pay local staff in foreing US embassies a competitive salary anymore. How will Obama keep the west safe if he is cutting back on all the things that protect us?
http://www.cnn.com/2009/POLITICS/05/13/state.employees.pay/index.html
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As part of Cap & Trade , , ,
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The federal government wants to install GPS units in cars that can upload data for the purpose of eliminating a gas tax.
http://www.kansascity.com/business/story/1299981.html
I’m no conspiracy theorist, but unless they are wanting logs on exactly where we’ve been, it would be much cheaper, and easier, to use the existing OBD-II interface on cars to track total mileage. I guess GPS jammers are going to become very popular soon.
http://www.dealextreme.com/details.dx/sku.8758
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I give Soros credit for putting up some money. Why he thinks it ok to confiscate tax payer money for the rest though I disagree with.
Why not just buy the books supplies and uniforms and pass out at school rather than hand out cash to people with the promise they will use it for school supplies?
That is a joke.
Another politically correct adorable program that is wasted IMHO.
Oh sure the government can do these things.
****Back to school spree: Billionaire, feds give out $175M to aid neediest students around the state
BY Erica Pearson, Tanyanika Samuels, Kenneth Lovett and Adam Lisberg
DAILY NEWS STAFF WRITERS
Wednesday, August 12th 2009, 8:14 AM
Billionaire George Soros speaks at P.S. 208 in Harlem where he announced a $35 million gift for low-income families in New York to purchase supplies and clothing for the new school year.
Roberta Aguilar and her daughter Lilly Gomez (11) plan to buy a uniform for her first day of school wait at the Chase Bank on Junction Blvd in Queens.
People wait to receive 200 dollars given to disadvantaged families for school supplies.
Take our PollSoros, feds hand out $175M to needy NY kids
A $200 back-to-school giveaway for needy kids sparked a mad rush for money on the streets of New York on Tuesday.
"It's free money!" said Alecia Rumph, 26, who waited in a Morris Park, Bronx, line 300 people deep for the cash to buy uniforms and book bags for her two kids.
"Thank God for Obama. He's looking out for us."
Thousands of people lined up at banks and check-cashing shops to withdraw the cash that magically appeared on their electronic benefit cards.
Some rushed out because of rumors the money would vanish by the end of the day.
"Rumors, there's always rumors," said Teresa Medina, who waited four hours at a Pay-O-Matic in Clinton Hill, Brooklyn, to get $600 for her three teenagers - just in case they were true.
The no-strings-attached money went to families receiving food stamps or welfare.
Every child between 3 and 17 was eligible for $200, which worked out to 813,845 kids across the state - including 498,866 in the city.
"Times are really tough right now. The situation is bad with money. So it's easy to want to use the money for other things," said Ana Barcos, 31, of Corona, Queens, where 200 people waited outside a check-cashing business.
"But if the money's supposed to be for my kids, then I will use it for my kids."
Billionaire philanthropist George Soros gave $35 million toward the program, with $140 million in federal stimulus funds routed through state government making up the rest.
"It's a help," said Tania Gomez of Chelsea, who withdrew $600 for her kids. "Every penny counts nowadays. It's really something that was unexpected."
Storekeepers were glad to hear about the program, too - and the notebooks, clothes and backpacks it would buy.
"It's good for everyone," said Aziz Boughroum, 31, who works at Stevdan Pen & Stationers in the West Village.
Gov. Paterson and Mayor Bloomberg joined Soros to announce the payments at Public School 208 in Harlem, where the billionaire reminisced that as a penniless student in London, he survived because of a handout he got from Quakers.
"This gift has a special personal meaning to me, because I was once also a recipient of charity," Soros said in a choking voice. "I'm very pleased that I'm able to repay what they gave me."
Paterson's Republican critics blasted the giveaway, saying he should spend the money to reduce property taxes.
"It is a plan that is ripe for fraud and abuse," said Senate Republican leader Dean Skelos. "This is a totally irresponsible use of federal stimulus money."
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CCP Thanks for posting. Lady in line: ""It's free money!" said Alecia Rumph, 26, who waited in a Morris Park, Bronx, line 300 people deep for the cash to buy uniforms and book bags for her two kids."
- She only regrets that she didn't have more children that she couldn't afford to raise.
When faced with the choice of teaching our free enterprise system or teaching successful welfare recipiency, they choose the latter every time.
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http://formerspook.blogspot.com/2009/08/todays-reading-assignment.html
Tuesday, August 11, 2009
Today's Reading Assignment
To borrow a phrase from Howard Beale, Americans are mad as hell, and they're not going to take it any more.
If you don't believe us, participate in one of those (increasingly) infrequent town hall meetings, hosted by Democratic Congressmen. When those events were first scheduled, members of the House and Senate were expecting a modest turnout, with supporters of health reform out-numbering opponents.
So much for political calculations. Judging from the sound bites we heard today, the American public is still upset, and ready to send scores of politicians packing.
But it's not just health care that has pushed ordinary citizens past the point of no return. In today's edition of The Wall Street Journal, John Fund notes the firestorm that greeted Congressional plans to expand the government fleet of private jets.
And that's just the tip of the iceberg; coming next, a public eruption over un-reimbursed per diem--travel money paid to members of the Senate and House for food and lodging expenses overseas. But in many cases, those expenses are paid by the host country or other government organizations. When that happens, members of Congress are supposed to reimburse the government, but that almost never happens.
How much money are we talking about? On longer trips (or jaunts to pricey locales), the tab can reach $3,000 for each Congressman, Senator, or staff member. Multiply that by scores of visits, and pretty soon, you're talking about real money.
About what you'd expect from a group Mark Twain aptly described as "America's native criminal class."
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August 20, 2009
Federal Spending Deficit Explodes Nearly Eight Fold
Christopher Alleva
With rock star billionaire Warren Buffet sounding the alarm about the Federal Budget deficit, a retrospective look shows the unprecedented level of the deficit.
The 2009 deficit is projected to be $1.977 trillion. This is almost 12 times more than the deficits in the 1980s, 45 times the deficits in 1990s and nearly 8 times more than than deficits in the 2000s.
(http://www.americanthinker.com/blog/Alleva%201.JPG)
A multi-trillion dollar deficit is unsustainable and one of the most dangerous threats to the Country. The Obama Administration and Congress should shelve the Healthcare and Global Warming Bills and concentrate on the chronic economic problems that plague us.
Page Printed from: http://www.americanthinker.com/blog/2009/08/federal_spending_deficit_explo.html at August 20, 2009 - 09:15:34 AM EDT
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Americans are about to re-learn that bank deposit insurance isn't free, even as Washington is doing its best to delay the coming bailout. The banking system and the federal fisc would both be better off in the long run if the political class owned up to the reality.
We're referring to the federal deposit insurance fund, which has been shrinking faster than reservoirs in the California drought. The Federal Deposit Insurance Corp. reported late last week that the fund that insures some $4.5 trillion in U.S. bank deposits fell to $10.4 billion at the end of June, as the list of failing banks continues to grow. The fund was $45.2 billion a year ago, when regulators told us all was well and there was no need to take precautions to shore up the fund.
.The FDIC has since had to buttress the fund with a $5.6 billion special levy on top of the regular fees that banks already pay for the federal guarantee. This has further drained bank capital, even as regulators say the banking system desperately needs more capital. Everyone now assumes the FDIC will hit banks with yet another special insurance fee in anticipation of even more bank losses. The feds would rather execute this bizarre dodge of weakening the same banks they claim must get stronger rather than admit that they'll have to tap the taxpayers who are the ultimate deposit insurers.
It isn't as if regulators don't understand the problem. Earlier this year they quietly asked Congress to provide up to $500 billion in Treasury loans to repay depositors. The FDIC can draw up to $100 billion merely by asking, while the rest requires Treasury approval. The request was made on the political QT because, amid the uproar over TARP and bonuses, no one in Congress or the Obama Administration wanted to admit they'd need another bailout.
But this subterfuge can't last. Eighty-four banks have already failed this year, and many more are headed in that direction. The FDIC said it had 416 banks on its problem list at the end of June, up from 305 only three months earlier. The total assets of banks on the problem list was nearly $300 billion, and more of these assets are turning bad faster than banks can put aside reserves to account for them. The commercial real-estate debacle is still playing out at thousands of banks, even as the overall economy bottoms out and begins to recover.
Meantime, even as it "resolves" and then sells failed banks, the FDIC is also guaranteeing the buyers against losses on tens of billions of acquired assets. This is known in the trade as "loss sharing," which is another form of taxpayer guarantee that taxpayers aren't supposed to know about. Most of the losses won't be realized if the economy recovers. But this too is a price of taxpayers guaranteeing deposits. Even as Treasury and the press corps broadcast that the feds are making money on TARP repayments, these guarantees go largely unnoticed.
FDIC Chairman Sheila Bair continues to say that deposits will be covered up to the $250,000 per account insurance limit, and of course she's right. But we wish she'd force Congress—and the American public—to face up to the reality of what deposit insurance costs. Amid the panic last year, Congress raised the deposit limit from $100,000. While this may have calmed a few nerves—though the worst runs were on money-market funds, not on banks—it also put taxpayers further on the hook.
The $250,000 limit was supposed to expire at the end of 2009, but in May Congress extended it through 2013, and no one who understands politics thinks it will return to $100,000. The rising bank losses mean that the FDIC's ratio of funds to deposits is down to 0.22%, far below its obligation under the insurance statute to keep it between 1.15% and 1.50%.
Rather than further soak capital from already weak banks, the FDIC ought to draw down at least $25 billion from its Treasury line of credit. Ms. Bair is going to have to ask for the cash sooner or latter, and she might as well do it before the fund hits zero and we get another round of even mild depositor anxiety. We suppose Congress could raise a faux fuss, but these are the same folks who ordered the FDIC to broaden the insurance limit. They need to face the political consequences of their promises.
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I guess the economy is just going to collapse.
I hear no one stating the obivous - less doles, less pulbic pensions, social security/medicare at age 70 not younger etc.
Otherwise we are done as we know it.
Illegals out of the country - Americans taking their jobs for less. We have to get more people off the dole and get them working.
As for my part doctors making less - although as it is my expenses are already sky high.
Bama is heading right for the proverbial end of the line.
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The Americans With No Abilities Act of 2009 (H.R 00) Washington, DC
President Barack Obama and the Democratic-controlled Congress are considering sweeping legislation that will provide new benefits for many Americans.
The Americans With No Abilities Act (AWNAA) is being hailed as a major legislative goal by advocates of the millions of Americans who lack any real skills or ambition.
"Roughly 60 percent of Americans do not possess the competence and drive necessary to carve out a meaningful role for themselves in society," said California Senator Barbara Boxer. "We can no longer stand by and allow People of Inability (POI) to be ridiculed and passed over. With this legislation, employers will no longer be able to grant special favors to a small group of workers, simply because they are competent and have some idea of what they are doing."
In a Capitol Hill press conference, House Majority Leader Nancy Pelosi and Senate Majority Leader Harry Reid pointed to the success of the U.S. Postal Service, which has a long-standing policy of providing opportunity without regard to job performance. Approximately 74 percent of postal employees lack any job skills, making this agency the single largest U.S. employer of Persons of Inability (POI). Private-sector industries with good records of non-discrimination against "the inept"
include retail sales (72%), the airline industry (68%), and home improvement warehouse stores (65%). All levels of the state government, especially the Department of Motor Vehicles also has an excellent record of hiring Persons of Inability (63%).
Under AWNAA, more than 25 million mid-level positions will be created, with important-sounding titles but little real
responsibility, thus providing an illusory sense of purpose and performance. Mandatory non-performance-based raises and promotions will be given so as to guarantee upward mobility for even the most unremarkable employees.
The legislation provides substantial tax breaks to corporations that promote a significant number of Persons of Inability into
middle-management positions, and gives a tax credit to small and medium-sized businesses that agrees to hire one clueless worker for every two talented hires.
Finally, the AWNAA contains tough new measures to make it more difficult to discriminate against the non-able, banning, for
example, discriminatoryinterview questions such as, "Do you have any skills or experience that relate to this job?"
"As a non-able person, I can't be expected to keep up with those frigging people who have something going for them," said Mary Lou Gertz, who lost her position as a lug-nut twister at the GM plant in Flint, Michigan, due to her inability to remember rightey-tightey, lefty-loosey."This new law should be real good for people like me," Gertz added. With the passage of this bill,Gertz and millions of other untalented citizens will finally see a light at the end of the tunnel.
Said Senator Dick Durbin (D-IL), "As a Senator with no abilities, I believe the same privileges that elected officials enjoy ought to be extended to every American with no abilities. It is our duty as lawmakers to provide each and every American citizen, regardless of his or her inadequacy, with some sort of space to take up in this great Nation."
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Heh would not put it past them. Anything for a voter! :-D :wink: :roll: :-D
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Perhaps this should have been filed under Politics of Health Care, but as the underlying examination involves faulty spending processes, I slapped it over here.
http://www.reason.com/news/show/135979.html
Where's the Paying Customer?
Health care reform isn't serious until the patient is at the center of the picture.
Nick Gillespie | September 10, 2009
As someone under 60 with what passes for private health insurance and, far more important, access to actual health care (insurance and care are two very different things that are routinely and wrongly conflated in discussions of "reform"), I realize that I wasn't the primary audience of President Barack Obama's speech last night. In this, I am more representative than you might think. About 80 percent of people under 65 (who are covered by Medicare) have coverage and upwards of 80 percent of people with health care rate their service very favorably.
Yet as the father of two young kids whose backs are already bowing under the weight of the debt and future taxes our nation has wracked up in the past couple of decades, I'm more than a little concerned. Especially when Obama's speech failed to clarify even the most basic points for which he seemed to be reaching. Those of us who have coverage through existing private and public plans, he explained, can sit tight. Nothing will change. All uninsured people will be forced to get coverage, but precisely what that means is vague, to say the least (especially since half of them could either afford coverage now or qualify for existing programs). Then there's his claim that a plan which will cost almost $1 trillion dollars over the next 10 years will not only not cost us anything but will actually save us money in the long haul. No government official—and certainly not a president who came into office vowing to veto pork-barrel spending and implement a net spending cut and then did the exact opposite—has credibility on that score.
On a more basic level: Is the so-called public option in or out? Without saying it has to absolutely, definitely be part of any reform, Obama likened the mythopoetical public option to public universities that compete with private universities to increase choice for consumers. Leaving aside a host of questions about the analogy, college costs are among the few that have been rising with the speed and intensity of medical costs. So how would this sort of competition reduce costs, one of the main goals, says Obama, of any health care reform worth the name? Indeed, the obvious similarity between higher ed and health care is that both systems rely on a third-party payer system where expenses are heavily subsidized (by employers, tax breaks, parents, federal grants, special loans, you name it) and the end consumers (patients, students) are shielded from knowing the full cost of the services they consume.
And when we look at rising costs, what's to be done with Medicare, which Obama singled out for inviolable preservation (it's "a sacred trust" to him) yet denounced as spendthrift? Following a report by his own economic advisers that said around 30 percent of Medicare spending could be cut without any reduction in quality of service, Obama says we need to squeeze existing government programs for savings that will largely pay for the reforms, which include measures such as capping out of pocket costs and mandatory coverage of routine diagnostic tests such as mammograms that will certainly increase consumption of health care. It's a no-brainer to squeeze a program that wastes 30 percent of its budget, but it begs the question of why it has never been done. Not since Obama took office, and not since Bush expanded Medicare spending by hundreds of billions of dollars on prescription drugs (a plan whose price tag more than doubled in less than five years), and not since LBJ's actuaries underestimated the future cost of Medicare in 1990 by roughly 644 percent.
Obama proudly proclaimed that his plan would "cost around $900 billion over the next ten years" but that it would "not add to our deficit." This is simply not credible and, as my colleague Matt Welch points out with regularity, is exactly what Obama has promised regarding his overall spending plans, which most certainly have added to our deficits for as long as we dare look into the future.
One of the great problems with health care reform is that it always takes place, perhaps necessarily, either at the most grandiose level of abstraction ("Now," thundered Obama, "is the time to deliver on health care," as if it's an easily defined commodity) or the least insightful level of anecdote ("One man from Illinois," intoned the president, "lost his coverage in the middle of chemotherapy because his insurer found that he hadn't reported gallstones that he didn't even know about").
Here's a more basic question when it comes to controlling costs: The easiest way to do this is to make the person doing the buying actually pay the price. You haggle more when the change is coming out of your own pocket. Or, alternatively, you splurge because you're worth it. Earlier this year, my coverage changed from a conventional network preferred-provider plan with a standard co-pay for prescription drugs to a high-dollar deductible plan in which I essentially pay the first $2,000 dollars of medical care I consume in a year (any unused money rolls over in a Medical Savings Account that I can use in the following year). As my doctor prescribed me a brand-name drug, I thought about the cost and whether there were any possible alternatives. For the first time I can recall, I actually had a conversation with my doctor—right there, in the examination room—about medical costs. We settled on a generic alternative, saving me roughly $75 on that particular transaction. More recently, we had a similar conversation, in which he didn't know the costs of a name-brand drug and a generic alternative—a sign that the medical system has a long way to go in terms of customer service. Imagine going into an auto shop and the mechanic not being able to quote you the price difference between a new and refurbished part.
Yet exchanges such as the ones above are small examples of price signals being injected into a system that has consciously erected a series of mufflers, walls, and funhouse mirrors precisely to make it impossible for consumers to even know what they are paying, much less how to evaluate alternative plans of action. The blame here is shared by government policymakers, insurance bureaucrats, and medical providers, all of whom have some stake in a status quo that serves them tolerably well. Any reform that doesn't explicitly and transparently harness the same basic market forces that have driven down prices and improved quality throughout the economy over the past several decades simply will not work at containing costs and thus, expanding access (cheaper, better goods and services, whether we're talking about automobiles or plane tickets or gourmet coffee, have a way of leaching out into every level of society).
Doctors and other health professionals, who assiduously work to limit the number of health care providers in a given field, bitch and moan all the time about how Medicare, Medicaid, and private insurers are driving down reimbursements for basic procedures. Yet somehow the overall cost of health care goes up, up, up. It's because the system, including the vague reforms being championed by Barack Obama in a speech designed to lay out his plan in detail, really don't do anything to empower the person at the center of the drama—the patient, the customer—with the sort of choices that might actually trigger changes that will either curtail costs or, same thing, improve the range and quality of services so that we are happy with the money we're shoveling out.
Until that discussion gets underway, any so-called reform will fail to deliver on anything other than empty promises.
Nick Gillespie is the editor in chief of Reason.tv and Reason.com.
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U.S. Is Finding Its Role in Business Hard to Unwind
Pravda NY is surprised to discover that putting the toothpaste back in the tube is tough to do , , ,
ND L. ANDREWS and DAVID E. SANGER
Published: September 13, 2009
WASHINGTON — When President Obama travels to Wall Street on Monday to speak from Federal Hall, where the founders once argued bitterly over how much the government should control the national economy, he is likely to cast himself as a “reluctant shareholder” in America’s biggest industries and financial institutions.
But one year after the collapse of Lehman Brothers set off a series of federal interventions, the government is the nation’s biggest lender, insurer, automaker and guarantor against risk for investors large and small.
Between financial rescue missions and the economic stimulus program, government spending accounts for a bigger share of the nation’s economy — 26 percent — than at any time since World War II. The government is financing 9 out of 10 new mortgages in the United States. If you buy a car from General Motors, you are buying from a company that is 60 percent owned by the government.
If you take out a car loan or run up your credit card, the chances are good that the government is financing both your debt and that of your bank.
And if you buy life insurance from the American International Group, you will be buying from a company that is almost 80 percent federally owned.
Mr. Obama plans to argue, his aides say, that these government intrusions will be temporary. At the same time, however, he will push hard for an increased government role in overseeing the financial system to prevent a repeat of the excesses that caused the crisis.
“These were extraordinary provisions of support, not part of a permanent program,” said Lawrence H. Summers, director of the National Economic Council at the White House. “You’re seeing a process of exit every day. It’s a process that’s going to take quite some time, but the prospects are much brighter today than they were nine months ago.”
That process unfolds every day in a bland bureaucrat’s haven, an annex connected by an underground tunnel to the Treasury’s main building on Pennsylvania Avenue. There, about 200 civil servants — accountants, lawyers, former investment bankers — oversee the $700 billion program that pumps taxpayer money into banks, insurance companies and two of Detroit’s Big Three auto companies.
In the main Treasury building, senior officials hold veto power over executive pay packages for the biggest recipients of government loans, like Citigroup and Bank of America. A separate group, working closely with the Federal Reserve Bank of New York, oversees the multibillion-dollar bailout of American International Group. Ten blocks away, at the Federal Reserve, officials are still providing the emergency liquidity that keeps a battered economy moving.
To Mr. Obama’s critics, thousands of whom took to the streets of Washington this weekend to protest a new era of big government, all these efforts are part of a plan to dismantle free-market capitalism. On the ground it looks quite different, as a new president and his team try to define the proper role, both as owners and regulators.
A Light Hand on the Reins
Far from eagerly micromanaging the companies the government owns, Mr. Obama and his economic team have often labored mightily to avoid exercising control even when government money was the only thing keeping some companies afloat.
A few weeks ago, there were anguished grimaces inside the Treasury Department as the new chief executive of A.I.G., Robert H. Benmosche, whose roughly $9 million pay package is 22 times greater than Mr. Obama’s, ridiculed officials in Washington — his majority shareholders — as “crazies.”
Causing even more unease to policymakers, Mr. Benmosche insisted that A.I.G. — one of the worst offenders in the risk-taking that sent the nation over the edge last year — would not rush to sell its businesses at fire-sale prices, despite pressure from Fed and Treasury officials, who are desperate to have the insurer repay its $180 billion government bailout.
But in the end, according to one senior official, “no one called him and told him to shut up,” and no one has pulled rank and told him to sell assets as soon as possible to repay the loans.
A similar hands-off decision was made about the auto companies. Shortly after General Motors and Chrysler emerged from bankruptcy, some members of the administration’s auto task force argued that the group should not go out of business until it was confident that a new management team in Detroit had a handle on what needed to be done.
But Mr. Summers strongly rejected that approach, and the Treasury secretary, Timothy F. Geithner, agreed.
“The argument was that if the president said he wasn’t elected to run G.M., then we couldn’t hire a new board and then try to run any aspect of it,” one participant in the discussions said. The auto task force took off for summer vacation in July, and it never returned.
But it will probably be several years before the government can begin to sell its stake in G.M. back to the public, and even then, according a report issued last week by the independent monitor of the Troubled Asset Relief Program, some of the $20 billion or so funneled to G.M. and Chrysler is probably gone forever.
Winding Down Programs
By contrast, Mr. Obama’s team and the Federal Reserve have been more successful than generally recognized at winding down many of the support programs for banks. Nearly three dozen financial institutions have repaid $70 billion in loans to the Treasury, and officials predict that $50 billion more will be repaid over the next 18 months. Indeed, the government has earned tidy profit on the first round of repayments.
One of the biggest backstops has been the Temporary Liquidity Guarantee Program of the Federal Deposit Insurance Corporation, which now guarantees about $300 billion worth of bonds issued by banks.
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U.S. Is Finding Its Role in Business Hard to Unwind
Published: September 13, 2009
(Page 2 of 2)
The volume of new guarantees has declined to less than $5 billion a month in August from more than $90 billion a month earlier this year. The F.D.I.C. announced last week that it would either end the program entirely on Oct. 31 or reduce it further by substantially increasing the fees that banks have to pay.
Similarly, one of the Fed’s biggest emergency loan programs, the Term Auction Facility, has shrunk by more than half in the last 12 months. A second big program, which finances short-term i.o.u.’s for businesses, has shrunk to $124 billion, from $332 billion a year ago.
Obama administration officials bristle at even the hint that their rescue measures have ushered in a new era of “big government.”
But supporters and critics alike worry that it will be difficult to shrink the government to anything like its former role. For one thing, Mr. Obama is determined to expand government regulation of business and to beef up federal protections for consumers.
Seeking More Oversight
Mr. Obama’s proposals to overhaul the system of financial regulation would give the Fed new powers to supervise giant financial institutions whose failure could threaten the entire financial system.
To limit the dangers posed by insolvent institutions that are “too big to fail,” the F.D.I.C. would receive new authority to close them in an orderly way.
The administration would impose much tougher regulation over the vast market for financial derivatives like credit-default swaps and other exotic instruments for hedging risk.
It would also create an entirely new Consumer Financial Protection Agency, which would have broad power to regulate most forms of consumer lending.
In his speech on Monday, White House officials say, Mr. Obama will step up pressure on Wall Street to accept tougher oversight. Even though his proposals have made little headway in Congress, largely because of the battle over health care, Democratic lawmakers said they were determined to pass comprehensive legislation by next year.
“Big government now is the consequence of too little government before,” said Representative Barney Frank, chairman of the House Financial Services Committee. “What you have right now, with the government owning companies, is the result of insufficient regulation before.”
On a practical level, experts say it will take years for the government to unwind some of its rescue programs.
Thanks to the mortgage crisis and the collapse in housing prices, private investors have fled the mortgage market, and the federal government now finances about 9 out of 10 new home loans in the United States.
The Treasury took over Fannie Mae and Freddie Mac, the government-sponsored finance companies that own or have guaranteed more than $5 trillion in mortgages, in the first week of September 2008. Fannie and Freddie now buy or guarantee almost two-thirds of all new mortgages. The Federal Housing Administration guarantees another 25 percent.
The cost of keeping the two giant companies afloat has been huge. The Treasury has provided Fannie and Freddie with $95 billion to cover losses tied to soaring default rates and losses in value on their own mortgage portfolios. Analysts predict that the companies will need considerably more in the year ahead. At the same time, the Fed is buying almost all the new mortgage-backed securities issued by Fannie Mae, Freddie Mac and the F.H.A. Buying up those securities drives up their price and pushes down their effective interest rates, and ultimately lowers borrowing costs to homebuyers.
An Enormous Scale
The scale of the Fed’s intervention has been staggering. The central bank has acquired more than $700 billion in mortgage-backed securities so far, and officials have said they will buy up to $1.25 trillion — a goal that should take the Fed until early next year. To help Fannie and Freddie raise the money they need to buy mortgages from lenders, the Fed is also buying $200 billion of their bonds.
All told, the government is propping up almost the entire mortgage market and, by extension, the housing industry.
As the government backs away from its rescue operations, economists and others worry about unknown consequences. Some analysts are already predicting that mortgage rates will bump higher when the Fed stops buying mortgage securities, potentially delaying a recovery in housing.
But the much bigger puzzle is how the government will untangle Fannie Mae and Freddie Mac, with their combustible mix of taxpayer support, public policy goals and for-profit structures.
“It will be very difficult to unwind, having stepped in as big as they did,” said Howard Glaser, a senior housing official during the Clinton administration and now an industry consultant in Washington. “There is no structure, no mechanism, for private investors to come back into the market.”
Other experts and policy makers have begun to raise broader concerns. Even if the Obama administration and the Fed do manage to shrink the government’s role to precrisis levels, has the government’s immense rescue simply set the stage for more frequent interventions in the future?
“This crisis, whether it’s because of the Fed or the Treasury or Congress, has created a lot of new moral hazards,” said Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia. “Once you have done this once, even though it was in a severe crisis, the temptation will be for people to figure that in the next crisis you’ll do it again. You’ve got to figure out a way to say no.”
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W H A T A D E A L !! ????
Here’s what my friend had to say about “Democratic Math”:
It’s worse than that. Ignore all the gas crap and just look at how the stupid car buyer got taken to the cleaners:
If you traded in a clunker worth $3500, you get $4500 off for an apparent "savings" of $1000.
However, you have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.
So, rather than save $1000, you actually pay an extra $350 to the feds. In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need, that was costing you less to run than the payments that you will now be making.
But wait, it gets even better: you also got ripped off by the dealer.
For example, every dealer here in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500 the month before the "cash for clunkers" program started.
When "cash for clunkers" came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3000 more than you would have the month before. (Honda, Toyota, and Kia played the same list price game that Ford and Chevy did).
So lets do the final tally here:
You traded in a car worth: $3500
You got a discount of: $4500
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Net so far +$1000
But you have to pay: $1350 in taxes on the $4500
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Net so far: -$350
And you paid: $3000 more than the car was selling for the month before
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Net -$3350
We could also add in the additional taxes (sales tax, state tax, etc.) on the extra $3000 that you paid for the car, along with the 5 years of interest on the car loan but lets just stop here.
So who actually made out on the deal? The feds collected taxes on the car along with taxes on the $4500 they "gave" you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. The manufacturers got to dump lots of cars they could not give away the month before. And the poor stupid consumer got saddled with even more debt that they cannot afford.
Obama and his band of merry men convinced Joe consumer that he was getting $4500 in "free" money from the "government" when in fact Joe was giving away his $3500 car and paying an additional $3350 for the privilege
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President Obama's economic advisers are struggling to sell their financial reform plan to . . . an Obama economic adviser. Paul Volcker, the Democrat and former Federal Reserve chairman who worked with President Reagan to slay inflation in the 1980s, now leads President Obama's Economic Recovery Advisory Board. He warned in Congressional testimony Thursday that the pending Treasury plan could lead to more taxpayer bailouts by designating even nonbanks as "systemically important."
"The clear implication of such designation whether officially acknowledged or not will be that such institutions . . . will be sheltered by access to a federal safety net in time of crisis; they will be broadly understood to be 'too big to fail,'" Mr. Volcker told Congress.
Rather than creating broad bailout expectations destined to be expensively fulfilled, the former Fed chairman wants Washington to draw a tighter circle around commercial banks with insured deposits. Those inside the circle get heavy oversight and are eligible for assistance during a crisis. Assumptions that various other firms also enjoy the federal safety net "should be discouraged," said Mr. Volcker.
We don't agree with all of Mr. Volcker's prescriptions—nor he with ours—but on too big to fail he's exactly right. As he also told Congress, regulators are unlikely to correctly guess which firms will pose systemic risk, and the implicit protection by taxpayers could put firms not deemed important by Washington at a market disadvantage. He also pointed out that, while Team Obama pushes its plan to address firms that are "systemically important," Treasury still hasn't said what exactly that means.
Mr. Volcker's comments won't endear him to Administration officials due to receive more power under the Treasury plan, but taxpayers should be cheering his counsel.
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Pravda on the Hudson
IG says Treasury misled on bailouts
By LOUISE STORY
Published: October 5, 2009
WASHINGTON — The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for some misleading public statements last fall and raising the possibility that it had unfairly disbursed money to the biggest banks.
A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government was doling out billions of dollars in aid, according to a report on the Troubled Asset Relief Program to be released on Monday by the special inspector general, Neil M. Barofksy.
The report also provides new insight into the way the Treasury allocated billions of dollars to nine of Wall Street’s largest players. The report says that Bank of America appeared to qualify for more aid earlier, under the government plan. That assertion adds another element of intrigue to continuing investigations of the bank’s merger with Merrill Lynch and the role that regulators played in the deal, even as Merrill’s condition deteriorated.
The bailout formula called for banks to get an amount equal to as much as 3 percent of their risk-weighted assets, with aid capped at $25 billion for each institution, according to the report. By size, Citigroup, JPMorgan Chase and Bank of America could have qualified for more, and the first two received $25 billion.
But Bank of America was given only $15 billion in October, since Merrill Lynch was earmarked for $10 billion. The two companies agreed to a merger, though their deal had not yet been approved by regulators or shareholders.
Bank of America ultimately received Merrill’s $10 billion in January — as well as $20 billion in additional bailout funds — but if the bank had not been involved in the Merrill deal, it would probably have received $25 billion at the outset, as did Citigroup and JPMorgan.
Another company in the process of a merger was not treated the same. Wells Fargo was acquiring Wachovia, and it received both companies’ money at the start, according to the inspector general.
Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy.
Former Treasury Secretary Henry M. Paulson Jr., for instance, said on Oct. 14 that the banks were “healthy,” and that they accepted the money for “the good of the U.S. economy.” The banks, he said, would be better able to increase their lending to consumers and businesses.
In truth, regulators were concerned about the health of several banks that received that first bailout, the inspector general writes.
The inspector general said government officials need to be more careful when describing their actions and rationale. In a letter included with the report, the Federal Reserve concurred with Mr. Barofsky’s concern about the statements made last year, but the Treasury Department said that any review of announcements last year “must be considered in light of the unprecedented circumstances in which they were made.”
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http://reason.com/blog/2009/10/09/elizabeth-warren-we-must-open
Reason Magazine
Elizabeth Warren: We Must Open Our Wallets To All Deadbeats Everywhere Always
Tim Cavanaugh | October 9, 2009
What does it say about Washington, DC's professional class when out of five people overseeing a $700 billion Treasury Department program, only two of them show any concern for American taxpayers, and one of those two is a member of Congress?
The Congressional Oversight Panel (COP) for the Troubled Asset Relief Program has put out a 210-page report [pdf] on foreclosure mitigation efforts. The amount of special pleading in this report shocks the conscience. COP has an interesting story to tell: that Treasury's decision to commit $50 billion in TARP funds to the Home Affordable Modification Program (HAMP) is a fiasco. But instead of sticking to that truth, COP repeatedly uses the program's failures as propaganda for expanding the program.
We're told, for example, that "the foreclosure crisis has moved beyond subprime mortgages and into the prime mortgage market" and that a crisis once limited to "home flippers, speculators, reach borrowers...and homeowners who were sold subprime refinancings" has now engulfed "families who put down 10 or 20 percent and took out conventional, conforming fixed-rate mortgages to purchase or refinance homes that in normal market conditions would be within their means."
First of all, this is overblown. The most recent OCC Mortgage Metrics Report has prime mortgage default rates at 3 percent -- double the usual average, but unalarming. Rather than bringing in outside reports, though, let's be sporting and find the inconsistencies within COP's own report. On page 30, we learn that "as many as 50 percent of at-risk mortgages also have second liens. Therefore, it is critical that second liens be addressed as part of a comprehensive mortgage modification initiative."
Those second liens, boy, they're like secondhand smoke and gay sex. You're just sitting there minding your own business when some goon comes along, hands you a barrel of money, and then expects you to pay it back. My heart goes out to all those families with fixed-rate confirming loans who put down a large equity portion and yet mysteriously are getting stuck by a greedy second lien holder. And the pixies, the sprites, the leprechauns and the centaurs -- my heart goes out to all of them too.
What makes the report interesting is that it's not the work of conscious idealogues but of earnest good-government believers. In a way, picking out the chop logic and weird passive phrasings (duly aped by the media in, for example, this A.P. piece that says foreclosures are "stalking" innocent home borrowers) is too easy. This is just what happens when smart, honest people try to tell dumb lies. Characteristically, the report brushes past what should be an "oversight" committee's main concern: that Treasury's accounting of TARP expenditures is laughably thin and incomplete.
In fact, it's because Chairwoman Elizabeth Warren (making the case for an improved and expanded program on the YouTubes here) and her cohorts believe they are acting in the nation's best interest that we need to remember something: This is not some nearly theoretical public choice exercise, where the distributed costs to taxpayers are balanced against the concentrated benefits to some group. To the (mercifully limited) extent a foreclosure modification program works, it imposes a very concentrated cost on a very large group: home buyers. There are millions upon millions of Americans out there who want to buy homes and would be able to do so if homes were affordable. If the Treasury Department wants to help out homeowners, it will let house prices lose whatever amount they still need to lose (I'm calling it 30 percent) to make home-buying an attractive proposition again. (And it's worth noting that the Secretary of the Treasury has a direct personal financial interest in supporting inflated home prices.)
And so I suggest you dispense with the main report and skip right down to page 138, where the dissents begin. Rep. Jeb Hensarling (R - TX)'s opinion makes the case against expanding foreclosure mitigation programs with great coherence and ample documentation.
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Time for Congress to Work Under the Same Rules as the Private Sector
by James Sherk and Ryan O'Donnell
Backgrounder #2326
Abstract: All too often, Congress imposes restrictive and burdensome regulations on employers in the private sec tor--while conveniently exempting itself from these same rules. Many Members of Congress are currently urging passage of the misnamed Employee Free Choice Act and RESPECT Act, which, again, would leave Congress untouched. This paper demonstrates the hypocrisy of such an approach, and urges Congress to either swallow its own medicine or to extend the same rights to the private sector that it claims for itself.
Many Members of the current Congress support passage of the misnamed Employee Free Choice Act (EFCA) and the RESPECT Act--laws that would push workers into joining unions. They argue that unions benefit workers and the economy. Yet Congress's own employees do not have the right to form a union-- making Congress exempt from the consequences of the very union laws it might pass. If Congress believes--as it claims--that unions do not exces sively burden private-sector employees and employ ers, Congress should allow its own staff to unionize under the National Labor Relations Act (NLRA). Congress should not exempt itself from the rules and reg ulations it imposes on businesses across the country.
Organized Labor Lobbies for More Power
Most non-union workers--81 percent, according to a recent Rasmussen poll--do not want to form unions at their workplaces.[1] Federal employment law and modern human resource policies, as well as the increasing focus on individual skills in the work place, have reduced the need for union representa tion. Consequently, private-sector union membership has fallen sharply over the past 25 years. Today, just 7.6 percent of private-sector workers belong to a union, down from 16.5 percent in 1983.[2]
Organized labor has responded by lobbying strongly for legislation that increases union power over employees and employers in order to make it easier to recruit new dues-paying members. The Employee Free Choice Act (EFCA) is anything but-- abolishing secret-ballot elections for union forma tion, making it hard for workers to turn down a union's offer to join. It also empowers government officials to dictate contracts to newly organized workers and firms in the private sector. The RESPECT Act similarly penalizes the workplace. By narrowly defining "supervisors" as employees who spend a majority of their time hiring or disciplining employees, the RESPECT Act would re-establish the strict and hierarchical labor-management divisions that characterized the workplace until the mid-20th century. Instead of allowing workers the freedom to decide whether to join a union, EFCA and the RESPECT Act would pressure workers to unionize.
Many Members of Congress support these bills. They argue that unions improve the workplace and that these proposals will not unduly hinder busi ness operations or curtail workers' rights. If this is true, Congress should live under the same law.
Congressional Staff Not Covered by Unionizing Statutes
Since the National Labor Relations Act applies only to the private sector, congressional employees are prohibited from forming unions. Section 2 .2 of the NLRA specifically excludes public-sector employers from the act's definition of "employer":
The term "employer" includes any person acting as an agent of an employer, directly or indirectly, but shall not include the United States or any wholly owned Govern ment corporation, or any Federal Reserve Bank, or any State or political subdivision thereof, or any person subject to the Railway Labor Act…
In order to enforce the Federal Service Labor-Management Relations statute, which allows fed eral employees to organize and bargain collectively, Congress created the Federal Labor Relations Authority (FLRA) in 1978.[3] However, because the Federal Service Labor-Management Relations statute excludes legislative employees, including those working in "the personal office of any Member of the House of Representatives or of any Senator," congressional employees remain unable to organize.
Should Congress Play by Its Own Rules?
Congress should not stack the deck by pushing workers into collective bargaining. The law should leave that choice to employees and should neither encourage nor discourage unionizing. If, however, Congress believes that unionizing best protects the rights of private-sector employees and does not harm business operations, Congress should allow its own staff to organize and bargain collectively under the same laws it wants to impose on private-sector workers. Although unionizing the Hill is hardly a desirable outcome, it is curious that Congress refuses to apply the laws it devises for the private sector to its own workplaces. Legislatively speaking, it would be fairly simple--Congress could simply include itself under the National Labor Relations Act's definition of an employer.
"Card Check" Impact on a Congressional Office
Many Members of Congress argue that replacing secret-ballot elections with publicly signed cards ("card check") and allowing government arbitrators to impose contracts on employees and employers will not excessively burden business operations. Again, if this is what Members of Congress truly believe, why do they not apply the provisions of EFCA to their own staff?
If Congress extended the NLRA to include itself, card check would also apply to congressional offices. If EFCA passed, congressional staff, too, would lose the privacy of the voting booth. Addi tionally, 100 days after a majority of staff in a con gressional office signed union cards and began bargaining for a contract their union could request mediation by the Federal Mediation and Concilia tion Service (FMCS). EFCA mandates that "the FMCS shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the service."[4] In essence, under EFCA's arbitration clause, the government would be able to dictate key private-sector busi nesses decisions.
Many private-sector employers have argued against giving government bureaucrats this level of control over their businesses. They fear that unknowledgeable bureaucrats could impose con tracts that prove impossible to work with, and could bankrupt their firms. Congressional supporters of EFCA have simply dismissed these fears. Yet, if EFCA applied to Congress, government officials would determine how many people each Member of Congress hires, as well as their salaries, promotion procedures, and their retirement and health benefits.
Redefining Supervisors
Some Members of Congress have proposed elim inating the NLRA's definition of "supervisor" in the RESPECT Act.[5] Under the NLRA, unions are not allowed to accept company supervisors as members because they help manage the company. If the RESPECT Act became law, the only employees who would be considered supervisors would be those who spend a majority of their time hiring, transfer ring, suspending, laying off, recalling, promoting, discharging, rewarding, or disciplining other employees. Very few employees at any firm spend the majority of their time on these matters.[6]
If Congress applied the RESPECT Act to itself, chiefs of staff and legislative directors would become part of the collective bargaining unit. Very few of them spend a majority of their working time hiring, promoting, and laying off employees. As a result, most chiefs of staff and legislative directors would become members of the union bargaining unit. Consequently, automatic seniority promo tions--not decisions by Members of Congress-- would determine who served in these positions. Grievance procedures would make it next to impos sible to lay off ineffective legislative directors and chiefs of staff. This could reduce their effectiveness on the job. Yet, Congress wants to return private-sector supervisors to the bargaining unit, claiming no undue hardship will result.
Unions Ban Merit Wages
Giving congressional staffers the same rights to collectively bargain as private employees would also impose on Congress the same restrictions that the National Labor Relations Act (NLRA) imposes on private workers and their employers. In the non-unionized private sector, most workers are evaluated on the basis of merit, earning promo tions, raises, and bonuses according to their perfor mance. Congress also operates this way: 57 percent of congressional offices offer annual merit-based raises.[7] Like non-union private-sector employers, Members of Congress generally treat workers as individuals and reward individual exemplary per formance with higher pay. Employees can get ahead by working hard.
The NLRA makes earning raises very difficult for union members. Employers are not allowed to pay individual union members more than dictated by their contracts without negotiating with the union bosses--who rarely agree to merit raises. Most union contracts base salaries on seniority systems and job classifications.[8] As a result, no matter how produc tive an individual union member is, he cannot earn more than the amount specified in his union contract.
Union members chafe under this restriction because they, like anyone else, want the opportunity to get ahead. Employers want to use incentives that result in worker productivity that raises wages and profits. If Congress believes that preventing merit bonuses does not hinder productivity, it should not hesitate to allow its own workers to unionize and accept that consequence. If Congress believes that merit pay improves productivity, it should allow unionized private-sector employers to offer merit pay as well. The proposed Rewarding Achievement and Incentivizing Successful Employees (RAISE) Act would lift the wage ceiling that unions impose on their members.[9]
Time for Congress to Live by Its Own Rules
Congress has developed two separate sets of labor polices: one for the private sector, another for itself. If Congress believes that expanding collective bargaining through legislation like the RESPECT Act and EFCA benefits workers and improves the workplace, it should have no difficulty living under these same laws and allowing its employees to organize under the National Labor Relations Act. The same restrictions Congress wants to impose on union and non-union private-sector employees-- the seniority wage ceiling, government-imposed contracts, eliminating the secret ballot during union organizing drives, and the loss of managerial status for supervisory employees--should also apply to Congress.
It is time for Congress to stop forcing private-sector employers to swallow a pill that Congress refuses to swallow itself.
James Sherk is Bradley Fellow in Labor Policy in the Center for Data Analysis, and Ryan O'Donnell, a former private-sector labor attorney, is a Web Editor, at The Heritage Foundation.
[1]Rasmussen Reports, "Only 9% of Non-Union Workers Want to Join a Union," March 16, 2009. Sample of 1,000 adults conducted March 13-14, 2009, with a margin of error of + or - 3 percent.
[2]Barry T. Hirsch and David A. Macpherson, "Union Membership and Coverage Database from the Current Population Survey: Note," Industrial and Labor Relations Review, Vol. 56, No. 2 (January 2003), pp. 349-354.
[3]The FLRA does not cover employees of the United States Post Office.
[4]James Sherk, "EFCA Authorizes Government Control of 4 Million Small Businesses," Heritage Foundation WebMemo No. 2341, March 12, 2009, at http://www.heritage.org/Research/Labor/wm2341.cfm.
[5]James Sherk and Ryan O'Donnell, "How the RESPECT Act Hurts Companies and Employees Alike," Heritage Foundation Backgrounder No. 2277, May 28, 2009, at http://www.heritage.org/Research/Labor/bg2277.cfm.
[6]Ibid.
[7]ICF International, "2006 House Compensation Study: Guide for the 110th Congress," Chief Administrative Office, U.S. House of Representatives, survey conducted July-August 2006.
[8]David Metcalf, Kirstine Hansen, and Andy Charlwood, "Unions and the Sword of Justice: Unions and Pay Systems, Pay Inequality, Pay Discrimination and Low Pay," National Institute Economic Review, Vol. 176, No. 1 (2001), pp. 61-75; Richard B. Freeman, "Union Wage Practices and Wage Dispersion Within Establishments," Industrial and Labor Relations Review, Vol. 36, No. 1 (October 1982), pp. 3-21; and Assar Lindbeck and Dennis Snower, "Centralized Bargaining and Reorganized Work: Are They Compatible?" European Economic Review, Vol. 45 (2001), pp. 1851-1875.
[9]S. 1184, H.R. 2732
http://www.heritage.org/Research/Labor/bg2326.cfm
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Cash for Clubbers
Congress's fabulous golf cart stimulus.
Article
We thought cash for clunkers was the ultimate waste of taxpayer money, but as usual we were too optimistic. Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart.
The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart. Even in states that don't have their own tax rebate plans, the federal credit is generous enough to pay for half or even two-thirds of the average sticker price of a cart, which is typically in the range of $8,000 to $10,000. "The purchase of some models could be absolutely free," Roger Gaddis of Ada Electric Cars in Oklahoma said earlier this year. "Is that about the coolest thing you've ever heard?"
The golf-cart boom has followed an IRS ruling that golf carts qualify for the electric-car credit as long as they are also road worthy. These qualifying golf carts are essentially the same as normal golf carts save for adding some safety features, such as side and rearview mirrors and three-point seat belts. They typically can go 15 to 25 miles per hour.
In South Carolina, sales of these carts have been soaring as dealerships alert customers to Uncle Sam's giveaway. "The Golf Cart Man" in the Villages of Lady Lake, Florida is running a banner online ad that declares: "GET A FREE GOLF CART. Or make $2,000 doing absolutely nothing!"
Golf Cart Man is referring to his offer in which you can buy the cart for $8,000, get a $5,300 tax credit off your 2009 income tax, lease it back for $100 a month for 27 months, at which point Golf Cart Man will buy back the cart for $2,000. "This means you own a free Golf Cart or made $2,000 cash doing absolutely nothing!!!" You can't blame a guy for exploiting loopholes that Congress offers.
The IRS has also ruled that there's no limit to how many electric cars an individual can buy, so some enterprising profiteers are stocking up on multiple carts while the federal credit lasts, in order to resell them at a profit later. We should note that some states, such as Oklahoma, have caught on to the giveaway and are debating whether to cancel or limit their state credits. But in Congress they're still on the driving range.
This golf-cart fiasco perfectly illustrates tax policy in the age of Obama, when politicians dole out credits and loopholes for everything from plug-in cars to fuel efficient appliances, home insulation and vitamins. Democrats then insist that to pay for these absurdities they have no choice but to raise tax rates on other things—like work and investment—that aren't politically in vogue. If this keeps up, it'll soon make more sense to retire and play golf than work for living.
Printed in The Wall Street Journal, page A12
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Mortgage Mod Program Causing Havoc on Citi Delinquencies
Posted by JJ Hornblass on October 20, 2009 at 9:30am
View JJ Hornblass's blog
The home mortgage modification program espoused by President Obama and affectionately called HAMP is wreaking havoc on loss mitigation at banks. The most glaring example: Citigroup.
Citigroup officials have effectively acknowledged that an outsider cannot get a sense for the bank's mortgage performance because it has so many loan modifications in the works. Citi's 90-to-179-day delinquency bucket is growing in size because of all the loan mods underway, yet the bank said it does not know what the results of these modifications will be. Citi's CFO:
Under HAMP, borrowers make reduced mortgage payments for a trial period, during which they continue to age through our delinquency buckets even if they are current under the new payment terms. This serves to increase our delinquencies. Virtually all of the increase in the 90 to 179 bucket and half of the increase in the 180 plus day bucket are loans in HAMP trial modifications. The rest of the increase in the 180 plus day bucket is attributable to a backlog of foreclosure inventory driven by a slowdown in the foreclosure process in many states. ... The HAMP program right now has got a rather significant impact on our delinquency statistics and really makes it difficult for anyone from the outside to actually have a good view as to the inherent credit profile in our delinquency buckets.
Here's a look at the current state of Citi's mortgage portfolio:
The HAMP dynamic is repeating itself at banks nationwide. BB&T Corp., a Top 20 bank in the US, also said yesterday that loan modifications were skewing its credit-performance metrics.
The upshot of all this is that modifications -- as opposed to collections or foreclosure -- injects a big question mark into mortgage performance and returns. Even beyond the immediate loss allocations for holders of mortgages, subsequent buyers of mortgage paper that has been modified must confront the fact that even the post-charged-off performance of the loans may not perform as expected. HAMP has thrown a big question mark into the mortgage market, and I expect that the collection industry is going to have to figure it out -- eventually.
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A friend forwarded this to me. Can anyone verify it?
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I had a former employee call me earlier today inquiring about a job, and at the end of the conversation he gave me his phone number. I asked the former employee if this was a new cell phone number and he told me yes this was his “Obama phone.” I asked him what an “Obama phone” was and he went on to say that welfare recipients are now eligible to receive (1) a FREE new phone and (2) approx 70 minutes of FREE minutes every month. I was a little skeptical so I Googled it and low and behold he was telling the truth. TAX PAYER MONEY IS BEING REDISTRIBUTED TO WELFARE RECIPIENTS FOR FREE CELL PHONES. This program was started earlier this year. Enough is enough, the ship is sinking and it’s sinking fast. The very foundations that this country was built on are being shaken. The age old concepts of God, family, and hard work have flown out the window and are being replaced with “Hope and Change” and “Change we can believe in.” You can click on the link below to read more about the “Obama phone”…
https://www.safelinkwireless.com/EnrollmentPublic/home.aspx
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two friends respond:
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http://www.marketwatch.com/story/tracfone-wireless-launches-safelink-wirelessr-to-aid-547349-low-income-households-in-wisconsin-2009-08-24
The program that supports this give away predates Obama by a over a decade. Take a look at the link. I just guess it took 15years before the cellphone component could finally be worked out. Somebody want to see whether Tracfone has investment potential. If somebody is making hay while the sun shines, it makes sense to jump on and ride the wagon back to the barn. Couldn't resist the Hayride metaphor with the fall season upon us.
John
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Tracfone is a subsidiary of American Movil AMX (NYSE) or AMOV (Nasdaq)..
http://en.wikipedia.org/wiki/TracFone_Wireless
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The Troubled Asset Relief Program will expire on December 31, unless Treasury Secretary Timothy Geithner exercises his authority to extend it to next October. We hope he doesn't. Historians will debate TARP's role in ending the financial panic of 2008, but today there is little evidence that the government needs or can prudently manage what has evolved into a $700 billion all-purpose political bailout fund.
We supported TARP to deal with toxic bank assets and resolve failing banks as a resolution agency of the kind that worked with savings and loans in the 1980s. Some taxpayer money was needed beyond what the FDIC's shrinking insurance fund had available. But TARP quickly became a Treasury tool to save failing institutions without imposing discipline (Citigroup) and even to force public capital onto banks that didn't need it. This stigmatized all banks as taxpayer supplicants and is now evolving into an excuse for the Federal Reserve to micromanage compensation.
TARP was then redirected well beyond the financial system into $80 billion in "investments" for auto companies. These may never be repaid but served as a lever to abuse creditors and favor auto unions. TARP also bought preferred stock in struggling insurers Lincoln and Hartford, though insurance companies are not subject to bank runs and pose no "systemic risk." They erode slowly as customers stop renewing policies.
TARP also became another fund for Congress to pay off the already heavily subsidized housing industry by financing home mortgage modifications. Not one cent of the $50 billion in TARP funds earmarked to modify home mortgages will be returned to the Treasury, says the Congressional Budget Office.
As of the end of September, Mr. Geithner was sitting on $317 billion of uncommitted TARP funds, thanks in part to bank repayments. But this sum isn't the limit of his check-writing ability. Treasury considers TARP a "revolving fund." If taxpayers are ever paid back by AIG, GM, Chrysler, Citigroup and the rest, Treasury believes it has the authority to spend that returned money on new adventures in housing or other parts of the economy.
A TARP renewal by Mr. Geithner could thus put at risk the entire $700 billion. Rep. Jeb Hensarling (R., Texas) and former SEC Commissioner Paul Atkins sit on TARP's Congressional Oversight Panel. They warn that the entire taxpayer pot could be converted into subsidies. They are especially concerned about expanding the foreclosure prevention programs that have been failing by every measure.
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Associated Press
Treasury Secretary Timothy Geithner
.TARP inspector general Neil Barofsky agrees that the mortgage modifications "will yield no direct return" and notes charitably that "full recovery is far from certain" on the money sent to AIG and Detroit. Mr. Barofsky also notes that since Washington runs huge deficits, and interest rates are almost sure to rise in coming years, TARP will be increasingly expensive as the government pays more to borrow.
Even with the banks, TARP has been a double-edged sword. While its capital injections saved some banks, its lack of transparency created uncertainty that arguably prolonged the panic. Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Hank Paulson recently admitted to Mr. Barofsky what everyone figured at the time of the first capital injections. Although they claimed in October 2008 they were providing capital only to healthy banks, Mr. Bernanke now says some of the firms were under stress. Mr. Paulson now admits that he thought one in particular was in danger of failing. By forcing all nine to take the money, they prevented the weaklings from being stigmatized.
Says Mr. Barofsky, "In addition to the basic transparency concern that this inconsistency raises, by stating expressly that the 'healthy' institutions would be able to increase overall lending, Treasury created unrealistic expectations about the institutions' conditions and their ability to increase lending."
The government also endangered one of the banks that they considered healthy at the time. In December, Mr. Paulson pressured Bank of America to complete its purchase of Merrill Lynch. His position is that a failed deal would have hurt both firms, but this is highly speculative. Mr. Barofsky reports that, according to Fed documents, the government viewed BofA as well-capitalized, but officials believed that its tangible common equity would fall to dangerously low levels if it had to absorb the sinking Merrill.
In other words, by insisting that BofA buy Merrill, Messrs. Paulson and Bernanke were spreading systemic risk by stuffing a failing institution into a relatively sound one. And they were stuffing an investment bank into one of the nation's largest institutions whose deposits were guaranteed by taxpayers. BofA would later need billions of dollars more in TARP cash to survive that forced merger, and when that news became public it helped to extend the overall financial panic.
Treasury and the Fed would prefer to keep TARP as insurance in case the recovery falters and the banking system hits the skids again. But the more transparent way to address this risk is by buttressing the FDIC fund that insures bank deposits and resolves failing banks. The political class has twisted TARP into a fund to finance its pet programs and constituents, and the faster it fades away, the better for taxpayers and the financial system.
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It's hard not to laugh when viewing the results of the federal first-time home-buyer tax credit. The credit, worth up to $8,000 for the purchase of a home, has only been available since April of last year. Yet news of the latest taxpayer-funded mortgage scam has traveled fast. The Treasury's inspector general for tax administration, J. Russell George, recently told Congress that at least 19,000 filers hadn't purchased a home when they claimed the credit. For another 74,000 filers, claiming a total of $500 million in credits, evidence suggests that they weren't first-time buyers.
Among those claiming bogus credits, at least some of them were definitely first-timers. The credit has already been claimed by 500 people under the age of 18, including a four-year-old. This pre-K housing whiz likely bought because mom and dad make too much to qualify for the full credit, which starts to phase out at $150,000 of income for couples, $75,000 for singles.
As a "refundable" tax credit, it guarantees the claimants will get cash back even if they paid no taxes. A lack of documentation requirements also makes this program a slow pitch in the middle of the strike zone for scammers. The Internal Revenue Service and the Justice Department are pursuing more than 100 criminal investigations related to the credit, and the IRS is reportedly trying to audit almost everyone who claims it this year.
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Associated Press
.Speaking of the IRS, apparently its own staff couldn't help but notice this opportunity to snag an easy $8,000. One day after explaining to Congress how many "home-buyers" were climbing aboard this gravy train, Mr. George appeared on Neil Cavuto's program on the Fox Business Network. Mr. George said his staff has found at least 53 cases of IRS employees filing "illegal or inappropriate" claims for the credit. "In all honesty this is an interim report. I expect that the number would be much larger than that number," he said.
The program is set to expire at the end of November, so naturally given its record of abuse, Congress is preparing to extend it. Republican Senator Johnny Isakson of Georgia is so pleased with the results that he wants to expand the program beyond first-time buyers and double the income limits.
This is the point in the story when a taxpayer's sense of humor is bound to give way to a different emotion. The credit's cost is running at about $1 billion a month and $15 billion for the year. Also, even when employed by an honest buyer, it's another distortion that drives capital into housing and away from other more productive uses. For America's tens of millions of tax-paying renters, it's another subsidy they provide for their neighbors to be able to sell their houses at a higher price.
While the credit seems to have boosted home sales, many of those sales would have happened anyway and have merely been stolen from the future. Meanwhile, the credit continues to distort the housing market and postpone the day when home prices can find a floor that is a basis for a stable recovery.
More than two years into the housing bust, trillions of dollars in taxpayer losses or guarantees via Fannie Mae and Freddie Mac, and amid an ongoing plague of redefaults in federal programs to prevent foreclosures, politicians are still trying to manipulate housing prices. And leave it to Congress to design a program that even a four-year-old can scam.
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My apologies to the board, but I can't find a nicer way of saying this, but what a bunch of brain-dead, Marxist dumb-f*cks we have in power and unfortunately that reaches most of the way across to both parties.
What went wrong with housing in the first place? A bubble in values grew and grew far beyond the intrinsic value of the properties and far beyond the ability of buyers to continue to afford them. How could or why would something sell above its 'value'?? One word: Market Tampering (okay, two words).
Besides government skewing of values in the form of deductibility of interest that constitutes mostly a luxury item, besides the allowance of deductibility of property taxes, which takes away from the electorate pressure to LOWER the property taxes, we invent all these other non-market concoctions to skew the values. Or we are just brain dead to the idea of UNINTENDED CONSEQUENCES. Worst was the CRA P rogram that pressured banks to make non-creditworthy loans. Next came the disguising and packaging of bad loans by federally insured institutions without oversight. Then put on top of that FREE MONEY in the form of the first time homebuyer federal credit to further encourage people to buys homes they can't afford and to END the practice of SAVING and putting some of their OWN hard-earned money on the line before the bank puts up the rest.
So what do we do after the crash? More and more and more of the same.
Then we are SURPRISED by the result. Shame on us.
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Moving BBG's post to this thread:
Analysis by Edmunds.com, the automotive website, that concludes Cash for Clunkers cost $20K + per car sold and had a minor impact of overall sales.
http://www.edmunds.com/help/about/press/159446/article.html
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http://reason.com/archives/2009/10/29/self-governance-works
Reason Magazine
Self-Governance Works
Elinor Ostrom's research shows that free people can overcome the "tragedy of the commons"
John Stossel | October 29, 2009
Much of what government does is based on the premise that people can't do things for themselves. So government must do it for them. More often than not, the result is a ham-handed, bumbling, one-size-fits-all approach that leaves the intended beneficiaries worse off. Of course, this resulting failure is never blamed on the political approach—on the contrary, failure is taken to mean the government solution was not extravagant enough.
We who have confidence in what free people can achieve have long believed that government should not venture beyond its narrow sphere of providing physical security. It should not attempt to cure every social ill. So it's good to learn that serious scholars have demonstrated that our intuitions are right. Free people, given the chance, solve what many "experts" think are problems that require state intervention.
For that reason, Elinor Ostrom's winning of the Nobel Memorial Prize in Economic Sciences ought to kindle a new interest in freedom. (See my earlier column here.)
Ostrom made her mark through field studies that show people solving one of the more vexing problems: efficient management of a common-pool resource (CPR), such as a pasture or fishery. With an unowned "commons," each individual has an incentive to get the most out of it without putting anything back.
If I take fish from a common fishing area, I benefit completely from those fish. But if I make an investment to increase the future number of fish, others benefit, too. So why should I risk making the investment? I'll wait for others to do it. But everyone else faces the same free-rider incentive. So we end up with a depleted resource and what Garrett Harden called "the tragedy of the commons."
Except, says Ostrom, we often don't. There is also an "opportunity of the commons." While most politicians conclude that, depending on the resource, efficient management requires either privatization or government ownership, Ostrom finds examples of a third way: "self-organizing forms of collective action," as she put it in an interview a few years ago. Her message is to be wary of government promises.
"Field studies in all parts of the world have found that local groups of resource users, sometimes by themselves and sometimes with the assistance of external actors, have created a wide diversity of institutional arrangements for cooperating with common-pool resources."
She has studied, for example, self-governing irrigation systems in Nepal and found successes never anticipated in the textbooks. "Irrigation systems built and governed by the farmers themselves are on average in better repair, deliver more water, and have higher agricultural productivity than those provided and managed by a government agency. ... (F)armers craft their own rules, which frequently offset the perverse incentives they face in their particular physical and cultural settings. These rules may be almost invisible to outsiders. ..."
In Governing the Commons, she writes about self-governed commons in Switzerland, Japan, the Philippines, and elsewhere that date back hundreds of years. For example, in the alpine village of Tobel, Switzerland, herdsmen "tend village cattle on communally owned alpine meadows" under rules of an association created in 1483. The rules govern who has access to the grazing lands and how many cows a herdsman can place there, preventing overgrazing. The cattle owners themselves run the association and handle the monitoring. Sanctions are imposed for violation of the rules, but compliance is high.
Don't mistake the association for government. Rather, it is a private co-op designed for a narrow purpose. "All of the Swiss institutions used to govern commonly owned alpine meadows have one obvious similarity—the appropriators themselves make all the major decisions about the use of the CPR."
She found something similar in Japanese villages, where residents use private property for some agricultural purposes and self-managed common forests for others.
Solutions imposed by external authority were not necessary—and usually self-defeating: "Academics, aid donors, international nongovernmental organizations, central governments, and local citizens need to learn and relearn that no government can develop the full array of knowledge, institutions and social capital needed to govern development efficiently and sustainably. ..."
How about that? Freedom works.
John Stossel will soon host Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity.
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Snowmaking in Duluth, and I wonder if you have to melt down your Lexus to get the golf cart credit (you don't). My personal favorite has got to be no. 3. $219k to study the sex lives of female college freshmen. I know people who would do that thankless work for nothing - for the good of the country.
Where in the C (Constitution) is the federal authority to build baseball training parks in 2 cities, to neuter in Wichita, to make snow in Duluth, to see if the girls are getting any? Seriously, this stuff isn't funny.
http://republican.senate.gov/public/index.cfm?FuseAction=blogs.view&blog_id=25c154db-0f1c-41ed-9f99-c82c2e06b6da
10 Stimulus Projects To Remember
Mapping Rabbit Feces, Studying Facebook, And Building MLB Spring Training Facilities Are All Financed By The American Taxpayer
1. $300,000 FOR MAPPING RADIOACTIVE RABBIT FECES:
“A Week Mapping Radioactive Rabbit Feces With Detectors Mounted On A Helicopter Flying 50 Feet Over The Desert Scrub. … $300,000 In Federal Stimulus Money.” “A government contractor at Hanford, in south-central Washington State, just spent a week mapping radioactive rabbit feces with detectors mounted on a helicopter flying 50 feet over the desert scrub. … the helicopter flights, which covered 13.7 square miles and were paid for with $300,000 in federal stimulus money, took place in an area that had never been used by the bomb makers. … Marylia Kelley, the executive director of a California group called Tri-Valley Communities Against a Radioactive Environment, said the rabbit cleanup was ‘kind of funny, in a sick way.’” (“Even Rabbit Droppings Count In Nuclear Cleanup,” The New York Times, 10/14/09)
2. $4,200-$5,500 TAX CREDIT FOR PURCHASING GOLF CARTS:
“President Obama’s Stimulus Plan… Is Now Paying Americans To Buy That Great Necessity Of Modern Life, The Golf Cart.” “Thanks to the federal tax credit to buy high-mileage cars that was part of President Obama's stimulus plan, Uncle Sam is now paying Americans to buy that great necessity of modern life, the golf cart. The federal credit provides from $4,200 to $5,500 for the purchase of an electric vehicle, and when it is combined with similar incentive plans in many states the tax credits can pay for nearly the entire cost of a golf cart.” (“Cash For Clubbers,” The Wall Street Journal, 10/17/09)
3. $219,000 TO STUDY THE SEX LIVES OF FEMALE COLLEGE FRESHMEN:
“Five Hundred Syracuse University Freshmen Will Divulge The Details Of Their Sex Lives … $219,000 In Stimulus Funds For The Study.” “Five hundred Syracuse University freshmen will divulge the details of their sex lives as part of a women's health study called ‘The Women's Health Project,’ being conducted by Michael Carey, SU professor of psychology and medicine. Carey has found himself the target of nationwide criticism from conservatives since he received $219,000 in stimulus funds for the study, which looks at the sex patterns of college women.” (“SU Sex Study Raises Concern,” The [Syracuse] Daily Orange, 9/8/09)
4. $1 MILLION TO RENOVATE “THE SUNSET STRIP”:
“Sunset Boulevard, Also Known As ‘The Sunset Strip’ And One Of The Most Famous Streets In The World, Will Be Getting A $7 Million Facelift After More Than 75 Years Of Use, With A Free Million Dollar Nose Job Coming From Uncle Sam. The City of West Hollywood Council received one million dollars in federal funds from the Federal American Reinvestment and Recovery Act (ARRA), (otherwise known as the $700 billion federal stimulus package), for the long-planned Sunset Strip Beautification Project, which is scheduled to break ground soon. The guaranteed funding will allow the City to increase the already nearly $7 million budgeted for this project by an additional $1,105,000, meaning enhancements to a project that already included the resurfacing of the roadway, sidewalk and improved landscaping.” (“Feds Stimulus Sunset Strip Beautification Project,” WeHoNews, 9/28/09)
5. $2.3 MILLION FOR BUG RESEARCH IN CONNECTICUT:
“$2.3 Million” “Federal Economic Stimulus Cash” For “Rearing Large Numbers Of Arthropods” Such As “Nasty Invasive Insects Like The Asian Longhorned Beetle, The Nun Moth, And The Infamous ‘Predator Of The Hemlock,’ The Woolly Adelgid.” “‘Rearing large numbers of arthropods’ probably isn't the first thing that comes to mind when you think about using Connecticut's $3 billion in federal economic stimulus cash. But the U.S. Forest Service is using part of the $2.3 million it's spending here to fix up a quarantine research facility in Ansonia. (The arthropods, by the way, are nasty invasive insects like the Asian longhorned beetle, the nun moth, and the infamous ‘predator of the hemlock,’ the woolly adelgid.)” (“Money For Nothing,” New Haven Advocate, 9/1/09)
6. $6 MILLION FOR A SNOWMAKING FACILITY IN THE 15th SNOWIEST CITY IN THE COUNTRY:
“The Other Third Of The Stimulus, Government Infrastructure Spending, Has Been The Most Controversial From The Start. Some Proposals Have Been Criticized As Wasteful, Such As A $6 Million Snowmaking Facility In Duluth, Minn.” (“The Challenge In Counting Stimulus Returns,” The Wall Street Journal, 10/27/09) (Top 101 Cities With The Highest Average Snowfall In A Year (Population 50,000+))
7. $500,000 TO STUDY “SOCIAL NETWORKS LIKE FACEBOOK”:
“A $498,000, Three-Year Grant” To Study “Social Networks Like Facebook.” “Millions of Internet users have been enjoying the fun -- and free -- services provided by advertiser-supported online social networks like Facebook. But Landon Cox, a Duke University assistant professor of computer science, worries about the possible down side -- privacy problems. … To delve deeper into these issues and begin the search for alternatives, Cox recently won a $498,000, three-year grant from the National Science Foundation. The funding is part of the federal stimulus package called the American Recovery & Reinvestment Act of 2009 (ARRA).” (“Seeking Privacy In The Clouds: Research Aims At Isolating Social Network Information From ‘Control Of A Central Entity,’” Science Daily, 10/15/09)
8. $380,000 TO SPAY AND NEUTER PETS IN WICHITA, KANSAS:
“The City Recently Launched A $55,000 Project To Spay And Neuter Pets Owned By Low-Income Residents. Unwanted Pets Ultimately Cost $240 Apiece To Collect, Board And Euthanize, the city estimates, so the program covering 800 animals should save taxpayers money in the long run. The stimulative effect? That is harder to gauge. With the $380,000 overall Wichita has received from its share of the stimulus, the city estimates that it is directly funding 32 jobs so far. The bigger job producers, such as construction and transit projects, are due to start in the coming months.” (“The Challenge In Counting Stimulus Returns,” The Wall Street Journal, 10/27/09)
9. $3.4 MILLION FOR A TURTLE TUNNEL IN FLORIDA:
“The Other Third Of The Stimulus, Government Infrastructure Spending, Has Been The Most Controversial From The Start. Some Proposals Have Been Criticized As Wasteful, Such As … A $3.4 Million ‘Ecopassage’ To Help Turtles Cross A Highway In Tallahassee, Fla.” (“The Challenge In Counting Stimulus Returns,” The Wall Street Journal, 10/27/09)
10. $30 MILLION FOR A SPRING TRAINING BASEBALL COMPLEX FOR THE ARIZONA DIAMONDBACKS AND COLORADO ROCKIES:
“A Big Chunk Of The Money That Will Pay For A New Spring-Training Baseball Complex On Tribal Land In The East Valley Will Be Delivered Via A Financing Program That's Part Of The Federal Economic-Stimulus Plan. The Salt River Pima-Maricopa Indian Community says it may borrow as much as $30 million of the estimated cost of the $100 million complex near Scottsdale that will become the spring home of the Arizona Diamondbacks and the Colorado Rockies.” (“Stimulus To Help Tribe Build Baseball Complex,” The Arizona Republic, 9/17/09)
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$24K per cash for clunker sold, and on $250K per job created. Such a deal. . . .
Stimulus Job Creation = Bigger Government
by Veronique de Rugy
On Friday, in the name of holy transparency, the White House released the list of jobs created or saved with the stimulus funds. Now, let’s assume that the government can create jobs even though it can’t. Let’s assume that “job saved” is not the lamest excuse for government spending I have heard in my life time as a budget analyst. And let’s look at what this data means.
The White House claims that 640,329 were created or saved. That, by the way, is way less than what Christina Romer claimed would be created. Last week, she mentioned 1.4 million during a Joint Committee hearing. Remember.
First, $159 billion has been spent so far. That’s $248,273 per job.
However, when you look at some specific contracts that were awarded you find that some jobs were created or saved at an insane cost to taxpayers. For instance, $1,359,633,501 were awarded to CH2M WG IDAHO LLC, in WA to create 2,183 jobs. That’s $622,827 per job. That’s not as bad though as the $258,646,800 awarded to the Brookhaven Science Associates, LLC in NY, to create 25 jobs. That’s over $10.3 million per job.
I would be happy with one of these jobs.
Second, while the administration is promising good and in time reporting, we can see that it’s far from being the case. Agencies report having spent $207.3Billion and yet only $36,688,660,161 were reported by states. That’s a big gap, isn’t it?
Third, some 85 percent of the money went to 4 agencies: HHS, Labor, Education and Social Security. That money wasn’t spent on shovel ready projects. For instance, some of the HHS funds went to some rural high school and college students from Arkansas, Kentucky and Tennessee to conduct medical research this summer with a team of leading scientists at Vanderbilt University. The Department of Labor spent $11,058,877 in unemployment insurance (UI) modernization incentive funds to the state of West Virginia. And the Department of Education is mainly spending its money to keep union protected school teachers in their jobs. Not really shovel ready projects, are they?
But the most relevant information on Recovery.gov is that most of the jobs created or saved are in the public sector. For instance, according to Vice President Biden, out of the 640,329 jobs, 325,000 went to education and 80,000 to construction jobs. The difference we will soon find out is going to other government jobs.
You need more evidence? 13,080 grants went to the private sector, and 116,625 went to feral agencies.
So even if we assume that the government could create jobs by spending our money, we can see that what this money is being spent on is big government. Or bigger government I should say.
So when you think that, on top of everything, the government can’t create jobs (here and here), this data is transparently depressing.
http://biggovernment.com/2009/11/02/stimulus-job-creation-bigger-government/
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In the Battle for Stimulus Jobs, Shoe Store Owner Tells War Story
Louise Radnofsky reports on how the stimulus money is being spent.
How did Kentucky shoe store owner Buddy Moore save nine jobs with just $889.60 in federal stimulus money? He didn’t, and that’s turning into a big headache for him.
Moore’s store in Campbellsville, Ky., filed one of 156,614 reports from recipients of stimulus dollars designed to show how money from the $787 billion program is being spent, and how many jobs the funds have created or saved.
Moore’s slice of the stimulus came in an $889.60 order from the Army Corps of Engineers for nine pairs of work boots for a stimulus project.
Moore says he’s been supplying the Corps with boots for at least two decades. This year, because he provided safety shoes for work funded by the stimulus package, he said he got a call from the Corps telling him he had to fill out a report for Recovery.gov detailing how he’d used the $889.60, and how many jobs it had helped him to create or save. He later got another call, asking him if he’d finished the report.
“The paperwork was unreal,” said Moore, who added that he tried to figure out how to file the forms online, then gave up and asked his daughter to help.
Paula Moore-Kirby, 42 years old, had less trouble with the Web site, but couldn’t work out how to answer the question about how many jobs her father had created or saved. She couldn’t leave it blank, either, she said. After several calls to a helpline for recipients she came away with the impression that she would hear back if there was a problem with her response, and have a chance to correct it. So with 15 minutes to go before the reporting deadline, she sent in her answer: nine jobs, because her father helped nine members of the Corps to work.
“You could fill out the form in 10 minutes, but we were trying to fill out the form correctly,” she said, guessing that she spent up to eight hours on it in total.
That was a few weeks ago. The only thing the Moores heard after that was that because they’d received less than $25,000 in stimulus money, they shouldn’t have reported in the first place.
Today, three days after the reports were made public, local television stations and national newspapers including The Wall Street Journal started telephoning Moore, because his nine jobs for $889.60 in stimulus money makes him look like one of the most effective spenders in the country.
Kirby-Moore says she then got a call from her dad, asking her, ‘Paula, I thought you knew what you were doing… What did you put in that form?”
“I thought it was the right answer,” she said. “It is sad that creating nine jobs should get so much attention… If anybody’s looking for instant fame, I guess we’ve found the way.”
“The question, I would like to know is: How do you answer that? Did we create zero? Is it creating a job because they have boots and go out and work for the Corps? I would be really curious to hear how somebody does create a job. The formula is out there for anyone to create, and it’s just so difficult,” she said.
Republicans have criticized the Obama administration’s claims – based on forms like the one filed by Kirby-Moore — that the stimulus has created or saved 640,000 jobs. What counts, they say, are the number of Americans without jobs and the rising unemployment rate.
Nobody answered the phone at the U.S. Army Corps of Engineers in Louisville, Ky., this evening.
UPDATE: A spokeswoman for the Army Corps of Engineers in Louisville said that the stimulus reporting requirements were cumbersome, but important, and that the Corps had contracts ranging up to millions of dollars in the region. “It’s painstaking; it’s very, very detailed record keeping,” said Carol Labashosky. “We’re certainly up to the task, but if we inadvertently caused him some consternation, we apologize.”
http://blogs.wsj.com/washwire/2009/11/02/in-the-battle-for-stimulus-jobs-shoe-store-owner-offers-war-story/
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Oy fg vey.
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www.chicagotribune.com/news/education/chi-education-stimulus-04-nov04,0,4659134.story
chicagotribune.com
TRIBUNE WATCHDOG
Illinois data on stimulus-related jobs saved, created don't add up
Districts say job numbers attributed to them inaccurate; totals ignore Chicago
By Bob Secter and Erika Slife
Tribune reporters
November 4, 2009
More than $4.7 million in federal stimulus aid so far has been funneled to schools in North Chicago, and state and federal officials say that money has saved the jobs of 473 teachers.
Problem is, the district employs only 290 teachers.
"That other number, I don't know where that came from," said Lauri Hakanen, superintendent of North Chicago Community Unit Schools District 187.
The Obama administration last week released the first round of data designed to underpin the worthiness of its economic stimulus plan, which so far has directed $1.25 billion to Illinois schools. That money has helped save or create 14,330 school jobs in the state, the administration claimed.
But those statistics, compiled initially by the Illinois State Board of Education, appear riddled with anomalies that raise questions about their validity, according to a Tribune analysis of district-by-district stimulus spending and other state data. Many local school officials were perplexed by the stimulus data attributed to their districts.
In the official report, Wilmette Public Schools District 39 was credited with 166 jobs saved by stimulus aid. Superintendent Raymond Lechner said the number should be zero.
At Dolton-Riverdale School District 148, stimulus funds were said to have saved the equivalent of 382 full-time teaching jobs -- 142 more than the district actually has.
A similar discrepancy was found in data for Kankakee School District 111, where the stimulus report logged the equivalent of 665 full-time jobs saved. "That's impossible," a top Kankakee school official said, adding that the entire payroll -- full and part time -- is 600 workers.
But if that suggests the numbers for Illinois may be artificially inflated, then consider the following, which could suggest an undercount:
The totals do not reflect any school jobs saved or created in Chicago, the state's biggest district and the recipient of at least $293 million in stimulus funds. Chicago schools budget chief Christina Herzog said the district easily saved at least 1,200 jobs because of the stimulus, but didn't report them as such because of directives from the state board. State officials dispute that.
The district-specific data, obtained through the Freedom of Information Act, also underscore how little of the money has been spent to expand educational opportunities. Statewide, districts reported using most of their stimulus funds to prevent layoffs, with the equivalent of just 222 full-time jobs added to payrolls.
Last week's stimulus report came against the backdrop of a raging debate over the wisdom of President Barack Obama's entire $787 billion stimulus program. Critics on the right contend it has ballooned the deficit while failing to rapidly revive the economy. The administration said the stimulus was designed to build a lasting recovery and has helped avert an even more drastic downturn.
Problems with the Illinois stimulus data illustrate how difficult it is to benchmark the impact of so sprawling an initiative. Many districts were unclear about what they should report. And there also may have been confusion over how the data were collated once the figures arrived at the state level.
It appears the state treasury -- not students or school districts -- was the prime beneficiary of the education stimulus jackpot in Illinois. In great measure, funds simply were used to replace general aid payments already owed to local districts by the state. That gave Gov. Pat Quinn breathing room in his struggle to rein in a whopping two-year budget deficit of more than $10 billion.
Confusion reigns over why the numbers for many districts appear so off. Responsibility for collecting data and sending the figures to Washington fell to Quinn's office, which turned the task over to the state board.
Board spokesman Matt Vanover said the data might be flawed and said the information was only as good as the numbers sent in by local districts. But officials of several districts contacted by the Tribune insisted they never provided the state with the jobs numbers used in the official tabulation.
Herzog said the jobs saved in the city weren't reflected in official paperwork because the state directed that layoff notices had to have at least been served and then rescinded before jobs could be counted as retained.
Vanover said Chicago received the same guidance as every other district in the state, but apparently interpreted it differently.
Chicago's omission from the stimulus data is not without irony. The federal overseer of school stimulus spending is U.S. Education Secretary Arne Duncan, who until early this year was the CEO of the Chicago schools.
Sandra Abrevaya, a spokeswoman for Duncan, said the discrepancies the Tribune uncovered in Illinois jobs data are "really troubling" and would be investigated and corrected if necessary. Still, she said, similar jobs reports from other states appear more solid.
"At this point, the department feels good about the number overall," she said.
Some local school officials suggested that the jobs data sent to the state appeared to have been overcounted in the official tabulation.
Last spring, Dolton-Riverdale received $3.6 million in stimulus money and reported to the state that the money saved 181 teaching jobs. A follow-up report this fall on another installment of $750,000 brought the total to 201. The official state report states that stimulus money saved 382 jobs.
But Carolyn Keith, the district's comptroller, said the data from the two reports overlap and should not be added together.
The report from the state board listed jobs being retained or created thanks to the stimulus in 348 local districts, but more than half that total was concentrated in just 35 districts.
By contrast, the numbers reported for many districts -- even big ones -- were conservative. Naperville Community Unit School District 203, with 18,000 students, reported just six jobs created with stimulus money.
In Schaumburg-based School District 54, Superintendent Ed Rafferty said the state's estimate of 250 jobs preserved or created was accurate, though more than half belonged to a multidistrict preschool program that includes District 54.
Just a handful of the jobs were new, Rafferty said, and he warned that every position propped up by stimulus money would be in jeopardy when the program expires. "Unless there's a guarantee of continuation of (federal or state) money, the vast majority of these will be eliminated because there won't be local resources to fund them," he said.
Tribune reporter John Keilman contributed. bsecter@tribune.com
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And a second one today. The gall of some of those spinning this bad math is appalling:
STIMULUS WATCH: Salary raise counted as saved job
By BRETT J. BLACKLEDGE and MATT APUZZO – 15 hours ago
WASHINGTON — President Barack Obama's economic recovery program saved 935 jobs at the Southwest Georgia Community Action Council, an impressive success story for the stimulus plan. Trouble is, only 508 people work there.
The Georgia nonprofit's inflated job count is among persisting errors in the government's latest effort to measure the effect of the $787 billion stimulus plan despite White House promises last week that the new data would undergo an "extensive review" to root out errors discovered in an earlier report.
About two-thirds of the 14,506 jobs claimed to be saved under one federal office, the Administration for Children and Families at Health and Human Services, actually weren't saved at all, according to a review of the latest data by The Associated Press. Instead, that figure includes more than 9,300 existing employees in hundreds of local agencies who received pay raises and benefits and whose jobs weren't saved.
That type of accounting was found in an earlier AP review of stimulus jobs, which the Obama administration said was misleading because most of the government's job-counting errors were being fixed in the new data.
The administration now acknowledges overcounting in the new numbers for the HHS program. Elizabeth Oxhorn, a spokeswoman for the White House recovery office, said the Obama administration was reviewing the Head Start data "to determine how and if it will be counted."
But officials defended the practice of counting raises as saved jobs.
"If I give you a raise, it is going to save a portion of your job," HHS spokesman Luis Rosero said.
The latest stimulus report, released Friday, significantly overstates the number of jobs spared with money from programs serving families and children, mostly the Head Start preschool program. The report shows hundreds of the programs used nearly $323 million to provide pay raises and other benefits to their existing employees.
The raises themselves were appropriate — the stimulus law set aside money for Head Start salary increases — but converting that number into jobs proved difficult. The Obama administration told Head Start officials to consider a fraction of each employee as a job saved.
"That's more than ridiculous," said Antonia Ferrier, a spokeswoman for Republican House Minority Leader John Boehner.
Many Head Start programs around the country went further, counting everyone who received a raise as a job saved.
"It's a glitch in the system," said Ben Allen, the research director at the National Head Start Association. "There was some misunderstanding among some in the Head Start community about completing the reporting requirements."
Allen said a cost-of-living adjustment "may not be viewed traditionally as a job saved, but one could interpret it that, by providing COLA, you're retaining staff."
The Bergen County Community Action Program in Hackensack, N.J., noted the nearly $213,000 it received went to cover raises for existing staff only, but it also reported saving 85 jobs.
At Southwest Georgia Community Action Council in Moultrie, Ga., director Myrtis Mulkey-Ndawula said she followed the guidelines the Obama administration provided. She said she multiplied the 508 employees by 1.84 — the percentage pay raise they received — and came up with 935 jobs saved.
"I would say it's confusing at best," she said. "But we followed the instructions we were given."
Ed DeSeve, who oversees the stimulus at the White House, said the Head Start numbers "represent a few percent of all jobs reported" and said the problems would probably be balanced out by other errors that underreported jobs.
"So we don't expect any corrections to this data to meaningfully impact the total 640,000 direct jobs," DeSeve said.
More than 250 other community agencies in the U.S. similarly reported saving jobs when using the money to give pay raises, to pay for training and continuing education, to extend employee work hours or to buy equipment, according to their spending reports.
Other agencies didn't count the raises as jobs saved, reporting zero jobs.
Last week's stimulus report claimed 640,000 jobs saved or created by the economic recovery plan so far. Those jobs came from 156,614 federal contracts, grants and loans awarded to more than 62,000 recipients, worth a total of $215 billion.
Obama has promised the stimulus would save or create 3.5 million jobs by the end of next year, and the data released Friday represented the first head count toward that goal.
http://www.google.com/hostednews/ap/article/ALeqM5jMNoef6xDenBbHWO0Im6rIjDmAgAD9BOJH300
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Obama's accountants are beginning to look like a long line of mathematicians getting out of a clown car. . . .
Don't count on stimulus job tally
Many employment reports from sources in Wisconsin are inflated
By Ben Poston of the Journal Sentinel
Posted: Nov. 5, 2009
A stimulus job report that says more than 10,000 jobs were saved or created in Wisconsin is rife with errors, double counting and inflated numbers based more on satisfying federal formulas than creating real jobs, a Journal Sentinel review has found.
In one case, five jobs were mistakenly listed as 50 - and then counted twice. In another, pay raises to workers were listed as saving more than 100 jobs. And in another, jobs were listed as saved even though the money had not been received and no work on the project had begun.
The problems mirror those surfacing around the country, as the federal numbers claiming 640,000 jobs created or saved by stimulus money are being scrutinized.
Among the Journal Sentinel's findings:
Double-counted jobs: About $7.3&enspmillion of federal money will flow to the Parkland Sanitary District in Douglas County to replace its sewer system, a project listed as creating or saving 100 jobs even though work won't start until this spring, federal recovery data shows.
But that number is inflated by 95 jobs, Parkland Sanitary District treasurer Eric Shaffer admitted.
When reporting to the U.S. Department of Agriculture's online reporting system, Schaffer meant to type "5" but mistakenly added a zero - and that 50-job figure appears twice in the federal data because it was a combined grant and loan. He tried to correct the error, but was told it was too late for the federal reporting deadline.
"We are volunteers, and we made a mistake," Shaffer said. "It was a simple typographical error, and we tried to fix it. Now that we understand the system, it will be much easier."
Meanwhile, three other Wisconsin towns reported jobs on combined federal loans and grants that were counted twice, doubling their totals from 35 to 70 jobs, records show.
Any erroneous job figures won't be corrected until January, said Ed Pound, communications director at the federal Recovery Accountability and Transparency Board, the oversight panel for stimulus money.
"Recipients are going to make mistakes, and we've had a fair number of those," Pound said. "But we said from the very beginning, there were going to be errors because this is the first time people have done this. It's just not surprising."
Pay raises: United Migrant Opportunity Services based in Milwaukee reported saving 113 jobs through spending $18,000 of a Head Start preschool grant, or about $160 per job. The award provided their employees a 1.8% cost-of-living wage increase. The nonprofit provides services to migrant farm workers in Wisconsin and other states.
"We think the 113 jobs were preserved, but more importantly, the quality of teachers and Head Start child development staff was maintained," UMOS spokesman Rod Ritcherson said.
In total, 157 jobs were reported saved as part of 17 Head Start grants in Wisconsin, all attributed to cost-of-living increases.
A spokesman for the U.S. Department of Health and Human Services, Luis Rosero, said the Head Start pay raises "are still under review to determine how and if estimates will be counted. We continue to work with recipients to update and correct their estimates."
Murky numbers: Nearly half the jobs reported in Wisconsin - 4,670 - came from preserving teaching, administrative and custodial positions at schools, according to the Wisconsin Department of Public Instruction.
For instance, Milwaukee Public Schools said 996 jobs were saved by the $75.8&enspmillion it received in state stabilization money. Those saved jobs represent about 9% of the district's total staff.
Without the boost in funding, MPS would have faced a budget shortfall, but it's unlikely to have been resolved exclusively through staff layoffs, MPS finance director Ron Vavrik said.
"We would have had to make severe cuts both in personnel and programs," he said. "No matter what would happen, there is no way we could have avoided cutting positions. It might have been more; it might have been less."
Hard to verify
Last Friday, the White House reported that about 640,000 jobs were created or saved by the stimulus package. The numbers, however, are difficult to verify because of the guesswork involved in determining whether businesses had used stimulus funding to retain workers who otherwise would have been laid off.
Tom Schatz, president of Citizens Against Government Waste, a national watchdog group, questions the legitimacy of the job figures in Wisconsin and other states.
"It's difficult to believe because the quality of the information is questionable," Schatz said. "There is no penalty for reporting inaccurately. It certainly has raised questions in the taxpayers' minds about what kind of value they are getting for the stimulus."
Chris Patton, policy director for Gov. Jim Doyle, defended the quality of the information submitted by the state. The Journal Sentinel found no problems with state-submitted data, but rather information that contractors, agencies and local governments reported directly to the federal government.
"I think we have a high degree of quality now and on future reporting periods," Patton said. "We can't speak to any inconsistencies outside of the state data."
Schatz criticized the stimulus package, saying it just preserves existing government and education jobs.
"It's just bailing out the states," he said. "They are not taking steps they should to reduce waste and spending. It really just postpones the day they will have to make tough decisions."
Patton said channeling stimulus money to school districts avoided deep reductions.
"Without the recovery funding, we would have been faced with a $550&enspmillion cut to educational funding that would have had dramatic impacts like layoffs and skyrocketing tax levies," he said.
The newspaper's analysis found other inconsistencies:
•&enspC3T Construction Co., a general contracting company in Milwaukee, listed 24 jobs retained for projects on which no work had begun and no stimulus money had been received, records show. The company got more than $7&enspmillion for five contracts, including replacing the roof and fire-alarm systems at the Milwaukee Veterans Affairs Medical Center.
C3T Vice President Jim Hubbell said the number represented a projection of full-time jobs retained for the duration of the projects.
•&enspOwners at five Section 8 housing complexes in Madison and Milwaukee reported saving 38 jobs with more than $540,000 in additional rental assistance for low-income residents, though they acknowledged no new jobs were created.
For instance, $117,000 in federal Housing and Urban Development money went to 3700 Green Tree Corp., a subsidized housing project on Milwaukee's northwest side, which reported saving 16 jobs.
Carmen Porco, housing director at Green Tree, said there would have been only five job losses if not for the stimulus money. However, getting that money allowed the housing complex to continue its operations, he said.
"Where was it written that the only purpose of the stimulus was to create jobs?" Porco said. "What was really at stake was the rental assistance for residents - that's a significant issue because they continue to live in the apartment and not on the street."
Andrea Mead, spokeswoman for the U.S. Department of Housing and Urban Development, said project-based rental assistance is a longstanding federal program that had become underfundedand was supplemented with stimulus money.
Indirect impact
Officials are touting more than just the direct jobs created or saved, also pointing to harder-to-quantify "indirect" and "induced" jobs.
For instance, according to the state, some 470 jobs have been created or saved so far by road and bridge projects funded with grant money from the Federal Highway Administration.
The state Transportation Department estimates the "total employment impact" at 974 if direct, indirect and induced jobs are counted, according to federal data. Likewise, the federal government claims about 1&enspmillion jobs have been created or saved through the stimulus spending when viewed this way.
An indirect job includes one created by an asphalt plant that supplied material for a road construction project. An example of an induced job: A waitress at a restaurant where construction workers eat lunch.
More than $10&enspmillion spent so far on the I-94 widening project in Kenosha County has created 45 jobs so far, Transportation Department data shows. But the department puts the total employment impact of the interstate project at more than twice that - 113 jobs - if indirect and induced jobs are counted.
http://www.jsonline.com/news/wisconsin/69254347.html
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"Obama's accountants are beginning to look like a long line of mathematicians getting out of a clown car. . ."
When they cleverly invented that turn of phrase, created or saved, we were put on notice that there would be no real accounting for the results of the trillions and that they already knew there may be no net job creation whatsoever in the private sector.
If the purpose of the public investment is to jump-start the PRIVATE economy, the only job creation that count are new, real jobs in the private sector that stand on their own AFTER the stimulus is done.
At this point it will take hope, change and a conservative takeover of the government to get that number back up to ZERO.
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SBA bailouts draw little notice
Loan program to aid small firms is expected to see 60% default rate
By Kimberly Kindy
Washington Post Staff Writer
Friday, November 6, 2009
A federal bailout of AIG last year attracted angry protesters who for weeks gathered outside the insurance giant's headquarters in New York and stalked company executives at their homes.
But there has been little response to the bailout of Peter Miller, who runs a two-person lobster-fishing crew in Maine.
Miller, who gets 50 cents on the dollar for his catch these days, a few months ago received a $35,000 loan from a new Small Business Administration program that was crafted in February during final negotiations on the federal stimulus package. The loan program offers an unprecedented 100 percent guarantee to banks, vs. the SBA's standard 75 percent. The loans' anticipated default rate is 60 percent, compared with the agency's average 10 percent. And all of the funds must be used to repay other delinquent loans -- another first for the SBA.
"Logic tells you this is a bad idea. By definition these businesses are already failing, but we are lacking standards right now; our world has been turned upside down," said Barry Bosworth, an economist with the Brookings Institution.
Just how $255 million in federal funds was set aside for the program -- called American Recovery Capital -- is a classic Washington story.
When Congress negotiated the final details of the American Recovery and Reinvestment Act, Democrats needed to secure a few key votes from Republican colleagues for the stimulus bill to pass. This allowed Sen. Olympia J. Snowe (R-Maine) to ask for a few concessions -- including a loan program aimed at helping her home state's ailing lobster industry.
The small-business owners in this industry are fishermen whose companies typically consist of little more than a boat, some traps and a small crew.
And their attitudes about the big guys' bailouts -- coupled with complaints that the SBA rescue for them may be too risky -- are shaping a new conversation as the money rolls out to a variety of small businesses.
"The way I feel about it is if we all default, it's just a drop in the bucket compared to what they gave AIG," said Miller, whose son also owns a lobster boat and who also secured his own SBA loan. "We're not looking for charity. We will work hard to pay it back."
Snowe also defended the program as a crucial "lifeline" to small businesses during "this particularly difficult economic time." But Snowe said she was troubled by the estimated default rate of 60 percent and hoped the SBA would take "corrective action" to ensure that only "viable" businesses receive the funds, as the legislation stipulates.
For their part, SBA officials said their borrower requirements are already so strict that they face growing criticism from the small-business community for creating too many barriers to the money. The first loan wasn't made until June, and so far $121.9 million of the $255 million has gone to 3,767 business owners.
The biggest problem that economists see with such rescue programs is over the long haul. The SBA loan is supposed to be a one-time thing, set to expire as soon as the money is doled out, which should be some time next year.
But how will federal agencies and Congress roll back such programs if there has been no economic rebound by that time? What about when things do bounce back?
Bosworth and other economists said history shows that taking away such programs can be difficult. As evidence, they cite programs that have lingered long past their sunset dates, such as the Agriculture Department's production flexibility contracts (now called direct payments) in the 1996 Freedom to Farm Act. That program was supposed to phase out over seven years as farmers transitioned to a market system that did not rely on government subsidies. More than 1 million farmers who received the original payments continue to receive them, according to data from the Environmental Working Group.
"When the crisis is over, we will have to find a way to clean up this mess," Bosworth said. "But how the hell are we going to turn this back to common sense again?"
http://www.washingtonpost.com/wp-dyn/content/article/2009/11/05/AR2009110505178.html
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One of the benchmark portions of the stimulus was the $25 billion devoted to
creating green jobs. Professor Obama imagined a world of greener buildings and green
jobs miraculously sprouting all across the fruited plains. So, he dumped $25 billion
into painting shingles white and whatever else it is they do to 'green' buildings.
The result? Zero jobs. Just another government 'success' story. READ
http://hotair.com/archives/2009/11/09/25-billion-stimulus-program-produces-0-jobs/
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[youtube]http://www.youtube.com/watch?v=5P8hyMG3qsM&feature=player_embedded[/youtube]
http://www.scrappleface.com/
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Stimulus job boost in state exaggerated, review finds
Errors, incomplete data, estimated positions go into federal report
By Jenn Abelson and Todd Wallack, Globe Staff | November 11, 2009
While Massachusetts recipients of federal stimulus money collectively report 12,374 jobs saved or created, a Globe review shows that number is wildly exaggerated. Organizations that received stimulus money miscounted jobs, filed erroneous figures, or claimed jobs for work that has not yet started.
The Globe’s finding is based on the federal government’s just-released accounts of stimulus spending at the end of October. It lists the nearly $4 billion in stimulus awards made to an array of Massachusetts government agencies, universities, hospitals, private businesses, and nonprofit organizations, and notes how many jobs each created or saved.
But in interviews with recipients, the Globe found that several openly acknowledged creating far fewer jobs than they have been credited for.
One of the largest reported jobs figures comes from Bridgewater State College, which is listed as using $77,181 in stimulus money for 160 full-time work-study jobs for students. But Bridgewater State spokesman Bryan Baldwin said the college made a mistake and the actual number of new jobs was “almost nothing.’’ Bridgewater has submitted a correction, but it is not yet reflected in the report.
In other cases, federal money that recipients already receive annually - subsidies for affordable housing, for example - was reclassified this year as stimulus spending, and the existing jobs already supported by those programs were credited to stimulus spending. Some of these recipients said they did not even know the money they were getting was classified as stimulus funds until September, when federal officials told them they had to file reports.
“There were no jobs created. It was just shuffling around of the funds,’’ said Susan Kelly, director of property management for Boston Land Co., which reported retaining 26 jobs with $2.7 million in rental subsidies for its affordable housing developments in Waltham. “It’s hard to figure out if you did the paperwork right. We never asked for this.’’
The federal stimulus report for Massachusetts has so many errors, missing data, or estimates instead of actual job counts that it may be impossible to accurately tally how many people have been employed by the massive infusion of federal money. Massachusetts is expected to receive an estimated $1 billion more in stimulus contracts, grants, and loans.
The stimulus bill - a $787 billion package of tax breaks, expanded government benefits, and infrastructure improvements - was signed into law in February by President Obama, who said it would create and save jobs by preserving local government services and spurring short- and long-term economic development.
To be sure, the legislation has accomplished an important goal: funding public services facing the ax after the recession created gaping shortfalls in state and local government budgets. So Worcester and Lynn, for example, were able to keep police officers targeted for layoffs, schools across the state lost far fewer teachers, and community agencies preserved staff in the face of mounting demands for social services.
The president also said the legislation demanded an unprecedented level of accounting from recipients, who report on the uses of the money and the jobs via a massive online system, www.Recovery.gov.
Clearly, the first comprehensive accounting had shortcomings.
Recipients said they found the reporting system confusing, leading them to submit information erroneously, and leaving them unable to correct mistakes in their reports. Additionally, the government files are massive and unwieldy. Reports do not distinguish between newly created positions and those that were “retained.’’
“We see $15 million construction projects with no jobs, and a $900 shoe sale that created nine jobs. Both are obviously wrong,’’ said Michael Balsam, chief solutions officer for Onvia, a Seattle data company tracking the stimulus spending. “There were a lot of recipients that did not report. Those that did report have some data challenges - wrong data or missing data.’’
Cheryl Arvidson, assistant director of communications for the Recovery Accountability and Transparency Board, the federal government’s oversight panel for the stimulus money, acknowledged the problems recipients are having reporting job counts.
“Some people are going to be confused. Some people are manually entering data. We figured there would be innocent mistakes,’’ Arvidson said. “We anticipate that as we go forward . . . the data quality will be increasingly improved. We knew there was going to be a shake-out.’’
Some of the errors are striking: The community action agency based in Greenfield reported 90 full-time jobs associated with the $245,000 it got for its preschool Head Start program. That averages out to just $2,700 per full-time job. The agency said it used the money to give roughly 150 staffers cost-of-living raises. The figure reported on the federal report was a mistake, a result of a staffer’s misunderstanding of the filing instructions, said executive director Jane Sanders.
Several other Head Start agencies also reported using stimulus funds for pay raises and claimed jobs for it.
At Bridgewater State, Baldwin said the college mistakenly counted part-time student jobs as full time.
Some agencies that received stimulus money reported jobs for work that had not started. The Greater Lawrence Family Health Center reported 30 construction jobs “have been created,’’ even though it hadn’t begun construction on a $1.5 million renovation and expansion. Grant administrator Beth Melnikas said the health center does expect to hire 30 workers.
There was often variance among recipients of the same source of funding. Some did not report any positions retained; others did. Some used different methods and got different results.
For example, the City of Waltham said a $630,500 solar panel installation on the roof of City Hall created 10 jobs - even though the work had yet to begin. Revere spent $485,500 in stimulus funds to install solar panels on the roof of a city school. Revere’s job count? 64.
The city’s project consultants used a different formula than the one the federal government recommended.
“If not for this stimulus money, we would not have done the solar panel roof,’’ said Revere Mayor Thomas G. Ambrosino. “A lot went into this.’’
Another source of confusion over the job counting is because Congress this year labeled as stimulus initiatives several longstanding programs, such as student work-study and low-income rental subsidies, that it otherwise regularly funds in annual appropriations bills. In some cases Congress increased the funding amount, too, so the stimulus legislation was a vehicle for expanding government support for people in need.
Regardless of its label, the recipients treated the funding as business as usual. Only in September, when government officials told them they had to report on their stimulus spending, did they confront the issue of how to account for jobs associated with the money they received.
Massachusetts property owners received $75.5 million in rental subsidies from the stimulus bill, for a reported total of 437 jobs. Recipients of 27 of the 87 contracts reported zero jobs. The others, meanwhile, simply reported the number of employees working at the property. If they received two contracts, for a larger property, they reported the employee figure twice.
For example, Plumley Village East in Worcester listed 23 jobs for each of its two contracts for a total of 46 jobs, even though it has only 23 employees working throughout the complex.
“There was some confusion about what they were really looking for,’’ said Karen Kelleher, general counsel for Community Builders Inc., which runs Plumley Village.
Those overstated jobs are going to disappear from future counts. The Obama administration has recently determined the rental subsidies don’t have to be reported under the stimulus bill.
One of those property owners, meanwhile, is frustrated by his experience with the legislation. Robert Ercolini manages a 201-unit affordable housing development in Plymouth. After being notified his annual rental subsidies were classified as stimulus spending, Ercolini renewed a request to the US Department of Housing and Urban Development for more than $1 million to fix up the property, reasoning he would be creating jobs by hiring contractors. He was refused.
“After HUD denied me money to make needed improvements and actually create jobs,’’ Ercolini said, “it’s really funny to find out in September that I’ve been receiving stimulus funds all along and they want to know how many jobs we’ve saved or created.’’
By his count, the answer is: “No jobs.’’
Matt Carroll of the Globe Staff contributed to this report. Jenn Abelson can be reached at abelson@globe.com. Todd Wallack can be reached at twallack@globe.com.
http://www.boston.com/business/articles/2009/11/11/stimulus_fund_job_benefits_exaggerated_review_finds/
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Interactive map tracking all those claims of stimulus jobs that don't quite add up:
http://www.washingtonexaminer.com/maps/Bogus-jobs-created-or-saved-by-the-Stimulus.html
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"This is not really a real number of people," a CSU spokesman said. "It's like a budget number." :? This kind of thinking in a college?! Welll, it is California........... Quite frankly G. Dawg I am surprised you are still staying there.
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More cash for fewer clunkers
November 18, 2009 9:33 AM by Mark Thornton (Archive)
The CPI rose three tenths of one percent in October and one of the big factors was the rise in used car prices. Used car prices increased 3.4% in October. This is no doubt due to the hundreds of thousands of cars taken off the market and destroyed by the cash for clunkers program. This is good news for those trading in used cars to buy a brand new one, but bad news for those struggling to get basic transportation to get to work.
http://blog.mises.org/archives/011056.asp
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TARP Inspector General Neil Barofsky keeps committing flagrant acts of political transparency, which if nothing else ought to inform the debate going forward over financial reform. In his latest bombshell, the IG discloses that the New York Federal Reserve did not believe that AIG's credit-default swap (CDS) counterparties posed a systemic financial risk.
Hello?
For the last year, the entire Beltway theory of the financial panic has been based on the claim that the "opaque," unregulated CDS market had forced the Fed to take over AIG and pay off its counterparties, lest the system collapse. Yet we now learn from Mr. Barofsky that saving the counterparties was not the reason for the bailout.
View Full Image
REUTERS
Timothy Geithner
.In the fall of 2008 the New York Fed drove a baby-soft bargain with AIG's credit-default-swap counterparties. The Fed's taxpayer-funded vehicle, Maiden Lane III, bought out the counterparties' mortgage-backed securities at 100 cents on the dollar, effectively canceling out the CDS contracts. This was miles above what those assets could have fetched in the market at that time, if they could have been sold at all.
The New York Fed president at the time was none other than Timothy Geithner, the current Treasury Secretary, and Mr. Geithner now tells Mr. Barofsky that in deciding to make the counterparties whole, "the financial condition of the counterparties was not a relevant factor."
This is startling. In April we noted in these columns that Goldman Sachs, a major AIG counterparty, would certainly have suffered from an AIG failure. And in his latest report, Mr. Barofsky comes to the same conclusion. But if Mr. Geithner now says the AIG bailout wasn't driven by a need to rescue CDS counterparties, then what was the point? Why pay Goldman and even foreign banks like Societe Generale billions of tax dollars to make them whole?
Both Treasury and the Fed say they think it would have been inappropriate for the government to muscle counterparties to accept haircuts, though the New York Fed tried to persuade them to accept less than par. Regulators say that having taxpayers buy out the counterparties improved AIG's liquidity position, but why was it important to keep AIG liquid if not to protect some class of creditors?
Yesterday, Mr. Geithner introduced a new explanation, which is that AIG might not have been able to pay claims to its insurance policy holders: "AIG was providing a range of insurance products to households across the country. And if AIG had defaulted, you would have seen a downgrade leading to the liquidation and failure of a set of insurance contracts that touched Americans across this country and, of course, savers around the world."
Yet, if there is one thing that all observers seemed to agree on last year, it was that AIG's money to pay policyholders was segregated and safe inside the regulated insurance subsidiaries. If the real systemic danger was the condition of these highly regulated subsidiaries—where there was no CDS trading—then the Beltway narrative implodes.
Interestingly, in Treasury's official response to the Barofsky report, Assistant Secretary Herbert Allison explains why the department acted to prevent an AIG bankruptcy. He mentions the "global scope of AIG, its importance to the American retirement system, and its presence in the commercial paper and other financial markets." He does not mention CDS.
All of this would seem to be relevant to the financial reform that Treasury wants to plow through Congress. For example, if AIG's CDS contracts were not the systemic risk, then what is the argument for restructuring the derivatives market? After Lehman's failure, CDS contracts were quickly settled according to the industry protocol. Despite fears of systemic risk, none of the large banks, either acting as a counterparty to Lehman or as a buyer of CDS on Lehman itself, turned out to have major exposure.
More broadly, lawmakers now have an opportunity to dig deeper into the nature of moral hazard and the restoration of a healthy financial system. Barney Frank and Chris Dodd are pushing to give regulators "resolution authority" for struggling firms. Under both of their bills, this would mean unlimited ability to spend unlimited taxpayer sums to prevent an unlimited universe of firms from failing.
Americans know that's not the answer, but what is the best solution to the too-big-to-fail problem? And how exactly does one measure systemic risk? To answer these questions, it's essential that we first learn the lessons of 2008. This is where reports like Mr. Barofsky's are valuable, telling us things that the government doesn't want us to know.
In remarks Tuesday that were interpreted as a veiled response to Mr. Barofsky's report, Mr. Geithner said, "It's a great strength of our country, that you're going to have the chance for a range of people to look back at every decision made in every stage in this crisis, and look at the quality of judgments made and evaluate them with the benefit of hindsight." He added, "Now, you're going to see a lot of conviction in this, a lot of strong views—a lot of it untainted by experience."
Mr. Geithner has a point about Monday-morning quarterbacking. He and others had to make difficult choices in the autumn of 2008 with incomplete information and often with little time to think, much less to reflect. But that was last year. The task now is to learn the lessons of that crisis and minimize the moral hazard so we can reduce the chances that the panic and bailout happen again.
This means a more complete explanation from Mr. Geithner of what really drove his decisions last year, how he now defines systemic risk, and why he wants unlimited power to bail out creditors—before Congress grants the executive branch unlimited resolution authority that could lead to bailouts ad infinitum.
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With F.H.A. Help, Easy Loans in Expensive Areas
DAVID STREITFELD
Published: November 19, 2009
SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.
Policy changes in insurance, while introduced on a temporary basis, are becoming so popular that they could prove difficult to undo.
Back to Business
From left to right, Jordan Kurland, Mike Rowland and Michael Bedar, in front of the building they bought in San Francisco for nearly a million dollars, with help from the Federal Housing Administration.
A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.
“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”
In its efforts to prop up a shattered housing market, the government is greatly extending its traditional support of real estate, including guaranteeing the mortgages of middle-class and even upper-class buyers against default.
In 2007, the government did not insure a single mortgage in this city, one of the most expensive in the country. Buyers here, as well as in Manhattan, Santa Monica and every other wealthy area, were presumed to be able to handle the steep prices and correspondingly hefty down payments on their own.
Now the government is guaranteeing an average of six mortgages a week here. Real estate agents say the insurance is such a good deal that there will soon be many more.
Policy changes like the shift in insurance, while often introduced on a temporary basis, are becoming so popular that they could prove difficult to undo. With government finances already under great strain, the policy expansions are creating new risks for American taxpayers.
The Internal Revenue Service is giving tax rebates to first-time buyers, and soon to move-up buyers, in a program beset by accusations of fraud. And the government agency that issues mortgage insurance, the Federal Housing Administration, is underwriting loans at quadruple the rate of three years ago even as its reserves to cover defaults are dwindling. On Thursday, the Mortgage Bankers Association said more than one in six F.H.A. borrowers was behind on payments.
F.H.A. insurance was created for minority and low-income families who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent.
For decades, most F.H.A. loans were in low-cost states like Texas and Michigan. Under the agency’s loan limits, houses along the coasts were usually too expensive to qualify. In 2007, fewer than 4,400 F.H.A. loans were made in California, according to the research firm MDA DataQuick, and none were in San Francisco.
The Economic Stimulus Act of 2008 helped change that by temporarily doubling the maximum loan the F.H.A. insured, to $729,750. A two-unit property like the one bought by Mr. Rowland and his friends can be insured for up to $934,200.
“F.H.A. financing was a lost language in San Francisco, the real estate equivalent of Aramaic,” said Michael Ackerman, the agent who represented Mr. Rowland and his friends. “Once the limits were raised, smart buyers started calling.”
The F.H.A. has insured more than 107,000 loans so far this year in the state, according to DataQuick, about 270 of them in San Francisco.
Condominium buildings approved for F.H.A. financing — a relative handful — trumpet the news on their Web sites. The Soma Grand, a new 246-unit building downtown where one-bedrooms cost in excess of $500,000, received F.H.A. certification early in the summer. A half-dozen buyers since then used F.H.A. insurance.
At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.
“It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.
Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling. Others, like Mr. Rowland and his friends, simply do not have the money required by private lenders — which would have been nearly $200,000, in their case.
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“We were resigned to waiting another year,” said a second partner, Michael Bedar, 31. “Then we read about the F.H.A. I had never heard of it before, and couldn’t quite believe it. But it was the answer to our problems.” They put down about $33,000, split among the three of them.
While the F.H.A. is certainly strengthening the high-end market in the Bay Area by prompting more sales, there are growing concerns that it might become a destabilizing force.
Kenneth Donohue, inspector general for the Department of Housing and Urban Development, the parent agency of the F.H.A., said the higher loan limits were increasing the potential risk to the F.H.A. Last week, the agency said its cash reserves had fallen below their Congressionally mandated minimum because of the large volume of foreclosures.
“If one of these higher-limit loans fail, that’s equivalent to two or three cheaper loans,” Mr. Donohue said. “You have to ask yourself, was the F.H.A. ever intended to address these markets?”
He sees another risk: larger loans will be a greater draw for those who want to commit fraud. That would exacerbate a problem already besetting the agency.
Even some San Francisco agents who are doing F.H.A. deals worry about the long-term consequences. Real estate commissions are 6 percent. If the value of a property were to hold steady, a seller who put down the F.H.A. minimum would suffer a loss after fees. And while the Bay Area has traditionally been an excellent investment, the last few years have proved a big exception.
“Is this going to be the next wave of the housing downturn?” asked Eileen Bermingham, an agent with Pacific Union. “With such a minimal down payment, how do we make sure people don’t get in over their heads?”
The F.H.A. commissioner, David H. Stevens, said recently that its loans were relatively safe because the buyer was required to live in the property. They “are for shelter. They aren’t speculative-type investments,” Mr. Stevens said.
But the idea of a house as an investment dies hard. Mr. Bedar, Mr. Rowland and the third partner in their property, Jordan Kurland, are all in the technology field, but their dreams of wealth do not feature stock options.
“We’re banking on real estate,” said Mr. Kurland, 24. “Everyone expects prices to keep going up.”
Mr. Kurland and Mr. Bedar, who are employed full time, are the buyers of record. Mr. Rowland, a freelancer, will have his interests protected by a legal agreement.
Their building, for which they paid $963,000, is on a quiet street in the up-and-coming Hayes Valley neighborhood, close to fashionable restaurants they have already been trying out. The friends plan to live in the bottom unit and rent out the top. Thanks to rock-bottom interest rates, none of them will pay much more than a thousand dollars a month. “Everyone should have the chance to do this,” Mr. Kurland said.
Everyone may get a chance.
A few weeks ago, Congress extended the higher lending limits for another year. Representative Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that he planned to introduce legislation next year raising the maximum F.H.A. loan by $100,000, to $839,750.
His bill would make the new limits permanent.
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U.S. Unlikely to Use the Ethanol Congress Ordered
MaTTHEW L. WALD
Published: November 26, 2009
WASHINGTON — Two years ago, Congress ordered the nation’s gasoline refiners to do something that is turning out to be mathematically impossible.
To please the farm lobby and to help wean the nation off oil, Congress mandated that refiners blend a rising volume of ethanol and other biofuels into gasoline. They are supposed to use at least 15 billion gallons of biofuels by 2012, up from less than seven billion gallons in 2007.
But nobody at the time counted on fuel demand falling in the United States, which is what has happened during the recession. And that decline could well continue, as cars become more efficient under other recent government mandates.
At the maximum allowable blend, in which gasoline at the pump contains 10 percent ethanol, updated projections suggest that the country is unlikely to be able to use all the ethanol that Congress has ordered up. So something has to give.
“The market is full,” said Jeff Broin, chief executive of Poet, a company in Sioux Falls, S.D., that produces ethanol.
In theory, the Environmental Protection Agency has the power to solve this problem by tweaking the mandates imposed by Congress, and it may act as early as next week.
Each potential solution would anger one interest group or another, so the agency has been subjected to fierce lobbying, including from members of Congress lining up behind various factions. One possibility is to raise the maximum proportion of ethanol in gasoline to 15 or 20 percent.
But that idea is opposed by some carmakers and pollution experts. They contend that high ethanol blends can cause damage to cars, including making catalytic converters run hotter.
The Alliance of Automobile Manufacturers says it believes this could cause the converters, components that help control pollution, to fail at around 50,000 miles. They are supposed to last for 120,000 to 150,000 miles. “We are sensitive to the issues facing the ethanol industry, but the government must make decisions based on sound science,” said Dave McCurdy, president and chief executive of the alliance, in a letter to the E.P.A.
Another possibility is that the agency could waive the mandates requiring use of a large volume of biofuels. But that would anger farmers, who sell a great deal of corn to ethanol factories, and the members of Congress who represent them. It might also undermine the efforts of companies that are investing millions in factories to make ethanol from waste materials, like corncobs, straw and garbage.
“Ethanol is the only viable, competitive alternative to foreign oil,” said Tom Buis, chief executive of Growth Energy, the ethanol trade group that filed the petition with the E.P.A. to increase the blending percentage. “If we’re going to become less dependent on foreign oil, we’ve got to move forward.”
A third possibility is that the E.P.A. could announce that it is waiting for more data on how cars perform at higher blends, but that would merely put off the hard decision.
When Congress wrote the rules, in 2007, gasoline consumption had been growing for years, and it looked as if the nation would be able to use considerably more ethanol in the future. Gasoline consumption hit a peak of 3.4 billion barrels that year.
But gasoline demand fell in 2008, after soaring gas prices early in the year were followed by the economic crisis. Consumption was slightly less than 3.3 billion barrels last year, and it could end 2009 at about the same level.
With consumers buying more fuel-efficient cars these days, and carmakers rushing to bring even more of those to market, gasoline demand may not recover much in coming years, even as ethanol production soars.
As of yet, not all gasoline is blended with 10 percent ethanol, but that saturation point is rapidly approaching. Under the present rules, the nation could hit the upper limit of its ability to consume ethanol in 2011.
Mr. Buis and others argue that Congress or the E.P.A. must do something if the country is to move to a new generation of biofuels that do not compete with food crops. The possibilities include ethanol made from wood chips, waste paper or agricultural waste like straw and corncobs.
Congress has also passed mandates for the blending of this type of fuel, so that the nation’s total consumption of all renewable fuels, in vehicles and other equipment, is supposed to reach 36 billion gallons in 2022.
Perhaps the easiest way for the country to absorb all the excess ethanol would be to make wider use of an ethanol blend called E85, which contains 85 percent ethanol and 15 percent gasoline. Most cars on the road cannot use it, but in recent years, millions of “flex-fuel” cars have been sold, especially by General Motors. (Any car with a yellow gasoline cap can use E85.)
The problem is that at current prices, E85 does not make economic sense for drivers, and most of them use regular gasoline in their flex-fuel cars. That means gasoline stations have little incentive to install pumps for E85. The fuel can be found in the Corn Belt but is not readily available elsewhere in the country.
Gasoline was selling on average Thursday for $2.63 a gallon, while E85 was selling for $2.23 a gallon. That might make E85 sound like a bargain, but cars go fewer miles on a gallon of ethanol than of gasoline. Adjusted for that factor, E85 on Thursday was effectively 31 cents a gallon more expensive than gasoline.
A return of $4 gasoline might change things, by making E85 a relative bargain and spurring wider use. So would an unexpected spurt in total fuel demand. Otherwise, it is not at all clear how the nation’s coming surplus of ethanol can be absorbed.
Gregory M. Scott, executive vice president of the National Petrochemical and Refiners Association, drives a flex-fuel car in the Washington area, but said he had never put E85 in it.
He said the amount of renewable fuel that Congress had mandated refiners to use, and the amount that can be blended for conventional automobiles, were on a collision course.
“At some point,” he said, “those two lines cross.”
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Too Much Here, Too Little There, and inability to adjust because of an embedded CYA Bureaucracy. Sound like USSR to me. They proved that centrally managed economies just don't work. China has made some serious changes and will probably be the only viable "communism" if only in name.
I think that all these PoliSci's running the gov't are totally incapable of learning from history, do they have ANY as part of their coursework?
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There's encouraging news on that other Washington effort to force Americans into a government-run system. The White House plan to drive private lenders out of the market for student loans is igniting a backlash on campus and Capitol Hill.
The typical tale of a free-speech controversy on campus involves administrators landing on some poor undergrad who violates political correctness. But in this story the administrators have been afraid to speak as the Department of Education pressured them to drop private lenders and embrace the department's own Direct Lending (DL) program. The pending bill, which has passed the House but is stalled in the Senate, would ban private lenders from making federally guaranteed loans after July 1, 2010.
Congress has already enacted regulations in recent years to discourage making loans without a federal guarantee. And many lenders have quit the business. Now the White House and Democrats like California Rep. George Miller want to go further and convert students from private loans largely backed by the taxpayer into government loans made and serviced by government and backed by the taxpayer. Think of this as a prelude to how Congress will rig the rules for any public option in health care.
The private lenders have been the most popular choice, while—big surprise—the government's program has a history of shoddy customer service. But before the bill has even come to the Senate floor, federal officials have been making unsolicited contacts to schools urging them to accept this "public option." In October, Secretary of Education Arne Duncan sent a letter to schools nationwide offering to help them "in taking the necessary steps to ensure uninterrupted access to federal student loans by ensuring your institution is Direct Loan-ready for the 2010-2011 academic year."
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.Schools got the message. The leader of a large university recently refused to discuss the issue with us on the record, fearful that the feds are taking names. Rep. John Kline (R., Minn.) has asked the Department of Education's inspector general to investigate efforts by officials to encourage outside groups to advocate for the ban on private lenders. He wants to know if department staff violated a federal law against lobbying with appropriated funds, among other possible offenses.
Several House Democrats wrote to Mr. Duncan this week questioning the "aggressive outreach" to schools on behalf of one option while Congress is still considering others. We seem to remember from our student days that the executive branch is supposed to enforce laws only after the legislature has written them. Over in the Senate, more than a dozen Democrats have criticized the Administration's plan, and Senator Bob Casey has offered an alternative that would allow private lenders to stay in business.
Meanwhile, faced with the prospect of a monopoly government-run loan provider, the tweed-jacket crowd is finding its voice. Mr. Duncan spoke this week at a conference for financial aid officers in Nashville, and he may be sorry that he agreed to take questions from the audience. To vigorous applause, several attendees questioned whether financing that's good enough for government work will be good enough for their students.
Ted Malone of the University of Alaska said that the department had already "created an impossible-to-administer program" for Pell Grants and therefore said it's "hard to trust that you're going to be looking out for our best interests" when forcing all colleges into the government-run lending system.
Another speaker talked about how hard the private firms work to serve students and said, "My partnership with my lenders is being taken away from me."
Sheila Nelson Hensley of Virginia's Bluefield College said, "I'm concerned that there's going to be a delay in us receiving our funds, which will ultimately affect our students and the cash flow of our institution."
When even such natural allies as college administrators are warning that Team Obama is moving too quickly and too far left, perhaps it's time to go back to school on this issue. Focusing on the needs of students and taxpayers—rather than an ideological conviction that government always knows and does best—would be a good place to start.
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"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
-- Cicero (55 BC)
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eom
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"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
-- Cicero (55 BC)
I find that reassuring, which scares me..........
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"Politics is the art of looking for trouble, finding it everywhere,
diagnosing it incorrectly, and applying the wrong remedies" -- Groucho Marx
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Stimulus III
Democrats want TARP to become a revolving line of political credit..
If at first fiscal stimulus doesn't succeed, spend, spend again. That's the motto President Obama embraced yesterday, even if he didn't use the word "stimulus," which has managed to set a political record in the speed with which it has become unpopular with voters. This time, the spending is being called "Proposals to Accelerate Job Growth and Lay the Foundation for Robust Economic Growth."
But wasn't that also supposed to be the point of last February's $787 billion stimulus, or for that matter of the Nancy Pelosi-George W. Bush $165 billion stimulus of February 2008?
Nearly two years after that first Keynesian stimulus that was supposed to prevent a recession, and nearly a year after the second that the White House said would keep the jobless rate below 8%, the President now feels obliged to propose a third. Like the joke about Paul Krugman having predicted seven of the last two recessions, sooner or later the White House is bound to get the political timing right.
This time around, the President is at least suggesting a couple of good ideas. One proposal would revive his 2008 campaign promise for a zero capital gains tax on new investments in small business stock. Mr. Obama dropped the idea from his first stimulus because liberals on Capitol Hill hate the words "capital gains," but yesterday he proposed a zero rate for one year.
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Associated Press
Eight of the 18 California Conservation Corps workers were hired by the U.S. Forest Service as part of the federal stimulus plan.
.Another decent idea would extend enhanced expensing for small business that was otherwise set to expire at the end of this year. This will allow businesses to immediately expense up to $250,000 of certain investments, which should help with business cash flow.
Both ideas would reduce the cost of capital, and thus would partially counteract the many tax increases coming from the House and Senate that would raise the cost of capital and hiring. These tax reductions also recognize that the only source of real long-term job creation is private business.
Most of the rest of Mr. Obama's proposals are unfortunately a grab-bag of greatest Congressional mis-hits. They include a "new" tax credit for small business hiring that looks suspiciously like Jimmy Carter's jobs tax credit that led to few net new jobs and was abandoned after a year.
There's also a flood of new spending, with the amount presumably to come later from Congress (oh oh!), on highways and other public works. Perhaps you thought these "shovel-ready" projects had been included as part of Stimulus II. Alas, that was merely the sales pitch. In the event, the bulk of that money was shovel-readied to such transfer payments as Medicaid, welfare, community block grants, and cash for the clunkers who run failing public schools. This time, we're told, roads and bridges really will get the money—and you can bet they'll all be built with higher Davis-Bacon wage rates that will balloon their cost, too.
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.How will this all be paid for? Well, there are the huge tax increases to come in 2011, if not earlier, as well as more federal borrowing. This time, however, Mr. Obama is also proposing to use funds repaid by banks to the $700 billion Troubled Asset Relief Program. When Congress passed TARP a year ago, the Democrats who ran the joint vowed that the cash was intended to save the financial system and that any returns would promptly go to pay down the debt. As Candidate Obama put it, "every penny" would go "directly back to the American people." That was then.
Now, we're heading into a new election year and Treasury says it expects the bailout to cost $200 billion less than expected, and that it should be able to recover all but $42 billion of the $370 billion it has lent to financial firms. That ought to be cause for rejoicing—and for using the cash to reduce a federal deficit that reached $1.4 trillion in fiscal 2009 and after two months is on pace to be even higher in 2010.
Instead, TARP is now morphing into a revolving line of Democratic political credit. Barney Frank wants to divert at least $4 billion to bail out more home owners. Virginia Senator Mark Warner wants $50 billion for loans to small business. Mr. Obama proposed yesterday to use TARP to finance his own ideas as part of Stimulus III, and if he and fellow Democrats succeed the taxpayers will never see this cash again.
The President tried to recast his "every penny" promise yesterday by arguing that recycled TARP cash would create jobs and thus revenue to bring down the deficit. This is also Speaker Nancy Pelosi's new talking point. They're right that a strong economy is the best way to reduce deficits, but their spend and spend again policies only make closing those deficits more difficult.
One note of hope here is that the White House admits that the TARP statute restricts its use to the "stabilization" of the financial system. The law also specifies that repaid money must go to deficit reduction, a fact that allowed Mrs. Pelosi to gather enough votes to pass TARP last year. This means Democrats are going to have to rewrite the law to spend TARP on pork and green jobs, giving Senate Republicans some leverage and Blue Dog Democrats another chance to write the ad scripts for their 2010 opponents.
As the President gladly admitted yesterday, the economy is recovering and even the job market is healing. If Congress won't reduce taxes, the best stimulus now would be for Congress to stop scaring private job creators by promising to help them. Just do nothing at all.
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If he made an effort to send some of that money to the small business level, I might believe it might have an effect. I am totally against the government distorting the economy at a time it is trying to fix itself in the first place.
Too bad we can't specify what programs we want to fund when we pay our taxes, eh?
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I'm against the govt distorting, managing, directing, "partnering with" the economy. Period. :-)
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Welllll- Yeah. :-D
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Global Warming as a Political Tool
Jonah Goldberg
Friday, December 11, 2009
On Monday, Lisa Jackson, head of the Environmental Protection Agency, formally announced that her agency now considers carbon dioxide to be a dangerous pollutant, subject to government regulation. The "finding" comes two years after the Supreme Court ruled that CO2 falls under the EPA's jurisdiction.
A day later, an unnamed White House official told Fox's Major Garrett that the message for Congress is clear: "If you don't pass this (cap-and-trade) legislation ... the EPA is going to have to regulate in this area. ... And it is not going to be able to regulate on a market-based way, so it's going to have to regulate in a command-and-control way, which will probably generate even more uncertainty."
And such "uncertainty" is a huge "deterrent to investment," which will hurt the economy even more.
Translation: We don't want the EPA to kick the economy in the groin, but if Congress doesn't act, well, a-groin-kickin' we shall go.
This is grotesquely dishonest.
The White House and Congress could, quite easily, do something about the EPA's threat. President Obama could instruct Jackson to interpret the Supreme Court's 2007 decision granting the EPA power to regulate greenhouse gases more loosely. He could ask Congress to simply rewrite the Clean Air Act so as to exclude carbon dioxide from its list of official pollutants -- the policy the EPA followed for years until the Supreme Court reinterpreted the Clean Air Act.
But no.
As part of the enduring statist desire to penetrate ever deeper into every nook and cranny of our lives, Greens have wanted to find a way for the government to regulate CO2, a natural byproduct of fire and breathing, for decades. Now they can.
That is why the White House will use Jackson as a Medusa's head, to petrify cap-and-trade opponents with the prospect of something even worse: the effective seizing of the means of production. The White House says nothing of the sort is going on. Jackson, the former chief of staff to lame-duck New Jersey Gov. Jon Corzine, is an independent, disinterested public servant simply following sound science with no concern for politics.
If Jackson cares so much about sound science, why is she basing some of her policies on data from the discredited scientific frat house, the Climatic Research Unit?
If Jackson cares so little about politics, why did she make her announcement to such fanfare at the opening of Climapalooza in Copenhagen?
In fairness, Jackson is only a Medusa's head to those who care desperately about economic growth and who don't think draconian taxes on energy and massive wealth transfers for white elephants in the Third World are the answer to our problems. But for others, she represents another icon from Greek mythology: the Golden Fleece.
Jason and his Argonauts set out to find the fleece so they might place Jason on the throne of Iolcus. The original story is one of power-seeking in a noble cause.
It's debatable whether the modern tale of Jackson and the Goregonauts is quite so noble. But it's obvious they're interested in power and hell-bent on fleecing.
Indeed, some of loudest voices have a weird habit of telegraphing their priorities. Tim Wirth, a former Senator and now chairman of the United Nations Foundation, once said: "We've got to ride the global-warming issue. Even if the theory of global warming is wrong, we will be doing the right thing, in terms of economic policy and environmental policy." New York Times columnist and prominent warm-monger Thomas Friedman has repeatedly said (most recently this week) that he doesn't care if global warming is a "hoax" because even if it is, the fear of it will force us to do what we need to do.
And it just so happens that with the exception of nuclear power -- which most greens still won't support -- global warming fuels nearly every progressive ambition. Wealth transfers from rich to poor nations: Check. The rise of "global governance" and the decline of American sovereignty: Check. A secular fatwa not only to erode capitalism but to intrude on every aspect of our lives (Greenpeace offers a guide to carbon-neutral sex): Check. Weaning us off of oil (which, don't let the Goregonauts fool you, was a priority back when we were still worried about global cooling): Check. The checks go on for as far as the eye can see, and we will be writing them for years to come.
http://townhall.com/columnists/JonahGoldberg/2009/12/11/global_warming_as_a_political_tool
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http://coburn.senate.gov/public/index.cfm?FuseAction=Files.View&FileStore_id=a28a4590-10ac-4dc1-bd97-df57b39ed872
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Geothermal Project in California Is Shut Down
By JAMES GLANZ
Published: December 11, 2009
The company in charge of a California project to extract vast amounts of renewable energy from deep, hot bedrock has removed its drill rig and informed federal officials that the government project will be abandoned.
AltaRock Energy has told the Department of Energy it has removed its drill rig, shown above in May, from a Northern California site and abandoned the project. The project by the company, AltaRock Energy, was the Obama administration’s first major test of geothermal energy as a significant alternative to fossil fuels and the project was being financed with federal Department of Energy money at a site about 100 miles north of San Francisco called the Geysers. But on Friday, the Energy Department said that AltaRock had given notice this week that “it will not be continuing work at the Geysers” as part of the agency’s geothermal development program.
The project’s apparent collapse comes a day after Swiss government officials permanently shut down a similar project in Basel, because of the damaging earthquakes it produced in 2006 and 2007. Taken together, the two setbacks could change the direction of the Obama administration’s geothermal program, which had raised hopes that the earth’s bedrock could be quickly tapped as a clean and almost limitless energy source.
The Energy Department referred other questions about the project’s shutdown to AltaRock, a startup company based in Seattle. Reached by telephone, the company’s chief operations officer, James T. Turner, confirmed that the rig had been removed but said he had not been informed of the notice that the company had given the government. Two other senior company officials did not respond to requests for comment, and it was unclear whether AltaRock might try to restart the project with private money.
In addition to a $6 million grant from the Energy Department, AltaRock had attracted some $30 million in venture capital from high-profile investors like Google, Khosla Ventures and Kleiner Perkins Caufield & Byers.
“Some of these startup companies got out in front and convinced some venture capitalists that they were very close to commercial deployment,” said Daniel P. Schrag, a professor of geology and director of the Center for the Environment at Harvard University.
Geothermal enthusiasts asserted that drilling miles into hard rock, as required by the technique, could be done quickly and economically with small improvements in existing methods, Professor Schrag said. “What we’ve discovered is that it’s harder to make those improvements than some people believed,” he added.
In fact, AltaRock immediately ran into snags with its drilling, repeatedly snapping off bits in shallow formations called caprock. The project’s safety was also under review at the Energy Department after federal officials said the company had not been entirely forthcoming about the earthquakes produced in Basel in making the case for the Geysers project.
The results of that review have not yet been announced, but the type of geothermal energy explored in Basel and at the Geysers requires fracturing the bedrock then circulating water through the cracks to produce steam. By its nature, fracturing creates earthquakes, though most of them are small.
On Friday, the Energy Department, which has put some $440 million into its geothermal program this year alone, said that despite the latest developments, it remained confident of the technology’s long-term prospects. Many geothermal methods do not require drilling so deep or fracturing bedrock.
“The Department of Energy believes that geothermal energy holds enormous potential to heat our homes and power our economy while decreasing our carbon pollution,” said Stephanie Mueller, a spokeswoman.
AltaRock has also received some $25 million in federal money for a project in Oregon, and some scientists speculated on Friday that after the spate of problems at the Geysers, the company wanted to focus on a new site.
But the company, whose project at the Geysers was located on land leased from the federal government by the Northern California Power Agency, has held information about its project tightly. Not even the power agency has been informed of AltaRock’s ultimate intentions at the site, said Murray Grande, who is in charge of geothermal facilities for the agency.
“They just probably gave up, but we don’t know,” Mr. Grande said. “We have nothing official from them at all.”
But a resident of the nearby town of Anderson Springs, which is already shaken by quakes generated by less ambitious geothermal projects, reacted with jubilation when told it appeared the new project was ending.
“How I feel is beyond anything that words can express,” said the resident, Jacque Felber, who added that an unnerving quake had rattled her property the night before. “I’m just so relieved, because with this going on, I’m afraid one of these days it’s going to knock my house off the hill.”
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FAA Says Wasteful Spending ‘All Good’
Posted by Tad DeHaven
It’s not uncommon to hear the claim made that the “stimulus” would have had a greater economic impact had the money been focused on infrastructure. But proponents of public “investment” in infrastructure seem to forget that the government allocates capital on the basis of politics rather than economics. Government is naturally inefficient because it is immune to the market signals that guide private actors who stand to lose their own money should an investment not pan out.
A perfect example is federal spending on airport infrastructure. The USA Today’s Thomas Frank has been doing good work looking at how the Federal Aviation Administration distributes funds to the nation’s airports. In his latest piece, Frank analyzed FAA records obtained under the Freedom of Information Act and found that taxpayer money is being put to questionable use:
Airports have spent $3.5 billion in federal money since 1998 on projects the Federal Aviation Administration rated as low priority because they do little to improve the most pressing needs in the nation’s aviation system…The money comes from a program that is supposed to improve aviation safety…But the program also has funded terminals at little-used airports, hangars to store private jets, and parking areas that are free to customers.
For example, Frank reports on Pellston Regional Airport in Michigan, which “used $7.5 million in federal funds to build a terminal with stone fireplaces and cathedral ceilings. The airport averages three departures a day.”
But the FAA sees it differently:
‘They’re all good projects,’ said Catherine Lang, FAA acting associate administrator for airports.
C@L readers who get stuck in congested airports this holiday season may wish to keep that quote in mind.
In a sister piece, Frank quotes Lang as saying that the terminals at these airports are “crumbling, loaded with asbestos and have no other source [of money].” If airport infrastructure in this country is truly crumbling, then why is the FAA expending scarce resources on stone fireplaces?
Frank cites more examples:
Lake Cumberland Regional Airport in Kentucky got $3.5 million to build a glass-fronted terminal in 2004 that was largely unused until the first passenger flights began this June. The airport now has six flights a week.
Montgomery Regional Airport in Alabama got $22 million to build a $35 million terminal with a sloping glass facade and a rotunda topped with a domed ceiling that reflects the historical architecture of the state Capitol.
Halliburton Field Airport in Duncan, Okla., got $700,000 for a terminal with a pilot room and a reception room. The airport, open only to private planes, has 24 landings and takeoffs a day, mostly local pilots in piston-engine planes.
We should be looking to privatize infrastructure as this Cato op-ed states:
First, privatization would reduce the responsibilities of the government so that policymakers could better focus on their core responsibilities, such as national security. Second, there is vast foreign privatization experience that could be drawn upon in pursuing U.S. reforms. Third, privatization would spur economic growth by opening new markets to entrepreneurs.
I suppose the drawback would be that politicians would be denied the fun of spending other people’s money, not to mention the campaign contributions.
http://www.cato-at-liberty.org/2009/12/15/faa-says-wasteful-spending-all-good/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Cato-at-liberty+%28Cato+at+Liberty%29
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Unemployment funds going broke
December 22, 2009 - 5:23am
WASHINGTON - Joblessness is becoming such a drain on state unemployment funds that 40 states will go broke within two years.
Those states need $90 billion in loans to keep issuing benefit checks, The Washington Post reports.
The projection comes from Department of Labor estimates.
Twenty five states have already run out of benefit money and had to borrow $24.2 billion from the government. Virginia is among those states.
The options may be to cut unemployment benefits or raise payroll taxes, something that industry and business groups oppose.
Experts say the problems have occurred because states failed to prepare for the economic downturn.
(Copyright 2009 by WTOP. All Rights Reserved.)
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I know a couple of guys that cannot find a job that pays more than unemployment............
They both had jobs that allow for them to collect a substantial check, but they cannot get back into the work force at their previous level, and cannot support their "basics" for below a certain wage. That is a couple $ an hour above unemployment but below what they were earning. I suspect a lot of people are in that sort of catch 22.
(Try getting laid off from a 20$ hour job and living on unemployment, now add the stress of trying to collect at least 14$ an hour at a new job which is not hiring. There are a lot of 10$ an hour jobs, but they are paying less than unemployment, so why take the job? Maybe when the benefits run out yes, but until then.......)
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http://reason.com/archives/2009/12/29/black-liquor-binge
Reason Magazine
Black Liquor Binge
Bringing an end to the costly and unnecessary Alternative Fuel Mixture Credit
Greg Beato | December 29, 2009
Thanks to a federal tax credit that was originally introduced in 2005 to encourage motor vehicle users to add a little biomass fuel to their diesel, the stench of rotting eggs that permeates the air in mill towns like Coosa Pines, Alabama and Baileyville, Maine smelled as sweet as perfume this year. That’s because the stench results from the incineration of black liquor, and in 2009, burning this sticky, chemical-laced byproduct of the wood-pulping process proved far more profitable to the pulp and paper industry than actually selling newsprint, cardstock, or any of the other myriad products it manufactures. On December 31st, however, the good times come to an end.
In a year where the government famously entered the automobile business and spent months trying to increase its presence in the healthcare industry as well, state support of the pulp and paper industry went largely unnoticed by the general public. On the level of sheer weirdness, and as a case study in unintended consequences, however, it was at least the equal of the more notorious bailouts. In one year, approximately three dozen companies received upwards of $8 billion from the U.S. Treasury for increasing their consumption of diesel fuel when they were supposed to be decreasing it, depressing worldwide paper prices at a time when demand for paper isn’t particularly strong, and discouraging the production of recycled paper in the name of environmental sustainability. Oh, and as if that weren’t enough, they almost started a war—okay, a trade war—with Canada!
The elixir at the heart of all this drama is a sticky, chemical-ridden substance known as black liquor. To turn trees into the glossy pages of your favorite magazines and catalogs, pulp mills first “cook” wood chips in a broth of sodium hydroxide and sodium sulfide. This extracts the cellulose fibers from the chips that eventually get made into paper; the dark mixture that remains, which consists mostly of lignon and chemicals, is known as black liquor.
In bygone days, and even in more recent times, pulp mills used to dump
this black liquor into those natural but not terribly efficient recycling bins otherwise known as lakes and rivers. As early as the 1930s, however, the industry had also started incinerating black liquor in recovery boilers. This allowed pulp mill operators to reclaim still-useable chemicals and also to create something that could in turn power turbogenerators. In this manner, they were able to create electricity they could use to run their machinery.
Today, the pulp and paper industry generates approximately two-thirds of the energy it uses through such processes. Some mills produce so much energy via black liquor and other renewable byproducts that they sell it to local
utilities.
When Senator Chuck Grassley (R–Iowa) proposed a 50 cents per gallon
tax credit for alternative fuel users as part of 2005’s Safe, Accountable, Flexible, Efficient, Transportation Equity Act, he reportedly wasn’t thinking about black liquor or the pulp and paper industry. Instead, he wanted to encourage motor vehicle operators to use domestic alternatives rather than imported fossil fuels.
However, while the “Alternative Fuel Credit” section of the statute explicitly states that the credit applies only when the alternative fuel is used in a “motor vehicle or motorboat,” the “Alternative Fuel Mixture Credit” section of the statute is not so explicit. It states that the credit applies to any alternative fuel mixture that is “for sale or use in a trade or business of the taxpayer.” According to a recent press release issued by Rep. Ann Kirkpatrick (D-Ariz.), Congress “expanded the tax credit to allow non-transportation entities to qualify” in 2007.
While most pulp mills were burning pure black liquor in their recovery boilers, some canny alchemist realized that by adding a small amount of diesel to the process, the black liquor would be transformed into an alternative fuel mixture—and thus quality for the 50 cents a gallon tax credit. In late 2008, at least two companies, Verso Paper and International Paper, applied to the IRS for certification as “alternative fuel mixers” and passed muster. Shortly thereafter, the checks started arriving. In February 2009, Verso Paper received a $29.7 million payment from the IRS for its black liquor usage in the last three months of 2008. In March, International Paper received a $71. 6 million payment for the black liquor it used in a month-long period at the end of 2008.
In a March Securities and Exchange Commission filing, Verso revealed that it had received the payment and that more could be on the way. Two weeks later, JPMorgan analyst Claudia Shank Hueston published a briefing on how the industry at large might benefit from this development. After that, every pulp mill in the country started adding adding diesel to its black liquor and the Treasury Department found itself on the hook for what would eventually amount to billions of dollars.
For pulp and paper companies, these are tough times. Thanks to declines in the construction industry and the subsequent sawmill closings, the price of wood chips has gone up even as demand for paper has fallen. Newspapers are shrinking or disappearing altogether, magazines aren’t any healthier, and even junk mailers are showing genuine restraint these days. In good times and bad, digital revolution be damned, we’ll always need toilet paper and cocktail napkins—but that’s not enough to keep the industry afloat. Over the last two years, it lost 25 mills and 250,000 jobs.
In the early months of 2009, worldwide demand for paper was declining and inventory levels were high. For the companies that qualified for the tax
credit, however, business had fundamentally changed. Instead of producing pulp and paper for their traditional consumers, they were consuming alternative fuel mixtures for the federal government. In the second quarter of the year, Rayonier earned $79 million for burning black liquor and $28 million for selling its products. In the first three quarters of the year, Clearwater Paper earned $87 million for burning black liquor and $48 million for selling its products. During that time, its stock price rose from $15.50 to $59.31.
“The tax credits give U.S. companies a huge incentive to keep their kraft-pulp mills running full bore and then to turn that pulp into paper, even if it has to be sold at rock-bottom prices,” observed the anonymous editor of Dead Tree Edition, a blog that focuses on the production and distribution of print publications. He also noted that mill operators were choosing kraft-pulping over more environmentally friendly methods of pulp production, and surmised that they were likely using such tricks as “cooking” wood fibers longer to maximize their output of black liquor.
In May, Canada, Brazil, Chile, and the European Union sent a letter to Congress threatening trade sanctions against the U.S. in retaliation for the negative
impact the tax credit was having on global markets. In July, the European Commission accused U.S. paper manufactures of using the no-strings-attached “cash injection” they were getting from the government to “undercut market prices for other wood products” like newsprint.
In response to such criticisms, and as a relatively modest attempt at fiscal restraint, Sen. Grassley and Sen. Max Baucus (D-Mont.) floated the idea of terminating the credit at a Senate Finance Committee meeting in April. Other senators leapt to the paper’s industry’s defense, however. “Given the gravity of our economic circumstances, do we really want to punish an industry that employs 1.3 million Americans?” asked Sen. Olympia Snowe (R-Maine). “Here’s an industry that generates a majority of its own power,” exclaimed Sen. Debbie Stabenow (D-Mich.). “We don’t want to penalize them.”
In less entitled times, words like “punish” and “penalize” were generally associated with phenomena such as jail time, fines, or public floggings. Now, apparently, it’s a penalty when the government stops giving companies piles of cash simply for engaging in practices that are inherently beneficial to them. It’s a brave new world but a costly one. By the time Alternative Fuel Mixture Credit expires on Thursday, the government will have paid out more than $8 billion to a few dozen companies—and to what end? Smurfit-Stone Container, the second-largest recipient of 2009’s black liquor binge, with an estimated take of more than $500 million, is ringing in the new year with permanent mill closures in Frenchtown, Montana and Ontogan, Michigan. Apparently even carbon-neutral fuel can’t propel a company into the future if demand for its products is waning.
Contributing Editor Greg Beato is a writer living in San Francisco. Read his Reason archive here.
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This year, I've heard how tough it is for folks to get work and make ends meet. But not in Washington. The following facts should make you madder than a hornet's nest hit by a baseball bat. When I started reading this stuff, I wanted to go to Washington and fire the whole lot of 'em.
First, the government is posting data about the stimulus money spending on the website www.recovery.gov for all to see. It's part of the new transparency theme from Obama's team. Hah. If this is the stuff it's willing to disclose, I'd hate to know what it's hiding.
One group I trust, the nonprofit investigative news outlet ProPublica, has organized the "recovery" data by state and reported stimulus spending per capita in places around the country.
In most states, the numbers are kind of boring... per capita (per person) spending exceeds $1,000 in only 15 states, and the average of those 15 is $1,241. In the other 35 states, the amount is closer to $900 a head.
However, in D.C., per capita spending totals $5,276.84. Yep, you read that right. Spending in D.C. is at least four times higher than the next 15 states and nearly six times higher than the other 35 states. This means in the area surrounding the capital, thousands of bureaucrats are feeding themselves from the taxpayer trough. They're taking our hard-earned money and spending it on questionable programs.
Consider this outrage: Last summer, internships in D.C. paid city youths for essentially doing nothing. The government gave several hundred disadvantaged kids "internships" to come and learn about politics and the capital. They were supposed to show up every day, check in, and shadow some politicos. Apparently, over the whole summer, only a couple showed up out of hundreds, yet they all got paid. Imagine the lessons they learned. It's a mockery of the ethics of hard work and responsibility.
But it gets worse. The newspaper USA Today reports that before the recession started, the Department of Transportation employed only one person earning more than $170,000 a year. (I might argue even one is too many). Today, more than 1,690 people there earn more than $170,000.
That's not a typo... In 18 months, the government has increased the number of people in one federal department making more than $170,000 by hundreds of thousands of percent. While the average American worries about making ends meet, these federal bureaucrats are taking more and more of our tax dollars. Moreover, I don't understand how there needs to be more than a few people at the Department of Transportation making that kind of money, yet there are thousands of them.
Look, the average federal worker makes $71,206 versus $40,331 in the private sector. I think this is absurd. And the counterargument from the government affairs director at a federal employees union is laughable. It's "because the government employs skilled people," he told the USA Today.
Take the Secret Service. They couldn't keep two party-crashers out of the president's home – I'm sure you heard how a couple walked into a White House State Dinner uninvited and unchallenged at the door. It turns out, hundreds of these sorts of security lapses have gone on under the Secret Service's watch.
Folks, please listen... This nonsense will lead to higher and higher taxes. Unless we tell people in power to stop the nonsense immediately, things will go from bad to worse really quickly. I can't spend more than I earn. Neither can you. What makes lazy government bureaucrats think it works differently when they're spending someone else's money?
I encourage you to do what I do and write your local and national elected officials and tell them to stop spending our hard-earned money and start cutting taxes so people can get back to work. And also remember in upcoming election cycles to vote for people who will be fiscally responsible (we'll try and keep track of this for the 2010 elections). Sitting around and doing nothing about it is simply condoning the behavior.
And finally, I'm often asked if things I do work. Honestly, I don't know because it's hard to test something like writing my elected officials. But unless they know you are mad about government spending and money wasting, there's no chance they'll pull their snouts from Washington's feed trough.
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If you don't believe me that taxes will skyrocket across states, cities, and municipalities soon, then just look at what's happening at public airport authorities. I recently rented a car from the Minneapolis airport... I paid a 56% tax on the rental. Seriously... here's my car rental bill:
Base Rate $65
Facility Fee $9.75
Recovery Fee $6.82
Rental Tax $4.03
Vehicle Rental Fee $3.25
Energy Recovery Fee $3
Loyalty Charge $3
Sales Tax $ 6.90
Total Charge $101.75
That $36.75 equates to a 56% tax rate on the $65 the rental company charges. Think about that for a moment, a 56% tax! And it all reflects pass-along fees and taxes imposed by the airport authority, a state government entity.
Local governments are hurting for money so badly they're dreaming up new ways to raise revenues and that means fees and taxes for everything.
I suspect this sort of taxation will get worse. In many states, income and real estate tax revenues are plummeting... that means taxing consumption – on things like rental cars, gasoline, and even college tuition – is one of the few options left.
Let's hope the Feds don't get any ideas.
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'Minneapolis car rental tax 60%.' His itemization missed the sales tax surcharge for the outdoor ballpark totally unusable here in April and November. I recall that in Denver car rental tax is worse, a lower tax state but a newer airport. They think it is free money since the tourist doesn't get to vote. Then they dream up subsidy schemes and incentives because tourism is down. Go figure. The home phone tax is also 60% with a similarly long list. Hurts the poor worst who do not even pay it because they no longer afford landlines. When their prepaid cell minutes run out they are out of luck, out of touch, out of job contact etc. Same for the energy bill, quite a few fees before the first kilowatt hour gets billed. In the land of lakes we have the 'cabin tax'. Again tax the non local resident at a higher rate since they can't vote in the district or do anything about it, then up go the new schools and government centers of construction to make the great pyramids blush. My total property taxes alone are more than food, clothing and shelter costs combined. That's before federal and state income taxes and the returning 55% death tax. Ahhhh... freedom and limited government in the greatest country on earth. What could possibly go wrong?
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Living on Nothing but Food Stamps
By JASON DEPARLE and ROBERT M. GEBELOFF
Published: January 2, 2010
CAPE CORAL, Fla. — After an improbable rise from the Bronx projects to a job selling Gulf Coast homes, Isabel Bermudez lost it all to an epic housing bust — the six-figure income, the house with the pool and the investment property.
“Without food stamps we’d probably be starving,” said Rex Britton, who has had trouble finding paving work and lives with his girlfriend, Amy Freeman. More Photos »
The Safety Net
Zero Income
With millions of jobs lost and major industries on the ropes, America’s array of government aid — including unemployment insurance, food stamps and cash welfare — is being tested as never before. This series examines how the safety net is holding up under the worst economic crisis in decades.
Now, as she papers the county with résumés and girds herself for rejection, she is supporting two daughters on an income that inspires a double take: zero dollars in monthly cash and a few hundred dollars in food stamps.
With food-stamp use at a record high and surging by the day, Ms. Bermudez belongs to an overlooked subgroup that is growing especially fast: recipients with no cash income.
About six million Americans receiving food stamps report they have no other income, according to an analysis of state data collected by The New York Times. In declarations that states verify and the federal government audits, they described themselves as unemployed and receiving no cash aid — no welfare, no unemployment insurance, and no pensions, child support or disability pay.
Their numbers were rising before the recession as tougher welfare laws made it harder for poor people to get cash aid, but they have soared by about 50 percent over the past two years. About one in 50 Americans now lives in a household with a reported income that consists of nothing but a food-stamp card.
“It’s the one thing I can count on every month — I know the children are going to have food,” Ms. Bermudez, 42, said with the forced good cheer she mastered selling rows of new stucco homes.
Members of this straitened group range from displaced strivers like Ms. Bermudez to weathered men who sleep in shelters and barter cigarettes. Some draw on savings or sporadic under-the-table jobs. Some move in with relatives. Some get noncash help, like subsidized apartments. While some go without cash incomes only briefly before securing jobs or aid, others rely on food stamps alone for many months.
The surge in this precarious way of life has been so swift that few policy makers have noticed. But it attests to the growing role of food stamps within the safety net. One in eight Americans now receives food stamps, including one in four children.
Here in Florida, the number of people with no income beyond food stamps has doubled in two years and has more than tripled along once-thriving parts of the southwest coast. The building frenzy that lured Ms. Bermudez to Fort Myers and neighboring Cape Coral has left a wasteland of foreclosed homes and written new tales of descent into star-crossed indigence.
A skinny fellow in saggy clothes who spent his childhood in foster care, Rex Britton, 22, hopped a bus from Syracuse two years ago for a job painting parking lots. Now, with unemployment at nearly 14 percent and paving work scarce, he receives $200 a month in food stamps and stays with a girlfriend who survives on a rent subsidy and a government check to help her care for her disabled toddler.
“Without food stamps we’d probably be starving,” Mr. Britton said.
A strapping man who once made a living throwing fastballs, William Trapani, 53, left his dreams on the minor league mound and his front teeth in prison, where he spent nine years for selling cocaine. Now he sleeps at a rescue mission, repairs bicycles for small change, and counts $200 in food stamps as his only secure support.
“I’ve been out looking for work every day — there’s absolutely nothing,” he said.
A grandmother whose voice mail message urges callers to “have a blessed good day,” Wanda Debnam, 53, once drove 18-wheelers and dreamed of selling real estate. But she lost her job at Starbucks this year and moved in with her son in nearby Lehigh Acres. Now she sleeps with her 8-year-old granddaughter under a poster of the Jonas Brothers and uses her food stamps to avoid her daughter-in-law’s cooking.
“I’m climbing the walls,” Ms. Debnam said.
Florida officials have done a better job than most in monitoring the rise of people with no cash income. They say the access to food stamps shows the safety net is working.
“The program is doing what it was designed to do: help very needy people get through a very difficult time,” said Don Winstead, deputy secretary for the Department of Children and Families. “But for this program they would be in even more dire straits.”
But others say the lack of cash support shows the safety net is torn. The main cash welfare program, Temporary Assistance for Needy Families, has scarcely expanded during the recession; the rolls are still down about 75 percent from their 1990s peak. A different program, unemployment insurance, has rapidly grown, but still omits nearly half the unemployed. Food stamps, easier to get, have become the safety net of last resort.
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“The food-stamp program is being asked to do too much,” said James Weill, president of the Food Research and Action Center, a Washington advocacy group. “People need income support.”
With millions of jobs lost and major industries on the ropes, America’s array of government aid — including unemployment insurance, food stamps and cash welfare — is being tested as never before. This series examines how the safety net is holding up under the worst economic crisis in decades.
Food stamps, officially the called Supplemental Nutrition Assistance Program, have taken on a greater role in the safety net for several reasons. Since the benefit buys only food, it draws less suspicion of abuse than cash aid and more political support. And the federal government pays for the whole benefit, giving states reason to maximize enrollment. States typically share in other programs’ costs.
The Times collected income data on food-stamp recipients in 31 states, which account for about 60 percent of the national caseload. On average, 18 percent listed cash income of zero in their most recent monthly filings. Projected over the entire caseload, that suggests six million people in households with no income. About 1.2 million are children.
The numbers have nearly tripled in Nevada over the past two years, doubled in Florida and New York, and grown nearly 90 percent in Minnesota and Utah. In Wayne County, Mich., which includes Detroit, one of every 25 residents reports an income of only food stamps. In Yakima County, Wash., the figure is about one of every 17.
Experts caution that these numbers are estimates. Recipients typically report a small rise in earnings just once every six months, so some people listed as jobless may have recently found some work. New York officials say their numbers include some households with earnings from illegal immigrants, who cannot get food stamps but sometimes live with relatives who do.
Still, there is little doubt that millions of people are relying on incomes of food stamps alone, and their numbers are rapidly growing. “This is a reflection of the hardship that a lot of people in our state are facing; I think that is without question,” said Mr. Winstead, the Florida official.
With their condition mostly overlooked, there is little data on how long these households go without cash incomes or what other resources they have. But they appear an eclectic lot. Florida data shows the population about evenly split between families with children and households with just adults, with the latter group growing fastest during the recession. They are racially mixed as well — about 42 percent white, 32 percent black, and 22 percent Latino — with the growth fastest among whites during the recession.
The expansion of the food-stamp program, which will spend more than $60 billion this year, has so far enjoyed bipartisan support. But it does have conservative critics who worry about the costs and the rise in dependency.
“This is craziness,” said Representative John Linder, a Georgia Republican who is the ranking minority member of a House panel on welfare policy. “We’re at risk of creating an entire class of people, a subset of people, just comfortable getting by living off the government.”
Mr. Linder added: “You don’t improve the economy by paying people to sit around and not work. You improve the economy by lowering taxes” so small businesses will create more jobs.
With nearly 15,000 people in Lee County, Fla., reporting no income but food stamps, the Fort Myers area is a laboratory of inventive survival. When Rhonda Navarro, a cancer patient with a young son, lost running water, she ran a hose from an outdoor spigot that was still working into the shower stall. Mr. Britton, the jobless parking lot painter, sold his blood.
Kevin Zirulo and Diane Marshall, brother and sister, have more unlikely stories than a reality television show. With a third sibling paying their rent, they are living on a food-stamp benefit of $300 a month. A gun collector covered in patriotic tattoos, Mr. Zirulo, 31, has sold off two semiautomatic rifles and a revolver. Ms. Marshall, who has a 7-year-old daughter, scavenges discarded furniture to sell on the Internet.
They said they dropped out of community college and diverted student aid to household expenses. They received $150 from the Nielsen Company, which monitors their television. They grew so desperate this month, they put the breeding services of the family Chihuahua up for bid on Craigslist.
“We look at each other all the time and say we don’t know how we get through,” Ms. Marshall said.
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(Page 3 of 3)
Ms. Bermudez, by contrast, tells what until the recession seemed a storybook tale. Raised in the Bronx by a drug-addicted mother, she landed a clerical job at a Manhattan real estate firm and heard that Fort Myers was booming. On a quick scouting trip in 2002, she got a mortgage on easy terms for a $120,000 home with three bedrooms and a two-car garage. The developer called the floor plan Camelot.
With millions of jobs lost and major industries on the ropes, America’s array of government aid — including unemployment insurance, food stamps and cash welfare — is being tested as never before. This series examines how the safety net is holding up under the worst economic crisis in decades.
“I screamed, I cried,” she said. “I took so much pride in that house.”
Jobs were as plentiful as credit. Working for two large builders, she quickly moved from clerical jobs to sales and bought an investment home. Her income soared to $180,000, and she kept the pay stubs to prove it. By the time the glut set in and she lost her job, the teaser rates on her mortgages had expired and her monthly payments soared.
She landed a few short-lived jobs as the industry imploded, exhausted her unemployment insurance and spent all her savings. But without steady work in nearly three years, she could not stay afloat. In January, the bank foreclosed on Camelot.
One morning as the eviction deadline approached, Ms. Bermudez woke up without enough food to get through the day. She got emergency supplies at a food pantry for her daughters, Tiffany, now 17, and Ashley, 4, and signed up for food stamps. “My mother lived off the government,” she said. “It wasn’t something as a proud working woman I wanted to do.”
For most of the year, she did have a $600 government check to help her care for Ashley, who has a developmental disability. But she lost it after she was hospitalized and missed an appointment to verify the child’s continued eligibility. While she is trying to get it restored, her sole income now is $320 in food stamps.
Ms. Bermudez recently answered the door in her best business clothes and handed a reporter her résumé, which she distributes by the ream. It notes she was once a “million-dollar producer” and “deals well with the unexpected.”
“I went from making $180,000 to relying on food stamps,” she said. “Without that government program, I wouldn’t be able to feed my children.”
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http://hotair.com/archives/2010/01/04/27-million-in-porkulus-money-spent-in-nonexistent-zip-codes/
$27 million in Porkulus money spent in nonexistent zip codes
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One in eight Americans now receives food stamps, including one in four children
Incredible.
But I just don't get it.
We have illegals coming here by the millions and finding work and yet we have people who ?are Americans (some probably are also illegal) who claim they cannot find any job at all?
Why is this NEVER addressed by the mainstream propaganda media??
Yet we have foreigners going to our schools, getting Medicaid and Medicare - I think I know how they do it - the have relatives who come here and work or own businesses and they put their relatives on a payroll claiming payroll taxes and then later they get them Medicare.
Yet Americans cannot find a job.
And the liberal answers to everything. Tax and give out more handouts.
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CCP: "One in eight Americans now receives food stamps, including one in four children. Incredible...
Yet Americans cannot find a job."
I can't add much to what you wrote, just appreciate that someone else notices this stuff. With unemployment pay, you are required to job search or pretend job search and fill out forms. With food stamps - no such thing. They are marketed on television as being cool and for almost anyone. There is no stamp anymore, just a free credit card with money put on it automatically on a regular basis. There are restrictions on what you can buy with it but the restricted free dollars are very openly sold in the inner cities at fifty cents on the dollar for cash that can be used for the other necessities of life like booze and drugs.
As an inner city landlord what I am noticing more is how it seems almost everyone gets a disability check, SSI for kids, adults, anyone. No visible disability ever it seems. Sometimes I ask and hear about a healthy twenty something year old with a bad back while my 85 year old parents both keep working because they can. Sometimes I think it may be something more like ADHD or learning disability but it always seems to be something subtle. No wheelchairs or amputees in my experience. Steep stairs, no problem. They move the beds and dressers in and if they need a refrigerator or washing machine moved in somehow they find a way to get it done, but not work or job hunting. - From the original story, "she did have a $600 government check to help her care for (her own daughter!) Ashley, who has a developmental disability."
The new healthcare bill puts people at 400% of the poverty rate in the subsidy pool. Families of 4 making $88,000 on welfare - the public dole.
What is sad is that it is the government's goal to get more and more people on assistance (and politically supporting the programs) when it seems to me the goal should be to get more and more people OFF of assistance.
CCP, you, me, Crafty?, and about 7 other people on earth seem to get this and everyone else seems to have that 'see no evil', 'what's the problem' reaction to it all as it grows and grows and continues to swallow up more and more people in more and more ways enticing them to move away from work ethic and individual responsibility toward a dependency mentality and adopting the 'welfare rights' agenda. - The underlying point of the original NYT piece was: why aren't these programs much bigger and easier to get!
The immigration aspect is whole 'nother deal. I first tried to post the swedish muslim riot video under the health care thread. They come for the world's greatest free benefits - for doing nothing. Same goes for the riot videos from Chicago. Minneapolis has shorter lines, better services and higher benefits, so if you are a 4th generation welfare recipient in Chicago and want to make a 'better life' for you and your family, move to Mpls. and start applying for all the programs, free health care, free food, free clothing, cab rides to your appointments, section 8 housing, and on and on. And they come. The largest US Somali population is in Mpls. The largest Hmong location is Mpls-St.Paul. Yet the inner city neighborhoods have no major employers. Unfortunately, that is no problem because they didn't come looking for employers.
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Good post.
Like the eternal flame of the Hanukah menorah, we seek to keep the flame of Truth alive around here. It is always darkest before the dawn. Ben Franklin told us the Constitution gave us a republic "if we can keep it." Time to stand up for the American Creed.
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I can only pray we get someone who is a spokesman for the Americans who are still probably slightly in the majority who have to pay for all this abuse of the "system" and hence them before they become the minority. This critical tipping point seems nearer and nearer.
There is no question in my mind this is part of the grand design of the people who chose Bama as their One spokesperson.
Make no mistake he believes in this socialistic agenda fervently.
He only pretends to believe in the American just enough to hold onto power.
He is only coming out with a big mouth now on terrorism in words only and only precisely because he IS falling in the polls and he knows he is vulnerable on this. Don't think for one second this guy is tough on terror.
But I think I preach to the choir here unfortunately. Except for Fox and talk radio this country is screwed.
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The public is waking up and the Obama koolaid is turning bitter in many mouths.
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I have had a few people say they are being told more and more that people who supported Bama are now admitting they were wrong about him.
This is purely anecdotal but I hope the tide has turned.
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I too am hearing this.
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No Shock: Stimulus Is A Money Loser
Posted 01/12/2010 06:36 PM ET
IBD
Economic Recovery: The results are in, and last year's $787 billion stimulus not only failed to do what it was supposed to do, but it has also turned out to be one of the worst investments in economic history.
Remember the debate in 2008 over the bailouts then being put together by the Treasury, the Fed and the Democratic Congress? Proponents often raised the possibility that any bailout would make money for taxpayers.
Didn't work that way. As we've discovered, the American people aren't just saddled with the ongoing costs of the various and sundry stimulus programs. They're also taking huge losses in doing so.
On Tuesday, the Treasury estimated that taxpayers had lost $68.5 billion in the fiscal year ended Sept. 30, 2009, on the Troubled Asset Relief Program and that the losses could go as high as $120 billion.
That isn't imaginary cash stuffed under some government cushion. It's a tax on you that comes straight out of your pocket. It's money that won't be used to fund private-sector jobs or pay for a child's education or a new house. It's gone.
Meanwhile, the Federal Reserve says it earned $45 billion last year — the largest one-year profit in its 96-year history.
As the Washington Post points out, that will easily eclipse "the expected profits of Bank of America, Goldman Sachs and JPMorgan Chase combined."
Why the big Fed profit? Basically, it printed money, bought Treasuries and private bonds with what it printed (we called it a bailout), then watched as interest on the investments flowed in. At year-end, the Fed held $1.8 trillion in U.S. government debt and mortgage securities, up from $497 billion a year earlier.
Don't worry, though. The Fed doesn't keep the money. It goes to the Treasury — which will just spend the money on something else.
All of this only underscores how badly the so-called stimulus has turned out. After trillions of dollars in outlays by the Fed, Treasury and Congress, the U.S. has zero net new jobs to show for it. Zip.
In fact, jobs at private businesses shrank by 4 million in 2009.
Nor have banks started lending to small and midsize businesses. Commercial and industrial loans, the lifeblood of U.S. industry, fell $252 billion, or nearly 16%, from January through November.
Why aren't profitable banks lending to businesses? Good question. For one thing, like the Fed, banks have found a sure thing in round-tripping bailout funds provided at virtually zero interest into Treasuries yielding 3%. No risk, all gain.
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The piece misses the point that the better strategy would be NOT to have stimulus, but does note the massiveness of the fraud coming down the pike.
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By DANIEL J. CASTLEMAN
The Obama administration—and state and local governments—should brace themselves for fraud on an Olympic scale as hundreds of billions of taxpayer dollars continue to pour into job creation efforts.
Where there are government handouts, fraud, waste and abuse are rarely far behind. The sheer scale of the first and expected second stimulus packages combined with the multitiered distribution channel—from Washington to the states to community agencies to contractors and finally to workers—are simply irresistible catnip to con men and thieves.
There are already warning signs. The Department of Energy's inspector general said in a report in December that staffing shortages and other internal weaknesses all but guarantee that at least some of the agency's $37 billion economic-stimulus funds will be misused. A tenfold increase in funding for an obscure federal program that installs insulation in homes has state attorneys general quietly admitting there is little hope of keeping track of the money.
While I was in charge of investigations at the Manhattan District Attorney's office, we brought case after case where kickbacks, bid-rigging, false invoicing schemes and outright theft routinely amounted to a tenth of the contract value. This was true in industries as diverse as the maintenance of luxury co-ops and condos, interior construction and renovation of office buildings, court construction projects, dormitory construction projects, even the distribution of copy paper. In one insurance fraud case, the schemers actually referred to themselves as the "Ten Percenters."
Based on past experience, the cost of fraud involving federal government stimulus outlays of more than $850 billion and climbing could easily reach $100 billion. Who will prevent this? Probably no one, particularly at the state and local level.
New York, for instance, has an aggressive inspector general's office, with experienced and dedicated professionals. But, it is already woefully understaffed—with a head count of only 62 people—to police the state's already existing agencies and programs. There is simply no way that office can effectively scrutinize the influx of $31 billion in state stimulus money.
There is a solution however, which is to set aside a small percentage of the money distributed to fund fraud prevention and detection programs. This will ensure that states and municipalities can protect projects from fraud without tapping already thinly stretched resources.
Meaningful fraud prevention, detection and investigation can be funded by setting aside no more than 2% of the stimulus money received. For example, if a county is to receive $50 million for an infrastructure project, $1 million should be set aside to fund antifraud efforts; if it costs less, the remainder can be returned to the project's budget.
While the most obvious option might be to simply pump the fraud prevention funds into pre-existing law enforcement agencies, that would be a mistake. Government agencies take too long to staff up and rarely staff down.
A better idea is to tap the former government prosecutors, regulators and detectives with experience in fraud investigations now working in the private sector. If these resources can be harnessed, effective watchdog programs can be put in place in a timely manner. Competition between private-sector bidders will also lower the cost.
Some might object to providing a "windfall" to private companies. Any such concern is misplaced. One should not look at the 2% spent, but rather the 8% potentially saved. Moreover, consider the alternative: law enforcement agencies swamped trying to stem the tide of corruption on a shoestring and a prayer.
There will always be individuals who will rip off money meant for public projects. In the aftermath of the 9/11 attacks, and Hurricane Katrina hundreds of people were prosecuted for trying to steal relief funds. But the stimulus funding represents the kind of payday even the most ambitious fraudster could never have imagined
To avoid a stimulus fraud Olympics that will be impossible to clean up, it is better to spend a little now to save a lot later. The savings could put honest people to work and fraudsters out of business.
Mr. Castleman, a former chief assistant Manhattan district attorney, is a managing director at FTI Consulting.
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Paying for the Privilege
Wall Street still funds the Democrats who vilify it.
By Kevin Williamson
The new proposed tax on banks — 15 basis points on all liabilities — is not about revenue or responsibility: It’s about politics. President Obama is running away from Wall Street as fast as he can, but Wall Street has a funny way of catching up with him.
As I reported some months ago (“Losing Gordon Gekko,” subscription required), Wall Street is, contrary to stereotype, a strongly Democratic place: Goldman Sachs gave 73 percent of its 2006–08 political money to Democrats, who also took in a majority of the political contributions in that same cycle from Citigroup, JPMorgan Chase, Morgan Stanley, UBS, and Lehman. Democrats took in the majority of the hedge-fund money and the lion’s share of political contributions from six of ten non-financial Big Business sectors: law, health care, defense contractors, communications/electronics, finance/insurance/real estate, and the catch-all category that includes chemical firms, retailers, manufacturers, food processors, and other industrial operators. E. J. Dionne, writing in The New Republic, argues that Obama fears being permanently tagged as a “Wall Street liberal” — which is what he is — and this, not recouping losses from the Troubled Asset Relief Program, is what the bank tax is all about.
But if the Democrats are gluttons for Wall Street money, Wall Street is a glutton for punishment: The president and his party in Congress are engaging in truly dishonest demagoguery — as National Review has noted, TARP losses aren’t coming from the banks, but from largely Democratic messes including AIG, the automakers’ bailouts, and Rep. Barney Frank’s beloved foreclosure-prevention program. But even as the Democrats demonize Wall Street and vilify Big Business in general, the pinstripes-and-obscene-bonuses set continues to write big checks to Obama’s party.
For the 2010 election cycle, Democrats have an enormous lead in almost every business sector they denounce: According to the Center for Responsive Politics, the hedge-fund industry has, so far, given 70 percent of its money for this cycle to Democrats. The numbers for other industries are comparable — insurance: 53 percent to Democrats; mortgage bankers and brokers: 55 percent to Democrats; finance and credit companies: 57 percent to Democrats; pharmaceuticals: 58 percent to Democrats; utilities companies: 59 percent to Democrats; automakers: 64 percent to Democrats; private-equity and investment firms: 74 percent to Democrats. And to top it off, the venture-capital industry has given 75 percent of its contributions to Democrats. There are very few sectors that outperform VC guys in their fealty to the Democratic party — except for usual suspects such as the teachers’ unions (92 percent to Democrats, and it’s a mystery who those Republicans are who took in the other 8 percent).
If you needed any more evidence that this is about politics and not about smart financial regulation, consider that Obama did not even consult his own FDIC chief, Sheila Bair, before announcing his bank-tax plan. Sheila Bair is not exactly a candidate for conservatives’ unalloyed admiration, but the FDIC is one of the few institutions that have performed well during the financial crisis, and her plan for establishing an FDIC-style resolution authority that would charge too-big-to-fail financial institutions an insurance premium in exchange for the government’s support of them in times of financial crisis is something that is endorsed both by many Democrats and, in principle, by the editors of National Review. But such a plan would not allow the president to preen on television and deliver homilies about fat cats and their wicked ways. Meanwhile, note that the president’s allegedly anti-fat-cat agenda is filtered through a bunch of Wall Street guys: Tim Geithner, Rahm Emanuel, etc.
The bank tax is not only a new and unneeded burden on our struggling financial sector, it’s also a long-term competitive disadvantage for American industry: Finance is a cutthroat world, and New York City is in a constant battle with London, Shanghai, and other financial centers for jobs and investment. If it inspires even a handful of firms to relocate, Obama’s new tax could end up costing the government money in the form of forgone revenue from personal-income taxes, corporate-income taxes, and capital-gains taxes. Wall Street’s loss will be the City of London’s gain. The real mystery is why Wall Street is still paying for the privilege of being scourged.
— Kevin Williamson is an NRO deputy managing editor.
National Review Online - http://article.nationalreview.com/?q=NThhNDZkZmQxNjcxZDExYWRjNTJkYmQ4YTFmNjFjNzU=
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Well I guess the latest deal made between "law" makers and the unions involving their so called "cadillac plans" shows that donations to the Democrats pays off in great dividends and makes good business sense.
"Wall Street is a glutton for punishment". There are the Soros of the world - the true believers etc but the rest is simply an investment in the party that holds power. The NYC insiders know that DC has to do its political grandstading. But the real deals are made in secret behind closed doors. Their bribes work obviously.
There is no end to the outrage. There never will be.
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We keep hearing the Dems threaten to use resolution process to ram through the health care bonanza with 51 Senate votes instead of the usual 60 needed for normal bills.
So what is this process? If I read this correctly the process used multiple times since around 1980 (passed in 1974) is meant to *control* budgets not *explode* them with a takeover of one seventh of the economy.
http://www.rules.house.gov/archives/bud_rec_proc.htm
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Good question CCP. Anyone here care to take a stab at answering it?
Separately:
The White House has spent months imploring banks to lend more money, so will President Obama's new proposal to extract $117 billion from bank capital encourage new bank lending?
Just asking. Welcome to one more installment in Washington's year-long crusade to revive private business by assailing and soaking it.
Mr. Obama's new "Financial Crisis Responsibility Fee"—please don't call it a tax—is being sold as a way to cover expected losses in the Troubled Asset Relief Program. That sounds reasonable, except that the banks designated to pay the fee aren't those responsible for the losses. With the exception of Citigroup, those banks have repaid their TARP money with interest.
The real TARP losers—General Motors, Chrysler and delinquent mortgage borrowers—are exempt from the new tax. Why the auto companies? An Administration official told the Journal that the banks caused the crisis that doomed the auto companies, which apparently were innocent bystanders to their own bankruptcy. The fact that the auto companies remain wards of Washington no doubt has nothing to do with their free tax pass.
Also exempt are Fannie Mae and Freddie Mac, which operate outside of TARP but also surely did more than any other company to cause the housing boom and bust. The key to understanding their free tax pass is that on Christmas Eve Treasury lifted the $400 billion cap on their potential taxpayer losses expressly so they can rewrite more underwater mortgages at a loss.
View Full Image
Reuters
.In other words, the White House wants to tax more capital away from profit-making banks to offset the intentional losses that the politicians have ordered up at Fan and Fred. The bank tax revenue will flow directly into the Treasury to be spent on whatever immediate cause Congress favors. Come the next "systemic risk" bailout, taxpayers will still be on the hook. "Responsibility" is not the word that comes to mind here.
The tax will apply to liabilities that are not already insured by government, so the White House is saying it will deter excessive risk-taking. And it does at least tilt at the role of excessive debt in creating systemic risk. But the heart of the moral hazard for the biggest banks is the implicit government guarantee that they will never be allowed to fail, and the tax does nothing about this.
The tax will be levied on financial companies with more than $50 billion in assets. However, as a too-big-to-fail litmus test, $50 billion can't possibly be the right answer. America has just run the experiment by putting a company bigger than $50 billion—CIT Group—through bankruptcy. By any objective reckoning, there were no systemic consequences. The new $50 billion tax threshold thus increases the scope of future bailouts by drawing a wider circle around firms that can gamble with implicit federal backing.
A better idea is to do the hard policy work of creating a plan that allows failure or else separates traditional banking from hedge-fund trading, as Bank of England Governor Mervyn King and former Federal Reserve Chairman Paul Volcker have suggested.
There's encouraging news that bank failure may still be an option. A bipartisan Senate effort led by Bob Corker (R., Tenn.) and Mark Warner (D., Va.) is considering the creation of a special bankruptcy court to decide whether an institution should go through bankruptcy or be subjected to an FDIC resolution process.
The first route sounds better than the second. Although FDIC Chairman Sheila Bair has been an outspoken advocate for a resolution process with certain punishment for failure, the provisions recently passed by the House would yield the opposite. The FDIC could choose among a number of ways to assist a company, and could decide how hard a bargain to drive with the firm's various creditors as well as discriminate within the same class of creditors. Not even the New York Federal Reserve of AIG fame has been willing to do the latter.
Another idea to reduce the moral hazard of too-big-to-fail would be to restore long-ago limits on leverage. For example, abolish the corporate income tax for financial companies and replace it with a tax on assets that rises with the bank's leverage ratio. There could be a tax-free zone at leverage levels below current regulatory standards. Washington could also reform margin requirements.
These ideas should all be thoughtfully considered, but of course that is hard political work and the biggest banks would oppose them because they secretly like too-big-to-fail. As for the politicians, it's so much easier to blame bankers, deplore their bonuses, tax them, regulate them, accept their campaign contributions and then bail them out while you talk about "change" and "responsibility."
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The Congressional Budget Office has lopped $20 billion off its estimate of the cost of keeping Fannie Mae and Freddie Mac afloat for the next decade—to a mere $79 billion. That will have to pass for good news, even if the estimate comes loaded with caveats. The bigger story is why the White House continues to keep these wards of the state off-budget.
As the CBO notes in a recent background paper, the standards for when to include government-sponsored entities in the budget go back to the 1960s, when a Presidential commission laid out a set of questions.
To wit: "Who owns the agency?" (In the case of Fan and Fred, taxpayers.) "Who supplies its capital?" (Taxpayers.) "Who selects its managers?" (The federal government.) And finally, "Do the Congress and the President have control over the agency's program and budget, or are the agency's policies the responsibility of the Congress or the President only in some broad ultimate sense?" (The feds have control in every sense.)
Since Hank Paulson placed them in conservatorship in September 2008, Fan and Fred have stopped even pretending to be run for profit. Losses have mounted accordingly: Some $291 billion for taxpayers through 2009, $48 billion for the cost of new business in 2009 alone, and $21 billion more this year. Last August, CBO estimated the 10-year cost to taxpayers of keeping Fannie and Freddie afloat at $389 billion.
Yesterday's estimate reduces that by some 5%, but this assumes the companies will stabilize at a loss rate of nearly $8 billion a year on average over the next decade. CBO bases its projection on an expectation that the housing market will "normalize" as the recession ends. However, there is no more normal in a housing market that now depends almost entirely on government subsidies. The full cost of subsidizing mortgages via Fannie and Freddie, the FHA and Ginnie Mae remains hidden and off the official balance sheet, so there is little political pressure to stop the losses.
As the CBO notes, Fannie and Freddie "purchase mortgages at above-market prices," driving down interest rates and passing some of the savings to home buyers. That subsidy is felt right away, but the risks in providing it are stored up over time, and their real costs may not be felt for years or even decades—as was the case in the years leading up to their spectacular collapse in 2008.
Yet this is precisely the fiction that the Obama Administration seeks to preserve by keeping the cost of Fan and Fred off the government's books. The Administration's budget accounting assumes Fannie and Freddie are private companies. So under its preferred treatment, the only recognized cost to taxpayers is the money that is being pumped in to keep them afloat—$110 billion so far.
That's plenty as it is, but in the wake of their government takeover, there is no justification for pretending that their risks aren't taxpayer risks. This is all the more true with the likes of New York Senator Chuck Schumer giving the companies marching orders to rescue tenants in the Stuyvesant Town development in Manhattan.
We suspect the real reason the White House wants Fan and Fred off budget is to disguise their real costs to taxpayers. They have become off-the-books subsidy engines for the housing lobby, and it is easier to push off the recognition of their losses to some future Administration and Congress rather than pay for them today. The new age of transparency has once again died aborning.
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President Obama’s Binge Diet
By Veronique de Rugy
Thursday, January 28, 2010
Filed under: Economic Policy, Government & Politics, Numbers
The proposed budget freeze is akin to skipping dessert after binging at an all-you-can-eat buffet, and still hoping to lose weight.
The president announced in his State of the Union address last night that he will put the federal government on a diet. The centerpiece of this diet, he explained, rests on a three-year freeze of non-defense, non-homeland security discretionary spending starting in fiscal 2011. This, the White House touts, will save taxpayers $250 billion over ten years.
That’s right. President Obama is talking about freezing—not cutting—16 percent of the total fiscal 2011 budget. This is a small part of the budget, especially considering that this portion grew by 16.3 percent between fiscal 2009 and fiscal 2010 (and, once we include all fiscal 2010 spending, this increase will reach 24 percent). And this is on top of the 5.5 percent increase a year during each of the Bush years.
In other words, this budget freeze is akin to skipping dessert after binging at an all-you-can-eat buffet, and still hoping to lose weight.
Using data from the Office of Management and Budget, the chart below shows which part of the budget the president is targeting.
(http://american.com/graphics/2010/DeRugy%201.27.gif)
In addition, the across-the-board freeze is so full of caveats and loopholes that it can only be seen as a joke. Here, our dieter isn’t allowed to eat desserts, unless it’s one with chocolate and whipped cream.
For instance, the freeze won’t apply to the $513 billion in unspent stimulus funds. Nor will it apply to the $247 billion of Troubled Asset Relief Program funds or to any of the programs that cash from repaid TARP funds will pay for, such as the $30 billion to prop up community bank lending to small businesses proposed by the president during his speech.
Besides, the president might ask for a freeze, but if history is any guide, Congress won’t give it to him. The president asserted his commitment to his diet by saying that he would veto any spending bill that doesn’t meet his requirement. It will be interesting to see if he can keep this promise, especially considering how unpopular this proposal was among liberals.
In the best-case scenario, the three-year freeze over the course of ten years will save on the order of $250 billion. That amounts to only 0.58 percent of the total federal spending during that period. This seems a rather meek savings especially in light of the CBO data showing ten-year baseline deficits of $6 trillion under current laws.
Last but not least, President Obama outlined a menu of small initiatives aimed at helping middle-class families (increasing child care tax credits) and small businesses (such as eliminating the capital gains tax). He also outlined larger infrastructure initiatives and green energy initiatives. All these measures would be part of a new job bill, which he told Congress he is expecting on his desk soon.
He also announced a series of spending measures to bolster education spending, boost community college education, make college affordable, and expand Pell Grants. He proposed to require that students never have to spend more than 10 percent of their income each year repaying their student loans and to give debt forgiveness to those going into “public service.”
Finally, he asked Congress to pursue healthcare overhaul.
In the end, these initiatives amount to many calories. The total cost of all of the measures will definitely be well over $250 billion over the next ten years. How is that a freeze? Where are the cuts coming from?
Veronique de Rugy is a senior research fellow at The Mercatus Center of George Mason University.
FURTHER READING: De Rugy regularly illustrates the follies of government spending for THE AMERICAN. She recently explained "So How Is the Stimulus Working Out? Part II” and “The High Cost of No Price” for healthcare. “Why Reform Will Cost Taxpayers More, Much More” looks at some of our recent cost overruns in government-driven medical spending. And AEI’s John Makin reviewed the U.S. economy and government policy in “Post Crisis Risks.”
Image by Darren Wamboldt/Bergman Group.
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There Is Some Budget Good News, but It Is Actually Really Bad News
Posted by Daniel J. Mitchell
The Office of Management and Budget has released the President’s FY2011 budget and the Congressional Budget Office has released its semi-annual Budget and Economic Outlook. Much of the coverage of these documents has focused on deficit numbers. This is not a trivial concern, particularly since the Bush-Obama policies of bigger government have dramatically boosted red ink.
But the most important numbers in the budget documents are the estimates of what is happening to government spending. The good news is that burden of government spending is projected to decline over the next few years from about 25 percent of GDP to less than 23 percent of GDP.
That’s the good news. The bad news is that federal government outlays only consumed 18.2 percent of economic output when Bush took office. In other words, notwithstanding the good news cited above, the size and scope of government has increased dramatically since 2001. The worse news is that the long-run spending forecasts show a cataclysmic expansion in the burden of government. The “optimistic” estimate is that the federal government will consume more than 30 percent of GDP by 2050 and 40 percent of GDP by 2080.
http://www.cato-at-liberty.org/2010/02/01/there-is-some-budget-good-news-but-it-is-actually-really-bad-news/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Cato-at-liberty+%28Cato+at+Liberty%29
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The Federal Government Is Bribing States to Create More Welfare Dependency?!?
Posted by Daniel J. Mitchell
If you want to get depressed or angry, the New York Times has an article celebrating the effort by politicians at all levels of government to lure more people into the food stamp program. New York City is running ads in foreign languagues asking people to stick their snouts in the public trough. The City is even signing up prisoners when they get out of jail. The state of New York, meanwhile, actually set up quotas for enrolling new recipients. And on the federal level, there apparently is a program that gives states “bonuses” for putting more people on the dole. No wonder one out of every eight Americans is receiving food stamps. By the way, this is not just the fault of Democrats. The ranking Republican on the Agriculture Committee is a big defender of the program, in part because of the sordid pact among urban and rural politicians to support each other’s handouts. And President George W. Bush’s food stamp administrator actually had the gall to assert “food stamps is not welfare.” No wonder the burden of federal spending skyrocketed during the reign of so-called compassionate conservatism. The correct policy, of course, is to get the federal government out of the welfare business. If Mayor Bloomberg thinks it is a “civic duty” to expand food stamps, he should see whether New York City voters agree with him – and want to foot the bill.
http://www.cato-at-liberty.org/2010/02/11/the-federal-government-is-bribing-states-to-create-more-welfare-dependency/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Cato-at-liberty+%28Cato+at+Liberty%29
A decade ago, New York City officials were so reluctant to give out food stamps, they made people register one day and return the next just to get an application. The welfare commissioner said the program caused dependency and the poor were “better off” without it. Now the city urges the needy to seek aid (in languages from Albanian to Yiddish). Neighborhood groups recruit clients at churches and grocery stores, with materials that all but proclaim a civic duty to apply — to “help New York farmers, grocers, and businesses.” There is even a program on Rikers Island to enroll inmates leaving the jail. “Applying for food stamps is easier than ever,” city posters say. …These changes, combined with soaring unemployment, have pushed enrollment to record highs, with one in eight Americans now getting aid. “I’ve seen a remarkable shift,” said Senator Richard G. Lugar, an Indiana Republican and prominent food stamp supporter. “People now see that it’s necessary to have a strong food stamp program.” …The program has commercial allies, in farmers and grocery stores, and it got an unexpected boost from President George W. Bush, whose food stamp administrator, Eric Bost, proved an ardent supporter. “I assure you, food stamps is not welfare,” Mr. Bost said in a recent interview. Still, some critics see it as welfare in disguise and advocate more restraints. …The federal government now gives bonuses to states that enroll the most eligible people. …In 2008, the program got an upbeat new name: the Supplemental Nutrition Assistance Program — SNAP. …Since Mayor Michael R. Bloomberg took office eight years ago, the rolls have doubled, to 1.6 million people… Albany made a parallel push to enroll the working poor, setting an explicit goal for caseload growth. “This is all federal money — it drives dollars to local economies,” said Russell Sykes, a senior program official. But Mr. Turner, now a consultant in Milwaukee, warns that the aid encourages the poor to work less and therefore remain in need. “It’s going to be very difficult with large swaths of the lower middle class tasting the fruits of dependency to be weaned from this,” he said.
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The more of this stuff I read, the better the family farm starts to look. If I am going to have to work like a slave, better for myself than these guys. I will have the space to do a lot more of what I want- when I can- than near the welfare thieves anyway.
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Even though this is POTH (i.e. the NYT) it does a surprisingly honest job of flagging yet another facet of the coming clusterfcuk.
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Public Pension Funds Are Adding Risk to Raise Returns
By MARY WILLIAMS WALSH
Published: March 8, 2010
States and companies have started investing very differently when it comes to the billions of dollars they are safeguarding for workers’ retirement. Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, said states were looking at riskier investments in an effort to meet pension obligations. Trent May, chief of Wyoming's pension fund, said states were “moving away from the perceived safety and liquidity of the investment-grade market.”
Companies are quietly and gradually moving their pension funds out of stocks. They want to reduce their investment risk and are buying more long-term bonds. But states and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees. Higher returns come with more risk.
“In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, which oversees public plans in that state. “Double up to catch up.”
Though they generally say that their strategies are aimed at diversification and are not riskier, public pension funds are trying a wide range of investments: commodity futures, junk bonds, foreign stocks, deeply discounted mortgage-backed securities and margin investing. And some states that previously shunned hedge funds are trying them now.
The Texas teachers’ pension fund recently paid Chicago to receive a stream of payments from the money going into the city’s parking meters in the coming years. The deal gave Chicago an upfront payment that it could use to help balance its budget. Alas, Chicago did not have enough money to contribute to its own pension fund, which has been stung by real estate deals that fizzled when the city lost out in the bidding for the 2016 Olympics.
A spokeswoman for the Texas teachers’ fund said plan administrators believed that such alternative investments were the likeliest way to earn 8 percent average annual returns over time.
Pension funds rarely trumpet their intentions, partly to keep other big investors from trading against them. But some big corporations are unloading the stocks that have dominated pension portfolios for decades. General Motors, Hewlett-Packard, J. C. Penney, Boeing, Federal Express and Ashland are among those that have been shifting significant amounts of pension money out of stocks.
Other companies say they plan to follow suit, though more slowly. A poll of pension funds conducted by Pyramis Global Advisors last November found that more than half of corporate funds were reducing the portion they invested in United States equities.
Laggards tend to be companies with big shortfalls in their pension funds. Those moving the fastest are often mature companies with large pension funds, and who fear a big bear market could decimate the funds and the companies’ own finances.
“The larger the pension plan, the lower-risk strategy you would like to employ,” said Andrew T. Ward, the chief investment officer of Boeing, which shifted a big block of pension money out of stocks in 2007. That helped cushion Boeing’s pension fund against the big losses of 2008.
Shedding stocks gave Boeing “material protection right when we needed it most,” Mr. Ward said. By the time the markets had bottomed out last March, Boeing’s pension fund had lost 14 percent of its value, while those of its equity-laden peers had lost 25 to 30 percent, he said.
“We estimated that the strategy saved our company in the short term right around $4 or $5 billion of funded status,” he said.
Boeing and other companies seeking to reduce their investment risk are moving into fixed-income instruments, like bonds — but not just any bonds. They are buying and holding bonds scheduled to pay many years in the future, when their retirees expect their money.
The value of the bonds may fall in the meantime, just like the value of stocks. But declining bond prices are not such a worry, because the companies plan to hold the bonds for the accompanying interest payments that will in turn go to retirees, not sell them in the interim.
Towers Watson, a big benefits consulting firm, surveyed senior financial executives last year and found that two-thirds planned to decrease the stock portion of their companies’ pension funds by the end of 2010. They typically said their stock allocations would shrink by 10 percentage points.
“That’s 10 times the shift we might see in any given year,” said Carl Hess, head of Towers Watson’s investment consulting business. Economists have speculated that a truly seismic shift in pension investing away from stocks could be a drag on the market, but they say it would not be long-lasting.
Corporate America’s change of heart is notable all on its own, after decades of resistance to anything other than returns like those of the stock markets. But it’s even more startling when compared with governments’ continued loyalty to stocks. When governments scale back on the domestic stocks in their pension portfolios these days, it is often just to make way for more foreign stocks or private equities, which are not publicly traded.
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Government pension plans cannot beef up their bonds that mature many, many years from now without dashing their business models. They use long-range estimates that presume high investment returns will cover most of the cost of the benefits they must pay. And that, they say, allows them to make smaller contributions along the way.
Most have been assuming their investments will pay 8 percent a year on average, over the long term. This is based on an assumption that stocks will pay 9.5 percent on average, and bonds will pay about 5.75 percent, in roughly a 60-40 mix.
(Corporate plans do their calculations differently, and for them, investment returns are a less important factor.)
The problem now is that bond rates have been low for years, and stocks have been prone to such wild swings that a 60-40 mixture of stocks and bonds is not paying 8 percent. Many public pension funds have been averaging a little more than 3 percent a year for the last decade, so they have fallen behind where their planning models say they should be.
A growing number of experts say that governments need to lower the assumptions they make about rates of return, to reflect today’s market conditions.
But plan officials say they cannot.
“Nobody wants to adjust the rate, because liabilities would explode,” said Trent May, chief investment officer of Wyoming’s state pension fund.
The $30 billion Colorado state pension fund is one of a tiny number of government plans to disclose how much difference even a slight change in its projected rate of return could make. Colorado has been assuming its investments will earn 8.5 percent annually, on average, and on that basis it reported a $17.9 billion shortfall in its most recent annual report.
But the state also disclosed what would happen if it lowered its investment assumption just half a percentage point, to 8 percent. Though it might be more likely to achieve that return, Colorado would earn less over time on its investments. So at 8 percent, the plan’s shortfall would actually jump to $21.4 billion. Contributions would need to increase to keep pace.
Colorado cannot afford the contributions it owes, even at the current estimated rate of return. It has fallen behind by several billion dollars on its yearly contributions, and after a bruising battle the legislature recently passed a bill reducing retirees’ cost-of-living adjustment, to 2 percent, from 3.5 percent. Public employees’ unions are threatening to sue to have the law repealed.
If Colorado could somehow get 9 percent annual returns from its investments, though, its pension shortfall would shrink to a less daunting $15 billion, according to its annual report.
That explains why plan officials are looking everywhere for high-yielding investments.
Mr. May, in Wyoming, said many governments were “moving away from the perceived safety and liquidity of the investment-grade market” and investing money offshore, but he said he was aware of the risks. “There’s a history of emerging markets kind of hitting the wall,” he said.
Last year, the North Carolina Legislature enacted a measure to let the state pension fund invest 5 percent of its assets in “credit opportunities,” like junk bonds and asset-backed securities from the Federal Reserve’s Term Asset-Backed Securities Loan Facility, an emergency program created to thaw the frozen markets for such securities.
The law also lets North Carolina put 5 percent of its pension portfolio into commodities, real estate and other assets that the state sees as hedges against inflation. A summary of the bill issued by the state’s treasurer and sole pension trustee, Janet Cowell, said it would provide “flexibility and the tools to increase portfolio return and better manage risk.”
But some think they see new risks.
“It doesn’t pass the smell test,” said Edward Macheski, a retired money manager living in North Carolina. “North Carolina’s assumption is 7.25 percent, and they haven’t matched it in 10 years.” He went to a recent meeting of the state treasurer’s advisory board, armed with a list of questions about the investment policy. But the board voted not to permit any public discussion.
Wisconsin, meanwhile, has become one of the first states to adopt an investment strategy called “risk parity,” which involves borrowing extra money for the pension portfolio and investing it in a type of Treasury bond that will pay higher interest if inflation rises.
Officials of the State of Wisconsin Investment Board declined to be interviewed but provided written descriptions of risk parity. The records show that Wisconsin wanted to reduce its exposure to the stock market, and shifting money into the inflation-proof Treasury bonds would do that. But Wisconsin also wanted to keep its assumed rate of return at 7.8 percent, and the Treasury bonds would not pay that much.
Wisconsin decided it could lower its equities but preserve its assumption if it also added a significant amount of leverage to its pension fund, by using a variety of derivative instruments, like swaps, futures or repurchase agreements.
It decided to start with a small amount of leverage and gradually increase it over time, but word of even a baby step into derivatives elicited howls of protest from around the state.
The big California pension fund, known as Calpers, was already under fire for losing billions of dollars on private equities and real estate in the last few years. So far it has stayed with those asset classes, while negotiating lower fees and writing off some of the most troubled real estate investments.
It announced in February that it had started looking into whether it should lower its expected rate of investment return, now 7.75 percent a year. It has embarked on a study, but a spokesman said that process would not be done until December, safely after the coming election.
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Federal Pay vs. Private Sector Pay
USA Today recently conducted a survey comparing average salaries of private sector employees to those of federal employees. Guess who did better? If you said the public sector worker, go to the front of the class.
First of all, many federal workers are covered by civil service rules, making them nearly impossible to fire and difficult to layoff. On top of that, based on 2008 data, the typical federal worker is paid 20 percent more than one in the private sector in the same occupation. The median salary for a federal employee is $66,591, while that of a private sector employee is $55,500, a difference of $11,091 -- before adding benefits such as medical insurance, sick days and holidays, pensions and the like. According to the Bureau of Economic Analysis, benefits averaged $40,785 per federal employee versus $9,882 per private worker. Add these to the USA Today figures and the average in total compensation for each is $107,376 versus $65,382, a whopping 64 percent difference of $41,994.
The difference in salaries is greatest in the public relations occupations. The widest spread, $44,169, was for public relations managers, with the federal employee receiving $132,410, compared to $88,241 for his private sector counterpart. The next largest difference was $41,045 for broadcast technicians.
So if you want a job that pays well, has great benefits and offers little chance of being laid off, the federal government is the employer for you -- that is, until it runs out of other people's money.
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San Francisco- I recently Talked to a friend in the bay area. It looks like at least 1 mayor is getting creative.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/03/11/BAUF1CE0E3.DTL (http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/03/11/BAUF1CE0E3.DTL)
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The U.S. government's rescue of wobbly companies and financial markets is starting to look far less expensive or long-lasting than once feared.
As momentum grows at companies that looked like zombies just a few months ago to repay taxpayers for lifelines they got during the financial crisis, the projected cost of the bailout is shrinking to just a fraction of previous estimates. Treasury Department officials say the tab is likely to reach $89 billion, which includes the Troubled Asset Relief Program, capital injections into Fannie Mae and Freddie Mac, loan guarantees by the Federal Housing Administration and Federal Reserve moves ...
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Perhaps this could go under the way forward for conservative, etc:
***Jewish World Review April 11, 2010
Only a brave few acknowledge an entitlement crisis
By George Will
http://www.JewishWorldReview.com | A puzzle from Philosophy 101: If a tree falls in a forest and no one hears it, does it make a sound? A puzzle from the prairie: If an earthquake occurs in Illinois and no one notices, is it really a seismic event?
Gov. Pat Quinn called it a "political earthquake" when the state's legislature recently voted — by margins of 92 to 17 in the House and 48 to 6 in the Senate — to reform pensions for state employees. There is now a cap on the amount of earnings that can be used as the basis for calculating benefits. In some states, employees game the system by "spiking" their last year's earnings by accumulating vast amounts of overtime pay.
An even more important change — a harbinger of America's future — is that most new Illinois state government employees must work until age 67 to be eligible for full retirement benefits. Those already on the state payroll can still retire at 55 with full benefits.
The 1935 Social Security Act established 65 as the age of eligibility for payouts. But welfare state politics quickly becomes a bidding war, enriching the menu of benefits, so Congress in 1956 entitled women to collect benefits at 62 and in 1961 extended the entitlement to men. Today, nearly half of Social Security recipients choose to begin getting benefits at 62. This is a grotesque perversion of a program that was never intended to subsidize retirees for a third to a half of their adult lives.
It also reflects the decadent dependence that the welfare state encourages: Because of the displacement of responsibility from the individual to government, 48 percent of workers over 55 have total savings and investments of less than $50,000.
Because most states' pension plans compute their present values — and minimize required current contributions — by assuming an unrealistic 8 percent annual return on investments, the cumulative funding gap of state pensions already may be $3 trillion and certainly is rising. For example, Wednesday's New York Times contained this attention-seizing bulletin: "An independent analysis of California's three big pension funds has found a hidden shortfall of more than half a trillion dollars, several times the amount reported by the funds and more than six times the value of the state's outstanding bonds." It is not news that California is America's home-grown Greece, but the condition of the three funds, which serve 2.6 million current and retired public employees, is going to exacerbate the state's decline by requiring significantly higher taxpayer contributions.
A recent debate on "Fox News Sunday" illustrated the differences between the few politicians who are, and the many who are not, willing to face facts. Marco Rubio, the former speaker of Florida's House of Representatives who is challenging Gov. Charles Crist for the Republican U.S. Senate nomination, made news by stating the obvious.
Asked how the nation might address the projected $17.5 trillion in unfunded Social Security liabilities, Rubio said that we should consider two changes for people 10 or more years from retirement. One would raise the retirement age. The other would alter the calculation of benefits: Indexing them to inflation rather than wage increases would substantially reduce the system's unfunded liabilities.
Neither idea startles any serious person. But Crist, with the reflex of the unreflective, rejected both and said that he would fix Social Security by eliminating "waste" and "fraud," of which there is little. The system's problems are the result not of incompetent administration but of improvident promises made by Congress.
Synthetic indignation being the first refuge of political featherweights, Crist's campaign announced that he believes Rubio's suggestions are "cruel, unusual and unfair to seniors living on a fixed income." They are indeed unusual, because flinching from the facts of the coming entitlements crisis is the default position of all but a responsible few, such as Wisconsin's Rep. Paul Ryan, who has endorsed Rubio. What is ultimately cruel is Crist's unserious pretense that America faces only palatable choices and that improvident promises can be fully funded with money currently lost to waste and fraud.
By the time the baby boomers have retired in 2030, the median age of the American population will be close to that of today's population of Florida, the retirees' haven that is Heaven's antechamber. The 38-year-old Rubio's responsible answer to a serious question gives the nation a glimpse of a rarity — a brave approach to the welfare state's inevitable politics of gerontocracy.***
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It never ceases to astound: some supposed problem with the safety of a vehicle that doesn't add up when viewed on an actuarial basis nonetheless gets ballyhooed all over the media. Yet the CAFE standards which lead to thousands of deaths and injuries each year gets a pass:
Death by CAFE Standards
By J.R. Dunn
Media discussions of the administration's new mileage rules have covered about everything except how many people they will kill.
Manipulating fuel efficiency standards has been a favored method of fulfilling environmental prerogatives for thirty years and more. Like most Green initiatives, it is essentially ritualistic. Rather than actually confront the problem at issue, it is instead intended to instill a sense of virtue (what economist Robert J. Samuelson calls "psychic benefits"), while at the same time acting as a punitive measure against those opposed to Green ideology. As is true of many environmentalist programs, it has the unintended side-effect of killing large numbers of unknowing individuals.
Like much else in the way of nonsense, mileage regulation was a product of the 1970s. The decade was marked by several "oil shortages," which media, government, and Green activists all attributed to resource depletion. In truth, they were triggered by Arab manipulation of oil prices in an attempt to undercut support for Israel, then amplified by U.S. government incompetence and public hysteria generated by the Greens.
Fuel standards are the longest-lived of an entirely futile array of attempts to address 1970s oil shortages. They first went into effect in the 1975 Energy Policy and Conservation Act as the Corporate Average Fuel Economy program, better known as CAFE. Under the CAFE standards, domestic and foreign automobile manufacturers had to meet a certain mileage standard in their cars and light trucks. They were allowed a very short time to carry this out before fines were levied, so they met the challenge in the easiest way possible: by designing small engines that used less fuel while lowering the size and weight of new vehicles to preserve performance.
The new standards had no success in lowering fuel consumption. Quite the contrary -- since it now cost less to fill the tank, people drove more. Within a few years, this "rebound effect" doubled average fuel usage. As a result, oil imports increased from 35% of consumption in 1975 to 52% by the year 2000.
The new regulations did accomplish one thing -- they killed drivers and passengers in large numbers. By lightening cars and removing material, auto companies were inadvertently discarding the armor that protected motorists in the event of a crash. Similarly, the compressed new models lacked space for impact forces to attenuate before causing damage and injury. Drivers in lightweight cars were as much as twelve times more likely to die in a crash. It was once said about American autos that they were "built like tanks." Many of the new models from the late '70s onward more closely resembled go-carts -- and proved to be about as sturdy.
Studies have repeatedly demonstrated the fatal results of mileage regulations, starting in 1989 with the Brookings Institution (in collaboration with the Harvard School of Public Health), followed by USA Today in 1999, the National Academy of Sciences in 2001, and at last the federal government's own National Highway Transportation and Safety Administration in 2003. This formidable lineup of organizations all came to the same conclusion: Fuel standards kill.
According to the Brookings Institution, a 500-lb weight reduction of the average car increased annual highway fatalities by 2,200-3,900 and serious injuries by 11,000 and 19,500 per year. USA Today found that 7,700 deaths occurred for every mile per gallon gained in fuel economy standards. Smaller cars accounted for up to 12,144 deaths in 1997, 37% of all vehicle fatalities for that year. The National Academy of Sciences found that smaller, lighter vehicles "probably resulted in an additional 1,300 to 2,600 traffic fatalities in 1993." The National Highway Transportation and Safety Administration study demonstrated that reducing a vehicle's weight by only one hundred pounds increased the fatality rate by as much as 5.63% for light cars, 4.70% for heavier cars, and 3.06% for light trucks. These rates translated into additional traffic fatalities of 13,608 for light cars, 10,884 for heavier cars, and 14,705 for light trucks between 1996 and 1999.
How many deaths have resulted? Depending on which study you choose, the total ranges from 41,600 to 124,800. To that figure we can add between 352,000 and 624,000 people suffering serious injuries, including being crippled for life. In the past thirty years, fuel standards have become one of the major causes of death and misery in the United States -- and one almost completely attributable to human stupidity and shortsightedness.
In 2007, the Bush administration moved to change these standards. No, not to abolish them as failed policy and a threat to public safety, but to expand and extend them exactly as if they constituted a rational solution to an actual existing problem. Rather than set a single figure, as was the case with the original CAFE standards, the Bush administration created a "sliding scale" based on a vehicle's size and weight. The typical bureaucratic solution: if something doesn't work, make it more complex and see what happens then. (To be fair to Bush, his administration had been hounded over fuel standards for several years by lawyers, activists, and the media, an effort that included two lost court cases. But this scarcely rates as an excuse.)
Along with Predator strikes, fuel standards were one of the few Bush initiatives that Barack Obama liked. (It's really too bad we can't persuade jihadi chiefs to drive around in Neons.) So much, in fact, that he decided to expand them even further. In the new standards announced -- surprise! -- on April 1, the Obama administration returned to the single standard. Mileage levels for cars and light trucks were raised to 35.5 mpg. (It goes without saying that the "light trucks" category was added to target that enemy of nature, the SUV.) In addition, the Environmental Protection Agency added a "tailpipe emissions standard" of 250 grams of CO2 per mile in order to combat global warming, should such a thing ever in fact occur.
All kinds of impressive results are being promised for this latest set of regulations. It will "save" 1.8 billion barrels of oil over an otherwise unspecified "program life." It will reduce CO2 emissions by 960 million metric tons. It will, in other words, do all the swell things that the previous standards somehow failed to do.
What we don't hear is how many motorists and passengers will be killed. The Obama mileage standards are jammed up right at the very edge of the technically feasible -- and perhaps beyond. Automobile technology has progressed substantially since the 1970s, and gas mileage can be increased by utilizing a number of technical advances including computerization, fuel injection, stop-start engines, and hybrid vehicles. But the Obama standards demand more. As in the original CAFE legislation, they demand cars that are chopped down, lightened, and diminished. They demand cars that will kill their drivers and passengers.
With these new standards, a kind of threshold has been passed. Liberal policies are killer policies. Since the early 1960s, liberal programs, whether dealing with criminal justice, health care, the environment, or any other aspect of society, have brought premature death to an increasing number of Americans. My upcoming book Death by Liberalism deals with dozens of such programs, many of them operating to this day. (It also provides a much more detailed -- and infuriating -- account of the CAFE standards.) The overall death rate may be as high as half a million. A level of mortality that would depopulate St. Louis, Cincinnati, or Tampa, brought to us on behalf of our own government.
But the mileage standards as applied by the Obama administration (not to forget the Bush administration before them) are different. They are different because everybody knows about them. No serious dissent exists concerning the fact that the CAFE standards have killed tens of thousands of Americans. If a private company were to be found responsible for even a small fraction of this level of fatalities, the sky would crack, Congress would go into twenty-four hour sessions, and John Edwards would experience a new lease on life. (Anyone doubting this should consider Toyota's recent travails. It is uncertain that anything, anything at all, is wrong with Toyota's products. Yet the media and government are tearing at the company like a pack of wolves after an injured deer.)
But in the case of fuel standards, the government itself is responsible -- and that's different. Governments get away with things that private companies can't. Even policies that enable deaths outnumbering those of all American wars of the past seventy years. Deaths that are unnecessary, deaths that can be avoided, deaths that are being encouraged in order to solve problems that can be overcome in any number of other ways. (Not to mention those problems -- such as global warming -- that can't even be demonstrated to exist.) Yet the topic doesn't even come up in debate. Did anyone involved in the health care "debate" ever mention how many people the British National Health Care system kills every year? That number is 95,000. The equivalent number for the U.S., adjusted for population, would be 450,000 a year. That's the "change" that's coming our way.
Such regulations embody the next step in the process by which the relationship between government and people begins to resemble that of a lawnmower and an anthill. We've seen the end result in other countries -- in most other countries, as a matter of fact. It could be argued that governmental irresponsibility and indifference are the ground state of civic culture, from which we have been attempting to escape for eight millennia, encountering real success only in the past two centuries. From that point of view, the fuel standards, and the mentality that justifies them, mark no advance at all, but a regression to a world that we want nothing to do with.
J.R. Dunn is consulting editor of American Thinker and will edit the forthcoming Military Thinker.
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Tea Party's rise makes perfect sense
By Robert Herbold and Scott Powell
If our elected officials were accountable to the rules they require of the private sector to ensure honest accounting, such as the standards of Generally Accepted Accounting Practices and the business reform laws of Sarbanes-Oxley, they would not only be removed from office, but many would be in jail.
Can anyone really trust the Congressional Budget Office' assessment of health care reform, wherein 10 years of taxes "balance" six years of health care benefit expenditures? How is it different from the crime committed at WorldCom about 10 years ago, in which fraudulent accounting mismatched expenses to income over the years in which they were incurred? The new health care bureaucracy will likely drive cost overruns like every other entitlement, but obviously "ObamaCare" goes negative in Year 11 and beyond.
Even before passage of health care reform, the public understood that Medicare and Medicaid are going bankrupt. The year-long debate didn't address that, but it helped voters see the government's accounting tricks to shift the liability of Medicare off the budget to suit politics. This deceptive accounting eventually will facilitate the bankruptcy of the United States as surely as the off-balance sheet liabilities brought down companies like Enron.
No doubt Bernard Madoff gets the Heisman Trophy for white-collar crime. But his Ponzi fraud that robbed the public of some $50 billion is dwarfed by the Social Security system that is a classic Ponzi scheme, in which present and future retiree claims cannot be met by those entering and currently paying into the system.
Fannie, Freddie and Co.
And consider the recent debt-driven meltdown that caused the worst recession since the 1930s. The legislators who opened the floodgates for the proliferation of subprime debt by pushing Fannie Mae and Freddie Mac to lower their portfolio standards were never held accountable. Fannie and Freddie required a $100 billion bailout (and counting) from taxpayers, but the lawmakers — well, they got promoted to chair the committees in charge of solving the problems they helped create.
Is it really any wonder that a "Tea Party" movement was born a year ago? What kind of government are we getting for the taxes we pay April 15? The fact that the Tea Party has gained center stage in American politics just one year from its founding reveals the breadth of lost public trust. Career Democrats and Republicans have too long been in denial of the elephant they brought into the living room — a dependency on buying votes without regard to deficits or debt. And now President Obama, the emperor who claimed to be committed to rolling back lobbyists, earmarks and profligacy with transparency and bipartisanship, has revealed for all to see that he has no clothes and that, in true Chicago style, the ends justify the means.
Incumbent politicians from both parties are now vulnerable — especially those visibly tied to the corrupting influence of big-money special interests. The obvious need to cut government spending is abrogated by these lobbyists who control funding for politicians' re-election campaigns. Each party has different entrenched constituent lobbyists. But their net effect drives ever more government spending, taxes and debt. As Federal Reserve Chairman Ben Bernanke noted in recent testimony before Congress, this burdens the private sector and edges the country ever closer to insolvency.
A quiet calamity
The watchmen to shine the light on all this abuse used to be the press. But in a media culture that embraces celebrity, sound bites and — yes — political correctness, the nation's slide toward financial ruin just didn't get the attention it most certainly deserved. Many reporters were all too happy to vilify the culprits of capitalism, as with WorldCom, Enron and the like, and to crowd the courthouses for the CEO perp walks. But they should have spent just as much energy taking to task the government players who enabled this financial catastrophe.
So what's to be done? The blatant disrespect for the will of the majority and the Constitution is setting up the November elections as a momentous turning point. Common sense truth that resonates with peoples' deepest concerns is very powerful as demonstrated in Virginia, New Jersey and Massachusetts. Voters' instincts are to protect their children and grandchildren, and nothing will get out the vote better than candidates who articulate a vision of freedom and opportunity that cuts spending, streamlines benefits and once and for all puts America's financial house in order.
Robert Herbold is a retired COO of Microsoft Corp. and managing director of the Herbold Group LLC. Scott Powell is director at AlphaQuest and RemingtonRand and a visiting fellow at the Hoover Institution.
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Examiner Editorial
April 14, 2010
Barely 15 percent of all construction-industry workers in the United States are union members, while the remaining 85 percent are nonunion, according to the U.S. Department of Labor's Bureau of Labor Statistics. So why has President Obama signed Executive Order 13502 directing federal agencies taking bids for government construction projects to accept only those from contractors who agree in advance to a project labor agreement that requires a union work force? Obama's new order applies to all federal construction projects with price tags of $25 million or more, and it means all such contracts will only be awarded to companies with unionized work forces.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/Another-Obama-favor-for-unions-90776984.html#ixzz0lVrSfgDG
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Yep, pay off for the votes- the point is? unions typically are 10% a serious about voting segment of the work force, if a politician can put them in his pocket by an Infrastructure or minimum wage bill? That has been a tit for tat going on for years.
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If I understand correctly the point is this: under the Davis Bacon Act, bids on government work required that contractors using non-union labor pay union scale on the work under that bid. BO has now gone much further, and simply prevented non-union shops from bidding PERIOD, whether they pay union scale on the work or not.
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"prevented non-union shops from bidding"
Didn't know hope and change included steering lucrative projects to your friends for payback. When you exclude qualified bidders on public projects, you are stealing from the taxpayers besides steering jobs to the already powerful.
Another form of elitism as unions are the high end of labor. He risks offending the other 85-90% if they are paying attention. Some 40% of the union vote is Republican. Most union members are white males, a group slipping away from Democrats. And public employees lean hard to the Dem side whether unionized or not.
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Could put this under Energy or What the ..., but this story is about a federal program to award private companies. Scratch my back and I'll scratch yours...
Source: CNN
http://news.blogs.cnn.com/2010/04/30/in-ironic-twist-bp-finalist-for-pollution-prevention-award/
In ironic twist, BP finalist for pollution prevention award
BP, now under federal scrutiny because of its role in the deadly Gulf of Mexico explosion and oil spill, is one of three finalists for a federal award honoring offshore oil companies for "outstanding safety and pollution prevention."
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By the way the story reads, I suspect BP was in fact the winner to be announced.
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Morning Bell: Fannie and Freddie Failure Forever
Posted By Conn Carroll On May 6, 2010 @ 9:29 am In Enterprise and Free Markets | No Comments
Yesterday, Sen. Chris Dodd (D-CT) told reporters [1] about his financial regulation bill, “We’ve ended the ‘too big to fail’ debate. So no longer do I expect any argument to be made that this bill exposes the American taxpayer.” Really. Someone might want to tell Sen. Dodd that in other news yesterday, Freddie Mac announced [2] that it lost another $6.7 billion in the first quarter of 2010 and therefore needed another $10.6 billion in cash from U.S. taxpayers. Since formally nationalizing Freddie in 2008, the federal government has already spent $50.7 billion bringing the Freddie bailout total to $61.3 billion so far. Combined with Fannie Mae’s raid on the Treasury, the Congressional Budget Office estimates that the American people will spend $389 billion bailing out the two Government Sponsored Entities by 2019. So much for American taxpayers no longer being exposed to “too big to fail.”
In fact, nothing in the Dodd bill does anything to reform Fannie Mae and Freddie Mac. This despite the fact that Fannie and Freddie were key components [3] in causing the very financial crises Dodd claims his bill will forever prevent. Fannie and Freddie were both created for the specific purpose of making it easier for Americans to buy more expensive housing. Starting in 1993 [4], political forces pushed Fannie and Freddie to loosen their once strict loan purchasing requirements. By 1996, regulations required that 40% of all Fannie and Freddie-bought loans [4] must come from individuals with below median incomes. In 1995, Fannie and Freddie began buying subprime securities [5] originally bought and bundled by private firms. One of these firms was Countrywide Financial who, thanks to their status as Fannie Mae’s biggest customer [6], delivered investors a 23,000% return between 1985 and 2003. [7] By 2004, Fannie and Freddie were purchasing $175 billion worth of subprime securities per year from Countrywide and their brethren… a 44% share of the entire market [5]. There are other factors that helped contribute to the 2008 financial crisis [3], but Fannie and Freddie’s use of their “too big to fail” status to create and grow the subprime security market was essential.
But Sen. Dodd, who received V.I.P. treatment from Countrywide CEO Angelo Mozilo [8], never saw any problem with Fannie and Freddie. On July 13, 2008, Senator Dodd said on national television [5], “To suggest somehow that [Fannie Mae and Freddie Mac] are in trouble is simply not accurate.” Less than two months later the bailouts of Fannie and Freddie began. Keep these facts in mind when Dodd says his bill solves the “too big to fail” problem.
The problems with the Dodd bill go beyond its failure to let Fannie and Freddie wither into extinction [9]. While Dodd has agreed to get rid of the $50 billion bailout fund, the underlying bailout authority still remains. Now taxpayers are expected to front the government money while firms are liquidated. But the irresponsible creditors who let those firms borrow money irresponsibly would still be eligible for taxpayer bailouts. According to The Washington Post [10], “a failing firm would be forced to pay back the government any money they received above what they would have gotten under a bankruptcy proceeding.” But how does the government know what creditors would have got if the company went into bankruptcy? Why not just strengthen the existing bankruptcy system [11] and actually allow these too big to fail firms to, ya know, fail?
But Dodd and the Obama administration would never allow that. It would defeat the whole purpose this financial regulation bill, which is to transfer as much power to the federal government as possible. Never mind that these are the same government regulators who failed to see the last crisis coming.
Quick Hits:
Protesters objecting to the cuts in government wages and pensions [12] necessary to secure $141 billion in loans for Greece from the European Union and the International Monetary Fund turned violent yesterday.
The European commission forecasts that the United Kingdom’s budget deficit is set to surpass Greece [13]’s as worst in the European Union.
Celebrating Cinco de Mayo at the White House, President Barack Obama promised to press for amnesty for illegal immigrants [14] this year.
The Federal Communications Commission announced yesterday that for the first time in its history, the federal government will try to regulate the Internet [15].
Sens. John Kerry (D-MA) and Joe Lieberman (I-CT) plan to use the BP oil spill [16] to push their energy tax bill next week.
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Article printed from The Foundry: Conservative Policy News.: http://blog.heritage.org
URL to article: http://blog.heritage.org/2010/05/06/morning-bell-fannie-and-freddie-failure-forever/
URLs in this post:
[1] told reporters: http://www.politico.com/news/stories/0510/36821.html
[2] announced: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050505227.html
[3] key components: http://www.heritage.org/Research/Reports/2009/10/Understanding-the-Great-Global-Contagion-and-Recession
[4] 1993: http://www.huduser.org/datasets/GSE/gse2001.pdf
[5] 1995, Fannie and Freddie began buying subprime securities: http://www.washingtonpost.com/wp-dyn/content/article/2008/06/09/AR2008060902626_pf.html
[6] Fannie Mae’s biggest customer: http://www.forbes.com/markets/2008/09/08/bofa-bailout-winner-markets-equity-cx_md_0908markets32.html
[7] delivered investors a 23,000% return between 1985 and 2003.: http://money.cnn.com/magazines/fortune/fortune_archive/2003/09/15/349151/index.htm
[8] who received V.I.P. treatment from Countrywide CEO Angelo Mozilo: http://blog.heritage.org/2008/06/13/the-countrywide-bailout-explained/
[9] let Fannie and Freddie wither into extinction: http://www.heritage.org/Research/Reports/2008/09/Fannie-and-Freddie-Time-to-Clean-up-the-Mess-and-Move-Forward
[10] The Washington Post: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050504164.html
[11] strengthen the existing bankruptcy system: http://www.heritage.org/Research/Commentary/2010/04/A-BETTER-WAY-TO-AVOID-BAILOUTS
[12] cuts in government wages and pensions: http://www.washingtonpost.com/wp-dyn/content/article/2010/05/05/AR2010050505360.html
[13] United Kingdom’s budget deficit is set to surpass Greece: http://www.guardian.co.uk/business/2010/may/05/uk-budget-deficit-worse-than-greece
[14] amnesty for illegal immigrants: http://thehill.com/blogs/blog-briefing-room/news/96311-obama-calls-for-immigration-reform-criticizes-ariz-law
[15] the federal government will try to regulate the Internet: http://www.nytimes.com/2010/05/06/technology/06broadband.html?ref=todayspaper&pagewanted=print
[16] plan to use the BP oil spill: http://www.politico.com/news/stories/0510/36837.html
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Spoof of GM CEO explaining how they re-paid the loan. Sounds about right.
[youtube]http://www.youtube.com/watch?v=1gq7J71VsDM&feature=player_embedded[/youtube]
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the 12 trillion debt is 400,000 for every one of the 300 million people living in this country. If you had recieved that kind of bundle as your part of the stimulus plan, what would you do with it? What is actually happening with that cash is that the banks and the fed are printing it up, buying off debt (very naughty bad obscene porcine type obese debt). This $ never actually circulates to stimulate the economy- prime the pump so to speak. Instead it is coming out of the irrigation pond and being pumped into the water trough a bunch of congress critters and their litters drink out of This pond is rapidly drying up, but the critters are thirsty..............they figure there is another watering hole (new tax) but how many such can you find before they start to remember the scam last time.
We may avoid the inflation because this flow is a whirlpool on a bend in the economy, but cash is escaping from this and the world is getting concerned abouy its cash standard......... If inflation hits and the fed cannot stop spending.........
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If the money escapes, to where does it go?
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It waters the weeds- We The People?
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I was hoping for a more specific answer than that , , ,
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I suspect it goes into various pockets. Like the bridge to nowhere pockets, or goes to fund public projects that end up underfunded some how due to milking, I know that there were a bunch of Pizza parlors that were started up during Clinton's administration using "special economic zone" stimulus money. They lasted for less than 2 years, but the money was a grant cost us several hundred thousand to a million at a pop. I suspect these businesses were planned to faill to give someone a nest egg.........and no way to real prove anything without throwing good money after bad.........
Basically fraud and other sneaky handouts.
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Europeans Fear Crisis Threatens Liberal Benefits
By STEVEN ERLANGER
Published: May 22, 2010
PARIS — Across Western Europe, the “lifestyle superpower,” the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.
Payback Time
Articles in this series are examining the consequences of, and efforts to deal with, growing public and private debts. Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.
Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.
But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.
With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.
“We’re now in rescue mode,” said Carl Bildt, Sweden’s foreign minister. “But we need to transition to the reform mode very soon. The ‘reform deficit’ is the real problem,” he said, pointing to the need for structural change.
The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable.
In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece’s bloated state sector and its employees. “They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,” he said. “As for us, the way things are going we’ll have to work until we’re 70.”
In Rome, Aldo Cimaglia is 52 and teaches photography, and he is deeply pessimistic about his pension. “It’s going to go belly-up because no one will be around to fill the pension coffers,” he said. “It’s not just me; this country has no future.”
Changes have now become urgent. Europe’s population is aging quickly as birthrates decline. Unemployment has risen as traditional industries have shifted to Asia. And the region lacks competitiveness in world markets.
According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1.
“The easy days are over for countries like Greece, Portugal and Spain, but for us, too,” said Laurent Cohen-Tanugi, a French lawyer who did a study of Europe in the global economy for the French government. “A lot of Europeans would not like the issue cast in these terms, but that is the storm we’re facing. We can no longer afford the old social model, and there is a real need for structural reform.”
In Paris, Malka Braniste, 88, lives on the pension of her deceased husband. “I’m worried for the next generations,” she said at lunch with her daughter-in-law, Dominique Alcan, 49. “People who don’t put money aside won’t get anything.”
Ms. Alcan expects to have to work longer as a traveling saleswoman. “But I’m afraid I’ll never reach the same level of comfort,” she said. “I won’t be able to do my job at 63; being a saleswoman requires a lot of energy.”
Gustave Brun d’Arre, 18, is still in high school. “The only thing we’re told is that we will have to pay for the others,” he said, sipping a beer at a cafe. The waiter interrupted, discussing plans to alter the French pension system. “It will be a mess,” the waiter said. “We’ll have to work harder and longer in our jobs.”
Figures show the severity of the problem. Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent.
The challenge is particularly daunting in France, which has done less to reduce the state’s obligations than some of its neighbors. In Sweden and Switzerland, 7 of 10 people work past 50. In France, only half do. The legal retirement age in France is 60, while Germany recently raised it to 67 for those born after 1963.
With the retirement of the baby boomers, the number of pensioners will rise 47 percent in France between now and 2050, while the number under 60 will remain stagnant. The French call it “du baby boom au papy boom,” and the costs, if unchanged, are unsustainable. The French state pension system today is running a deficit of 11 billion euros, or about $13.8 billion; by 2050, it will be 103 billion euros, or $129.5 billion, about 2.6 percent of projected economic output.
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(Page 2 of 2)
President Nicolas Sarkozy has vowed to pass major pension reform this year. There have been two contentious overhauls, in 2003 and 2008; the government, afraid to lower pensions, wants to increase taxes on high salaries and increase the years of work.
Payback Time
But the unions are unhappy, and the Socialist Party opposes raising the retirement age. Polls show that while most French see a pension overhaul as necessary, up to 60 percent say working past 60 is not the answer.
Jean-François Copé, the parliamentary leader for Mr. Sarkozy’s center-right party, says that change is painful, but necessary. “The point is to preserve our model and keep it,” he said. “We need to get rid of bad habits. The Germans did it, and we can do the same.”
More broadly, many across Europe say the Continent will have to adapt to fiscal and demographic change, because social peace depends on it. “Europe won’t work without that,” said Joschka Fischer, the former German foreign minister, referring to the state’s protective role. “In Europe we have nationalism and racism in a politicized manner, and those parties would have exploited grievances if not for our welfare state,” he said. “It’s a matter of national security, of our democracy.”
France will ultimately have to follow Sweden and Germany in raising the pension age, he argues. “This will have to be harmonized, Europeanized, or it won’t work — you can’t have a pension at 67 here and 55 in Greece,” Mr. Fischer said.
The problems are even more acute in the “new democracies” of the euro zone — Greece, Portugal and Spain — that embraced European democratic ideals and that Europe embraced for political reasons in the postwar era, perhaps before their economies were ready. They have built lavish state systems on the back of the euro, but now must change.
Under threat of default, Greece has frozen pensions for three years and drafted a bill to raise the legal retirement age to 65. Greece froze public-sector pay and trimmed benefits for state employees, including a bonus two months of salary. Portugal has cut 5 percent from the salaries of senior public employees and politicians and increased taxes, while canceling big projects; Spain is cutting civil service salaries by 5 percent and freezing pay in 2011 while also chopping public projects.
But all three need to do more to bolster their competitiveness and growth, mostly by changing deeply inflexible employment rules, which can make it prohibitively expensive to hire or fire staff members, keeping unemployment high.
Jean-Claude Meunier is 68, a retired French Navy official and headhunter, who plays bridge to “train my memory and avoid Alzheimer’s.” His main worry is pension. “For years, our political leaders acted with very little courage,” he said. “Pensions represent the failure of the leaders and the failure of the system.”
In Athens, Mr. Iordanidis, the graduate who makes 800 euros a month in a bookstore, said he saw one possible upside. “It could be a chance to overhaul the whole rancid system,” he said, “and create a state that actually works.”
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Woof,
Here's your chance to make some cuts in spending.
http://republicanwhip.house.gov/YouCut/
P.C.
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States face same/similar spending and deficit problems. New Jersey may now be the best example, but Minnesota of all places is another example over the last 8 years. Gov. Tim Pawlenty claims to have cut real spending levels by an average of 2% per year over his two 4-year terms. Hostile liberal CBS affiliate television station ran a mixed fact check reply but concluded the main claim is True. http://wcco.com/realitycheck/pawlenty.legacy.spending.2.1702034.html
Pawlenty presided over the implementation of the tax cuts enacted by his predecessor (a wrestler) to take Minnesota out of the top ten worst tax states. Coincidentally, the unemployment rate just dropped to 7.2%. http://www.minnpost.com/bradallen/2010/05/20/18330/minnesota_jobless_rate_drops_as_employers_add_10200_jobs_in_april
(Maybe this should be posted in the way forward for California.)
Minnesota loves its 'great liberals' Hubert Humphrey, Eugene McCarthy, Walter Mondale, Paul Wellstone, Garrison Keillor etc. but doesn't trust them to govern. The last time Dems won the Gov. race was 1982/1988, a dentist from the iron range who ran against the party establishment and pioneered school choice.
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IMHO one of the most important things in making it difficult to understand and measure what the hell is going on is "baseline budgeting" under which a smaller than previously "planned" increase is called a "cut".
If someone can find a good definition/explanation of BB and post it here it would be appreciated.
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"If someone can find a good definition/explanation of Baseline Budgeting and post it here it would be appreciated."
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I don't welcome the task of going inside the liberal, big government mind to explain its inner workings. What if I never make it back out?
Take last year's budget for any one of the thousands of federal social spending programs (like that amount was a commandment from God) and add some artificial multiplier for inflation and for population increase. Then any amount for the following year that is less than this 'required' increase is a 'cut' in a program.
So if your budget was $100 billion last year and we say inflation was 4% and population increase was 1% and then spend $102 Billion the next year, that is a 3% cut, in Washington-speak, typically hitting women and children the hardest.
A few small flaws in the logic:
a) If the $100 billion was spent to solve something, then presumably only $50 billion or ideally nothing would be required the following year. But in fact, if you pay for homelessness or hunger, for example, you will get more of it.
b) Budgets in a rational world come out of money available, not need or wish. So if the budget was in balance last year and tax revenues contract by 5%, then the baseline for each worthwhile program would be -5%, holding its share of the public money available. Not in Washington.
The real solution is Zero-Based-Budgeting, every two years. No congress has any right to obligate or presume that the following congress will choose to tax or spend on any of the same programs before the people have had their say. That is a level of arrogance and unconstitutionality I will never understand.
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I wonder what the blowback would be if a Bush or Reagan had submitted this budget. 33% of all spending is pretend money we admit we will never have, but agree to pay with interest.
Submitted February, 2010
Submitted by Barack Obama
Submitted to 111th Congress
Total revenue $2.57 trillion (estimated)
Total expenditures $3.83 trillion (estimated)
Deficit $1.267 trillion (estimated)
http://www.whitehouse.gov/omb/budget/fy2011/assets/tables.pdf
For revenues at that level, 'baseline' spending should be at 2005-2006 levels, no more.
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Doug:
That is profoundly scary :-o :-o :-o
All:
We're from the government and we are here to help you, the Australian version.
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The Australian Government and the NSW Forestry Service were presenting an alternative to NSW sheep farmers for controlling the dingo population. It seems that after years of the sheep farmers using the tried and true methods of shooting and/or trapping the predators, the Labor Government (Peter Garrett - Environmental Minister), the NSW Forestry Service and the Greens had a 'more humane' solution.
What they proposed was for the animals to be captured alive, the males would then be castrated and let loose again. Therefore the population would be controlled.
This was ACTUALLY proposed to the NSW Sheep farmers Association and Farming Association by the Federal Government and the NSW Forestry Service. All of the sheep farmers thought about this amazing idea for a couple of minutes. Finally, one of the old boys in the back of the conference room stood up, tipped his hat back and said, ‘Mr Garrett, son, I don't think you understand our problem. Those dingo’s ain't f*****' our sheep - they're eatin' 'em.'
You should have been there to hear the roar of laughter as Mr Peter Garrett and the members of the NSW Forestry Service and the Greens left the meeting very "sheepishly".
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Heavily illustrated piece demonstrating just how unsustainable the current budget and budgeting processes are:
http://www.heritage.org/Research/Reports/2010/06/Federal-Spending-by-the-Numbers-2010
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Friday Feature /The Millionaire Cop Next Door
~~~~~~~~~~~~
RICH KARLGAARD, Forbes.com "Digital Rules" (06/01/10): It is said that
government workers now make, on average, 30% more than private sector
workers. Put that fantasy aside. It far underestimates the real figures.
By my calculations, government workers make more than twice as much.
Government workers are America's fastest-growing millionaires.
Doubt it? Then ask yourself: What is the net present value of an $80,000
annual pension payout with additional full health benefits? Working
backward, the total NPV would depend on expected returns of a basket of
safe investments--blue chip stocks, dividends and U.S. Treasury bonds.
Investment pros like my friend Barry Glassman say 4% is a reasonable
return today. That's a pitiful yield, isn't it? It is sure to disappoint
the scores of millions of baby boomers who will soon enter retirement with
nothing more than their desiccated 401(k)s, down 30% on average from 30
months ago, and a bit of Social Security.
Based on this small but unfortunately realistic 4% return, an $80,000
annual pension payout implies a rather large pot of money behind it--$2
million, to be precise.
That's a lot. One might guess that a $2 million stash would be in the 95th
percentile for the 77 million baby boomers who will soon face retirement.
That $2 million also happens to be the implied booty of your average
California policeman who retires at age 55. Typical cities in California
have a police officer's retirement plan that works as follows: 3% at 50.
As the North County Times of Carlsbad, Calif., explains:
"Carlsbad offers its police and firefighters a "3-percent-at-50"
retirement plan, meaning that emergency services workers who retire at age
50 can get 3 percent of their highest salary times the number of years
they have worked for the city.
City officials have said that in Carlsbad, the average firefighter or
police officer typically retires at age 55 and has 28 years of service.
Using the 3 percent salary calculation, that person would receive an
annual city pension of $76,440."
That does not include health benefits, which might push real retirement
compensation close to $100,000 a year.
Who are America's fastest-growing class of millionaires? They are police
officers, firefighters, teachers and federal bureaucrats who, unless
things change drastically, will be paid something near their full salaries
every year--until death--after retiring in their mid-50s. That is
equivalent to a retirement sum worth millions of dollars....
Read On or Post a Comment:
http://blogs.forbes.com/digitalrules/2010/06/the-millionaire-cop-next-door/
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Analysis: Election fears, deficit stymie Democrats
Andrew Taylor
Congressional Democrats returning this week to the Washington they control will confront an embarrassing pile of unfinished budget business after spending the winter and spring blowing deadline after deadline.
With many Democratic lawmakers running for their political lives five months before the fall elections, even relatively simple tasks such as helping the jobless and preventing cuts in Medicare payments to doctors are hanging — victims of the ever increasing anxiety over annual trillion-dollar-plus deficits.
A war funding bill is long overdue. The most basic chore of writing a budget has been all but abandoned. There's no sign of the 12 annual spending bills for keeping government agencies open four months from now.
On the horizon is the dilemma of what to do about renewing a long roster of tax cuts enacted under former President George W. Bush. They're due to expire two months after the November election. Lawmakers will be under tremendous pressure to act in September or October. Based on the record so far, it won't be smooth — and might not get done before Election Day.
Efforts to pass a nonbinding blueprint that sketches out fiscal goals have stalled in the House. Moderate "Blue Dog" Democrats have demanded spending cuts beyond President Barack Obama's proposed freeze on domestic agency operating budgets. House leaders and the liberal core of the party are resisting.
The most painful budget questions — where and how to raise taxes or cut popular benefit programs, or both — were handed them off to bipartisan fiscal commission, which many budget experts believe is unlikely to succeed in coming up with a deficit-cutting plan.
"Every family knows that in tough times, a budget is even more important — not less important," said House Republican leader John Boehner of Ohio. "A $13 trillion national debt is an alarm bell and a wake-up call together, and it demands more than just lip service."
It's hardly the first time that Congress won't have passed a budget resolution, but Democrats were harshly critical of Republicans' failures to do so in the past.
"If you can't budget, you can't govern," Rep. John Spratt Jr., D-S.C., now the House Budget Committee chairman, said when the GOP-controlled Congress failed to produce a budget in 2006.
Unemployment benefits for hundreds of thousands of long-term jobless workers have been interrupted three times this year because Congress failed to meet self-imposed deadlines for renewing them. Delays in passing a catchall bill for extending those benefits, popular tax breaks and safety net programs through the election appear to have cost governors $24 billion in federal help with their Medicaid budgets.
The Medicaid money had won passage earlier in the House and Senate, then got dumped last month after protests from Democratic moderates unhappy about voting for higher deficits. Democratic leaders also were forced to drop a $7 billion extension of a program providing generous health insurance subsidies to the jobless.
"I just wasn't willing to vote for a lot of stuff ... that while good and urgent, should be paid for," said freshman Rep. Jim Himes, D-Conn.
To be sure, Democrats spent much of their time and attention early in the year on passing Obama's health care overhaul, which promises to have a far greater long-term impact on fiscal policy and political debates.
Republicans have been relentlessly on the attack, offering up mostly small-bore ideas for cutting spending. Like Democrats, most Republicans have steered clear of politically risky topics such as cutting Medicare and other benefit programs.
Democratic leaders are optimistic that the unemployment insurance measure and its many companion elements will pass Congress this month and be signed by Obama.
Extending Bush's tax cuts sounds a lot easier than done, especially in the face of record deficits. Obama wants to renew them — except for families making more than $250,000 per year and individuals making more than $200,000. He would raise their taxes.
But most Democrats never voted for the Bush tax cuts. Recent moves by House Democrats to scrap billions of dollars for Medicaid and health insurance subsidies for the unemployed — after voting for them in December — provide evidence of how those worries over the deficit have intensified.
"It's pretty obvious that the Democrats are in a mass panic over the deficit," said GOP tax expert Ken Kies of the Federal Policy Group. "I don't think they're going to extend the Bush tax cuts. The deficit's too big."
There's been no sign this year of the 12 annual appropriations bills that usually dominate Congress' summer schedule. Last year, the House passed all 12 before the summer recess in August. This year, because there's no budget in place, lawmakers have yet to set bottom-line figures for working back to figure out much each agency and program can spend in the budget year that begins Oct. 1.
Moderate Democrats and the party's more liberal leaders are divided. Congress may end up bundling most of the bills into a giant stack and pass them as a catchall measure during a postelection lame-duck session.
http://www.realclearpolitics.com/news/ap/politics/2010/Jun/06/analysis__election_fears__deficit_stymie_democrats.html
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http://endoftheamericandream.com/archives/50-statistics-about-the-u-s-economy-that-are-almost-too-crazy-to-believe
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Medicaid Cut Places States in Budget Bind
By KEVIN SACK
Published: June 7, 2010
Having counted on Washington for money that may not be delivered, at least 30 states will have to close larger-than-anticipated shortfalls in the coming fiscal year unless Congress passes a six-month extension of increased federal spending on Medicaid.
MedicaidGovernors and state lawmakers, already facing some of the toughest budgets since the Great Depression, said the repercussions would extend far beyond health care, forcing them to make deep cuts to education, social services and public safety.
Gov. Edward G. Rendell of Pennsylvania, for instance, penciled $850 million in federal Medicaid assistance into the revenue side of his state’s ledger, reducing its projected shortfall to $1.2 billion. The only way to compensate for the loss, he said in an interview, would be to lay off at least 20,000 government workers, including teachers and police officers, at a time when the state is starting to add jobs.
“It would actually kill everything the stimulus has done,” said Mr. Rendell, a Democrat. “It would be enormously destructive.”
The Medicaid provision, which would extend assistance first granted in last year’s stimulus package, was considered such a sure bet by many governors and legislative leaders that they prematurely included the money in their budgeting. But under pressure from conservative Democrats to rein in deficit spending, House leaders in late May eliminated $24 billion in aid to states from a tax and jobs bill that was approved and forwarded to the Senate.
The Senate plans to take up the measure this week, and the majority leader, Senator Harry Reid of Nevada, favors restoring the money, said his spokesman, Jim Manley. The House speaker, Nancy Pelosi, signaled last week that her chamber was open to reconsidering the appropriation.
But state and Congressional officials said the evolving politics of a midterm election year meant that the federal aid could no longer be taken for granted. And if it does not arrive, it will leave gaping shortages for states that are already slashing services and raising taxes to balance their recession-racked budgets.
According to the National Conference of State Legislatures, states are relying on the money to close more than a fourth of the $89 billion in cumulative budget shortfalls projected for the 2011 fiscal year, which starts on July 1 in 46 states.
In California, Gov. Arnold Schwarzenegger’s proposed budget assumed $1.5 billion in increased federal aid for Medicaid. With his state reeling from $57 billion in cuts over three years and facing a shortfall of $19 billion in 2011, further reductions would be “both cruel and counterproductive,” Mr. Schwarzenegger, a Republican, wrote to members of Congress last week.
In New York, which started its fiscal year on April 1 without a financial plan, Gov. David A. Paterson’s proposed budget included $1.1 billion in unsecured federal financing. Mr. Paterson, who is depending on the money to narrow a $9.2 billion gap, joined Mayor Michael R. Bloomberg of New York City at Gracie Mansion on Thursday to lobby their state’s Congressional delegation.
Governors and state lawmakers were caught largely by surprise by the House’s removal of the appropriation. Over the previous 10 months, the Medicaid money had been included in separate bills passed by each chamber, and President Obama had wrapped the extension into his executive budget proposal.
“There was every reason to think they’d get together,” Mr. Rendell said.
But in recent weeks, Republicans and conservative Democrats began to complain that the proposed spending would add to the deficit because it was not “paid for” with new revenue or other cuts. Their success in reducing the size of the bill reflected a deepening debate in Congress — and on the campaign trail — about the long-term consequences of using deficit spending to fight the recession.
Democratic aides in both the House and the Senate said state officials had not pressed their case forcefully enough.
“We may have fallen asleep at the wheel a little bit because we took it as a certainty for so long,” said Michael Bird, federal affairs counsel for the National Council of State Legislatures.
Republican governors in particular, the aides said, had been reluctant to petition for relief while the party’s leaders in Congress were criticizing Democrats for driving up the national debt.
“Governors need to make it clear that it is vital that their states receive this money, instead of blasting Congress for ‘out-of-control spending,’ ” said a senior Democratic aide in the House, speaking on the condition of anonymity because he was not authorized to talk about the issue publicly.
But the need to balance state and federal interests makes for awkward politics for some governors. Timing has made the conflict more pronounced because state budgets typically do not recover until well after a national recession fades.
“I’m very concerned about the level of federal spending and what it would mean for the long term,” said Gov. Jim Douglas of Vermont, a Republican and chairman of the National Governors Association. “But for the short term, states need this bridge to sustain the safety net of human services programs and education.”
A report issued Thursday by the National Governors Association and the National Association of State Budget Officers projected that state revenues would “remain sluggish” for two more years. State general fund spending declined by nearly $75 billion, or 11 percent, from 2008 to 2010, according to the report. But states, which unlike the federal government must balance their budgets, avoided even harsher cuts because of nearly $135 billion in stimulus grants from Washington.
The aid included $87 billion made available by adjusting how states and the federal government share the growing cost of Medicaid, the health insurance program for the poor and the disabled. The economic downturn is expected to drive up enrollment in the program by 21 percent from 2009 to 2011, according to the report.
Although the federal Medicaid share varies by state, the stimulus act raised it to an average of 66 percent, from 57 percent, according to the Kaiser Family Foundation.
The reimbursement increase was limited to a 27-month period that ends on Dec. 31. Almost as soon as it took effect, governors began fretting about the fiscal precipice they would face when the enhanced payments ended. In February, governors from 42 states and several territories signed a letter to Congressional leaders pleading for a six-month extension.
But with the public alarmed about deficit spending, House leaders found that they could not muster the Democratic votes needed to pass the tax and jobs bill without jettisoning several expensive components.
In a conference call with bloggers last week, Ms. Pelosi, Democrat of California, took note of the changed political climate, calling the package “too large for members to digest.”
“If I had all the votes that I needed in the non-Blue Dog world,” she said, referring to the caucus of conservative Democrats, “I would not have had to make some of the changes I made to get some of the Blue Dog support.”
Many states do not have contingencies for replacing the federal money. Their options will be limited by the severity of the steps they already have taken, and by federal requirements that they maintain eligibility levels for Medicaid.
“We don’t have a specific list of things we would do if we don’t get the money,” said Erik Kriss, a spokesman for Mr. Paterson’s budget office, “but we are looking for the most part at the cut side of the ledger.”
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Wall Street's War
Congress looked serious about finance reform – until America's biggest banks unleashed an army of 2,000 paid lobbyists
Matt Taibbi
It's early May in Washington, and something very weird is in the air. As Chris Dodd, Harry Reid and the rest of the compulsive dealmakers in the Senate barrel toward the finish line of the Restoring American Financial Stability Act – the massive, year-in-the-making effort to clean up the Wall Street crime swamp – word starts to spread on Capitol Hill that somebody forgot to kill the important reforms in the bill. As of the first week in May, the legislation still contains aggressive measures that could cost once-indomitable behemoths like Goldman Sachs and JP Morgan Chase tens of billions of dollars. Somehow, the bill has escaped the usual Senate-whorehouse orgy of mutual back-scratching, fine-print compromises and freeway-wide loopholes that screw any chance of meaningful change.
The real shocker is a thing known among Senate insiders as "716." This section of an amendment would force America's banking giants to either forgo their access to the public teat they receive through the Federal Reserve's discount window, or give up the insanely risky, casino-style bets they've been making on derivatives. That means no more pawning off predatory interest-rate swaps on suckers in Greece, no more gathering balls of subprime shit into incomprehensible debt deals, no more getting idiot bookies like AIG to wrap the crappy mortgages in phony insurance. In short, 716 would take a chain saw to one of Wall Street's most lucrative profit centers: Five of America's biggest banks (Goldman, JP Morgan, Bank of America, Morgan Stanley and Citigroup) raked in some $30 billion in over-the-counter derivatives last year. By some estimates, more than half of JP Morgan's trading revenue between 2006 and 2008 came from such derivatives. If 716 goes through, it would be a veritable Hiroshima to the era of greed.
"When I first heard about 716, I thought, 'This is never gonna fly,'" says Adam White, a derivatives expert who has been among the most vocal advocates for reform. When I speak to him early in May, he sounds slightly befuddled, like he can't believe his good fortune. "It's funny," he says. "We keep waiting for the watering-down to take place – but we keep getting to the next hurdle, and it's still staying strong."
In the weeks leading up to the vote on the reform bill, I hear one variation or another on this same theme from Senate insiders: that the usual process of chipping away at key legislation is not taking place with its customary dispatch, despite a full-court press by Wall Street. The financial-services industry has reportedly flooded the Capitol with more than 2,000 paid lobbyists; even veteran members are stunned by the intensity of the blitz. "They're trying everything," says Sen. Sherrod Brown, a Democrat from Ohio. Wall Street's army is especially imposing given that the main (really, the only) progressive coalition working the other side of the aisle, Americans for Financial Reform, has been in existence less than a year – and has just 60 unpaid "volunteer" lobbyists working the Senate halls.
The companies with the most at stake are particularly well-connected. The lobbying campaign for Goldman Sachs, for instance, is being headed up by a former top staffer for Rep. Barney Frank, Michael Paese, who is coordinating some 14 different lobbying firms to fight on Goldman's behalf. The bank is also represented by Capitol Hill heavyweights like former House majority leader Dick Gephardt and former Reagan chief of staff Ken Duberstein. All told, there are at least 40 ex-staffers of the Senate Banking Committee – and even one former senator, Trent Lott – lobbying on behalf of Wall Street. Until the final weeks of the reform debate, however, it seemed that all these insiders were facing the prospect of a rare defeat – and they weren't pleased. One lobbyist even complained to The Washington Post that the bill was being debated out in the open, on the Senate floor, instead of in a smoky backroom. "They've got to get this thing off the floor and into a reasonable, behind-the-scenes" discussion, he groused. "Let's have a few wise fathers sit around the table in some quiet room" to work it out.
As it neared the finish line, the Restoring American Financial Stability Act was almost unprecedentedly broad in scope, in some ways surpassing even the health care bill in size and societal impact. It would rein in $600 trillion in derivatives, create a giant new federal agency to protect financial consumers, open up the books of the Federal Reserve for the first time in history and perhaps even break up the so-called "Too Big to Fail" giants on Wall Street. The recent history of the U.S. Congress suggests that it was almost a given that they would fuck up this one real shot at slaying the dragon of corruption that has been slowly devouring not just our economy but our whole way of life over the past 20 years. Yet with just weeks left in the nearly year-long process at hammering out this huge new law, the bad guys were still on the run. Even the senators themselves seemed surprised at what assholes they weren't being. This new baby of theirs, finance reform, was going to be that one rare kid who made it out of the filth and the crime of the hood for everybody to be proud of.
Then reality set in.
Picture the Restoring American Financial Stability Act as a vast conflict being fought on multiple fronts, with the tiny but enormously influential Wall Street lobby on one side and pretty much everyone else on the planet on the other. To be precise, think World War II – with some battles won by long marches and brutal campaigns of attrition, others by blitzkrieg attacks, still more decided by espionage and clandestine movements. Time after time, at the last moment, the Wall Street axis has turned seemingly lost positions into surprise victories or, at worst, bitterly fought stalemates. The only way to accurately convey the scale of Wall Street's ingenious comeback is to sketch out all the crazy, last-minute shifts on each of the war's four major fronts.
Front #1
AUDITING THE FED
The most successful of the reform gambits was probably the audit-the-Fed movement led by Sen. Bernie Sanders, the independent from Vermont. For nearly a century, the Federal Reserve has been, within our borders, a nation unto itself – with vast powers to shape the economy and no real limits to its authority beyond the president's ability to appoint its chairman. In the bubble era it has been transformed into a kind of automatic bailout mechanism, helping Wall Street drink itself sober by flooding big banks with cheap money after the collapse of each speculative boom. But suddenly, with both the Huffington Post crowd and the Tea Party raising their pitchforks in outrage, Sanders managed to pass – by a vote of 96-0 – an amendment to force the Fed to open its books to congressional scrutiny.
If Alan Greenspan and Ben Bernanke don't take that 96-0 vote as a kick-to-the-groin testament to the staggering unpopularity of the Fed, they should. When 96 senators agree on something, they're usually affirming their devotion to the flag or commemorating the death of Mother Teresa. But as it turns out, the more than $2 trillion in loans that the Fed handed out in secret after the 2008 meltdown is something that both the left and the right have no problem banding together to piss on. One of the most bizarre alliances of the bailout era took place when Sanders, a democratic socialist, and Sen. Jim DeMint, a hardcore conservative from South Carolina, went on the CNBC show hosted by crazy supply-sider Larry Kudlow – and all three found themselves in complete agreement on the need to force Fed loans into the open. "People who come from very different places agree that it ought not to be done in secret, that the Fed isn't Skull and Bones," says Michael Briggs, an aide to Sanders.
The Sanders amendment, if it survives in conference, will lead to some delicious disclosures. Almost exactly a year ago, Sanders questioned Bernanke at a Senate-budget hearing, asking him to name the banks that had been bailed out by the Fed. "Will you tell the American people to whom you lent 2.2 trillion of their dollars?" Sanders demanded.
After a little hemming and hawing, a bored-looking Bernanke – Time magazine's 2009 Person of the Year, by the way – bluntly said, "No." It would be "counterproductive," he explained, if clients and investors learned that these poor banks were broke enough to need a public handout.
Bernanke's performance that day so rankled Sanders that he wrote up his amendment specifically to bring the Fed's goblin-in-chief to heel. The new law will force Bernanke to post the identity of loan recipients on the Fed's website for all to see. It also mandates that the Government Accountability Office investigate potential conflicts of interest that took place during the bailout, such as the presence of Goldman CEO Lloyd Blankfein in the room during the negotiations of the AIG bailout, which led to Goldman's receiving $13 billion of public money via the rescue.
The Sanders amendment was perhaps the headline victory to date in the ongoing War for Finance Reform, but even this battle entailed some heavy casualties. Sanders had originally filed an amendment that was much closer to a House version pressed by libertarian hero Ron Paul, one that would have permanently opened the Fed's books to Congress. But as the Senate crawled closer to a vote, the Sanders camp began to hear that the Obama administration opposed the bill, fearing it would give Congress too much day-to-day involvement in Fed policy. "The White House was saying how wonderful transparency is, but they still had 'concerns,' "Briggs says. "Within a couple hours, those concerns were being worked out."
The end result was a deal that restricted the audit to a one-time shot: Congress could only examine Fed loans made after December 2007. Once the audit was complete, the Fed's books would once again be sealed forever from public scrutiny. Sen. David Vitter, a Democrat from Louisiana, countered with an amendment to permanently open up the Fed's books, but it was shot down by a vote of 62-37. In one of the most absurd and indefensible retreats of the war, a decisive majority of senators voted to deny themselves the power to audit the Federal Reserve on behalf of the American people. When it comes to protecting the world's wealthiest banks from public scrutiny, it turns out, Democrats and Republicans have no trouble achieving bipartisanship.
FRONT #2
PROTECTING CONSUMERS
The biggest no-brainer of finance reform was supposed to be the Consumer Financial Protection Bureau. The idea was simple: create a federal agency whose sole mission would be to make sure that financial lenders don't rape their customers with defective products, unjust fees and other fine-print nightmares familiar to any American with a credit card. In theory, the CFPB would rein in predatory lending by barring lenders from making loans they know that borrowers won't be able to pay back, either because of hidden fees or ballooning payments.
Wall Street knew it would be impossible to lobby Congress on this issue by taking the angle of "We're a rapacious megabank that would like to keep skull-fucking to death our customers using incomprehensible and predatory loans." So it came up with another strategy – one that deployed some of the most inspired nonsense ever seen on the Hill. The all-powerful lobbying arm of the U.S. Chamber of Commerce, which has been fierce in its representation of Wall Street's interests throughout the War for Finance Reform, cued up a $3 million ad campaign implying that the CFPB, instead of targeting asshole bankers in flashy suits and hair gel, would – and this isn't a joke – target your local butcher, making it hard for him to lend you the money to buy meat. That's right: The ads featured shots of a squat butcher with his arms folded, standing in front of a big pile of meat. "The economy has made it tough on this local butcher's customers," the ad reads. "So he lets some of them run a tab and pay the bill over time to make ends meet. But now Washington wants to make it tougher on everyone." After insisting – falsely – that this kindly butcher would be subject to the new consumer protection bureau, the ad warns that the CFPB "would also have the ability to collect information about his customers' financial accounts and take away many of their financial choices."
Sitting in the Senate chamber one afternoon not long before the vote, I even heard Sen. Mike Enzi, an impressively shameless Republican from Wyoming, insist that the CFPB would mean that "anyone who has ever paid for dental care in installments could be facing the prospect of paying for dental care upfront." Other anti-reform ads claimed that everyone from cabinetmakers to electricians would be hounded by the new agency – even though the CFPB's mandate explicitly excludes merchants who are "not engaged significantly in offering or providing consumer financial products or services."
The CFPB was always a pretty good bet to pass in some form. Just as pushing through anything that could plausibly be called "health care reform" was a political priority for the Obama administration, creating a new agency with the words "consumer protection" in the title was destined from the start to be the signature effort of the finance bill, which is otherwise mostly a mishmash of highly technical new regulations. But that didn't stop leading Democrats from doing what they could to chisel away at the thing. Throughout the process, Chris Dodd, the influential chairman of the Senate Banking Committee, has set new standards for reptilian disingenuousness – playing the role of stern banker-buster while taking millions in Wall Street contributions. Dodd worked overtime trying to craft a "bipartisan" bill with the Republican minority – in particular with Sen. Richard Shelby, the ranking Republican on the committee. With his dyed hair, porcine trunk and fleshy, powdery-white face, Shelby recalls an elderly sumo wrestler in drag. I happened to be in the Senate on the day that Shelby proposed a substitute amendment that would have stuffed the CFPB into the FDIC, effectively scaling back its power and independence. Throughout the debate, I was struck by the way that Dodd and his huge black caterpillar eyebrows kept crossing the aisle to whisper in Shelby's ear. During these huddles, Dodd would gently pat Shelby's back or hold his arm; it was like watching a love scene in a Japanese monster movie.
Shelby's amendment was ultimately defeated by a vote of 61-37 – but he and Dodd still reached a number of important compromises that significantly watered down the CFPB. The idea was to rack up as many exemptions as possible for favored industries, all of which had contributed generously to their favorite senators. By mid-May, Republicans and Democrats had quietly agreed to full or partial "carve-outs" for banks with less than $10 billion in deposits, as well as for check-cashers and other sleazy payday lenders. As the bill headed toward a vote, there was also a furious fight to exempt auto dealers from anti-predatory regulations – a loophole already approved by the House – even though car loans are the second-largest source of borrowing for Americans, after home mortgages. The purview of the CFPB, in essence, was being limited to megabanks and mortgage lenders. That's a major victory in the war against Wall Street, but it will be hard to be too impressed if Congress can't even find a way to vote for consumer protection against used-car salesmen.
FRONT #3
ENDING "TOO BIG TO FAIL"
Perhaps the fiercest fight of all over finance reform involved a part of the bill called "resolution authority" – also known as, "The next time an AIG or a Lehman Brothers goes belly up, do we bail the fuckers out? And if so, with whose money?" In its original form, the bill answered these crucial questions by requiring that banks contribute to a $50 billion fund that could be used to aid failing financial institutions. The fund was hardly a cure-all – $50 billion "wouldn't even be enough to bail out Citigroup's prop-trading desk," as one industry analyst observed – but it at least established a precedent that banks should pay for their own bailouts, instead of simply snatching money from taxpayers.
The fund had been established after a fierce battle last fall, when Democrats in the House beat back a seemingly insane proposal backed by the Obama administration that would have paid for bailouts by borrowing from taxpayers and recouping the money from Wall Street later on, by means of a mysterious, convoluted process. That heroic stand in the House, which was marked by long nights of ferocious negotiations, was wiped out in one fell swoop on May 5th, after Dodd and Shelby huddled up in another of their monster-love sessions and hammered out a deal to strip the bailout fund from the bill. The surprise rollback was introduced by the Senate leadership late on a Wednesday and voted on three hours later. Just like that, taxpayers were back to fronting the nation's biggest banks the money when they find themselves in financial trouble.
One day after the Shelby-Dodd wipeout, another key reform got massacred. This was the "Too Big to Fail" amendment put forward by two reform-minded freshmen, Sens. Ted Kaufman of Delaware and Sherrod Brown of Ohio. The measure would have mandated the automatic breakup of any bank that held more than 10 percent of all insured deposits, or had at risk more than two percent of America's GDP. The amendment was just the kind of common-sense, loophole-proof, no-bullshit legislation that, sadly, almost never passes in the modern Senate.
Brown is an interesting character. Whenever I talk to him, I often forget he's a U.S. senator; he feels more like a dude you met on an Amtrak train and struck up a conversation with. He remains the only member of Congress I've ever met who took off his shoes and socks in the middle of an interview. But when I catch up with him in an anteroom outside the Senate chamber on the day his and Kaufman's amendment ends up being voted on, he seems harried and tense, like a man waiting for bad news in a hospital lobby. In recent weeks, he confides, he has found himself facing both barrels of the banking lobby.
"There are 1,500 bank lobbyists in this town, and they're coming by all the time," he says. "And it's not just the lobbyists. When the bank lobbyist from Columbus comes by, he brings 28 bankers with him."
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At the moment, though, Brown has a more pressing problem. He and Kaufman are both making themselves conspicuous in the Senate chamber, and the reason why is illustrative of the looniness of Senate procedure. Unlike in the House, where a rules committee decides in advance which amendments will be brought to a vote, senators have no orderly, dependable way of knowing if or when their proposals will get voted on. Instead, they're at the mercy of a strange and nebulous process that requires them to badger the leadership, who have the sole discretion of deciding which amendments go to a vote. So Brown is reduced to hanging around the Senate floor and trying to get a committee chair like Chris Dodd to put Too Big to Fail to a vote before other amendments use up all the time allotted for debate. It's not unlike fighting a crowd of pissed-off airport passengers for a single seat on an overbooked flight – you're completely at the mercy of the snippy airline rep behind the desk.
Near the end of the day, to Brown's surprise, Dodd actually allows his amendment to go to a vote. In the end, however, the proposal to break up the nation's riskiest banks gets walloped 61-33, with an astonishing 27 Democrats – including key banking committee heavyweights like Dodd and Chuck Schumer of New York – joining forces to defeat it. After the debate, Kaufman, a gregarious and aggressive advocate of finance reform, seems oddly unfazed that his fellow Democrats blew the best chance in a generation to corral the great banking monsters of Wall Street. "For some of them, it was just a bridge too far," he says. "There's an old saying: Never invest in anything you don't understand." Given the bizarre standards of the Senate bureaucracy, Kaufman considers it a victory just to have gotten his amendment into the woodshed for an ass-whipping.
I encounter that same "just glad to be here" vibe from Sen. Jeff Merkley, a Democrat from Oregon who co-authored one of the handful of genuinely balls-out reforms in the entire bill. The Merkley-Levin amendment couldn't have been more important; it called for restoring part of the Glass-Steagall Act, the Depression-era law that prevented commercial banks, investment houses and insurance companies from merging. The repeal of Glass-Steagall in 1999 paved the way for the creation of the Too-Big-to-Fail monsters like Citigroup, who drove the global economy into a ditch over the past 10 years.
Merkley-Levin was the Senate version of the "Volcker Rule," a proposal put forward by former Fed chief and Obama adviser Paul Volcker, that would prevent commercial banks from engaging in the kind of speculative, proprietary trading that helped trigger the financial crisis. When I meet with Merkley, he is in the same position as Brown and Kaufman, waiting anxiously for a chance to get his amendment voted on, with no idea of when or if that might happen. A vote – even if it means defeat – is all he's hoping for. When I ask if he's excited about the prospect of restoring a historic piece of legislation like Glass-Steagall, he smiles faintly. "I'm not saying I'm real optimistic," he says.
In the end, Merkley is forced to resort to the senatorial equivalent of gate-crashing: He attaches his amendment to the sordid proposal to exempt auto dealers from the CFPB, which has already been approved for a vote. That Merkley has to invoke an arcane procedural stunt just to get such a vital reform a vote is a testament to how convoluted American democracy looks by the time it reaches the Senate floor.
As with the whittled-down victories over the Fed audit and the Consumer Finance Protection Bureau – and the brutal defeat of Too Big to Fail – the stalling over the Volcker Rule underscores the basic dynamic of the Senate. With deals cut via backroom consensus, and leaders like Reid and Dodd tightly controlling which amendments go to a vote, the system allows a few powerful members whose doors are permanently open to lobbyists to pilot the entire process from beginning to end. One Democratic aide grumbles to me that he had no access to the negotiations for months, while a Wall Street lobbyist he knows could arrange an audience with the leadership. The whole show is carefully orchestrated from start to finish; no genuinely tough amendment with a shot at being approved receives an honest up-or-down vote. "It's all kind of a fake debate," the aide says.
FRONT #4
REINING IN DERIVATIVES
When all the backroom obfuscation doesn't work, of course, there is always one last route in Congress to killing reform: the fine print. And never has an amendment been fine-printed to death as skillfully as the proposal to reform derivatives.
Imagine a world where there's no New York Stock Exchange, no NASDAQ or Nikkei: no open exchanges at all, and all stocks traded in the dark. Nobody has a clue how much a share of IBM costs or how many of them are being traded. In that world, the giant broker-dealer who trades thousands of IBM shares a day, and who knows which of its big clients are selling what and when, will have a hell of a lot more information than the day-trader schmuck sitting at home in his underwear, guessing at the prices of stocks via the Internet.
That world exists. It's called the over-the-counter derivatives market. Five of the country's biggest banks, the Goldmans and JP Morgans and Morgan Stanleys, account for more than 90 percent of the market, where swaps of all shapes and sizes are traded more or less completely in the dark. If you want to know how Greece finds itself bankrupted by swaps, or some town in Alabama overpaid by $93 million for deals to fund a sewer system, this is the explanation: Nobody outside a handful of big swap dealers really has a clue about how much any of this shit costs, which means they can rip off their customers at will.
This insane outgrowth of jungle capitalism has spun completely out of control since 2000, when Congress deregulated the derivatives market. That market is now roughly 100 times bigger than the federal budget and 20 times larger than both the stock market and the GDP. Unregulated derivative deals sank AIG, Lehman Brothers and Greece, and helped blow up the global economy in 2008. Reining in derivatives is the key battle in the War for Finance Reform. Without regulation of this critical market, Wall Street could explode another mushroom cloud of nuclear leverage and risk over the planet at any time.
The basic pillar of derivatives reform is simple: From now on, instead of trading in the dark, most derivatives would have to be traded on open exchanges and "cleared" through a third party. Last fall, Wall Street lobbyists succeeded at watering down the clearing requirement by pushing through a series of exemptions for "end-users" – that is, anyone who uses derivatives to hedge a legitimate business risk, like an airline buying swaps as a hedge against fluctuations in jet-fuel prices. But the House then took it even further, expanding the exemption to include anyone who wants to hedge against balance-sheet risk. Since every company has a balance sheet, including giant insurers like AIG and hedge funds that gamble in derivatives, the giant loophole now covered pretty much everyone except a few megabanks. This was regulation with a finger crossed behind its back.
When it came time for the Senate to do its version, however, the lobbyists were in for a surprise. Sen. Blanche Lincoln of Arkansas – best known as one of the few Democrats to vote for Bush's tax cuts – suddenly got religion and closed the loophole. Facing a tough primary battle against an opponent who was vowing to crack down on Wall Street, Lincoln tweaked the language so derivatives reform would apply to any greedy financial company that makes billions trading risky swaps in the dark.
Republicans went apeshit, pulling the same tactics they tried to gut the Consumer Finance Protection Bureau. Sen. Enzi, back at the lectern after his failed attempt to claim that the CFPB was a government plot to control the orthodontics industry, barked to the Senate gallery that Lincoln's proposal would harm not millionaire swap dealers at JP Morgan and Goldman Sachs, but "a wheat-grower in Wyoming." Unmoved by such goofy rhetoric, the Senate shot down an asinine Republican amendment that would have overturned Lincoln's reform by a vote of 59-39.
Then reform advocates started reading the fine print of the Lincoln deal, and realized that all those Wall Street lobbyists had really been earning their money.
That same day the GOP amendment failed, the derivatives expert Adam White was at his home in Georgia, poring over a "redline" version of the Lincoln amendment, in which changes to the bill are tracked in bold. When he came to a key passage on page 570, he saw that it had a single line through it, meaning it had been removed. The line read, "Except as provided in paragraph (3), it shall be unlawful to enter into a swap that is required to be cleared unless such swap shall be submitted for clearing."
Translation: It was no longer illegal to trade many uncleared swaps. Wall Street would be free to go on trading these monstrosities by the gazillions, largely in the dark. "Regulators can't say any longer if you don't clear it, it's illegal," says White.
Once he noticed that giant loophole, White went back and found a host of other curlicues in the text that collectively cut the balls out of the Lincoln amendment. On page 574, a new section was added denying the Commodity Futures Trading Commission the power to force clearinghouses to accept swaps for clearing. On page 706, two lines were added making it impossible for buyers who get sold an uncleared swap to void the deal. Taken altogether, the changes amount to what White describes as a "Trojan Horse" amendment: hundreds of pages of rigid rules about clearing swaps, with a few cleverly concealed clauses that make blowing off those rules no big deal. Michael Greenberger, a former official with the Commodity Futures Trading Commission who has been fighting for derivatives reform, describes the textual trickery as a "circle of doom. Despite the pages and pages of regulations, violating them is risk-free."
On May 18th, as the clock ran out on the deadline to file amendments, reform-minded Democrats staged a concerted push to close the loopholes. But when Sen. Maria Cantwell of Washington offered a proposal to eliminate the "Trojan Horse" sham, Reid tried to slam the door on her and everyone else working to strengthen reform. The majority leader called for a vote to end debate – a move that would squelch any remaining amendments. This extraordinary decision to cut off discussion of our one, best shot at revamping the rules of modern American finance was made, at least in part, to enable senators to get home for Memorial Day weekend.
But then something truly unexpected took place. Cantwell revolted, joined by Sen. Russ Feingold of Wisconsin. That left Reid in the perverse position of having to convince three Republicans to come over to his side to silence a member of his own party. On May 20th, Reid got the votes he needed to kill the debate. A few hours later, the Senate passed the bill, loopholes and all, by a vote of 59-39.
In a heartwarming demonstration of the Senate's truly bipartisan support for Wall Street, Sen. Sam Brownback – a Republican from Kansas – stepped in to help Democrats kill one of the bill's most vital reforms. At the last minute, Brownback mysteriously withdrew his amendment to exempt auto dealers from regulation by the CFPB – a maneuver that prevented the Merkley-Levin ban on speculative trading, which was attached to Brownback's amendment, from even being voted on. That was good news for car buyers, but bad news for the global economy. Senators may enjoy scolding Goldman Sachs in public hearings, but when it comes time to vote, they'll pick Wall Street over Detroit every time.
The rushed vote also meant that the Democratic leadership wasn't able to gut 716, the amazingly aggressive section of Lincoln's amendment that would cut off taxpayer money to big banks that gamble on risky derivatives. Not that they didn't try. With just three minutes to go before the deadline, Dodd had filed a hilarious amendment that would have delayed the ban on derivatives for two years – and empowered a new nine-member panel to unilaterally kill it. Sitting on the panel would be Bernanke, Treasury Secretary Tim Geithner and FDIC chief Sheila Bair, all of whom violently opposed 716.
Dodd was forced to withdraw his amendment after Wall Street complained that even this stall-and-kill tactic would create too much "uncertainty" in the market. That left 716 still alive for the moment – but even its staunchest supporters expected the leadership to find some way to gut it in conference, especially since President Obama personally opposes the measure. "Treasury and the White House are in full-court mode, assuring everybody that this will be fixed," says Greenberger. "And when they say fixed, that means killed."
Whatever the final outcome, the War for Finance Reform serves as a sweeping demonstration of how power in the Senate can be easily concentrated in the hands of just a few people. Senators in the majority party – Brown, Kaufman, Merkley, even a committee chairman like Lincoln – took a back seat to Reid and Dodd, who tinkered with amendments on all four fronts of the war just enough to keep many of them from having real teeth. "They're working to come up with a bill that Wall Street can live with, which by definition makes it a bad bill," one Democratic aide explained in the final, frantic days of negotiation.
On the plus side, the bill will rein in some forms of predatory lending, and contains a historic decision to audit the Fed. But the larger, more important stuff – breaking up banks that grow Too Big to Fail, requiring financial giants to pay upfront for their own bailouts, forcing the derivatives market into the light of day – probably won't happen in any meaningful way. The Senate is designed to function as a kind of ongoing negotiation between public sentiment and large financial interests, an endless tug of war in which senators maneuver to strike a delicate mathematical balance between votes and access to campaign cash. The problem is that sometimes, when things get really broken, the very concept of a middle ground between real people and corrupt special interests becomes a grotesque fallacy. In times like this, we need our politicians not to bridge a gap but to choose sides and fight. In this historic battle over finance reform, when we had a once-in-a-generation chance to halt the worst abuses on Wall Street, many senators made the right choice. In the end, however, the ones who mattered most picked wrong – and a war that once looked winnable will continue to drag on for years, creating more havoc and destroying more lives before it is over.
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Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case
June 14, 2010, 3:00 AM EDT
By Lorraine Woellert and John Gittelsohn
June 14 (Bloomberg) -- The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.
Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.
“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.
Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.
‘Worst-Case Scenario’
The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.
If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.
Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.
“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.
Unfinished Business
A 20 percent decline in housing prices is possible, said David Rosenberg, chief economist for Gluskin Sheff & Associates Inc. in Toronto. Rosenberg, whose forecasts are more pessimistic than those of other economists, predicts a 15 percent drop.
“Worst case is probably 25 percent,” he said.
The median price of a home in the U.S. was $173,100 in April, down 25 percent from the July 2006 peak, according to the National Association of Realtors.
Fannie and Freddie are deeply wired into the U.S. and global financial systems. Figuring out how to stanch the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Barack Obama’s desk by July.
Neither political party wants to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser under President George W. Bush.
“Republicans and Democrats love putting Americans in houses, and there’s no getting around that,” Holtz-Eakin said.
‘Safest Place’
With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter. The alternative -- cutting the federal lifeline and letting the companies default on their debts -- would produce global economic tremors akin to the U.S. decision to go off the gold standard in the 1930s, said Robert J. Shiller, a professor of economics at Yale University in New Haven, Connecticut, who helped create the S&P/Case-Shiller indexes of property values.
“People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the U.S.,” Shiller said in an interview. “We can’t let Fannie and Freddie go. We have to stand up for them.”
Congress created the Federal National Mortgage Association, known as Fannie Mae, in 1938 to expand home ownership by buying mortgages from banks and other lenders and bundling them into bonds for investors. It set up the Federal Home Loan Mortgage Corp., Freddie Mac, in 1970 to compete with Fannie.
Lower Standards
The companies’ liabilities stem in large part from loans and mortgage-backed securities issued between 2005 and 2007. Directed by Congress to encourage lending to minorities and low- income borrowers at the same time private companies were gaining market share by pushing into subprime loans, Fannie and Freddie lowered their standards to take on high-risk mortgages.
Many of those went to borrowers with poor credit or little equity in their homes, according to company filings. By early 2008, more than $500 billion of loans guaranteed or held by Fannie and Freddie, about 10 percent of the total, were in subprime mortgages, according to Fed reports.
Fannie and Freddie also raised billions of dollars by selling their own corporate debt to investors around the world. The bonds are seen as safe because of an implicit government guarantee against default. Foreign governments, including China’s and Japan’s, hold $908 billion of such bonds, according to Fed data.
‘Debt Trap’
“Do we really want to go to the central bank of China and say, ‘Tough luck, boys’? That’s part of the problem,” said Karen Petrou, managing partner of Federal Financial Analytics Inc., a Washington-based research firm.
The terms of the 2008 Treasury bailout create further complications. Fannie and Freddie are required to pay a 10 percent annual dividend on the shares owned by taxpayers. So far, they owe $14.5 billion, more than the companies reported in income in their most profitable years.
“It’s like a debt trap,” said Qumber Hassan, a mortgage strategist at Credit Suisse Group AG in New York. “The more they draw, the more they have to pay.”
Fannie and Freddie also benefited by selling $1.4 trillion in mortgage-backed securities to the Fed and the Treasury since September 2008, bonds that otherwise would have weighed on their balance sheets. While the government bought only the lowest-risk securities, it could incur additional losses.
‘Hard to Judge’
Treasury Secretary Timothy F. Geithner has vowed to keep Fannie and Freddie operating.
“It’s very hard to judge what the scale of losses is,” Geithner told Congress in March.
One idea being weighed by the Obama administration involves reconstituting Fannie and Freddie into a “good bank” with performing loans and a “bad bank” to absorb the rest. That could cost taxpayers as much as $290 billion because of all the bad loans, according to a May estimate by Credit Suisse analysts.
At the end of March, borrowers were late making payments on $338.4 billion worth of Fannie and Freddie loans, up from $206.1 billion a year earlier, according to the companies’ first- quarter filings at the Securities and Exchange Commission.
The number of loans more than three months past due has risen every quarter for more than a year, hitting 5.5 percent at Fannie as of the end of March and 4.1 percent at Freddie, according to the filings.
Surge in Delinquencies
The composition of the $5.5 trillion of loans guaranteed by Fannie and Freddie suggests that the surge in delinquencies may continue. About $1.98 trillion of the loans were made in states with the nation’s highest foreclosure rates -- California, Florida, Nevada and Arizona -- and $1.13 trillion were issued in 2006 and 2007, when real estate values peaked. Mortgages on which borrowers owe more than 90 percent of a property’s value total $402 billion.
Fannie and Freddie may suffer additional losses as a result of the Treasury’s effort to prevent foreclosures. Under the program, banks with mortgages owned or guaranteed by the companies must rewrite loan terms to make them easier for borrowers to pay.
The Treasury program is budgeted to cost Fannie and Freddie $20 billion. The companies have already modified about 600,000 delinquent loans and refinanced almost 300,000 more, in some cases for an amount greater than the houses are worth.
The government is using Fannie and Freddie “for a public- policy purpose that may well increase the ultimate cost of the taxpayer rescue,” said Petrou of Federal Financial Analytics. “Treasury is rolling the dice.”
Republican Phase-Out
If the plan works and foreclosures fall, that could help stabilize Fannie’s and Freddie’s balance sheets and ultimately protect taxpayers.
“Avoiding foreclosures can be a route to reducing loss severity,” said Sarah Rosen Wartell, executive vice president of the Center for American Progress, a Washington research group with ties to the Obama administration.
Loans issued since 2008, when the companies raised standards for borrowers, should be profitable and help offset prior losses, Wartell said.
Republicans attempted to include a phase-out of the mortgage companies in the financial reform bill. Democratic lawmakers and the Obama administration opted for further study, and the Treasury began soliciting ideas in April.
Representative Scott Garrett, a New Jersey Republican and co-sponsor of the phase-out amendment, said eliminating Fannie and Freddie would force the government and the housing market to confront the issue.
“It’s somewhat impossible to predict the magnitude of their impact if they continue to be the primary source of lending,” Garrett said in an interview.
Caught in ‘Quandary’
Democrats dismissed the phase-out idea as simplistic.
“We need to have a housing-financing system in place,” Senate Banking Committee Chairman Christopher Dodd said last month. “If you pull that rug out at this particular juncture, I don’t know what the particular result would be. We’re caught in this quandary.”
By delaying action, the Obama administration keeps losses off the government’s books while building a floor under housing prices during a congressional election year.
Keeping Fannie and Freddie functioning could also support an overall economic recovery. Residential real estate -- the money spent on rent, mortgage payments, construction, remodeling, utilities and brokers’ fees -- accounted for about 17 percent of gross domestic product in 2009, according to the National Association of Home Builders.
‘Already Lost’
Allowing the companies to go under and hoping that private financing will fill the gap isn’t realistic, analysts say. It would require at least two years of rising property values for private companies to return to the mortgage-securitization market, said Robert Van Order, Freddie’s former chief international economist and a professor of finance at George Washington University in Washington.
The price tag of supporting Fannie and Freddie “needs to be evaluated against the cost of not having a mortgage market,” said Phyllis Caldwell, chief of the Treasury’s Homeownership Preservation Office.
Whatever the fix, the money spent will not be recovered, said Alex Pollock, a former president of the Federal Home Loan Bank of Chicago who is now a fellow at the Washington-based American Enterprise Institute.
“It doesn’t matter what you do or don’t do, Fannie and Freddie will cost a lot of money,” Pollock said. “The money is already lost. There’s an attempt to try to avert your eyes.”
--Editors: Lawrence Roberts, Robert Friedman
To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; John Gittelsohn in New York at johngitt@bloomberg.net.
http://www.businessweek.com/news/2010-06-14/fannie-freddie-fix-at-160-billion-with-1-trillion-worst-case.html
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http://article.nationalreview.com/436123/the-other-national-debt/kevin-williamson?page=1
It gets worse.
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America's Municipal Debt Racket
State and local borrowing as a percentage of U.S. GDP has risen to an all-time high of 22% in 2010.
By STEVEN MALANGA
New Jersey officials recently celebrated the selection of the new stadium in the Meadowlands sports complex as the site of the 2014 Super Bowl. Absent from the festivities was any sense of the burden the complex has become for taxpayers.
Nearly 40 years ago the Garden State borrowed $302 million to begin constructing the Meadowlands. The goal was to pay off the bonds in 25 years. Although the project initially went according to plan, politicians couldn't resist continually refinancing the bonds, siphoning revenues from the complex into the state budget, and using the good credit rating of the New Jersey Sports and Exposition authority to borrow for other, unsuccessful building schemes.
Today, the authority that runs the Meadowlands is in hock for $830 million, which it can't pay back. The state, facing its own cavernous budget deficits, has had to assume interest payments—about $100 million this year on bonds that still stretch for decades.
View Full Image
Getty Images
The authority that runs the new Meadowlands stadium in New Jersey is $830 million in hock.
This tale of woe has become familiar in the world of municipal finance. Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional borrowing limits. While the country's economic troubles have helped expose some of these practices, a sharp decline in tax revenues has prompted more abuse as politicians use long-term debt to kick short-term fiscal problems down the road.
It hasn't always been this way. Government debt has long fostered the expansion of the American republic, helping to build roads, bridges and water works to serve a growing population. But there have also been spectacular failures. In the mid-1970s, New York City almost defaulted on its debt after it used borrowing to fund an aggressive and ultimately unaffordable expansion of services (like the nation's most generous Medicaid program) inaugurated by Mayor John Lindsay. Gotham was bailed out by New York State and the federal government. But Cleveland, whose spending outpaced tax revenues thanks to borrowing, did default on $14 million in bonds in 1978.
The 1970s debt crises woke politicians up. Over the next 20 years the municipal fiscal picture improved, with debt rising only slightly. But memories of past busts have since faded, and outstanding debt has soared to $2.2 trillion today from $1.4 trillion in 2000. State and local borrowing as a percentage of the country's GDP has risen to an all-time high of 22% in 2010 from 15%, with projections that it will reach 24% by 2012.
Even more disconcerting is what the borrowing now often finances. One favorite scheme for muni debt is giant and risky development projects.
California's redevelopment regime is an object lesson. Starting in the 1950s, the state gave localities the right to create public agencies, funded by increases in property taxes, which can issue debt to finance redevelopment. A whopping 380 such entities now exist. They collect 10% of all property taxes—nearly $6 billion annually—and they have amassed $29 billion in debt never approved by voters for projects ranging from sports facilities to concert venues to retail malls, museums and convention centers.
More
Investors Looking Past Red Flags in Muni Market
WSJ.com/Sports | WSJ.com/NY
Critics, including taxpayer groups, say most such agency projects add little economic value. Sometimes the outcome is much worse. In 1999, Fresno conceived plans to revive its downtown area with various projects, including a baseball stadium for the minor-league Grizzlies, which it had lured from Phoenix. The city's redevelopment agency floated some $46 million in bonds to build the stadium. But the Grizzlies fizzled in their new home, demanded a break on rent, threatening to skip town and stick taxpayers with the entire $3.4 million annual bond payment on the facility. The team is now receiving $700,000 in annual subsidies to stay in the city.
Adding to the city's woes: Last June, another development project, the Fresno Metropolitan Museum, went bust, leaving the city's taxpayers on the hook for three-quarters of a million dollars in annual debt payments.
Cities now also use taxpayer-financed debt to engage in fierce bidding wars that benefit private enterprises. Charlotte, N.C., for instance, won the bidding for the new Nascar all of Fame with a $154 million offer, funded by a new hotel tax dedicated to servicing bonds for constructing the hall. But the venue employs only about 115 people—and an economic development study estimated the increased annual tourism from the venture won't even equal what a single Nascar race generates.
Why did politicians offer the deal? For the dubious and hard-to-quantify purpose of "branding" the city with a major attraction, according to the Charlotte Observer.
Voters have wised up to the failings of many grand, politically inspired projects, and when given the chance they've defeated new taxes and borrowing for them. But much state and local debt now exists in independent authorities whose borrowings are not subject to voter approvals. Some of these agencies have operated recklessly.
In 2000, Massachusetts moved to make the entity that runs Boston area mass transit, the Massachusetts Bay Transportation Authority, financially independent. As part of the plan the authority was supposed to gradually pay down some $5.6 billion in debt and use cash from operations to finance capital projects.
Instead, the agency deferred payments on its debt, put off capital projects, and borrowed more money, so that it now owes $8.5 billion. Today, the authority is paying a staggering $500 million yearly in debt service, forcing it to neglect maintenance, shelve expansion plans, and cut service. Even so, last year the agency needed a $160 million bailout from taxpayers to close a budget deficit.
Another weapon in the debt arsenal is the so-called pension-obligation bond. For two decades, governments have played a risky arbitrage game in which they issue bonds and then deposit the money in their pension funds to be invested in the stock market with the hope that the money will outperform the interest rate on the bonds. In a stock market that's been stagnant for years, pension bonds have become fiscally toxic. As the Center for State and Local Government Excellence noted in a report earlier this year, most pension bonds issued since 1992 have been money losers for states and cities, exacerbating severe underfunding of pension systems in places like New Jersey.
These abuses came to a head in the second half of 2008, when spooked investors were unwilling to bet on more municipal debt after several insurers who typically back these bonds exited the market. Then Washington stepped in with a new Build America Bond (BAB), allowing states and municipalities to issue them. Thanks to a federal subsidy, they carry attractive interest rates. Last year municipalities used BABs to rack up another $58 billion in debt.
Taxpayers are only slowly realizing that their states and municipalities face long-term obligations that will be increasingly hard to meet. Rick Bookstaber, a senior policy adviser to the Securities and Exchange Commission, recently warned that the muni market has all the characteristics of a crisis that might unfold with "a widespread cascade in defaults." If that painful scenario materializes, it will be because we have too long ignored how some politicians have become addicted to debt.
Mr. Malanga is a senior fellow at the Manhattan Institute and the author of "Shakedown: The Continuing Conspiracy Against the American Taxpayer," forthcoming from Ivan R. Dee. This op-ed is adapted from the forthcoming issue of City Journal.
http://online.wsj.com/article/SB10001424052748704269204575270802154485456.html
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http://www.marginalrevolution.com/
Not from the Onion: EPA Classifies Milk as Oil
Alex Tabarrok
New Environmental Protection Agency regulations treat spilled milk like oil,
requiring farmers to build extra storage tanks and form emergency spill
plans.
Local farming advocates says it’s ridiculous to regulate a liquid with a
small percentage of butter fat the same way as the now-infamous BP oil
spill.
“It’s just another, unnecessary over-regulation by the government just
lacking any common sense,” said Bill Robb, dairy educator for Michigan State
University Extension...
The EPA regulations state that “milk typically contains a percentage of
animal fat, which is a non-petroleum oil. Thus, containers storing milk are
subject to the Oil Spill Prevention, Control and Countermeasure Program rule
when they meet the applicability criteria..."
Seriously, this is
not<http://www.hollandsentinel.com/news/x1224670387/Outcry-from-farmers-over-spilled-milk-rule>
from The Onion.
Do note that the issue is not even regulation of milk spills it's regulation
of milk under the *oil spill* prevention law. Given the power of farmers,
my bet is that these laws will not go into effect; even so I do not expect a
milk gusher.
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NAIS National Animal Identification System. It is another overreaction by government in resoonse to the British Madcow disease problem. A gogle will probably turn up plenty of information way more current than my own- which is a couple years out of date.
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Homebuyer Tax Credit: Debt Financed Public Policy
By Emily Skarbek on Jun 28, 2010 in Budget and Tax Policy, Economics, Employment, Housing, Money and Banking, Taxation, corruption, mercantilism
As expected by many economists, the Homebuyer Tax Credit did little to nothing to encourage new home purchases and only shifted the purchase of new homes from May to April. Howard Gleckman over at the Tax Policy Center reports on the waste and fraud afforded by deficit financed public policy of this sort, noting that the “total amount of permanent job creation from this timing change [was] pretty close to zero. Cost to taxpayers: $12.6 billion just through last February.”
Gleckman highlights several points from the Treasury Department’s report that would otherwise be comical if not so costly:
1,295 prisoners received $9.1 million in credits for houses they claimed to buy while incarcerated, 241 of which were serving life sentences at the time
67 different people claimed the tax break for the same house
More than 2,500 got almost $18 million for homes they bought before the credit was effective
A total of 14,132 people received erroneous credits, totaling $17.6 million
So here is what the federal government accomplished. It succeeded in increasing home sales in April at the expense of those same home sales in May, injecting distortions into a relatively stable pattern of home sales. In addition to these immediate distortions, arbitrary rule changes increased the uncertainty facing consumers which undermines economic recovery. Maybe a few people purchased homes they otherwise wouldn’t, but that in itself is poor policy because it encourages individuals to take on more risk than they can afford. The tax credit created no permanent jobs, but it did increase the expected value of cheating on your taxes, thereby incentivizing tax fraud. All of this with a price tag of more than $12.6 billion, on which taxpayers will pay about 3% interest ($378 million) per year!
The real stench of the waste comes from the knowledge that this type of policy is systemic. The complete inefficacy of the Homebuyer tax credit will not prevent similar schemes from emerging from a democratic process through which benefits are handed out while the costs are billed to future generations.
Governments do not bear the full costs of the policies they pass in legislative sessions. Even the most myopic consumer, because he bears the costs of his actions, would consider postponing consumption if faced with a similar deal. And if he tossed prudence aside and made the purchase anyway, he would be forced to curtail consumption on other margins to pay for his preferences. For the individual, if it turns out he could not afford the costs of his decisions, he would eventually be forced to reconcile the reality of his resource constraints with his desires. At present, no such mechanisms of constraint tie the hands of our policy makers.
http://www.independent.org/blog/?p=6767
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Generally I do not like Boener at all, but here he actually talks seriously on SS:
http://link.brightcove.com/services/player/bcpid1886260998?bctid=104611069001
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Timothy P. Carney: On jobs, Obama giveth, and Obama taketh away
By: TIMOTHY P. CARNEY
Examiner Columnist
July 2, 2010
President Barack Obama speaks during a town hall meeting, Wednesday, June 30, 2010, in Racine, Wis. (AP Photo/M. Spencer Green) (ASSOCIATED PRESS)
"So those who talk about 'this is Big Government,' " Vice President Biden told a crowd at a General Electric factory in Kentucky, "this is Big Government giving a little bit of help to jump-start America to lead the world in the 21st century."
Biden was at GE's Appliance Park in Louisville, where a raft of government subsidies (and probably some gentle urging from the White House) has spurred the multinational conglomerate to begin manufacturing hybrid electric water heaters -- part of the "new foundation for a new economy," Biden said.
But later this month, 75 miles east, workers at GE's Kentucky Glass Plant get to see the other side of Big Government. About 175 workers there make glass, which is shipped to the Winchester Bulb Plant. Winchester Bulb is being shut down in September, and so the Lexington Glass Plant will be shuttered in late July.
GE explained in a press release last year, "A variety of energy regulations that establish lighting efficiency standards are being implemented in the U.S. and other countries, in some cases this year, and will soon make the familiar lighting products produced at the Winchester Plant obsolete."
These were "green" regulations that then-Sen. Obama supported in the 2007 energy bill -- as did GE. The company, you see, makes more profit off the more efficient compact fluorescent bulbs, because the company can charge more, but also because it makes those bulbs in China, with cheaper labor costs and fewer environmental regulations.
So, Obama and GE teamed up, pushed Big Government environmental regs and killed nearly 500 jobs in Lexington, Winchester, and another glass factory in Niles, Ohio.
But don't worry, Obama's got an answer for these workers, too. Obama's Labor Department this spring declared the plant an "adversely affected employer" under the 1974 Trade Act. It's true imports are replacing the bulbs Lexington workers used to make, but the culprit isn't free trade -- it's the light bulb law. And the imports are GE's compact fluorescents.
Back to Louisville, where Biden is touting the benefits of Big Government, the picture is far murkier. It's true Congress and the administration have opened the spout of corporate welfare for GE in order to keep jobs in Louisville: $24.8 million in "advanced manufacturing tax credits" from the stimulus, plus "p to $17 million in incentives from the state and metro government" according to a GE press release.
These water heater jobs are largely replacing lost refrigerator jobs, which brings us back to Big Government, although Obama bears no blame in this one. In July 2000, the U.S. Export-Import Bank, a government agency, subsidized GE's construction of a factory complex in Celaya, Mexico. That complex makes GE refrigerators -- fridges that used to be made in the United States.
To be fair, the Ex-Im subsidy exported the jobs making high-end fridges, while Appliance Park made low-end fridges. So Ex-Im helped kill GE jobs in Bloomington, Ind., rather than in Lexington.
So Big Government policies are killing GE jobs that might thrive in the free market, while creating GE jobs that never would survive in a free market. Obama is replacing unsubsidized jobs with subsidized jobs.
Biden calls this "a new economy." Obama calls it "remaking America." GE Chief Executive Officer Jeff Immelt calls this relationship "capitalism ... reset." Immelt wrote to shareholders days after Obama's inauguration, "The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner."
This partnership of Big Business and Big Government has been good for the workers in Appliance Park. It's also helped GE shareholders and executives. Of course, Biden and the Democrats benefit by getting to take credit for new jobs.
But will Biden be in Lexington later this month, telling workers laid off because of environmental regulations that Big Government is for their own good?
Timothy P. Carney is The Washington Examiner's Lobbying Editor. His K Street column appears on Wednesdays.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/opinion/columns/On-jobs_-Obama-giveth_-and-Obama-taketh-away-97603664.html#ixzz0sezEPEJu
http://www.washingtonexaminer.com/opinion/columns/On-jobs_-Obama-giveth_-and-Obama-taketh-away-97603664.html
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Tangent:
Not disagreeing at all with the essence of this piece-- govt regs here are absurd and are destroying jobs. That said, the LED market is going to be really big-- not only because of economic regs, but more because of the "creative destruction" of the free market.
CREE will be the leader in this market. AIXG, recently with a cup and a handle pattern that broke wrong, still bears watching. Disclaimer: Most of my CREE was bought at 22 but I am buying more at 60 and more yet at 57 should it go there.
End of tangent.
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This could go under housing but the economic point is to point out another failed government spending program. Artificial stimulus does not replace market fundamentals:
http://finance.yahoo.com/news/Newhome-sales-plunge-33-pct-apf-1718773153.html?x=0
New-home sales plunge 33 pct with tax credits gone
New-home sales drop to lowest level on record in May after federal homebuyer tax credits end
That was the slowest sales pace on records dating back to 1963. And it's the largest monthly drop on record. Sales have now sunk 78 percent from their peak in July 2005.
Analysts were startled by the depth of the sales drop.
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Yet the market is strongly up this morning. :?
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The Washington Post babbled again today about Obama inheriting a huge deficit from Bush. Amazingly enough,...... a lot of people swallow this nonsense. So once more, a short civics lesson.
Budgets do not come from the White House. They come from Congress, and the party that controlled Congress since January 2007 is the Democratic Party. They controlled the budget process for FY 2008 and FY 2009, as well as FY 2010 and FY 2011. In that first year, they had to contend with George Bush, which caused them to compromise on spending, when Bush somewhat belatedly got tough on spending increases.
For FY 2009 though, Nancy Pelosi and Harry Reid bypassed George Bush entirely, passing continuing resolutions to keep government running until Barack Obama could take office. At that time, they passed a massive omnibus spending bill to complete the FY 2009 budgets.
And where was Barack Obama during this time? He was a member of that very Congress that passed all of these massive spending bills, and he signed the omnibus bill as President to complete FY 2009. Let's remember what the deficits looked like during that period: (below)
GRAPH
If the Democrats inherited any deficit, it was the FY 2007 deficit, the last of the Republican budgets. That deficit was the lowest in five years, and the fourth straight decline in deficit spending. After that, Democrats in Congress took control of spending, and that includes Barack Obama, who voted for the budgets. If Obama inherited anything, he inherited it from himself.
In a nutshell, what Obama is saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th.
(remember that the federal government’s fiscal year runs from October 1st of the preceding calendar year to September 30th of the actual calendar year. So, FY 2007 ran from October 1, 2006 to September 30, 2007. The budget “deemed passed” by the last House bill is for FY 2011.)
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Not sure where to put this one, but here is as good a place as any:
“If you really want to see when an empire is getting vulnerable, the big giveaway is when the costs of servicing the debt exceed the cost of the defense budget,” Niall Ferguson said. Ferguson also predicts that will happen in the U.S. within the next six years because politicians lack urgency over the crisis to come.
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"Yet the market is strongly up this morning. huh "
That housing start headline was a couple of weeks old, sorry that didn't come through with my excerpting. I guess the market is over the concern about worst housing since 1963...
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"what Obama is (really) saying is I inherited a deficit that I voted for and then I voted to expand that deficit four-fold since January 20th." - Exactly true. That is the line they should run on - and be proud!
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"Budgets do not come from the White House. They come from Congress"
Surrounded by liberals over the holiday at one point they all agreed that our deficits really came from Reagan. Points already covered here but a) Reagan never had a Republican house, b) tax cuts caused revenues to double in the 1980s, c) the deficits came from spending over, above and ahead of the doubling, and d) the delay from congress to enact Reagan's tax cuts caused initial downturn, delaying the growth.
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Back to Crafty's point about 2007, 2008, 2009, 2010, etc:
The two largest tax revenue increase years in history in terms of dollars collected by the Treasury were the two years that ended with the election of the Pelosi-Obama congress. If they had taken that opportunity to lock in the successful tax rates (remove expiration) and committed to spending within those means, the economic results that followed would be enormously different. Unfortunately that was not the path chosen.
This current group of Democrats has been in charge since Jan. 2007 when the deficit headed upward. They were also on board during all of the emergency measures passed during the Presidential transition. They want power but don't seem to like taking responsibility.
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Probably all on this board has seen or will see this calculation on the costs of illegals to state budgets. Non taxpayers, illegals all have more rights than the rest of us who pay the taxes - particularly the middle class tax payers. Dems will of course deny these numbers and they will also point out this beckons and can easily be reckoned for and by "comprehensive reform". Surely if we make illegals suddenly pay taxes and fines these budget shortfalls will all disappear. :x (sarcasm implied).
I am infuriated by one of the reform remedies is to make illegals pay all back taxes. If this is not ridiculous. How do you make people who were paid under the table in cash back taxes? Does anyone think they are going to declare all their money - any more than bar tenders or waitresses/waiters do?
http://www.foxnews.com/projects/pdf/Cost_Study_2010_Budget_Gaps_vs_Costs.pdf
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As I have mentioned, I am against illegal immigration; I think to start, we need to seal the border and enforce the laws and implement severe penalties for employers who employ illegal immigrants.
That being said, I am not sure as CCP said, how "Non taxpayers, illegals all have more rights than the rest of us who pay the taxes - particularly the middle class tax payers."
What does "have more rights" mean?
Also, I went to the National Conference of State Legislatures Homepage.
While I could not find CCP's chart, I did find;
"A Summary of State Studies On Fiscal Impacts of Immigrants" where studies show immigrants do pay taxes and provide a positive cash flow in many states states.
http://www.ncsl.org/default.aspx?tabid=16867
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I'm not CCP :-) but I can imagine that he has no right to free legal, free health care, free food stamps etc while many of them do.
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http://www.foxnews.com/us/2010/07/02/immigration-costs-fair-amnesty-educations-costs-reform/
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Click on link to "click here for Fair's executive summary".
I doubt very much that intake is greater than outlays.
"What does "have more rights" mean?"
A figure of speech to point out that 50% of the country footing the bill for the other half do not have rights to say no to this. They simply continue to have their money confiscated.
"I am against illegal immigration; I think to start, we need to seal the border and enforce the laws and implement severe penalties for employers who employ illegal immigrants."
Yes we agree.
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I'm not CCP :-) but I can imagine that he has no right to free legal, free health care, free food stamps etc while many of them do.
Actually, citizen CCP if eligible (below poverty level) WOULD qualify for free legal, free health care, free food stamps, etc. AND much more
than an illegal alien could ever possibly qualify for.
Click on link to "click here for Fair's executive summary".
I doubt very much that intake is greater than outlays.
Ahhh now I understand. The FAIR report is a very biased report. FAIR's stated purpose is not only to oppose illegal immigration but to curtail even legal immigration. In contrast, the National Conference of State Legislatures is a very IMPARTIAL body existing to serve Democrat and Republican State Legislatures. While not true in all cases, most of their independent studies indicate that the intake IS greater than the outlays. See my previous reference and others under their Home Page.
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So California is just a couple million illegal aliens away from financial success, right?
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So California is just a couple million illegal aliens away from financial success, right?
What? You noticed that the National Conference of State Legislatures "State Studies On Fiscal Impacts"
forgot to mention CA? :-)
That being said, CA, regardless of the illegal immigrant issue, seems perfectly capable of driving themselves
into bankruptcy by themselves. American Citizens in CA seem to be in a state of denial. And so is our legislature (another subject).
But, I think immigrants, legal or illegal, are a convenient scapegoat.
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Legal aliens pay taxes and like US citizens, face civil and criminal penalties for failing to do so. Illegal aliens skirt the system, while enjoying taxpayers funded goods.
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I don't always follow other people's logic pattern. When you need to draw an absurdly false hypothetical (an actively practicing MD below the poverty line) in order to draw the opposite conclusion, does that mean you actually agree with me? :-) He pays in and doesn't receive those perks. They (in general) don't pay and do receive the perks. Why not just welcome that widely held frustration to be expressed here on the board and move on with whatever is your view or proposal for the problem.
California without illegals is also an absurdly false hypothetical as well. California today comes with the illegals no matter what we do in the future with the border. The flow of illegals into California probably has more to do with the generosity of the public benefits and the sanctuary status of the cities than it does with the height of the fence.
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Doug,
thank you! :-)
But it is not just me as an MD.
It is all of us who work and pay taxes and are "above the poverty line". And don't be sure illegals are not cashing in more than you think. Some state we should use this E-verify system for employers to document those that are legal are ok to hire. Yet someone said that it is only 50% accurate. Don't think for one second illegals are not taking more advantage of our system than you think.
JDN states he is for stopping illegal immigration and yet all he does is post arguments against it.
IF he believes illegals pay more into our system then they take out than why is he against it?
He makes the conclusion that FAIR is of course biased but the National Conference of State Legislators is objective. No selective cherry picking there right JDN.
Your arguments never seem to support your claims. What is your point?
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Actually, if you noticed I said "citizen CCP" not MD CCP. Few of us on this site (I hope) are below the poverty line.
But my point was, in response to Doug's post, that if we were in need, as CITIZENS we would be entitled to all the benefits of illegal immigrants
and many more benefits besides.
CCP; actually no, I'm not cherry picking; just looking for a reasonably unbiased source.
But CCP, I understand and respect your comment; "JDN states he is for stopping illegal immigration and yet all he does is post arguments against it."
Let me try to explain.
First, I do believe legal and illegal immigrants contribute. Of course legal resident aliens pay taxes, etc.
But many illegals pay income taxes (withholding) too; also let's not forget sales taxes, gas taxes, etc.
Our country was built on immigrants.
Therefore, I am strongly in favor of substantially increasing, properly vetted, legal immigration (you and I respectfully disagree on that matter).
However, I believe the word "ILLEGAL" immigrant is there for a reason. I don't necessarily agree with all laws,
but I try to obey them. And if I don't, I accept the consequences (speeding ticket for example).
Or I try to change the law, but in the interim I will continue to try to obey them. So let immigrants come here legally;
but for those who don't, enforce the laws. For example I support AZ's law. And seal the border as best we can.
And finally I guess I don't like that employers get off so easy. There is a supply and demand issue here. We seem to coddle the employers
seeking cheap and illegal employees, yet we blame the immigrant who merely wants a better life. GM's suggestion of forfeiting all of their
assets seems a bit draconian, but severe penalties should definitely be in place and rigidly enforced.
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"IF he believes illegals pay more into our system then they take out than why is he against it?"
Well speaking only for myself, the econ costs vel non of the illegals is not really the point. The point is that we get to decide who comes here and in what numbers they come. Even were it to turn out that illegals coming here were a net econ positive, there are cultural and political aspects of the question to consider as well.
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http://www.cnbc.com/id/38128585
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"... despite the $4 billion in pork that Byrd served his constituents over the past 19 years alone—not to mention the untold billions before observers started keeping tabs—West Virginia remains the third poorest state in the country. Government spending does not prosperity make.
When Byrd became senator in 1959, West Virginia ranked No. 39 in median family income, and No. 42 in per capita income. Today, it's No. 48 in both categories."
http://online.wsj.com/article/SB10001424052748704111704575354870221777334.html
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Doug
Interesting you post this. This AM on morning cable it was pointed out that the governor of W Virginia won by the largest margin by a governor in decades ~ 75% to 25 % in 2008.
He is a Democrat. When will West Virginians learn?
Wasn't this the state whose union goons got JFK the Democratic nomination in 1960?
Someone could probably do a study of this. It is not about the poeple. It is about the politicians keeping power.
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By STEPHEN MOORE
In one of the most fiscally inept stunts in many years on Capitol Hill, Congressional Democrats have taken a pass on enacting a budget this year. Legislators will just wing it and let the $3.6 trillion fall where it may and hope the public doesn't notice a $1.5 trillion dollar deficit. But the minority Republicans have just presented their own budget plan and it's a remarkably bold and honest document that involves big cuts in government spending over the next decade and a balanced budget by 2019. The GOP budget would be a Tea Partier's dream come true if it ever were enacted.
The plan, fashioned by Tom Price of Georgia, head of the conservative Republican Study Committee, reduces federal borrowing from the Obama baseline by a gargantuan $6.4 trillion over the next decade. Not bad considering that it also lowers taxes by $1.7 trillion more than the Obama budget by making the Bush tax cuts permanent. Spending reductions start with what Mr. Price calls a "reset" on spending for discretionary programs back to 2008 levels. That insures that "temporary" stimulus funding doesn't get continued year after year. The plan also instructs the President and Congress to dedicate every penny of bailout money repaid to the federal government by the banks to debt retirement.
"We think it's essential to show the American people we can cut spending enough to balance the budget even with the big hole Barack Obama has put us in," Mr. Price tells me. His budget is a Reaganite budget, calling for tax cuts, asset sales, repeal of hundreds of wasteful programs, and across-the-board cuts in virtually every program except Social Security. "Even some Republicans will flinch from the spending cuts required to get to a balanced budget," Mr. Price concedes.
Mr. Price and his RSC colleagues show that you can get from here ($1.5 trillion annual deficits) to there (a balanced budget) through spending discipline and economic growth. Can it be done the Democratic way, with higher taxes and lower growth? Not likely.
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http://www.nytimes.com/2010/07/19/business/19training.html?th&emc=th
After Training, Still Scrambling for Employment
By PETER S. GOODMAN
Published: July 18, 2010
In what was beginning to feel like a previous life, Israel Valle had earned $18 an hour as an executive assistant to a designer at a prominent fashion label. Now, he was jobless and struggling to find work. He decided to invest in upgrading his skills.
Mr. Valle, left, is living with his parents in New York as he looks for work. “Training was fruitless,” he said. “I’m not seeing the benefits. Training for what? No one’s hiring.”
It was February 2009, and the city work force center in Downtown Brooklyn was jammed with hundreds of people hungry for paychecks. His caseworker urged him to take advantage of classes financed by the federal government, which had increased money for job training. Upgrade your skills, she counseled. Then she could arrange job interviews.
For six weeks, Mr. Valle, 49, absorbed instruction in spreadsheets and word processing. He tinkered with his résumé. But the interviews his caseworker eventually arranged were for low-wage jobs, and they were mobbed by desperate applicants. More than a year later, Mr. Valle remains among the record 6.8 million Americans who have been officially jobless for six months or longer. He recently applied for welfare benefits.
“Training was fruitless,” he said. “I’m not seeing the benefits. Training for what? No one’s hiring.”
Hundreds of thousands of Americans have enrolled in federally financed training programs in recent years, only to remain out of work. That has intensified skepticism about training as a cure for unemployment.
Even before the recession created the bleakest job market in more than a quarter-century, job training was already producing disappointing results. A study conducted for the Labor Department tracking the experience of 160,000 laid-off workers in 12 states from mid-2003 to mid-2005 — a time of economic expansion — found that those who went through training wound up earning little more than those who did not, even three and four years later. “Over all, it appears possible that ultimate gains from participation are small or nonexistent,” the study concluded.
In the last 18 months, the Obama administration has embraced more promising approaches to training focused on faster-growing areas like renewable energy and health care. But most money has been directed at the same sorts of programs that in past years have largely failed to steer laid-off workers toward new careers, say experts, and now the number of job openings is vastly outnumbered by people out of work.
“It’s such an ugly situation that job training can’t solve it,” said Ross Eisenbrey, a job training expert at the Economic Policy Institute, a labor-oriented research institution in Washington, and a former commissioner of the federal Occupational Safety and Health Review Commission. “When you have five people unemployed for every vacancy, you can train all the people you want and unfortunately only one-fifth of the people will get hired. Training doesn’t create jobs.”
Labor economists and work force development experts say the frustration that frequently results from job training reflects the dubious quality of many programs. Most last only a few months, providing general skills without conferring useful credentials in specialized fields. Programs rarely involve potential employers and are typically too modest to enable cast-off workers to begin new careers.
Most job training is financed through the federal Workforce Investment Act, which was written in 1998 — a time when hiring was extraordinarily robust. Then, simply teaching jobless people how to use computers and write résumés put them on a path to paychecks. Today, even highly skilled people with job experience of two decades or more languish among the unemployed. Whole industries are being scaled down by automation, the shifting of work overseas and the recession.
“A lot of the training programs that we have in this country were designed for a kind of quick turnaround economy, as opposed to the entrenched structural challenges of today,” said Carl E. Van Horn, a labor economist and director of the John J. Heldrich Center for Workforce Development at Rutgers University. “It’s like attacking a mountain with a toothpick. You take a policy that was designed for the best economy that we had since World War II and you lay it up against the economy that is the worst since World War II. It can’t work.”
Claiming Successes
The Obama administration argues that expanded job training has already delivered success. As part of the nearly $800 billion stimulus package begun last year, the administration increased grants sent to states for training programs devoted to laid-off workers by $1.4 billion for 2009 and 2010. Those funds came on top of $2.9 billion allocated through normal budget channels for grants in those two years.
Last year, the number of laid-off workers in job training reached 241,000, up from about 124,000 the year before, according to the Labor Department.
(Marc: Lets do a little math here: $1.4B+2.9B=$4.3B. With the peak number of 241,000 (which was the number for only one of the two years) that comes out to 18,000 per person trained. With only one out of five hired, that comes out to $90,000 a job?!? Am I missing something here?)
“These programs are really working,” said the assistant secretary of labor, Jane Oates. “These are folks who clearly want to go back to work and we’re able to help them get back to work. The investment in job training is one that’s not only going to pay off in the short term, it’s going to help us be more competitive in the long term.”
(There's more, but you get the gist of it.)
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Having once participated in some congressional testimony, this script has a familiar ring:
The Welfare Script
The welfare state acquired its girth by following a familiar routine, over and over again.
America’s welfare state has grown into an unwieldy hodgepodge of programs that provide various forms of assistance to tens of millions of Americans. It costs taxpayers nearly a trillion dollars annually and experts predict that, absent reform, it will keep growing in the years ahead.
The welfare state acquired its girth by following a familiar script — over and over again. The latest performance came at a recent hearing of the House Education and Labor Committee, which is pondering yet another proposed expansion of government: the “Improving Nutrition for America’s Children Act,” an $8 billion add-on to the nation’s school-lunch and other child-nutrition programs. Here’s the routine:
Invite a star witness, in this case a celebrity chef, to draw media attention to the proposal.
Paint those supporting the plan as pure as the driven snow; smear those who object as callous Scrooges who (in this case) despise children.
Declare a “national crisis” to create a sense of urgency. In this case we face twin crises: nearly one in three children is obese, unfit for military service, and on track for adult-onset diabetes, while another 16 million kids go hungry because their parents must choose between “keeping the lights on or putting food on the table.”
Bring in a top dog from the administration to claim the moral high ground on behalf of those who stand to receive the latest government handout. Throw in a panel of “experts” from special-interest groups to up the ante on what needs to be done, thereby framing the chairman’s expensive ($8 billion in this case) plan as nothing more than a modest “first step.”
Finally, engage in some good old-fashioned political jujitsu. Invite a retired general to make the case that growing the welfare state can actually enhance our national security. And argue that “investing” billions today is the fiscally prudent thing to do because it will save much more in health and other societal costs down the road.
Such was the scene last week on Capitol Hill. Celebrity chef Tom Colicchio, camera crews in tow, asked the sort of question one always hears whenever Congress considers a welfare expansion. “Why,” he asked, “in this great country, where we produce enough food, are children going hungry every day?”
Committee chairman George Miller (D., Calif.), the bill’s sponsor, tugged on heartstrings, intoning: “We cannot ignore the fact that for millions of children, the only meals that they can count on are those they get at school or in child care.” He also touted the positive effects his bill would have on our fiscal mess. “If we work in the schools to both increase nutritional opportunities and educate kids about the foods they’re eating,” he insisted, “we have a chance to really, dramatically drive down future health-care costs.”
And, in a dramatic, made-for-TV gesture, Agriculture Secretary Tom Vilsack tossed aside his prepared testimony to speak extemporaneously “from the heart.” Predictably, liberal lawmakers swooned, and pledged to do “whatever it takes” to guarantee every child a healthy meal — not only when school is in session, but also before and after the school bell rings, on weekends, on holidays, and even during their summer vacations. After all, as Chairman Miller condescendingly noted: “We can do all we can do for five days [each week] during the school year, but on weekends and during the summer, youngsters are often left to their own design.” No word from the chairman as to the whereabouts of their parents.
If this means Uncle Sam will have to “create [nutritional] standards for [school-cafeteria] vending machines and a la carte lines,” so be it. And if federal bureaucrats will be required, as Vilsack suggested, to instruct schools on “how to . . . stretch that food dollar” and “come up with innovative and creative ways to make vegetables and fruits . . . delicious and appealing,” then let’s get started on devising those federally approved school-lunch recipes.
Be still my beating heart.
Fortunately, this time a contrarian voice inserted a much-needed reality check into the script. “It is misleading,” said Heritage Foundation welfare expert Robert Rector, the lone minority witness, “to examine spending on one or two government programs in isolation. In fact, the federal government creates . . . and funds 71 different means-tested programs assisting low-income families, providing cash, food, housing and medical care.” Not surprisingly, he pointed out, most families that receive subsidized school meals also receive benefits from many other programs. “Proposals to expand funding on a single program,” Rector warned, “must be examined holistically in the context of the overall growth of extraordinary government spending.”
The average family with children in the lowest-income third of the population, Rector noted, already receives more than $30,000 in assistance annually from these programs. The total amount of spending on this population exceeds $475 billion annually — which is only about half of all welfare spending. Rector, who knows more about the circuitry of the welfare state than anyone, offered the lawmakers a confession: “I’ve spent my entire career on this type of population and this type of spending, and I can tell you I have absolutely no idea where all that money goes.” And then a warning: “Before you propose spending even more money, you ought to at least have a reasonable accounting of where this money is currently going in 70 different programs, all of them going effectively to the same population.”
Rector stood alone in recommending that Chairman Miller and his colleagues conduct some rudimentary “due diligence” before committing billions of additional tax dollars to this effort. Specifically, do these programs benefit their intended beneficiaries, poor kids? He testified to one of the many dirty little secrets of welfare policy: The most rigorous studies demonstrate that these efforts just do not work.
Take the oft-repeated claim that students in the school-lunch program achieve more academically: “In reviewing for this testimony, I was quite shocked to find . . . [that] even though there are continuing claims that school-breakfast programs increase academic performance, there are, in fact, no studies with control groups that show that whatsoever. Zero.”
But to Chairman Miller, his liberal colleagues, and the innumerable welfare-industry groups that feed at the government trough, none of this matters. In fact, Rector has spent two decades trying to convince Congress to view the 71 programs that constitute the welfare state as a unified category of federal spending, dispensing over $950 billion a year and growing. He argues Congress should enact a firm spending cap on these programs, allowing them to grow at the rate of inflation, well below the current unsustainable trajectory. Such a cap, Rector estimates, would not only save taxpayers on average nearly $200 billion a year, with cumulative savings reaching $1.4 trillion over the next decade, but it would induce Congress to demand real evaluations of whether anti-poverty programs actually help the poor, and then defund those that do more harm than good while expanding those that actually lift the poor out of poverty.
Now that’s real compassionate conservatism.
— Michael G. Franc is vice president of government relations for the Heritage Foundation.
http://article.nationalreview.com/438248/the-welfare-script/michael-g-franc
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Return to the Article
July 04, 2010
The 'Deem'n Pass' budget
Cindy Simpson
Once again, the Democrats have shown a willingness to bypass procedure to further their own agenda. As Human Events' Connie Hair reported yesterday:
Last night, as part of a procedural vote on the emergency war supplemental bill, House Democrats attached a document that "deemed as passed" a non-existent $1.12 trillion budget. The execution of the "deeming" document allows Democrats to start spending money for Fiscal Year 2011 without the pesky constraints of a budget.
The procedural vote passed 215-210 with no Republicans voting in favor and 38 Democrats crossing the aisle to vote against deeming the faux budget resolution passed.
Never before -- since the creation of the Congressional budget process -- has the House failed to pass a budget, failed to propose a budget then deemed the non-existent budget as passed as a means to avoid a direct, recorded vote on a budget, but still allow Congress to spend taxpayer money.
Representative Paul Ryan issued a statement on behalf of the House Republican Budget Committee entitled "The Majority's Budget Deemer: An Admission of Fiscal Failure." Ryan opens with a scathing analysis:
What House Democratic leaders call a "budget enforcement resolution" is in fact just another "deeming" scheme - one that concedes they cannot meet their most fundamental governing responsibility: writing a congressional budget. They have created a masquerade that only advances their spend-as-you-go philosophy, accelerating the march toward a fiscal and economic crisis. They are doing so because a majority of rank-and-file Democrats cannot vote for a budget with trillion-dollar deficits. As even House Budget Committee Chairman Spratt has acknowledged: "You can say that that's a lack of courage."
Ryan's statement further explains that the "budget enforcement resolution" is not a "budget" or a "resolution," and he clearly reveals its deceptive facts and figures. He concludes by stating: "This is far more than a failure of procedure or politics. It is an abdication of a fundamental responsibility by a Majority that is losing both its will, and its ability, to govern - and it is threatening America's prosperity in the process."
Throw this latest maneuver of the Dems into the pile and one wonders if "threatening" has become something more like "destructing." If Congress can't reign in its reckless spending, America will continue its ride on the donkey's back beyond the "deem'n pass" into territory resembling a banana republic.
Page Printed from: http://www.americanthinker.com/blog/2010/07/the_deemn_pass_budget.html at July 08, 2010 - 03:13:02 PM CDT
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Social Insecurity
by Paul Cwik on August 13, 2010
Oh joy, oh joy! It has finally arrived! You wouldn't believe how excited I was to receive a letter from the Social Security Administration. In the letter, they dutifully showed me how much taxable income I have ever made. (Is it me, or is there something really creepy about that?) They showed me how much I have paid in taxes and how much my employer also "paid." Then they showed me how much my payment would be if I retire at full retirement (67 years old — not 62 or 65 like you may have heard) and if I delay "collecting" until I turn 70.
It is no secret that I turn 40 this year. That means I have another 30 years of work in front of me. I have (for fun) just taken an online life-expectancy survey, and it says that I will live until the age of 86. So let's assume that these numbers are correct. I will work for another 30 years and then have 16 years to spend it all.
According to the Social Security Administration, I will receive $2,522 a month during those 16 years. The value of that money when I turn 70 is a present-annuity-value calculation. For the purpose of this example, let's pick an easy interest rate of 5% per year. So the value of the Social Security payments (compounded monthly) for 16 years at annual rate of 5% is $335,444.57. In other words, for me to privately do the same as Social Security, I will need to have $335,444.57 in cash when I turn 70 and deposit it in a security that has a 5% annual return.
To take this example a step further, how much money would I have to set aside each year at an annual compounded rate of 5% to hit this target? Using some "quick math," we see that I would have to set $5,048.91 aside each year. Well, this does not seem too unreasonable. One might think that this is equivalent to putting away the maximum of $5,000/year in an IRA, and one would not be wrong for thinking that way.
Unfortunately, there is a larger point that has been missed. I have already been taxed for all of the previous years that I have worked. The Social Security Administration informs me that I have currently sunk a little more than $80,000 into this governmental pyramid scheme. Setting aside any interest I could have received over the past 21+ years, let's assume that they give me a lump sum payment today of $80,000.
Suppose that I take that $80,000 and put it into a security that gives me an annual return of 5% and I do not add another single cent. How much would I have when I turn 70? $345,752.00! I have already exceeded the target needed for the Social Security Administration to fulfill its "promise" to me.
Alas, I do not think that it will do me any good to write a letter to the Social Security Administration explaining that I have reached my target and that they no longer need to tax me. In fact, the letter states, quite explicitly, that I must maintain my current earning rate to collect the stated numbers. So at this point any additional taxes that come from me are just wealth extractions with no benefit to me.
You may think that this is a bad deal for me, and it is, but it is going to be much worse for those who are younger than I. At least I am still making a positive rate of return, somewhere between 2% and 2.5%.
A person born in 1988 making $30,000/year can expect to receive $1,539/month in the year 2058. The Social Security Administration says that he is expected to live until the ripe old age of 87. So that's another 17 years after retiring at the age of 70. The annuity present value of $1,539/month for 17 years at an annual rate of 5% is $212,938.88. In order to hit that target, he would have to set aside $1,132.50/year in a 5% security. This amount is only 3.775% of his $30,000 annual income.
Social Security and Medicare taxes are 15.3% of his income. If he invested that 15.3% of his income instead, he would be investing $4,590. Supposing that this annual contribution was invested each year for the next 48 years and the principal was collecting 5% interest, instead of the Social Security value of $212,938.88, he would have $863,036.55! That's a little more than four times the return that Social Security is "promising."
Or, to drive the nail home, he is paying $4,590 a year and is getting a future value of only $212,938.88. If he simply took that money and buried it in the dirt, he would have, after 48 years, $220,320! The bottom line is that, for today's 21-year-old, Social Security is a negative return.
Paul Cwik is associate professor of economics at Mount Olive College. See Paul Cwik's article archives.
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When Happy Cost of Government Day hits so late it spills over into Ramadan we really should start noticing that we have a problem. (Speaking of religious holidays, polls say more people are looking forward to November 2nd than December 25th this year.)
The nice thing about Happy Cost of Government Day falling on August 19 is that now you are good to go. Everything you make from today August 20th on until the end of the year is yours to spend anyway that you like - like maybe a little food for the family, a new pair of shoes or maybe a bicycle for one of the kids.
You people calling it all socialism just because you work 8 months for the government are over-reacting. For the next 4 months, it's all yours. Get out and enjoy it! For the way our nation has been voting and governing we are lucky to keep one day's earnings in a year.
http://www.atr.org/cost-government-finally-arrives-august-a5325#
Cost of Government Day Finally Arrives on August 19, 2010
Every year, the Americans for Tax Reform Foundation and the Center for Fiscal Accountability calculate Cost of Government Day. This is the day on which the average American has earned enough gross income to pay off his or her share of the spending and regulatory burdens imposed by government on the federal, state, and local levels.
In 2010, Cost of Government Day falls on August 19. That means working people must toil 231 days out of the year just to meet all costs imposed by government. In other words, the cost of government consumes 63.41 percent of national income.
“Two years ago Americans worked until July 16 to pay for the cost of government: all federal, state and local government spending and regulatory costs. That government was too expensive and wasteful. Two years later, we work until August 19 for the same bloated government. We have lost an additional full month of our income to pay the cost of government in just the last two years,” said Grover Norquist, president of Americans for Tax Reform.
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How many in this country pay no income taxes?
So Cost of government day which is somewhat buried in our withholdings keeps getting later and later. I think I can recall when it was March, then April then May.
Now August.
OF course one can get a government job and if one lives to say 85 they can get salary (or pension) for say 60 years but only have to work for 20 of them.
Like JDN pointed out, who in the private sector (except for CEO's and CFO's and their close buddies) get this?
I don't recall ever being asked for my opinion (AS A TAXPAYER) about what would be fair for a person whose salary is paid by taxes before this was granted to gov. empolyees at any level.
I always felt that nurses, teachers, police were underpaid but this is not what I had in mind. I respect and appreciate all they do but with the country literally going broke we can't keep this up.
I had a union trade employee tell me he makes 48 an hour here in NJ.
He said he went to Florida to meet with people in his trade. When they, who receive 16 or 17 an hour saw what he makes they got enraged and asked him to leave.
The power of unions. The power of unions in NJ. I don't know what he should make. I don't want to make that call anymore than I want anyone telling me as a doctor what I should be making. This came from someone in his field from a different state.
The unions ALWAYS (as far as I know ) support Dems. Dems get loads of money for campaigns and we all know return the favors in ways I doubt we can even dream about. I wonder how so many local politicains in NJ live like royalty. So many are rich. Some even say that is why they go into politics.
GM noted that police officers in rural areas receive far less compensation than those in urban areas. I wonder how much is due to unionization.
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NYPD gets pay raise
Newsday
NEW YORK CITY — Police officers got the award they were looking for when an arbitration panel yesterday awarded them a pay raise and hiked by more than $10,000 the starting salary that the NYPD felt had significantly hampered its recruitment efforts.
Rookie cops who had been paid a starting salary of $25,100 will now earn $35,881, with the hike retroactive to January 2006.
**NYPD has a union, and this pay is horrific, especially in NYC.**
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GM, I did a Google search of "NYPD jobs go unfilled" and amazingly got zero hits. That work is so fun and rewarding that people will do it without pay. :-) Are you counting a free gun, free uniform and squad car usage in that 25k?
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NYC has a far, far higher cost of living than elsewhere.
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http://gothamist.com/2008/02/17/more_nypd_recru.php
More NYPD Recruiting Trouble as Exam Takers Decline
The NYPD's recruiting woes appear to be continuing through 2008, with a sharp drop-off in the number of candidates applying to sit for the Police Officer Exam, which is the first step to qualifying to enter the Police Academy. According to the New York Post, the number of test takers is down 20% from number of people who took the exam at the same time last year. "Slightly fewer than 20,000 have applied for the Feb. 23 test, down from the roughly 25,000 who filed last year. In October 2004, more than 35,000 registered for the test."
The decline is not for lack of trying either. The NYPD has been casting its net far and wide in search of recruits.
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Starting Salary
The current starting salary for a trooper is $58,748.29 (including uniform allowance). The second-year total compensation jumps to $65,662.39. Top pay for a Trooper I is $97,188.48. Troopers receive yearly increments. All recruits receive $777.78 every two weeks, plus overtime pay. Room and board are also provided while training.
Work Schedule
Troopers typically work a 40-hour week on a variety of schedules. Overtime is voluntary, except in unusual circumstances, and is rewarded with premium pay or compensation time.
Holidays, Vacation and Sick Leave
There are 13 paid holidays a year.
Troopers are allotted one vacation day per month in the first year of service, as well as three personal days per year. The initial vacation allotment of 12 days increases after a trooper has been on the job for five years and increases at regular intervals after that.
Sick leave is allotted.
Health Benefits
Members of the State Police and their families are offered two options for medical coverage, two options for dental coverage, a prescription drug plan and a vision care program.
The two options for medical coverage are:
Health Maintenance Organization (HMO) - The HMO plan allows you to choose a plan from among several different HMOs, allows you to choose a primary care provider from a list of participating HMO physicians, requires no deductibles or claim forms, and only a possible co-payment for services. Coverage is not usually provided if you go outside the HMO for services.
NJ Plus (Preferred Provider Organization) - Combining features from the traditional and HMO systems, this plan allows you to choose from a network of physicians, usually covers 100 percent of services in network, and usually requires a $10 co-payment for services. In addition, with a yearly deductible, this plan allows you to use the medical service providers of your choice and covers 70 percent of the payment for their services.
Dental Coverage
For an optional biweekly payroll deduction, troopers may choose a "traditional" plan or a plan offered through an HMO system.
Prescription Plan
Under the plan offered to troopers (and their spouses and children), virtually all prescription drugs require only a co-payment of $10. Generic drugs require a co-payment of only $3.
Vision Care Program
The program provides for a partial reimbursement for the cost of eyeglasses, contact lenses, and the cost of the eye examinations.
Leave of Absence
Leaves of absence are available for such reasons as: pregnancy, child care, education, family leave or military service. These leaves are usually for not more than a year and must be approved.
Deferred Compensation Plans
Members are eligible to participate in a deferred compensation plan or supplemental annuity collective trust plan in order to supplement retirement income.
Life Insurance
Enlisted members are covered by a group Life Insurance Policy that provides 3 1/2 times their final average salaries in a lump sum to beneficiaries.
Retirement Package
The State Police Retirement System is overseen by a Board of Trustees which includes two members of the State Police. When a trooper retires, he or she can take advantage of a comprehensive retirement plan. The plan offers a wide variety of benefits, depending on years of service.
Mandatory Retirement
Everyone in the State Police must retire by age 55 except the Superintendent.
Pension
Enrollment in the State Police Retirement System (SPRS) is a condition of employment. Your employee contribution will be 7 1/2 percent of your annual salary. (Note: You will not pay pension contributions on your maintenance allowance, but it will count towards your final compensation for pension purposes.)
Service Retirement: After 20 years of service as a New Jersey State Trooper, you are eligible to receive a pension, regardless of age, consisting of 50% of your final compensation.
Special Retirement: After 25 years of service as a New Jersey State Trooper, you are eligible to receive a pension, regardless of age, consisting of 65% of your final compensation plus 1% for each year above 25 years. The maximum benefit that you can receive under a special retirement is 70% of your final compensation.
Deferred Retirement: Troopers who serve for 10 years and then terminate their employment before qualifying for a service retirement are vested and thereby eligible for a pension benefit at age 55. The benefit is 2% of final compensation for each year of SPRS service.
Optional Purchase of Former Membership: You can purchase former membership from a New Jersey State administered pension plan (e.g. PERS, TPAF, PFRS) that could increase your retirement benefit. This service cannot be used to qualify for a Special or Service Retirement. However, it can be used to compute your retirement allowance on the basis of 1% of final compensation for each year of such service credit.
State Paid Health Benefits
Troopers who attain 25 years of service in the SPRS are entitled to State paid health benefits in retirement according to the terms of the bargaining agreement in effect at the time they reach 25 years of service. The current agreement covering State Troopers does not require any cost sharing by the Troopers.
Troopers who do not attain 25 years of service in the SPRS before they retire or terminate employment may qualify for State paid health benefits in retirement if they have purchased former membership for a New Jersey State administered pension plan. The former membership purchased and the SPRS time must add up to 25 or more years to qualify.
Troopers who do not obtain a total of 25 years of state service will be afforded continuous State health benefits covered at a group rate.
Pension Benefits and Disability
If a trooper retires because of a job-related accidental disability, he or she receives a pension equal to two-thirds of his or her final compensation. If a trooper retires as a result of a non-job-related disability, he or she is eligible for a pension of no less than 40 percent of his or her final compensation.
Information or questions regarding your eligibility for any retirement benefit should be directed to the Division of State Police, Human Resource Management Bureau, Debra Hanko at (609) 882-2000 ext. 2623, email: lpphankd@smtp.lps.state.nj.us or Fred Warner at (609) 882-2000 ext. 2621, email: lppwarnf@smtp.lps.nj.us
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I don't know how accurate this is. Iselin and Newark NJ seem to be at similar rates. I guess if one wants to be a police officer go for State Policeman, or work in NJ or LA. I have had patients applying for jobs with local police force. They tell me 200 applicants for one or two spaces. It ain't too bad in Jersey is all I can say.
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"NYC has a far, far higher cost of living than elsewhere."
Agree. I was teasing GM a bit, but as I posted previously - I hate when they tell you the pay is X when the real pay is Y. Starting salary is MISLEADING. In government-speak, 25k for 1st year police work is really 45k to go to school - police academy: http://www.nypdrecruit.com/NYPD_BenefitsOverview.aspx And after 5.5 years that becomes 91k. Add a school teacher spouse to that and it takes you into the area we now call punishably rich. I don't know about police academy attendees, but trainees in business are not particularly valuable. But 91k in 5 years for working 11 months of the year including paid medical, unlimited full paid for sick half pay for life for working 20 years is not something to sneeze at in this economy.
Not included in the 'salary': overtime pay, plus
* 10 Paid vacation days during first & second year
* 13 Paid vacation days during third, fourth & fifth year
* 27 Paid vacation days after 5 years of service
* Unlimited sick leave with full pay
* A choice of paid medical programs
* Prescription, dental, and eyeglass coverage
* Annuity fund
* Deferred Compensation Plan, 401K and I.R.A.
* Optional retirement at one half salary after 20 years of service
* Annual $12,000 Variable Supplement Fund (upon retirement)
* Annual banking of $12,000 Variable Supplement Fund after 20 years of service (if not retiring)
* Excellent promotional opportunities
* Educational opportunities
* Additional benefits are available to military personnel.
Looks to me like they know how to recruit. Unlike private business, you can't stay at the entry level. After 5 years and with a little overtime the officer makes over 100k for working 11 months of the year. I'm not saying that is overpaid; I'm saying it's not a 25k job, the jobs are not going unfilled and the people are paying a high cost of living by choice.
"The NYPD has been casting its net far and wide in search of recruits."
That sounds like common sense. Still essential jobs are not going unfilled. If they do, then pay goes up- by public choice instead of union and labor board panels.
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Speaking of cost of living, it's funny how the social extremists keep telling the happy people who moving to the x-urbs that we all need to get more urbanized, live in greater density, that it is far more efficient to live close together and too costly to run a water or sewer pipe an extra mile or two out to the edge of town. What a bunch of B.S.
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http://abclocal.go.com/wabc/story?section=news/investigators&id=6133543
NYPD loses recruits to better paying agencies.
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"NYPD loses recruits to better paying agencies."
Nothing in that story ("hundreds of city cops, many of them rookies") tells us how many of those completed the 20 years and are PAID to leave, nor does the term hundreds out of 35,000 tell us anything significant.
Still, if essential jobs go unfilled, the pay plan will be upped - and it was. The combination of both stories tells us that the process of setting and adjusting those payscales is 'horrific'.
GM, Did you mean to quote a 'starting salary' and then refer to it as "this pay is horrific" when in fact the salary quoted ("this pay") was just over half of current total pay and only for the training period. The pay within just 5.5 years is nearly 4 times what was quoted and likely more with some overtime. (The story quoted without link or date was from May 20, 2008, more than 2 years ago: http://www.policeone.com/patrol-issues/articles/1696920-NYPD-gets-pay-raise/ )
Welcome to civil service. We hear how little they make without learning honestly or accurately hearing how much they make. Little things like recent increases, healthcare paid and other monies put into an account with their name on it don't really count. NYPD link: http://www.nypdrecruit.com/NYPD_BenefitsOverview.aspx
But once again, the problem with government budgets in NYC and America is not the cost of governing like paying police what is needed to get the job done. The problem is that the majority of government expenditures go to transfer payments for no service at all, NOT to pay for real public services like police work.
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Doug,
If you look at the base rate for academy training they posted, no one would have any shift differential or OT or step increases. Even once the academy is completed, getting paid overtime is unlikely, usually comp time is given instead.
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http://www.nytimes.com/2007/05/12/nyregion/12recruits.html?_r=2&ref=nyregion&oref=slogin
Sorry that this is 3 years old, but I doubt that the pay increase since then has made the financial burdens much easier.
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http://salary.nytimes.com/CostOfLivingWizard/layoutscripts/coll_start.asp
Interesting tool for comparing the cost of living from place to place.
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http://www.city-journal.org/2009/nytom_nypd.html
Heather Mac Donald
New York’s Indispensable Institution
The NYPD’s crime-fighting sparked the city’s economic revival and is essential to its future.
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A very well seasoned NYPD friend responded to me thusly-- in unvarnished cop candor. With his permission I post here:
===========
I don't like to discuss the job on public forums, but in a private correspondence I will tell you that macdoug or whatever his name is does not know what he's talking about.
If you're kid is sick u want the best dr money can buy. Not someone making minimum wage. So way should it be any different with someone who protects your life, or has the ability to take your life. The first 5 years I was on the job I would put my life on the line, then come home and decide what bill I was going to skip.
Bottom line you can't compare this to civillian work. Overtime usually means putting it on the line fighting with crackheads to make an arrest. If you get it u earned it. Second, most jobs if you make a mistake you might get fired. Here a mistake could mean death or prison.
When I first came on, people in the private sector would make fun of you. Now they're jealous because they feel we have job security. Trust me, we don't.
Anyway people like this make me laugh. Thanks for the info.
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Crafty, I don't suppose you quoted to him what I wrote earlier this week (next two paragraphs) on the same subject which might have helped him to understand in context that I was not saying anyone is overpaid or anyone is underpaid. Where in my post did I write that anyway? I don't have a dog in their fight and I didn't claim to know about their organization. I quoted exact words from their website. I was mostly making the point that 25k posted here is not 45k and we really are talking about roughly a 100k job (Not take home, but total compensation) by the time you get 5 years up to speed and I am still not saying that 100k is a lot of money for what a good cop in NYC does. At the 100k level they probably see well under half of that in take home pay and that is one problem but again I was not judging the value of their work. If he was offended my statement that if the spouse is a school teacher then you are approaching punishable wealth, a little good detective work would tell him quickly that was totally political tongue in cheek because if you took any context to my posts you would know that I don't think 100 million or 500 trillion is punishable wealth, much less 200k or 25k or 45k or 91k. I think all honestly earned wealth is good and there is no question that good cops deserve serious pay.
Aug. 16. 2010 I wrote: "I wouldn't want to judge the real value of what anyone does, the danger that military, fire or police officers face, nor would they want to pay full value for my sacrifices and dangers as an inner city landlord. We get what the market will bear and what it will take to get the right person to come in and do the job.
What I hate is when they disguise or deny the money we pay. Telling us a teacher makes 50 or 60k when we pay out 90k because they aren't counting the deferred money or the benefits as pay. It is all pay. If they want portions of their pay in forced savings, health benefits, pension funds, taxes or anything else, that is their business."
THAT was my point, that pay is pay. It all counts, even if it is low and even if major parts of it go to benefits or accounts in their name and don't show in a current paycheck, and to taxes. How can we begin to judge the money if we can't say accurately what the money is and I was miffed at the original post for putting that information out wrong in my opinion.
For all the insults, "macdoug or whatever his name is does not know what he's talking about", "people like this make me laugh", I didn't see anyone point out a fact that I posted wrong. I assume he did not go to the link I twice provided where all the pay figures I posted came from.
Your friend wrote: "The first 5 years I was on the job I would put my life on the line, then come home and decide what bill I was going to skip."
Sounds like his interests may not have been well served by having more than half of his money earned not be in his paycheck those early years due to inflexible union contracts, benefits and deferrals and high taxes which go more to transfer payments (including the crackheads) than toward real public services like good police work. Unfortunately I don't think he read that far into my post.
The remark about private sector comparisons in interesting. In return there are civil servants who might not always count deferred compensation or benefits as pay because they think everyone gets them. I will tell you, 'Trust me, we don't'.
The interesting part of this to me from a public policy point of view is the PROCESS of how compensation is set. It is not at all about me judging the risk, danger or value of someone else's work from a thousand miles away.
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Those seem like fair points to me.
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It would be nice if police/fire/EMS/military got compensated like pro athletes, but it isn't going to happen. The taxpayers can only pay what is affordable. Most of us in those careers got into the job to protect society, not to contribute to public debts that work to destroy our society.
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Amen, , , with some exceptions though e.g. the California Corrections Officers Union.
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This was unfair to Doug IMO.
Re: Government Programs, spending, budget process
« Reply #177 on: August 21, 2010, 05:02:09 PM »
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A very well seasoned NYPD friend responded to me thusly-- in unvarnished cop candor. With his permission I post here:
===========
I don't like to discuss the job on public forums, but in a private correspondence I will tell you that macdoug or whatever his name is does not know what he's talking about.
"What that Doug posted is untrue other than we hear from police officer who is offended from a taxpayer who is questioning the process of their pay?"
If you're kid is sick u want the best dr money can buy. Not someone making minimum wage. So way should it be any different with someone who protects your life, or has the ability to take your life. The first 5 years I was on the job I would put my life on the line, then come home and decide what bill I was going to skip.
"I don't see police officers in my area making minimum wage. Indeed hundreds applying for a few spots in a very samll local town *before the financial meltdown" sounds like they are hardly applying for min. wage jobs."
Bottom line you can't compare this to civillian work. Overtime usually means putting it on the line fighting with crackheads to make an arrest. If you get it u earned it. Second, most jobs if you make a mistake you might get fired. Here a mistake could mean death or prison.
"I am sure there is some of this particularly in urban areas but most overtime I see is for traffic control. Police officers are not dying in the streets."
When I first came on, people in the private sector would make fun of you. Now they're jealous because they feel we have job security. Trust me, we don't.
Anyway people like this make me laugh. Thanks for the info.
"I have to say this sounds arrogant". Unlike GM or BBG here who are being reasonable.
People question and don't pay my bills frequently. I have to repsond not just get haughty.
I want civil servants to be paid fair. But retiring in 20 years makes no sense. How about they do white collar crime after twenty years? Little in this country is doen about that?
If anyone wants to get annoyed with doctors I can take it. I agree most of us are not saints.
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NYPD's comments to me were made off-line. I posted them here with his permission as a way of fomenting the discussion. No offense or disrespect by me to Doug was intended-- as I emailed him the other day.
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Crafty,
I didn't think you meant to offend.
I hope police officers are not offended either by me or others who post their thoughts.
No one wants their livlihood questioned.
A good case could be made that doctors are breaking the bank more then police.
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I'm not offended. I may end up getting out of law enforcement for a variety of reasons, at least on a full time basis anyway.
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I think he thought I was joining the chorus who complain that civil servants have it cushy and make a boatload of money with time off etc. while he is out risking it all in tough situations sometimes like war and sometimes worse and barely breaking even. If Crafty had thought my words were offensive I don't think he would have passed them on. I never questioned our moderator's good faith on that or on posting the reply. He made the effort to get firsthand input and he made the effort coming back to add a fair warning label. My frustration was that thoughts so clear in my mind don't come out clearly after typed or received, because what he read was not at all what I was trying to say. Participating here for one thing is an attempt to work on that.
The friend at NYPD might also have thought the true numbers in total compensation are false because his own past and current paychecks don't look at all like that, especially if he has a spouse working and earning. I imagine he has an astonishing percentage of total pay taken from him before he sees it, good parts of that distributed to people like he runs across including the crackheads for example while his own bills remain challenging.
As I re-posted from the earlier thought, I have no idea how to value things like climbing into a burning building (fire dept.), military or police work except to elect and trust representatives that can do what's right and attract and retain the best people they can within the fiscal constraints they face.
Unions like to negotiate salary, benefits and work rules as separate items. We should IMO negotiate the total compensation, then let the worker designate for him/herself how they would like it distributed.
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Las Vegas Metro Police pays better and given that NV has no state income tax, you actually see more and 1000 dollars a month rent doesn't have you living next to the projects. Look at what a tiny apt in NYC goes for and factor in the federal, state and city taxes and overall cost of living for NYPD, even after 5 years, it's pretty brutal.
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**Most jobs, public sector or private don't have things like this as potential threats:
http://www.thedenverchannel.com/news/21227694/detail.html
PUEBLO, Colo. -- A man suspected of trying to blow up a Pueblo police officer's home was in jail Wednesday, following an extensive manhunt across the city.
Officers arrested Robert Howard Bruce, 47, at a Kmart in Pueblo on Tuesday evening.
Police had been actively looking for him since Pueblo police officer Nathan Pruce found a 30-pound propane tank on Tuesday morning, rigged to pump the explosive gas into his home.
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While I have the highest respect for Police Officers, I think Doug's point about total compensation is well taken.
On the NYPD web page........
By the way, note, only two years of college is required to get a job; good luck making much more than minimum wage in private industry with that.
But let's look at the NYPD pay scale:
As a Cadet in the Academy (you are just a student) you start at $44,700
After 5 years you are making over $69,000
Not bad for a two year college education (you get paid more if you have a four year degree and/or military service).
And this does not count overtime pay! Most pull down quite a bit of overtime pay substantially supplementing their total pay.
Further, check out the truly amazing benefits!!!!! Unbelievable.
Additional Benefits
10 Paid vacation days during first & second year
13 Paid vacation days during third, fourth & fifth year
27 Paid vacation days after 5 years of service
Unlimited sick leave with full pay
A choice of paid medical programs
Prescription, dental, and eyeglass coverage
Annuity fund
Deferred Compensation Plan, 401K and I.R.A.
Optional retirement at one half salary after 20 years of service
Annual $12,000 Variable Supplement Fund (upon retirement)
Annual banking of $12,000 Variable Supplement Fund after 20 years of service (if not retiring)
Excellent promotional opportunities
Educational opportunities
Additional benefits are available to military personnel.
As for danger/mortality on the job, well a lot of jobs are more dangerous; timber cutting, coal workers, pilots, farm workers, due to the heavy machinery. roofers, engineers and structural metal workers, sanitation workers, millers, are all placed in the top ten. Being a police officer doesn't even make the top ten most dangerous list. And most of these jobs don't pay as well as the NYPD.
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You aren't counting the injury rate, or attempted murders/assaults on officers. Lumberjacks don't have to worry that a tree will follow him home to ambush him and his family in his driveway.
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http://www.fbi.gov/ucr/killed/2008/officersassaulted.html
http://www.policeone.com/off-duty/articles/2026720-Off-duty-in-rural-America/
Couple of points to consider.
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Woof,
One thing I'll throw out there is that politicians often use the jobs and salaries of police officers and teachers as tools of extortion to put fear into the citizenry about cutting government spending or resisting tax hikes. Anytime there is a budget shortfall the first thing they roll out is cut backs in law enforcement and teachers as a way to remedy the problem; of course these are the last things people want to see cut but the politicians can't seem to find anything else less needful, like million dollar studies to figure out the mating habits of the tit mouse or the placement of thousand dollar road signs touting the stimulus plan at work or funding for the public golf course. And speaking of the stimulus, note that many states haven't spent a dime of that money yet but just as the elections are coming on they are loosening it up. As an added benefit the Democrat control House and Senate are funnelling a larger share of stimulus funds to states that have Democrats that are in trouble. In other words it's just a giant slush fund they've been setting on.
P.C.
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You aren't counting the injury rate, or attempted murders/assaults on officers. Lumberjacks don't have to worry that a tree will follow him home to ambush him and his family in his driveway.
Actually if you count the injury rate, police officers rank even "lower" i.e. have less injuries.
And to use your example, being hit by a tree, or cut by a saw statistically (frequency) is a lot worse than what happens to police officers....
The problem is not finding applicants; I mean where else can you make starting 100K (package per NYPD) with only two years of high school? Poor CCP already put in 10 years of competitive college and grueling hours before he started making 100K. The problem is attrition; experience police officers leave after 20 years with 50% of pay. Postpone this payout until age 65 and I bet more would stay longer. Or like private industry fire the deadwood and keep the good; but you can't do that because of the strong Police Union. The Union protects them, just like the teacher's union, the teamsters, or any other union. And as Doug succinctly points out, total package is the key. Yet, most of the public is not aware; they only look at salary not total compensation. I mean, did you look at the benefits listed on the NYPD website? Wow! Where can I get those benefits for rank and file in private industry?
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NYPD is the only one with unlimited sick time. Keep in mind though, you have to really be sick to use it. NYPD has an IA unit that places officers on sick leave under surveillance and verifies medical documentation.
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Sidetracked by contract micro-details of local governments paying for REAL work, maybe we should next take a look at the myriad of transfer programs federal state and local that pay people to NOT work. One of the most abused that I see with my work in the inner city is SSI. There are times when I am studying rental applications for income and start to believe that everybody by me is getting a check.
It is hard to oppose paying small amounts, maybe 450 per month per adult, to the disabled, except when you find out that nearly everyone in certain neighborhoods is disabled, physically, mentally or otherwise. It makes sense from a distance until you see them carrying in some very large and heavy entertainment systems and expensive furniture for them to relax all day.
One way that they are able to get a note from their doctor is that they already getting free taxpayer paid healthcare so a doctor is only a taxpayer paid cab ride and waiting room visit away whenever you need one.
The cash payment goes ostensibly to pay for food, shelter and clothing except the same people here are also receiving food stamps, free clothing and often housing programs in addition to free unlimited healthcare. I would also observe that because of the cash and other basics free, and time on their hands because they are banned from working so these people tend to have larger budgets available for beer, pot and cigarettes than most of the rest of us might have.
CCP (and others), how is it that these doctors determine these able bodied looking adults unable to participate in 'substantial gainful activity' (while the real disabled such as those returning from foreign wars with missing limbs are not exactly floating in cash)?
http://en.wikipedia.org/wiki/Supplemental_Security_Income
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Another example I am finding is where people are paid by the government to take care of their own family member. It is a huge, huge scandal IMO. I will post more when I find out more like whether it is state, federal or county that is paying.
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Doug,
I have frequently people coming to me for temporary disability. Not always but most of the time they will (if covered) drag out thier time off and complain that it is justified due to some medical problem. Usually it is obvious when they are soaking the "system" whether it be public or private for as much as possible. I admit, that I and other doctors have a very hard time saying no. When one is trying to be a good caring physician who wants to maintain a good relationship with a patient it is (for me at least) very hard to tell this patient they are full of it and they should get their behind back to work - even when I know this to be true.
Probably half of *all* disability is exaggerated and is abuse of the system.
I get angry myself when pts. come in making exxagerated claims but it isn't easy playing sole arbitar, judge and jury in deciding whether to give or not give medical excuses.
That is why many companies have arrangements with their own workers comp doctors who are less concerned about pissing off a person when they tell them they can go back to work.
I had one patient who is on permanent Federal disability for stress, anxiety. He came in for a renewal of his disability papers and I simpoly looked him straight in the eye and said, " you really can't work because you are stressed out?" His repsonse, "absolutely". So I filled out the form with this information exactly as it was and that is that. He gets it.
I tell him everyone is stressed out. Who isn't? He didn't blink one time when I asked him. He couldn't care less.
I don't know. What would you do?
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CCP, That gives me a nice understanding of how that works from your side and I'm sure you are as tough on them as anyone. Half of it being fraud or exaggeration, even if anecdotal is shocking, but lower than my estimate. The doctor's report should be the beginning of an application process. It should be descriptive not judgmental for the next step. He wouldn't conclude unfit to work, but he might say medium inflammation on the left ankle or the 7th vertebrae. For some the issue is mental health. The patient should not be asking the doctor for a work conclusion just a medical report. Screening and enforcement should in proportion to the resources we put into IRS. Then there should active followup to move people from unable to work to providing something back to society of value based on their capabilities.
Speaking of government spending, I have a true story from yesterday:
County emergency assistance approved and confirmed with me on the phone a thousand dollars of emergency money to be paid on behalf of my new tenants on the exact same day that the satellite dish installer confirmed with me on the phone the location of the new dish and the placement of the large screens throughout the house. Meanwhile I don't take paid TV because of the cost and because I am too busy to watch. The story is true. I have the address names and phone numbers. And it is not unique. Sorry for the generalization, but they all take cable or direct tv and the time that gets set up is on move-in, the same time that emergency assistance generally kicks in - every 6 months!
Instead of restricting things, we are advertising to get more clients into the programs.
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I thought (hoped) affirmative action was dead?
http://www.latimes.com/business/la-fi-reform-diversity-20100825-18,0,4400143.story
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You did? You voted for Obama with this in mind? :roll:
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Doug,
I have frequently people coming to me for temporary disability. Not always but most of the time they will (if covered) drag out thier time off and complain that it is justified due to some medical problem. Usually it is obvious when they are soaking the "system" whether it be public or private for as much as possible. I admit, that I and other doctors have a very hard time saying no. When one is trying to be a good caring physician who wants to maintain a good relationship with a patient it is (for me at least) very hard to tell this patient they are full of it and they should get their behind back to work - even when I know this to be true.
Probably half of *all* disability is exaggerated and is abuse of the system.
I get angry myself when pts. come in making exxagerated claims but it isn't easy playing sole arbitar, judge and jury in deciding whether to give or not give medical excuses.
That is why many companies have arrangements with their own workers comp doctors who are less concerned about pissing off a person when they tell them they can go back to work.
I had one patient who is on permanent Federal disability for stress, anxiety. He came in for a renewal of his disability papers and I simpoly looked him straight in the eye and said, " you really can't work because you are stressed out?" His repsonse, "absolutely". So I filled out the form with this information exactly as it was and that is that. He gets it.
I tell him everyone is stressed out. Who isn't? He didn't blink one time when I asked him. He couldn't care less.
I don't know. What would you do?
The Blatant ones, I would live without as patients, I guess. That one opposing physician report might be what is needed to take care of the abuser by triggering an investigation. Softselling a return to work a couple of times before signing off as ready and forcing the issue........ At least that way you are caring while at the same time minimizing the abuse?
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"a return to work a couple of times before signing off as ready and forcing the issue........ At least that way you are caring while at the same time minimizing the abuse?"
Often I try to do this. Yet if I sign off on the bottom line often there is not other oversight. Some companies or gov. agencies seem to have a policy of "whatever the doctor" will say although others tend to say enough is enough. Occasionally some have bosses who will simply tell the person to get their ass back to work. Occasionally I even see this go the other way where I think the patient could use more time to rest an injured back or limb. It certainly is different when I person gets paid for sick or disability time or not. They usually get better far faster when they are losing pay.
It is harder (for me) to tell a person I really suspect they are full of crap which if I refuse signing their papers is really what I am doing. I can often sense in the office what the deal is but then again I am not really following the patient around to see if they can or cannot do what they claim. It is not always what it appears. So if I accuse someone and am wrong, or based on my opinion I am thought be unfair.....
There was a story in Florida wherein a neurosurgeon was successfully sued for 2 million by some guy who claimed he was permanently disabled from the waist down. The neurosurgeon knew it was phoney and at his own expense hired a PI to follow the patient around. The pt. was caught on camera running to a hotel in the Keys carrying multiple heavy suitcases at the same time up the stairs shortly after receiving his money. According to the newspapers this guy was sentenced to jail time.
This kind of justice is rare. It took a doctor with the funds to hire his own person to go after this.
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Speaking of affirmative action, I hear that DEA is hiring Ebonics translators to help with cases. I wonder if well-qualified whites and Asians will get their proportional share of the hirings (joking):
http://news.yahoo.com/s/ap/20100823/ap_on_re_us/us_ebonics_dea
It actually sounds like a good and necessary idea. LE needs to know what potentially criminal conversations captured with legal warrants mean, be able to explain translations to investigators and juries and they should be free to hire whoever does that best. The key will be to find the Ebonics experts who also knows English well enough to do that.
Reminds me of Hillary's start at State. She couldn't find anyone in the entire Dept. of civil servants and diplomats or from all her other contacts that knew enough Russian to get the word 'reset' translated correctly, besides that it was a stupid idea. I don't think Russians are having the same trouble translating from English the military secrets that they steal. A predecessor of hers humbly spoke fluent Russian all at the same cost to the taxpayer.
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The Foundation
"We must not let our rulers load us with perpetual debt." --Thomas Jefferson
Editorial Exegesis
Obama's fiscal plan"Speaking last Wednesday in Columbus, Ohio, President Obama asked, 'How do we, over the long term, get control of our deficit?' Good question. Here's the answer suggested by last Thursday's semi-annual budget summary from the Congressional Budget Office: Stop spending so much. CBO's mid-year review largely reinforces the bad news we already knew -- to wit, that spending has exploded since Democrats took over Congress in 2007, first with the acquiescence of George W. Bush and then into hyperdrive after Mr. Obama entered the White House. To appreciate the magnitude of this spending blowout, compare CBO's budget 'baseline' estimate in January 2008 with the baseline it released Thursday. The baseline predicts future spending based on the law at the time. ... In a mere 31 months Congress has added more than $4.4 trillion to the 10-year spending baseline. ... As recently as 2005, total federal spending was only $2.47 trillion. Keep that $4.4 trillion in mind the next time you hear Mr. Obama or Speaker Nancy Pelosi say they 'inherited' this budget mess. Let's assume the recession that Mr. Obama inherited -- Mrs. Pelosi was already in power -- was responsible for causing $1 trillion or so in deficit spending. That still doesn't explain why the annual deficit of roughly $1.4 trillion will be nearly as high in fiscal 2010, after a year of economic growth, as it was in 2009. Or why CBO says the deficit will still be nearly $1.1 trillion in 2011 even if all of the Bush-era tax cuts are repealed. The deficit is barely declining because of the lackluster economic recovery, which continues to yield too little revenue, and especially because of the record levels of spending passed by the Democratic Congress and eagerly signed by Mr. Obama." --The Wall Street Journal
Insight
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http://www.usatoday.com/news/nation/2010-08-25-1Anresponsecops25_ST_N.htm
The de-policing of America.
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Woof,
One thing I'll throw out there is that politicians often use the jobs and salaries of police officers and teachers as tools of extortion to put fear into the citizenry about cutting government spending or resisting tax hikes. Anytime there is a budget shortfall the first thing they roll out is cut backs in law enforcement and teachers as a way to remedy the problem; of course these are the last things people want to see cut but the politicians can't seem to find anything else less needful, like million dollar studies to figure out the mating habits of the tit mouse or the placement of thousand dollar road signs touting the stimulus plan at work or funding for the public golf course. And speaking of the stimulus, note that many states haven't spent a dime of that money yet but just as the elections are coming on they are loosening it up. As an added benefit the Democrat control House and Senate are funnelling a larger share of stimulus funds to states that have Democrats that are in trouble. In other words it's just a giant slush fund they've been setting on.
P.C.
As I was saying...http://www.usatoday.com/news/nation/2010-08-25-1Anresponsecops25_ST_N.htm
The de-policing of America.
And...
www.tulsaworld.com/news/article.aspx?subjectid=332&articleid=20100824_19_A1_CUTLIN308268&allcom=1
And...
www.heraldnews.com/topstories/x1869747941/New-report-details-depth-of-state-aid-cuts-in-Fall-River-SouthCoast
P.C.
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PC,
What you say is true, but until recently the "We'll have to cut police/fire/EMS" was just a threat to protect pork. Now, lots of agencies are really getting cut, and at some levels, the money just isn't there.
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Woof,
Do you know how much Oakland spends on going green projects and parks and rec? The money is there to cut but they go for the cops and teachers first, so how is it their priories are so upside down? This is a shake down.
Also I added some more examples to my previous post. What!? Let the golf pro go at the public course? No way, instead let's get rid of some cops. :-P
P.C.
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"We'll have to cut police/fire/EMS" was just a threat to protect pork. Now, lots of agencies are really getting cut, and at some levels, the money just isn't there."
Agree, it went from a threat, to a tactic to a reality. When everything is top priority, nothing is. Most LE is local. One of our county commissioners likes to say 'don't tell me we don't have enough money' every time he sees one of these other crazy projects that go through. Not the obvious ones like the billion dollar ballpark that went through last year with a tax increase where the commissioners voted to waive the legal requirement to let the voters vote on it. Just couldn't trust the voters to do the right thing.
He finds the more obscure ones for his local golden fire hydrant award, like 14 million extra on a bridge re-build to make it look a little fancier in a recession (how many sheriff's deputies would that fund?), $600,000 to teach urban kids how to garden (the state and the school districts are charged with education, not the county), $700,000 on Landscaping at the Garbage Burner, $35,000 county funds for alcoholic wet houses where alcoholics can continue drinking, and on it goes.
http://www.taxpayerwatchdog.org/golden-hydrant/county-spends-extra-14-million-to-make-bridge-look-really-cool-526/
http://www.taxpayerwatchdog.org/general/county-requests-600000-to-teach-kids-how-to-garden-611/
http://www.taxpayerwatchdog.org/golden-hydrant/garbage-burner-beautification-240/
http://www.taxpayerwatchdog.org/golden-hydrant/home-sweet-wet-home-438/
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Wow. Those are amazing examples. I hope the public in those places is aware of this. :-o
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Woof GM,
I think you get the picture now; I know it's hard to believe that our public officials are knowingly doing this to us but they are and it is rampant across America.
P.C.
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Good article from Mort Zuckerman. I don't know how to link here.
The debt is unsustainable, and the spending from the most fiscally irresponsible administration in history appears to be a woeful failure.
We need a GOP *LEADER* who will lay an honest proposal on the table. Cutting taxes sounds nice but a lie if anyone thinks this alone is the answer.
We need to raise retirement age. We need to cut the dole. And yes wealthy people are going to have to pay more. I will not accept that wealth is continuously concentrated at the top more and more and that is good for this country.
I propose we streamline the tax code. Everyone pays a percentage including those above poverty and those at the top. Get rid of deductions.
Even charity. I do agree with reducing business taxes to stimulate. But not personal. Not at the very top. When a very small percentage of people control the vast majority of wealth something is wrong.
We can't have the lower classes suffer alone and keep bailing out the rich.
I understand supply side theory but there has to be some compromise or middle way with this.
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I suppose this could go on the Health Care thread too, but since the larger point seems to be about the nature of government programs, I post it here:
==========
From Nebraska congressman Lee Terry
HOME | ABOUT ME | CONSTITUENT SERVICES | NEWS | CONTACT ME
President Obama signed a government takeover of healthcare into law. Below is a list of new boards and commissions created in the bill and each one will require your tax dollar to support:
1. Grant program for consumer assistance offices (Section 1002, p. 37)
2. Grant program for states to monitor premium increases (Section 1003, p. 42)
3. Committee to review administrative simplification standards (Section 1104, p. 71)
4. Demonstration program for state wellness programs (Section 1201, p. 93)
5. Grant program to establish state Exchanges (Section 1311(a), p. 130)
6. State American Health Benefit Exchanges (Section 1311(b), p. 131)
7. Exchange grants to establish consumer navigator programs (Section 1311(i), p. 150)
8. Grant program for state cooperatives (Section 1322, p. 169)
9. Advisory board for state cooperatives (Section 1322(b)(3), p. 173)
10. Private purchasing council for state cooperatives (Section 1322(d), p. 177)
11. State basic health plan programs (Section 1331, p. 201)
12. State-based reinsurance program (Section 1341, p. 226)
13. Program of risk corridors for individual and small group markets (Section 1342, p. 233)
14. Program to determine eligibility for Exchange participation (Section 1411, p. 267)
15. Program for advance determination of tax credit eligibility (Section 1412, p. 288)
16. Grant program to implement health IT enrollment standards (Section 1561, p. 370)
17. Federal Coordinated Health Care Office for dual eligible beneficiaries (Section 2602, p. 512)
18. Medicaid quality measurement program (Section 2701, p. 518)
19. Medicaid health home program for people with chronic conditions, and grants for planning same (Section 2703, p. 524)
20. Medicaid demonstration project to evaluate bundled payments (Section 2704, p. 532)
21. Medicaid demonstration project for global payment system (Section 2705, p. 536)
22. Medicaid demonstration project for accountable care organizations (Section 2706, p. 538)
23. Medicaid demonstration project for emergency psychiatric care (Section 2707, p. 540)
24. Grant program for delivery of services to individuals with postpartum depression (Section 2952(b), p. 591)
25. State allotments for grants to promote personal responsibility education programs (Section 2953, p. 596)
26. Medicare value-based purchasing program (Section 3001(a), p. 613)
27. Medicare value-based purchasing demonstration program for critical access hospitals (Section 3001(b), p. 637)
28. Medicare value-based purchasing program for skilled nursing facilities (Section 3006(a), p. 666)
29. Medicare value-based purchasing program for home health agencies (Section 3006(b), p. 668)
30. Interagency Working Group on Health Care Quality (Section 3012, p. 688)
31. Grant program to develop health care quality measures (Section 3013, p. 693)
32. Center for Medicare and Medicaid Innovation (Section 3021, p. 712)
33. Medicare shared savings program (Section 3022, p. 728)
34. Medicare pilot program on payment bundling (Section 3023, p. 739)
35. Independence at home medical practice demonstration program (Section 3024, p. 752)
36. Program for use of patient safety organizations to reduce hospital readmission rates (Section 3025(b), p. 775)
37. Community-based care transitions program (Section 3026, p. 776)
38. Demonstration project for payment of complex diagnostic laboratory tests (Section 3113, p. 800)
39. Medicare hospice concurrent care demonstration project (Section 3140, p. 850)
40. Independent Payment Advisory Board (Section 3403, p. 982)
41. Consumer Advisory Council for Independent Payment Advisory Board (Section 3403, p. 1027)
42. Grant program for technical assistance to providers implementing health quality practices (Section 3501, p. 1043)
43. Grant program to establish interdisciplinary health teams (Section 3502, p. 1048)
44. Grant program to implement medication therapy management (Section 3503, p. 1055)
45. Grant program to support emergency care pilot programs (Section 3504, p. 1061)
46. Grant program to promote universal access to trauma services (Section 3505(b), p. 1081)
47. Grant program to develop and promote shared decision-making aids (Section 3506, p. 1088)
48. Grant program to support implementation of shared decision-making (Section 3506, p. 1091)
49. Grant program to integrate quality improvement in clinical education (Section 3508, p. 1095)
50. Health and Human Services Coordinating Committee on Women's Health (Section 3509(a), p. 1098)
51. Centers for Disease Control Office of Women's Health (Section 3509(b), p. 1102)
52. Agency for Healthcare Research and Quality Office of Women's Health (Section 3509(e), p. 1105)
53. Health Resources and Services Administration Office of Women's Health (Section 3509(f), p. 1106)
54. Food and Drug Administration Office of Women's Health (Section 3509(g), p. 1109)
55. National Prevention, Health Promotion, and Public Health Council (Section 4001, p. 1114)
56. Advisory Group on Prevention, Health Promotion, and Integrative and Public Health (Section 4001(f), p. 1117)
57. Prevention and Public Health Fund (Section 4002, p. 1121)
58. Community Preventive Services Task Force (Section 4003(b), p. 1126)
59. Grant program to support school-based health centers (Section 4101, p. 1135)
60. Grant program to promote research-based dental caries disease management (Section 4102, p. 1147)
61. Grant program for States to prevent chronic disease in Medicaid beneficiaries (Section 4108, p. 1174)
62. Community transformation grants (Section 4201, p. 1182)
63. Grant program to provide public health interventions (Section 4202, p. 1188)
64. Demonstration program of grants to improve child immunization rates (Section 4204(b), p. 1200)
65. Pilot program for risk-factor assessments provided through community health centers (Section 4206, p. 1215)
66. Grant program to increase epidemiology and laboratory capacity (Section 4304, p. 1233)
67. Interagency Pain Research Coordinating Committee (Section 4305, p. 1238)
68. National Health Care Workforce Commission (Section 5101, p. 1256)
69. Grant program to plan health care workforce development activities (Section 5102(c), p. 1275)
70. Grant program to implement health care workforce development activities (Section 5102(d), p. 1279)
71. Pediatric specialty loan repayment program (Section 5203, p. 1295)
72. Public Health Workforce Loan Repayment Program (Section 5204, p. 1300)
73. Allied Health Loan Forgiveness Program (Section 5205, p. 1305)
74. Grant program to provide mid-career training for health professionals (Section 5206, p. 1307)
75. Grant program to fund nurse-managed health clinics (Section 5208, p. 1310)
76. Grant program to support primary care training programs (Section 5301, p. 1315)
77. Grant program to fund training for direct care workers (Section 5302, p. 1322)
78. Grant program to develop dental training programs (Section 5303, p. 1325)
79. Demonstration program to increase access to dental health care in underserved communities (Section 5304, p. 1331)
80. Grant program to promote geriatric education centers (Section 5305, p. 1334)
81. Grant program to promote health professionals entering geriatrics (Section 5305, p. 1339)
82. Grant program to promote training in mental and behavioral health (Section 5306, p. 1344)
83. Grant program to promote nurse retention programs (Section 5309, p. 1354)
84. Student loan forgiveness for nursing school faculty (Section 5311(b), p. 1360)
85. Grant program to promote positive health behaviors and outcomes (Section 5313, p. 1364)
86. Public Health Sciences Track for medical students (Section 5315, p. 1372)
87. Primary Care Extension Program to educate providers (Section 5405, p. 1404)
88. Grant program for demonstration projects to address health workforce shortage needs (Section 5507, p. 1442)
89. Grant program for demonstration projects to develop training programs for home health aides (Section 5507, p. 1447)
90. Grant program to establish new primary care residency programs (Section 5508(a), p. 1458)
91. Program of payments to teaching health centers that sponsor medical residency training (Section 5508(c), p. 1462)
92. Graduate nurse education demonstration program (Section 5509, p. 1472)
93. Grant program to establish demonstration projects for community-based mental health settings (Section 5604, p. 1486)
94. Commission on Key National Indicators (Section 5605, p. 1489)
95. Quality assurance and performance improvement program for skilled nursing facilities (Section 6102, p. 1554)
96. Special focus facility program for skilled nursing facilities (Section 6103(a)(3), p. 1561)
97. Special focus facility program for nursing facilities (Section 6103(b)(3), p. 1568)
98. National independent monitor pilot program for skilled nursing facilities and nursing facilities (Section 6112, p. 1589)
99. Demonstration projects for nursing facilities involved in the culture change movement (Section 6114, p. 1597)
100. Patient-Centered Outcomes Research Institute (Section 6301, p. 1619)
101. Standing methodology committee for Patient-Centered Outcomes Research Institute (Section 6301, p. 1629)
102. Board of Governors for Patient-Centered Outcomes Research Institute (Section 6301, p. 1638)
103. Patient-Centered Outcomes Research Trust Fund (Section 6301(e), p. 1656)
104. Elder Justice Coordinating Council (Section 6703, p. 1773)
105. Advisory Board on Elder Abuse, Neglect, and Exploitation (Section 6703, p. 1776)
106. Grant program to create elder abuse forensic centers (Section 6703, p. 1783)
107. Grant program to promote continuing education for long-term care staffers (Section 6703, p. 1787)
108. Grant program to improve management practices and training (Section 6703, p. 1788)
109. Grant program to subsidize costs of electronic health records (Section 6703, p. 1791)
110. Grant program to promote adult protective services (Section 6703, p. 1796)
111. Grant program to conduct elder abuse detection and prevention (Section 6703, p. 1798)
112. Grant program to support long-term care ombudsmen (Section 6703, p. 1800)
113. National Training Institute for long-term care surveyors (Section 6703, p. 1806)
114. Grant program to fund State surveys of long-term care residences (Section 6703, p. 1809)
115. CLASS Independence Fund (Section 8002, p. 1926)
116. CLASS Independence Fund Board of Trustees (Section 8002, p. 1927)
117. CLASS Independence Advisory Council (Section 8002, p. 1931)
118. Personal Care Attendants Workforce Advisory Panel (Section 8002(c), p. 1938)
119. Multi-state health plans offered by Office of Personnel Management (Section 10104(p), p. 2086)
120. Advisory board for multi-state health plans (Section 10104(p), p. 2094)
121. Pregnancy Assistance Fund (Section 10212, p. 2164)
122. Value-based purchasing program for ambulatory surgical centers (Section 10301, p. 2176)
123. Demonstration project for payment adjustments to home health services (Section 10315, p. 2200)
124. Pilot program for care of individuals in environmental emergency declaration areas (Section 10323, p. 2223)
125. Grant program to screen at-risk individuals for environmental health conditions (Section 10323(b), p. 2231)
126. Pilot programs to implement value-based purchasing (Section 10326, p. 2242)
127. Grant program to support community-based collaborative care networks (Section 10333, p. 2265)
128. Centers for Disease Control Office of Minority Health (Section 10334, p. 2272)
129. Health Resources and Services Administration Office of Minority Health (Section 10334, p. 2272)
130. Substance Abuse and Mental Health Services Administration Office of Minority Health (Section 10334, p. 2272)
131. Agency for Healthcare Research and Quality Office of Minority Health (Section 10334, p. 2272)
132. Food and Drug Administration Office of Minority Health (Section 10334, p. 2272)
133. Centers for Medicare and Medicaid Services Office of Minority Health (Section 10334, p. 2272)
134. Grant program to promote small business wellness programs (Section 10408, p. 2285)
135. Cures Acceleration Network (Section 10409, p. 2289)
136. Cures Acceleration Network Review Board (Section 10409, p. 2291)
137. Grant program for Cures Acceleration Network (Section 10409, p. 2297)
138. Grant program to promote centers of excellence for depression (Section 10410, p. 2304)
139. Advisory committee for young women's breast health awareness education campaign (Section 10413, p. 2322)
140. Grant program to provide assistance to provide information to young women with breast cancer (Section 10413, p. 2326)
141. Interagency Access to Health Care in Alaska Task Force (Section 10501, p. 2329)
142. Grant program to train nurse practitioners as primary care providers (Section 10501(e), p. 2332)
143. Grant program for community-based diabetes prevention (Section 10501(g), p. 2337)
144. Grant program for providers who treat a high percentage of medically underserved populations (Section 10501(k), p. 2343)
145. Grant program to recruit students to practice in underserved communities (Section 10501(l), p. 2344)
146. Community Health Center Fund (Section 10503, p. 2355)
147. Demonstration project to provide access to health care for the uninsured at reduced fees (Section 10504, p. 2357)
148. Demonstration program to explore alternatives to tort litigation (Section 10607, p. 2369)
149. Indian Health demonstration program for chronic shortages of health professionals (S. 1790, Section 112, p. 24)*
150. Office of Indian Men's Health (S. 1790, Section 136, p. 71)*
151. Indian Country modular component facilities demonstration program (S. 1790, Section 146, p. 108)*
152. Indian mobile health stations demonstration program (S. 1790, Section 147, p. 111)*
153. Office of Direct Service Tribes (S. 1790, Section 172, p. 151)*
154. Indian Health Service mental health technician training program (S. 1790, Section 181, p. 173)*
155. Indian Health Service program for treatment of child sexual abuse victims (S. 1790, Section 181, p. 192)*
156. Indian Health Service program for treatment of domestic violence and sexual abuse (S. 1790, Section 181, p. 194)*
157. Indian youth telemental health demonstration project (S. 1790, Section 181, p. 204)*
158. Indian youth life skills demonstration project (S. 1790, Section 181, p. 220)*
159. Indian Health Service Director of HIV/AIDS Prevention and Treatment (S. 1790, Section 199B, p. 258)*
*Section 10221, page 2173 of H.R. 3590 deems that S. 1790 shall be deemed as passed with certain amendments.
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God help us.
I guess I better buy some Yuan and work on my Mandarin.
Thanks Obama voters.
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http://www.executivegov.com/2010/08/mullen-national-debt-is-a-security-threat/
The national debt is the single biggest threat to national security, according to Adm. Mike Mullen, chairman of the Joint Chiefs of Staff. Tax payers will be paying around $600 billion in interest on the national debt by 2012, the chairman told students and local leaders in Detroit.
“That’s one year’s worth of defense budget,” he said, adding that the Pentagon needs to cut back on spending.
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That $600B number for 2012 is more than twice the number I have been carrying in my head for current interest payments. :-o A major excrement storm cometh.
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Research Desk: How accurate were CBO projections of spending and revenue for the 2000s?
By Dylan Matthews
cummije5 asks:
Since the CBO makes 10 year projections, I would like to see how much more spending over what was projected in 2000 happened, and how much less revenue under what was projected in 2000 happened.
As cummije5 says, the CBO's 2000 Budget and Economic Outlook, released in January of that year, provided predicted revenue (see table 3-2) and spending figures, both in nominal terms and as a percentage of GDP, from 2000 to 2010. Given as we now know, of course, what revenue and spending were for 2000 to 2009, it's useful to see how accurate the predictions were. Here's how the projected and real figures compare:
(http://voices.washingtonpost.com/ezra-klein/actual_versus_cbo_projected_revenues_and_outlays%2C_2000-2009.png)
The discrepancy here does not prove that the CBO is wrong or bad at making these kinds of predictions. It just shows that they don't know what Congress is going to do over the course of the decade. For one thing, the outlays estimates assume that discretionary spending will grow at the rate of inflation, which they obviously did not.
But more important, the CBO in 2000 did not know that we were going to invade and occupy two foreign countries. They did not know two major tax cuts representing trillions in lost revenue would be passed. They did not know Medicare would start covering prescription drugs. They definitely did not know that the financial sector would collapse in upon itself, leading to a dramatic drop in revenues and necessitating trillions in spending to fuel a recovery. Policymaking is messy and unpredictable, and those sorts of thing just can't be factored in ahead of time.
Which is all to say that while CBO estimates are very useful, especially when discussing specific policies and trying to isolate their effects, Doug Elmendorf is not a precog. The next 10 years is a long time for Congress to pass new spending programs, cut old ones, raise some taxes, cut others and so forth, and while we have to operate off of something, it's likely in 10 years we'll look back at the budget discussions we're having now and find the budget outlook we're working with preposterous.
http://voices.washingtonpost.com/ezra-klein/2010/08/research_desk_how_accurate_wer.html
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Thanks BBG for that. CBO models are wrong just like the climate models. CBO still ignores almost all affects caused by changing incentives and disincentives. In the heyday of the previous tax cut and growth cycle, CBO was wrong about revenues by 12 digits in a year - roughly $100,000,000,000. As they say in Washington: good enough for government work. No one was fired and no changes to the flawed model were requested or forced on this BS agency.
That said, I think there is too much going on in that graph, measuring everything as a % of GDP which is not constant or on a straight line headed anywhere. Again like climate data, I say look at the actual numbers. At the end of the analysis, then some perspective is gained by seeing the results as a percentage of GDP or as a comparison to anything else. That graph hides much of the revenue growth during the highest growth years. In 2005 and 2006, we grew revenues by roughly a half a trillion dollars in two years to the Feds alone (highest dollar growth in history) not counting the windfalls states and local governments were taking in. At least the Wash. Post graph accurately shows that the hard inflection point is Jan. 2007 where it all started to go to hell, coinciding with Pelosi taking the Speakership, Obama-Hillary-Biden-Schumer taking majority power in the Senate, all promising to "end tax cuts for the rich", and new Congressman Keith Ellison symbolically putting his hand on the Koran and promising to dismantle piece by piece what we once knew as a great nation.
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"They did not know two major tax cuts representing trillions in lost revenue would be passed."
Exactly when were these tax rate cuts passed?
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Wash.Post: "They did not know two major tax cuts representing trillions in lost revenue would be passed."
Crafty: "Exactly when were these tax rate cuts passed?"
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I think they are referring to 2001 and 2003. Strangely even in hindsight they are confusing "trillions in lost revenue" with actual results which were the two largest years of dollar increases to a Treasury anywhere on earth at any time in history ending with the Pelosi-Obama takeover of congress.
http://www.gpoaccess.gov/usbudget/fy11/pdf/hist.pdf Long pdf, see p.26: Half trillion actual increase in revenues in 2 years, exactly when Wash Post says "trillions in lost revenue".
How can anyone report that wrongly and stay in business?
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A piece that speaks to Doug's point:
Higher Tax Rates on the Rich Will Backfire
August 28, 2010 by Dan Mitchell
I know I’ve beaten this drum several times before, but the Wall Street Journal today has a very good explanation of why class-warfare tax policy will backfire. The Journal’s editorial focuses on what happened after the 2003 tax rate reductions. And below the excerpt, you’ll find a table I prepared showing what happened with tax revenues from the rich following the Reagan tax cuts. The simple message is that lower tax rates are the best way to soak the rich.
Congress’s Joint Committee on Taxation recently dropped a study claiming that millionaires will pay $31 billion of the $36 billion in revenue that it expects will be raised next year if tax rates rise as scheduled on January 1. …If you believe that, you probably also believed Joint Tax when it predicted that the rich would gain a huge tax windfall when tax rates were cut in 2003. Let’s go to the videotape. According to the most recent IRS data on actual tax payments, total revenues collected over the period 2003-07 were about $350 billion higher than Joint Tax and the Congressional Budget Office predicted when the 2003 tax cuts were enacted. Moreover, the wealthiest taxpayers paid a larger share of all income taxes from the beginning to the end of this period. The IRS data show that in 2003 those with incomes above $200,000 paid $313 billion in income tax. By 2007 they paid $610 billion. …Guess what income group paid the most in higher taxes after tax rates were cut? Millionaires. From 2003 to 2008, millionaires increased their tax payments to $249 billion from $132 billion. One reason for the big increase in payments: the number of returns declaring $1 million or more in income increased 76% to 319,000 from 181,000 as the economy expanded. The IRS data are a useful reminder of how dependent Uncle Sam is on the rich to pay the government’s bills. …We’re not saying that tax cuts “pay for themselves.” What we are saying is that the 2003 tax cuts proved again, as we should have learned in the 1960s and 1980s, that rich people are the most responsive to changes in tax rates. When tax rates are high, the wealthy invest less, hire accountants to protect more of their income from the IRS, and park more of their money in tax shelters, such as municipal bonds. …That’s why it’s a fantasy to think that raising income and capital gains and dividend tax rates on the rich is going to pry $31 billion out of millionaire households. History teaches that the best way to soak the rich and reduce the deficit is to promote rapid economic growth. But that’s less likely to happen in 2011 if the economy is rear-ended with the biggest tax increase in at least 16 years.
(http://danieljmitchell.files.wordpress.com/2010/08/1980-88-laffer.jpg?w=500&h=360)
http://danieljmitchell.wordpress.com/2010/08/28/higher-tax-rates-on-the-rich-will-backfire/
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"A piece that speaks to Doug's point: Higher Tax Rates on the Rich Will Backfire"
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Thank you BBG. If you don't believe me, see Christina Romer's last published piece before being fired as chief economic adviser: the tax hikes coming will be highly contractionary.
We hear about tax cuts and deficits from the 1980s but seldom hear that revenues doubled in that decade, same link from my previous post: Revenues 1980: $517 Billion. Revenues 1990: 1.032 Trillion, almost exactly doubling in 10 years, in spite of one recession waiting for the tax cuts to kick in and while inflation was defeated in its tracks. As always, the deficits came from excess spending.
http://www.gpoaccess.gov/usbudget/fy11/pdf/hist.pdf p.26
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Ah, good to see it's business as usual in my old stomping grounds.
Road Construction: Illinois Contractors Learn How To Play Money Game
by Daniel T. Zanoza, Executive Director
You are driving down I-57, I-55, I-90/94, I-294 or any other major highway in Illinois. Suddenly, you see a sign that reads "road construction ahead for next 15 miles". The speed limit drops from 65 to 55 miles per hour and traffic begins to back up. Let's say you are traveling north on I-55 and you are unexpectedly riding on a road which is graded and unpaved. The other lane is in its usual condition, in need of repair or not, but there is no construction crew in sight. In fact, there are no road crews for the entire stretch of highway that is supposed to be under construction. You might ask why this is the case. Well, private contractors in Illinois have learned how to play the funding game. Instead of completing one stretch of road, before tearing up another, you find a patch work of torn up highway, sometimes for over 100 miles or more.
There is a reason for this. Construction companies have learned, if they tear up a piece of road at mile marker 155 through 160 and then tear up another section of highway between mile marker 170 and 180 and repeat this process infinitum, the contracts they received from the state will have to be fulfilled. In the past, if the state of Illinois ran out of money to pay for repairing the infrastructure of the Illinois highway system, a section of road would be left for another year's budget. But if a road is partially completed, covering a substantial distance, the work cannot be left for another year. That is why you will see a ten mile stretch of highway--which is in different stages of repair--not being worked on.
Sometimes it's so ridiculous, a piece of highway will be torn up for a quarter mile and traffic will slow to 55 or perhaps 45 for that short distance and there will be no road work being done for 25 miles or more. Often you will see signs which says "road construction ahead" and then come across another sign which tells you that you are out of the construction zone when there was no construction being done. This is a very clever bit of legal gamesmanship being practiced by contractors who want to make sure the contracts they signed for the jobs they bid on and won are fulfilled. And really, in a way, you can't blame them.
For example, if the state signs a contract for a company to do 100 miles of road, that business will make sure they get paid for 100 miles of road repair by doing it peacemeal. In the past, road construction was done in a linear fashion, complete one section of road and move on to the next.
So, the next time you're sitting in a traffic jam and wondering how long it's going to take you today to get through the construction zone, first of all you can thank the "American Recovery and Reinvestment Act" better known as the stimulus package, for your plight. No, the highway you're traveling on probably didn't need repair, but there were billions of dollars to spend. Your tax dollars, or let's say your children's tax dollars or perhaps their children's tax dollars. And thanks to some clever road construction contractors, you might expect that ride--which usually took a half hour--to last twice the time. So, pop in another one of your favorite cd's or listen to your I-Pod and plan to leave early, but at least now you know the reason why.
http://rffm.typepad.com/republicans_for_fair_medi/2010/08/road-construction-illinois-contractors-learn-how-to-play-money-game.html
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THE GENESIS OF OUR ECONOMIC PROBLEMS
By Neal Boortz @ September 8, 2010 9:05 AM Permalink | Comments (29) | TrackBacks (0)
Since we started off talking about the economy here ... once again it might be a good idea to remind you just what got us into this economic mess. As you know ... the entire economic crash was centered around a collapse in the U.S. real estate market. This collapse was cause by millions (tens of millions?) of homeowners suddenly finding themselves completely unable to make payments on their mortgage loans - payments that had increased due to adjustable rate mortgages.
I've gone through this explanation before ... but this time let me use the words of Thomas Sowell in this excellent column:
"Another political fable is that the current economic downturn is due to not enough government regulation of the housing and financial markets. But it was precisely the government regulators, under pressure from politicians, who forced banks and other lending institutions to lower their standards for making mortgage loans.
These risky loans, and the defaults that followed, were what set off a chain reaction of massive financial losses that brought down the whole economy.
Was this due to George W. Bush and the Republicans? Only partly. Most of those who pushed the lowering of mortgage lending standards were Democrats-- notably Congressman Barney Frank and Senator Christopher Dodd, though too many Republicans went along.
At the heart of these policies were Fannie Mae and Freddie Mac, who bought huge amounts of risky mortgages, passing the risk on from the banks that lent the money (and made the profits) to the taxpayers who were not even aware that they would end up paying in the end.
When President Bush said in 2004 that Fannie Mae and Freddie Mac should be reined in, 76 members of the House of Representatives issued a statement to the contrary. These included Barney Frank, Nancy Pelosi, Maxine Waters and Charles Rangel.
If we are going to talk about "the policies that created this mess in the first place," let's at least get the facts straight and the names right."
As I've been telling you for well over a year now ... if you want to point the finger at the people most responsible for our current economy, figure out where Barney Frank and Chris Dodd are right now ... and point in that general direction.
And while we're at it ... just to increase the insensitivity here ... when are we going to really explore the role of Barney Frank's boyfriend in this mess? At the very same time that the Republicans were trying to rein in Fannie and Freddie Barney's lover was working for Fannie Mae ... working in the very Fannie Mae program that was encouraging these irresponsible loans. Does that bring up any questions as to why Barney opposed reform? Change the scenario just a bit and have a congressman protecting Fannie Mae while his girlfriend was working there. Do you think THEN someone might have suggested investigating the situation?
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http://www.latimes.com/news/local/la-me-stimulus-audit-20100917,0,3706864.story
Lets see. If we divide $111,000,000 by the 55 jobs already created/saved, that comes out to $2,018,018 per job.
If we accept the promise of 265 jobs that will be created/saved when the program finishes spending its money, that comes out to about a mere bargain of $415,100 per job.
:-P :-P :-P :roll: :roll: :roll: :-o :-o :-o :x :x :x :x :x :x :x :x :x
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This story of course would go unnoticed if not for her famous nephew, leader of the free world.
Taxpayer funds were paying her to live here illegally long before he became famous. Do you wonder how many million others?
I agree with her on one point, it is the voters fault for the programs, not the recipient for taking it.
http://wbztv.com/local/obama.aunt.zeituni.2.1921954.html
Aunt Zeituni: 'The System Took Advantage Of Me'
President Obama's Aunt Speaks Exclusively With WBZ-TV
"If I come as an immigrant, you have the obligation to make me a citizen." Those are the words from 58-year-old Zeituni Onyango of Kenya in a recent exclusive interview with WBZ-TV.
Onyango is the aunt of President Barack Obama. She has been living in the United States illegally for years, receiving public assistance in Boston.
Aunt Zeituni, as she has come to be known, first surfaced in the public light in 2008, in the final days of the Presidential election. Then-candidate Obama said that he was not against the possible deportation of his aunt. "If she has violated laws, then those laws have to be obeyed," he told CBS's Katie Couric. "We are a nation of laws."
Onyango had violated the law, and she knew it.
"I knew I had overstayed" she told WBZ-TV's Jonathan Elias when the two sat down one-on-one.
Zeituni Onyango said she came to the United States in 2000 and had every intention of leaving. Then, however, she says she got deathly ill and was hospitalized. When she recovered, she said she was broke and couldn't afford to leave.
For two years Onyango said she lived in a homeless shelter, before she was moved into public housing. "I didn't take advantage of the system. The system took advantage of me."
"I didn't ask for it; they gave it to me. Ask your system. I didn't create it or vote for it. Go and ask your system," she said unapologetically.
And she's right. The system provided her assistance despite her status as an illegal immigrant.
In 2004 a judge ordered Zeituni Onyango out of the country, but she never left. She stayed, hiding in plain site. In 2005 she attended her nephew's swearing in as the junior Senator of Illinois. In 2008 she traveled to D.C. for President Obama's inauguration.
Onyango hired a top immigration lawyer from Cleveland to help fight her case. We asked how she afforded that lawyer, when she claimed poverty.
"When you believe in Jesus Christ and almighty God, my help comes from heaven," she responded.
When asked about cutting in line ahead of those who have paid into the system she answered plainly, "I don't mind. You can take that house. I will be on the street with the homeless."
In May 2010, Onyango's case went back before the same judge who ordered her out of the country in 2004. This time she was granted asylum in the United States. The ruling said a return to Kenya might put Onyango in danger.
So she is now here legally, still living on public assistance and hoping that the spotlight on her will dim.
http://wbztv.com/local/obama.aunt.zeituni.2.1921954.html
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Maybe CNN's Soledad O'Brien can do an hours long, "Kenyan in America" without, of course, a *single* mention about the costs to legal Americans.
Only that they are human like us, with hopes and dreams, and all want to work go to school and live in peace and harmony.
Is da bamster's aunt adorable??
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People are asking if the American dream is dead or if they will have to keep working hard. To the former the answer is no. To the latter the answer is yes. No politician has been honest about it yet.
****US Government 'hiding true amount of debt'
By Gregory Bresiger From: NewsCore September 20, 2010 9:09AM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these? THE actual figure of the US' national debt is much higher than the official sum of $US13.4 trillion ($14.3 trillion) given by the Congressional Budget Office, according to analysts cited on Sunday by the New York Post.
"The Government is lying about the amount of debt. It is engaging in Enron accounting," said Laurence Kotlikoff, an economist at Boston University and co-author of The Coming Generational Storm: What You Need to Know about America's Economic Future.
"The problem is we're seeing an explosion in spending," added Andrew Moylan, director of government affairs for the National Taxpayers Union.
In 1980, the debt - the accumulated red ink incurred by the Federal Government - was $US909 billion.
This represented some 33 per cent of gross domestic product, according to the Congressional Budget Office (CBO).
Thirty years later, based on this year's second-quarter numbers, the CBO said the debt was $US13.4 trillion, or 92 per cent of GDP.
The CBO estimates the debt will be at $US16.5 trillion in two years, or 100.6 per cent of GDP.
But these numbers are incomplete.
They do not count off-budget obligations such as required spending for Social Security and Medicare, whose programs represent a balloon payment for the Government as more Americans retire and collect benefits.
In the case of Social Security, beginning in 2016, the US Government will be paying out more than it is collecting in taxes.
Without basic measures - such as payment cuts or higher payroll taxes - the system could be on the road to bankruptcy, according to officials.
"Without changes," wrote Social Security Commissioner Michael Astrue, "by 2037 the Social Security Trust Fund will be exhausted. There will be enough money only to pay about $US0.76 for each dollar of benefits."
Mr Kotlikoff and Mr Moylan agree US national debt is much more than the official $US13.4 trillion number, but they disagree over how to add up the exact number.
Mr Kotlikoff says the debt is actually $US200 trillion.
Mr Moylan says the number is likely about $US60 trillion.
That is close to the figure quoted by David Walker, the US Comptroller General from 1998 to 2008.
He launched a campaign to convince Americans that the federal spending and debt is a greater threat than terrorism.
But whichever figure is accurate, all three agree that the problem has worsened in the last few years.
They say it is because Congress and the Administration, whether Republican or Democrat, consistently overspend.
Read more: http://www.news.com.au/business/breaking-news/us-government-hiding-true-amount-of-debt/story-e6frfkur-1225926567256#ixzz10BDwdNo6****
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Income Redistribution: Cost per Job 'Created' Is Sky High
History shows that there are two foolproof ways to drive up costs: increase demand
or involve the government. For the latest illustration of the latter, just look
west. According to reports recently released by Los Angeles City Controller Wendy
Greuel, for the $111 million in stimulus funds received by two L.A. departments,
only 55 jobs have been created. That's a whopping $2 million spent per job. Greuel
says that eventually the departments will create or save (those infamous words
again) 264 jobs, but even that would still keep the price per job at $420,000, far
higher than what the workers will receive.
Explaining the preposterous price tags, Investor's Business Daily
(http://www.investors.com/NewsAndAnalysis/ArticlePrint.aspx?id=547692 ) notes that
part of the money "goes to the capital costs and profit of the contractors. But much
of it also gets absorbed into the normal process of government contracting" (read:
bureaucracy). Even Greuel admits
(http://www.businessweek.com/ap/financialnews/D9I9MO300.htm ) the numbers are
disappointing, stating, "With our local unemployment rate over 12 percent we need to
do a better job cutting the red tape and putting Angelenos back to work."
Of course, the Obama administration still wants to convince us that the stimulus is
working. It seems that while Americans are stretching dollars to make ends meet,
Washington is stretching our patience with its tales of economic growth, job
creation and recovery.
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Europe needs Warren Buffett and Joe Biden to simply tell them to stop the whining and to grow up:
Austerity whips up anger, protests mount in Europe AFP - Wednesday, September 29Send IM Story Print
Austerity whips up anger, protests mount in Europe
BRUSSELS (AFP) - – Painful cuts by overspending EU countries come head to a head with mounting social anger on Wednesday when labour leaders call angry workers onto streets right across the continent.
Set for its largest Europe-wide protest for a decade is Brussels where labour leaders are planning to bring 100,000 people from 30 countries to say "No to austerity!"
"We will demonstrate to voice our concern over the economic and social context, which will be compounded by austerity measures," John Monks, general secretary of the European Trade Union Confederation.
The protest, the biggest such march since 2001 when 80,000 people spilled into the EU capital, is being held to coincide with a plan to fine governments running up deficits.
Detailed proposals are due to be released that day by the 27-nation bloc's executive arm, the European Commission, with the continent's finance ministers also gathering in Brussels this week.
Millions of jobs fell off the European map in the global downturn and many more look set to be squeezed as governments axe public spending.
"This is a crucial day for Europe," said Monks, "because our governments, virtually all of them, are about to embark on solid cuts in public expenditures.
"They're doing this at a time where the economy is very close to recession, and almost certainly you'll see the economy go back into recession as the effect of these cuts take place."
In Spain, where trade unions have called a general strike on Wednesday, unemployment has more than doubled, with one in five workers jobless in July.
Madrid in consequence is looking at a drastic overhaul of its labour legislation to ease flexi-time and hiring and firing. Pensions are frozen, wages cut for civil servants and VAT taxes on the rise.
But elsewhere labour leaders are equally concerned. At a glance: The human cost of the crisis in Europe
Portugal's leading labour confederation, the CGTP, which is close to the communists, has called protests in Lisbon and Porto and hopes for more than 10,000 participants.
Poland's main unions, Solidarity and OPZZ, expect "several thousand" at a protest outside government headquarters.
Similar marches are scheduled in Greece, Ireland, Italy, Latvia and Serbia, with labour leaders across the board clamouring for growth and protesting the injustice of workers paying for the errors of the financial sector.
"Those responsible for this crisis, the banks, the financial markets and the ratings agencies are all too quick in asking for help from states and public budgets and today want the workers to pay for their debts," said French labour leader Jean-Claude Mailly, who heads the FO union.
But while Europe tries to clean up its post-recession books, a backlash has begun among voters focused on vast anticipated numbers of public sector job cuts.
The worker backlash was clearly seen in Britain, where Labour unions, lawmakers and party members handed their leadership to left-leaning Ed Miliband -- in a surprise, last-minute defeat for his better-known, more centrist brother and former foreign secretary David.
"We're a rich part of the world," said Monks.
"We're going to keep this campaign going, fight for growth, fight for jobs, fight to protect social Europe. Don't go down the austerity route."
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By STEVE MOORE
During a recent press conference, President Obama blamed George W. Bush for the nation's fiscal condition. "When I walked in," he declared, "wrapped in a nice bow was a $1.3 trillion deficit sitting right there on my doorstep." Earlier this year he asserted that "we came in with $8 trillion worth of debt over the next decade."
Neither statement is correct, according to the Congressional Budget Office (CBO). True enough, the outgoing Bush administration bequeathed big deficits to Mr. Obama. The expected 2009 deficit was $1.19 trillion, not $1.3 trillion, however—and the actual deficit for 2009 came in at $1.41 trillion, meaning that the new president added some $220 billion to the total.
Steve Moore in Washington with the latest on the looming tax increases.
.Far more significant, however, was the president's misstatement that Mr. Bush and the Republicans left the country with $8 trillion of debt over the next 10 years. The CBO's projected 10-year deficit when Mr. Obama took office was actually $4.09 trillion. Now, after 20 months of his presidency, the expected deficit has almost doubled, to $7.68 trillion.
A strong case can be made that the people most responsible for the gigantic deficits we face today are neither George W. Bush nor Barack Obama. The real culprits are Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid.
Congress controls the purse strings. When Mrs. Pelosi and Mr. Reid rose to their present jobs in January 2007, the deficit was $161 billion. It had been on a downward trajectory from $413 billion in 2004. Three years later, the Pelosi-Reid Congress had added $1.2 trillion to the deficit.
Of course, Mr. Bush sponsored or signed into law many of these deficit-raising bills, such as the bank bailouts and effective tax rebates of 2008. But the Democratic Congress passed them.
View Full Image
Associated Press
House Speaker Nancy Pelosi, right, and Senate Majority Leader Harry Reid
.Long forgotten is the promise Mrs. Pelosi made on the day she became speaker: "Our new America will provide unlimited opportunity for future generations, not burden them with mountains of debt." I think future generations would like a do-over.
Today, Mr. Obama and Democrats in Congress love to talk about how Mr. Bush turned a $200 billion Clinton surplus into a $1 trillion deficit. Indeed he did, though they ignore the 9/11 terrorist attacks that happened less than a year after Mr. Bush became president. Those attacks were fiscal game-changers, jolting the economy to a temporary standstill and requiring unplanned spending for homeland security and antiterrorism efforts.
For the sake of comparison, let's look at the Pelosi-Reid fiscal record over 10 years. In January 2007, the CBO projected a $379 billion surplus over the next decade. Now, after four years under Mrs. Pelosi and Mr. Reid, and two years of Mr. Obama in the White House, the 2007-2016 projection is a deficit of $7.16 trillion.
This deterioration of the nation's fiscal situation is arguably the worst in United States history, and it was brought to us courtesy of a congressional leadership that pledged "pay as you go" budgeting to bring the budget into balance.
It is no wonder that Americans are not eager to retain the services of these two spendthrifts as leaders of Congress.
Mr. Moore is senior economics writer for The Wall Street Journal editorial page.
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Well it is POTH writing on a subject likely to exhibit itself at its worst. Is there any truth to any of this?
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WASHINGTON — Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all — the $700 billion lifeline to banks, insurance and auto companies — will expire after Sunday at a fraction of that cost, and could conceivably earn taxpayers a profit.
A final accounting of the government’s full range of interventions in the economy, including the bailouts of the mortgage finance giants Fannie Mae and Freddie Mac, is years off and will most likely remain controversial and potentially costly.
But the once-unthinkable possibility that the $700 billion Troubled Asset Relief Program could end up costing far less, or even nothing, became more likely on Thursday with the news that the government had negotiated a plan with the American International Group to begin repaying taxpayers.
The rescue of the troubled insurer included $70 billion from the bailout program that was enacted two years ago, at the height of the global financial crisis late in the Bush administration, initially to prop up big banks.
At the White House on Thursday, the Treasury secretary, Timothy F. Geithner, briefed President Obama about A.I.G. and about the broader outlook for the expiring rescue program, putting the projected losses at less than $50 billion, at most. Yet neither the White House nor Congressional Democrats are likely to boast much in the month remaining before midterm elections. For most voters, TARP remains a four-letter word.
Brian A. Bethune, the chief financial economist in the United States for IHS/Global Insight, while critical of parts, called the program over all “a tremendous success. Now obviously, they can’t go out on the campaign trail and say that, because certainly, for a lot of voters, it’s just not going to resonate.”
The “bank bailout” was the first big issue, before the Obama administration’s roughly $800 billion stimulus plan and its health insurance overhaul, to stoke the rise of the Tea Party movement. After supporting TARP, several Republicans have lost elections largely because of their votes. For many Americans, TARP is more than a vote; it is a symbol of big government at its worst, intervening in private markets with taxpayers’ billions to save Wall Street plutocrats while average Americans struggle through the recession those financiers spawned.
Fewer than three in 10 Americans say they believe the program was necessary “to prevent the financial industry from failing and drastically hurting the U.S. economy,” according to a poll in July for Bloomberg News.
“This is the best federal program of any real size to be despised by the public like this,” said Douglas J. Elliott, a former investment banker now associated with the Brookings Institution, a Washington think tank.
“It was probably the only effective method available to us to keep from having a financial meltdown much worse than we actually had. Had that happened, unemployment would be substantially higher than it is now, the deficit would have gone up even more than it has,” Mr. Elliott added. “But it really cuts against the grain for a public that is so angry at banks to think that something that so plainly helped the banks could also be good for the public.”
After Sunday the Treasury can no longer commit money to new initiatives or recycle repayments to other purposes.
The Treasury never tapped the full $700 billion. It committed $470 billion and has disbursed $387 billion, mostly to hundreds of banks and later to A.I.G., the car industry — Chrysler, General Motors, the G.M. financing company and suppliers — and to what is, so far, a failed effort to help homeowners avoid foreclosures.
When Mr. Obama took office, the financial system remained so weak that his first budget indicated the Treasury might need another $750 billion for TARP. The administration soon dropped that idea as Mr. Geithner overhauled the rescue program and the banking system stabilized. Still, by mid-2009, the administration projected that TARP could lose $341 billion, a figure that reflected new commitments to A.I.G. and the auto industry.
The Congressional Budget Office, which had a slightly higher loss estimate initially, in August reduced that to $66 billion.
Now Treasury reckons that taxpayers will lose less than $50 billion at worst, but at best could break even or even make money. Its best-case assumptions, however, assume that A.I.G. and the auto companies will remain profitable and that Treasury will get a good price as it sells its corporate shares in coming years.
“We’d have to be very lucky to have both A.I.G. and the auto companies pay us back in full,” Mr. Elliott said.
Also, the best result for taxpayers could mean bad results for squeezed homeowners. Treasury has been ready to use up to $50 billion to help modify mortgages for people facing foreclosure, but its initiatives have been such a failure that little has been spent.
Whatever the final losses from housing, auto companies, A.I.G. or smaller banks, those will be offset by taxpayers’ profits from the big banks that have been the focus of their ire since 2008.
They have repaid their loans and Treasury has collected about $25 billion more from dividends and proceeds from the sale of warrants held as collateral, officials say. Many smaller banks hold on to their loans, however, reflecting their weakness and the desire of some others to keep the money given its advantageous terms. Scores are behind on dividend payments to the Treasury.
By any measure, TARP’s final tally will be less than expected amid the crisis. But the program remains a big loser politically.
On Wednesday, four days before its expiration, House Republicans nonetheless unsuccessfully forced a vote on legislation to end TARP. “We would be much better served if private institutions would either fail or be successful on their own,” said Representative Erik Paulsen of Minnesota, in an interview.
Among those who voted for the program in 2008, several Republicans have lost nominating contests for re-election or for another office, and others are on the defensive in fall races.
Senator Robert F. Bennett of Utah was “Bailout Bob” to Republicans who refused to re-nominate him for a fourth term.
“For those who were screaming at me — and screaming was the operative word — ‘You’ve just saddled our children and grandchildren with $700 billion,’ I said, ‘No, I haven’t,” Mr. Bennett said in an interview.
“My career is over,” he added. “But I do hope that we can get the word out that TARP, number one, did save the world from a financial meltdown and, number two, did so in a manner that, I believe, won’t cost the taxpayer anything. And even if it did not all get paid back, it was still the thing to do.”
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I pulled this short paragraph of wisdom out of Victor Hanson's lastest post over at Works and Days / Pajamas Media:
The upper-middle-class is not greedy, but they do have three reservations about the Obama pie-slicing: they want to have a little say in the distribution; they better than Obama know how much they can afford to give; and they sense that something for nothing is not a neutral act, but a sort of evil in creating dependency and destroying initiative — all for that selfish feeling of benefaction among elites that comes from handing out someone else’s money.
http://pajamasmedia.com/victordavishanson/from-the-unbelievable-to-the-passe/2/
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(http://mercatus.org/sites/default/files/interest-payments-balloon2smaller_0.png)
http://mercatus.org/publication/projected-interest-payments-federal-debt-balloon
This chart by Mercatus Center Senior Research Fellow Veronique de Rugy examines likely options for the long-term cost of carrying the debt held by the public if investors begin to demand higher interest rates. This chart compares the Congressional Budget Office Alternative projection of net interest costs, which incorporates likely policy changes while assuming that the interest remains constant at just below 5%, with these same projections at long-term interest rates of 6% and 7%. At an interest rate of 6%, the interest cost of the debt balloons to 59.8% of GDP by 2084, at an interest rate of 7%, this cost more than doubles to 136% by 2084.
United States debt is primarily held short-term, and had long-benefitted from low interest rates due to its level of security relative to other sovereign debt
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That's looking out pretty far ahead :-o; I'd love to see a chart of the next 10 years first :-)
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Mentioned previously, 8 million people receive roughly $500/mo. (http://townhall.com/news/politics-elections/2010/10/11/the_numbers_on_who_gets_social_security_benefits) mostly under the following loose disability rules:
"Disability means inability to engage in any SGA [substantial gainful activity] by reason of any medically determinable physical or mental impairment which...has lasted or can be expected to last for a continuous period of not less than 12 months."
Normally paid via cash card in addition to all other programs of eligibility.
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My reason for posting was because of hundreds of personal observations of what I would consider to be abuse of the program. Already answered by CCP as to what kind of situation it puts the doctor in. One note from a doctor is worth 6k per year, year after year, and we pay for the doctor visit, and a taxi in some cases to get to the doctor.
Who is hurt most, the taxpayer or the recipient? I say the one who learns to end the search for productive accomplishment within their own mental and physical capability.
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Doug,
From one of my previous posts:
"I had one patient who is on permanent Federal disability for stress, anxiety. He came in for a renewal of his disability papers and I simpoly looked him straight in the eye and said, " you really can't work because you are stressed out?" His repsonse, "absolutely". So I filled out the form with this information exactly as it was and that is that. He gets it.
I tell him everyone is stressed out. Who isn't? He didn't blink one time when I asked him. He couldn't care less."
This pt. returned and apparantly was referred to a disability psychologist who through testing was able to show he was likely malingering.
The pt. advised me "they want to stop my disability".
Disability people must not have been impressed with my earlier notes and thus sent him for "second opinion".
I didn't offer to provide any additional information and fortunately he didn't come right out and ask.
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The public is waking up and the Obama koolaid is turning bitter in many mouths.
http://www.bloomberg.com/news/2010-10-12/obama-losing-supporters-in-poll-as-joblessness-prompts-voters-discontent.html
Hope has turned to doubt and disenchantment for almost half of President Barack Obama’s supporters.
More than 4 of 10 likely voters who say they once considered themselves Obama backers now are either less supportive or say they no longer support him at all, according to a Bloomberg National Poll conducted Oct. 7-10.
Three weeks before the Nov. 2 congressional elections that Republicans are trying to make a referendum on Obama, fewer than half of likely voters approve of the president’s job performance. Likely voters are more apt to say Obama’s policies have harmed rather than helped the economy. Among those who say they are most enthusiastic about voting this year, 6 of 10 say the Democrat has damaged the economy.
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http://www.washingtonexaminer.com/opinion/blogs/beltway-confidential/Report-In-Obamas-Chicago-stimulus-weatherization-money-buys-shoddy-work-widespread-fraud-105300303.html
Report: In Obama's Chicago, stimulus weatherization money buys shoddy work, widespread fraud
By: Byron York
Chief Political Correspondent
10/19/10 6:06 PM EDT
Projects to weatherize homes are a key part of the Obama administration's fusion of stimulus spending and the green agenda. But a new report by the Department of Energy has found serious problems in stimulus-funded weatherization work -- problems so severe that they have resulted in homes that are not only not more energy efficient but are actually dangerous for people to live in.
The study, by the Department's inspector general, examined the work of what's called the Weatherization Assistance Program, or WAP, in Illinois. Last year, the Department awarded Illinois $242 million, which was expected to pay for the weatherization of 27,000 homes. Specifically, Energy Department inspectors took a close look at the troubled operations of the Community and Economic Development Association of Cook County, known as CEDA, which is the largest recipient of weatherization money in Illinois with $91 million to weatherize 12,500 homes. (Cook County is, of course, home to Chicago.)
The findings are grim. "Our testing revealed substandard performance in weatherization workmanship, initial assessments, and contractor billing," the inspector general report says. "These problems were of such significance that they put the integrity of the entire program at risk."
Department inspectors visited 15 homes that were being weatherized by CEDA and paid for by stimulus funds. "We found that 14 of the 15 homes…failed final inspection because of poor workmanship and/or inadequate initial assessments," the report says. In eight of the homes, CEDA had come up with unworkable and ineffective plans -- like putting attic insulation in a house with a leaky roof. In ten of the homes, "contractors billed for labor charges that had not been incurred and for materials that had not been installed." The report calls billing problems "pervasive," with seven of ten contractors being cited for erroneous invoicing. And the department found "a 62 percent final inspection error rate" when CEDA inspectors reviewed their own work.
The work was not just wasteful; it was dangerous. Department inspectors found "heat barriers around chimneys that had not been installed, causing fire hazards." They found "a furnace [that] had not been vented properly." The found "a shut-off valve that had not been installed on a gas stove." And they found "carbon monoxide detectors, smoke alarms and fire extinguishers had not been installed as planned."
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I have enjoyed quite a time with no working television in the house fo much of the DTV era. Now with just a few channels, and seldom on, I can catch a glimpse of the campaign commercial season and see what the others are basing their vote on. Rep. Keith Ellison brags that he brought $120 million to Minneapolis. Like that is a big number for a major city - out of a budget he authorized of $4 trillion. Like it was something new. Like it was free money. Like it wouldn't have happened without him. What was so striking was just what old-style of politics that message was, with no apologies. I bring you pork. You need to reelect me. I will bring you more pork. Seriously.
Besides Muslim, Keith Ellison is black. A black former community activist from North Minneapolis. "We don't get no justice, you don't get no peace", he used to chant. You would think he would chant something about easing barriers to startup capital or easing employment regulations or lowering commercial property taxes or about private sector growth. North Minneapolis has almost no industry or employers. We have the Urban coalition. We have ACORN. We have the heating assistance office. We have welfare advocates. Unemployment within this community is astronomical if we had a way of measuring it all. No mention of that. Ellison policies make it worse. No mention of that either. Pork is his business and not the kind that puts food on the table. He is running with virtually no opposition and no media scrutiny. He can say what he wants and not be questioned on anything else. He holds a seat for life, if he wants. The only thing anyone can do to limit his power is to have his side be the political minority party in the House.
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Actually I don't even have a TV. I don't miss the 30 second political ads on TV (regardless of party); they are mostly *$.
I know nothing of Keith Ellison. But I do like Minneapolis. But frankly, IF he brought "120 million to Minneapolis" in these difficult
times, that IS a big deal to Minneapolis.
I always thought it seemed like a dichotomy; does a congressman represent his district first, or national interests first?
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Ellison, like Obama is anti-american first.
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http://www.jihadwatch.org/2010/10/congressman-keith-ellison-d-muslim-brotherhood-likens-resistance-to-islamic-supremacism-as-racism.html
Congressman Keith Ellison (D-Muslim Brotherhood) likens resistance to Islamic supremacism to racism
Ellison.jpg$13,350 from the group that wants to destroy the West from within
As I noted in December 2008, when it was first revealed that Ellison's Hajj was paid for with $13,350 from the Muslim American Society:
The Muslim Brotherhood "must understand that their work in America is a kind of grand Jihad in eliminating and destroying the Western civilization from within and "sabotaging" its miserable house by their hands and the hands of the believers so that it is eliminated and God's religion is made victorious over all other religions." -- "An Explanatory Memorandum on the General Strategic Goal for the Brotherhood in North America," by Mohamed Akram, May 19, 1991.
What does that have to do with Congressman Ellison? Everything. The Muslim American Society paid for his Hajj. And what is the Muslim American Society? The Muslim Brotherhood.
"In recent years, the U.S. Brotherhood operated under the name Muslim American Society, according to documents and interviews. One of the nation's major Islamic groups, it was incorporated in Illinois in 1993 after a contentious debate among Brotherhood members." -- Chicago Tribune, 2004.
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What Gets You Most Upset about the TARP Bailout, the Lying, the Corruption, or the Economic Damage?
Posted by Daniel J. Mitchell
As an economist, I should probably be most agitated about the economic consequences of TARP, such as moral hazard and capital malinvestment. But when I read stories about how political insiders (both in government and on Wall Street) manipulate the system for personal advantage, I get even more upset.
Yes, TARP was economically misguided. But the bailout also was fundamentally corrupt, featuring special favors for the well-heeled. I don’t like it when lower-income people use the political system to take money from upper-income people, but it is downright nauseating and disgusting when upper-income people use the coercive power of government to steal money from lower-income people.
Now, to add insult to injury, we’re being fed an unsavory gruel of deception as the political class tries to cover its tracks. Here’s a story from Bloomberg about the Treasury Department’s refusal to obey the law and comply with a FOIA request. A Bloomberg reporter wanted to know about an insider deal to put taxpayers on the line to guarantee a bunch of Citigroup-held securities, but the government thinks that people don’t have a right to know how their money is being funneled to politically-powerful and well-connected insiders.
The late Bloomberg News reporter Mark Pittman asked the U.S. Treasury in January 2009 to identify $301 billion of securities owned by Citigroup Inc. that the government had agreed to guarantee. He made the request on the grounds that taxpayers ought to know how their money was being used. More than 20 months later, after saying at least five times that a response was imminent, Treasury officials responded with 560 pages of printed-out e-mails — none of which Pittman requested. They were so heavily redacted that most of what’s left are everyday messages such as “Did you just try to call me?” and “Monday will be a busy day!” None of the documents answers Pittman’s request for “records sufficient to show the names of the relevant securities” or the dates and terms of the guarantees.
Here’s another reprehensible example. The Treasury Department, for all intents and purposes, prevaricated when it recently claimed that the AIG bailout would cost “only” $5 billion. This has triggered some pushback from Capitol Hill GOPers, as reported by the New York Times, but it is highly unlikely that anyone will suffer any consequences for this deception. To paraphrase Glenn Reynolds, “laws, honesty, and integrity, like taxes, are for the little people.”
The United States Treasury concealed $40 billion in likely taxpayer losses on the bailout of the American International Group earlier this month, when it abandoned its usual method for valuing investments, according to a report by the special inspector general for the Troubled Asset Relief Program. …“The American people have a right for full and complete disclosure about their investment in A.I.G.,” Mr. Barofsky said, “and the U.S. government has an obligation, when they’re describing potential losses, to give complete information.” …“If a private company filed information with the government that was just as misleading and disingenuous as what Treasury has done here, you’d better believe there would be calls for an investigation from the S.E.C. and others,” said Representative Darrell Issa, the senior Republican on the House Committee on Oversight and Government Reform. He called the Treasury’s October report on A.I.G. “blatant manipulation.” Senator Charles E. Grassley of Iowa, the senior Republican on the Finance Committee, said he thought “administration officials are trying so hard to put a positive spin on program losses that they played fast and loose with the numbers.” He said it reminded him of “misleading” claims that General Motors had paid back its rescue loans with interest ahead of schedule.
P.S. Allow me to preempt some emails from people who will argue that TARP was a necessary evil. Even for those who think the financial system had to be recapitalized, there was no need to bail out specific companies. The government could have taken the approach used during the S&L bailout about 20 years ago, which was to shut down the insolvent institutions. Depositors were bailed out, often by using taxpayer money to bribe a solvent institution to take over the failed savings & loan, but management and shareholders were wiped out, thus preventing at least one form of moral hazard.
http://www.cato-at-liberty.org/what-gets-you-most-upset-about-the-tarp-bailout-the-lying-the-corruption-or-the-economic-damage/
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Thomas Sowell (age 80) is on my short list for VP or maybe press secretary for the next administration. This is about the election but really about spending and process jeopardizing our freedom.
http://www.realclearpolitics.com/articles/2010/10/29/a_crossroads_election_107769.html
A Crossroads Election
By Thomas Sowell
Most elections are about particular policies, particular scandals or particular personalities. But these issues don't mean as much this year-- not because they are not important, but because this election is a crossroads election, one that can decide what path this country will take for many years to come.
Runaway "stimulus" spending, high unemployment and ObamaCare are all legitimate and important issues. It is just that freedom and survival are more important.
For all its sweeping and scary provisions, ObamaCare is not nearly as important as the way it was passed. If legislation can become laws passed without either the public or the Congress knowing what is in those laws, then the fundamental principle of a free, self-governing people is completely undermined.
Some members of Congress who voted for ObamaCare, and who are now telling us that they realize this legislation has flaws which they intend to correct, are missing the point.
The very reason for holding hearings on pending legislation, listening to witnesses on all sides of the issue, and having Congressional debates that will be reported and commented on in the media, is so that problems can be explored and alternatives considered before the legislation is voted into law.
Rushing ObamaCare into law too fast for anyone to have read it served no other purpose than to prevent this very process from taking place. The rush to pass this law that would not take effect until after the next two elections simply cut the voters out of the loop-- and that is painfully close to ruling by decree.
Other actions and proposals by this administration likewise represent moves in the direction of arbitrary rule, worthy of a banana republic, with only a mocking facade of freedom.
These include threats against people who simply choose to express opinions counter to administration policy, such as a warning to an insurance company that there would be "zero tolerance" for "misinformation" when the insurance company said that ObamaCare would create costs that force up premiums.
Zero tolerance for the right of free speech guaranteed by the Constitution?
This warning comes from an administration with arbitrary powers that can impose ruinous costs on a given business.
Those who are constantly telling us that our economic problems are caused by not enough "regulation" never distinguish between regulation which simply enforces known rules, as contrasted with regulation that gives arbitrary powers to the government to force others to knuckle under to demands that have nothing to do with the ostensible purposes of the regulation.
As more businesses reveal that they are considering no longer buying health insurance for their employees, as a result of higher costs resulting from ObamaCare legislation, the administration has announced that it can grant waivers that reduce these costs.
But the power to grant waivers is the power to withhold waivers-- an arbitrary power that can impose millions of dollars in costs on businesses that the administration doesn't like.
Recent proposals from the Obama administration to force disclosure of the names of people who sponsor election ads would likewise open all who disagree with Obama to retaliation by the government itself, as well as by community activists and others.
History tells us where giving government one arbitrary power after another leads. It is like going into a Venus fly-trap, which is easy to enter and nearly impossible to get out of.
The headstrong, know-it-all willfulness of this administration, which threatens our freedom at home, also threatens our survival in the international jungle, because Obama seems determined to do nothing that will stop Iran from going nuclear.
The Obama administration goes through all sorts of charades at the U.N. and signs international agreements on sanctions that have been watered down to the point where they are not about to bring Iran's nuclear weapons program to a halt. The purpose is not to stop Iran but to stop the American people from realizing what Obama is doing or not doing.
We have a strange man in the White House. This election is a crossroads, because either his power will be curbed by depriving him of his huge Congressional majorities or he will continue on a road that jeopardizes both our freedom and our survival.
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Red Tape Rising: Obama’s Torrent of New Regulation
Published on October 26, 2010 by James Gattuso , Diane Katz and Stephen Keen BACKGROUNDER #2482
Abstract: The burden of regulation on Americans increased at an alarming rate in fiscal year 2010. Based on data from the Government Accountability Office, an unprecedented 43 major new regulations were imposed by Washington. And based on reports from government regulators themselves, the total cost of these rules topped $26.5 billion, far more than any other year for which records are available. These costs will affect Americans in many ways, raising the price of the cars they buy and the food they eat, while destroying an untold number of jobs. With the enactment of new health care laws, financial regulations, and plans for rulemaking in other areas, the regulatory burden on Americans is set to increase even further in the coming year.
The Hidden Tax
The cost of regulation has often been called a hidden tax. Although the total does not appear anywhere in the federal budget, the multitude of rules, restrictions, and mandates imposes a heavy burden on Americans and the U.S. economy. According to a report recently released by the Small Business Administration, total regulatory costs amount to about $1.75 trillion annually, [1] nearly twice as much as all individual income taxes collected last year.[2]
Not all regulations are unwarranted, of course. Most Americans would agree on the need for protections against terrorism, although the extent of such rules is certainly subject to debate. Moreover, regulations are not necessarily inconsistent with free-market principles. Some, such as anti-fraud measures, protect the rights of consumers. But there is always a cost. And, for the same reasons that federal spending is reported, so, too, should regulatory costs.
Record Increases
This regulatory burden has been increasing for some time. During the presidency of George W. Bush, which many mistakenly consider as a period of deregulation, the regulatory burden increased by more than $70 billion, according to agency regulatory impact reports. In FY 2009, which spanned the Bush and Obama Administrations, rulemaking proceeded at a nearly unprecedented rate, with the addition of 23 major rules imposing $13 billion in new costs.[3]
But the available evidence indicates that regulatory costs increased last year at a far greater pace. According to data from the Government Accountability Office, federal agencies promulgated 43 rules during the fiscal year ending September 30, 2010,[4] that impose significant burdens on the private sector. The total costs for these rules were estimated by the regulators themselves at some $28 billion, the highest level since at least 1981, the earliest date for which figures are available.[5] Fifteen of the 43 major rules issued last during the fiscal year involved financial regulation. Another five stem from the Patient Protection and Affordable Care Act adopted by Congress in early 2010. Ten others come from the Environmental Protection Agency (EPA), including the first mandatory reporting of “greenhouse gas” emissions and $10.8 billion in new automotive fuel economy standards (adopted jointly with the National Highway Traffic Safety Administration (NHTSA)). Overall, counting the fuel standards, the EPA is responsible for the lion’s share of the reported regulatory costs—some $23.2 billion.
Among the most costly of the FY 2010 crop are:
Fuel economy and emission standards[6] for passenger cars, light-duty trucks, and medium-duty passenger vehicles imposed jointly by the EPA and NHTSA. Annual cost: $10.8 billion (for model years 2012 to 2016). For automakers to recover these increased outlays, NHTSA estimates the standards will lead to increases in average new vehicle prices ranging from $457 per vehicle in FY 2012 to $985 per vehicle in FY 2016.[7]
Mandated quotas for renewable fuels. Annual cost: $7.8 billion (for 15 years). Utilizing farmland to grow corn and other crops used in renewable fuels will displace food crops, leading food costs to increase by $10 per person per year—or $40 for a family of four, according to the EPA.[8]
Efficiency standards for residential water heaters, heating equipment, and pool heaters. Annual cost: $1.3 billion. The appliance upgrades necessary to comply with the new standards will raise the price of a typical gas storage water heater by $120.[9]
Limits on “effluent” discharges from construction sites imposed by the EPA. Annual cost: $810.8 million. The cost of the requirements will force the closure of 147 construction firms and the loss of 7,257 jobs, according to the EPA. Homebuyers also will bear some of the costs, with an increase in mortgage costs of about $1,953.
Regulatory Reductions Missing in Action
Measures to reduce regulatory burdens, by contrast, were few and far between in FY 2010. Only five significant rulemakings adopted last year reduced burdens. Of these, cost reductions were quantified for only two, for reported savings of $1.5 billion. This leaves a net increase in the regulatory burden of $26.5 billion.
Moreover, one of the five measures—though technically deregulatory in nature—relates to an unparalleled expansion of EPA powers. Due to its determination last year that greenhouse gases are pollutants, the agency is moving to set emissions limits for such gases. To follow the standards in the Clean Air Act would corral millions of currently unregulated “facilities,” including offices and apartment buildings, shopping malls, restaurants, hotels, hospitals, schools, houses of worship, theaters, and sports arenas into the EPA regulatory regime. In hopes of quieting political outrage over so sweeping a dictate, the EPA’s “Tailoring Rule”[10] set a minimum threshold level for regulation. Therefore, fewer facilities would be subject to permit requirements, making imposition of the emissions limits more feasible. Rather than reduce overall burdens, this action actually facilitated increased burdens.[11]
Actual Costs Likely Higher
The actual cost of regulations adopted in FY 2010 is almost certainly much higher than $26.5 billion. As a first matter, the cost of non-economically significant rules—rules deemed not likely to have an annual impact of $100 million or more—is not calculated (although such rules are believed to constitute only a small portion of total regulatory costs). Moreover, costs were not quantified for 12 of the economically significant rules adopted in FY 2010.
Many of the rules lacking quantified costs involve financial regulation. The Federal Reserve Board, for instance, did not quantify any costs for its new “Truth in Lending”[12] regulations—which impose fee and disclosure requirements for credit card accounts—although the new rules are generally expected to be costly. Similarly, costs were not calculated for new Federal Reserve Board regulations on prepaid electronic gift cards.[13]
It should also be noted that reported costs are likely minimized by allowing agencies to make the initial calculations, thereby casting their proposals in the best light. This could have a substantial impact: Overall, there is evidence that agencies systematically understate regulatory costs. In its 2005 report to Congress, the OMB’s Office of Information and Regulatory Affairs conducted ex ante analyses of regulations to test the accuracy of cost-benefit estimates. The study determined that regulators overestimated benefits 40 percent of the time and underestimated costs 34 percent of the time.[14]
Even a finding that costs exceed benefits does not necessarily stop a new rule from going into effect. For instance, in evaluating new regulations for train-control systems, the Department of Transportation identified costs of $477.4 million, and benefits of a mere $22 million. Nevertheless, due to a statutory mandate, the regulations were adopted.
The EPA is prohibited by law from considering costs in devising regulations under the Clean Air Act and other major environmental statutes. Thus, the agency recently set new, more stringent standards on emissions of nitrogen dioxide without formally considering the economic or technical feasibility of compliance.[15] While the EPA did prepare a cost-benefit analysis—concluding that the costs exceed the benefits—agency officials conceded they had no way of determining the number of localities that would be out of compliance under the new rule.
Lastly, it should be noted that annual compliance costs constitute only part of the economic burden of regulation. New rules also entail start-up costs for new equipment, conversions of industrial processes, and devising data collection and reporting procedures. These “first-year” costs exceed $3.1 billion for the 43 new FY 2010 regulations. For example, new restrictions on “short sales”[16] imposed by the Securities and Exchange Commission will require initial costs of more than $1 billion[17] for modifications to computer systems and surveillance mechanisms, and for information-gathering, management, and recordkeeping systems. Likewise, the EPA estimates one-time implementation costs of nearly $745 million for new limits on emissions from diesel engines used in energy production.[18]
More Rules on the Way
Many, many more regulations are in the pipeline. According to one estimate, financial regulation legislation recently adopted by Congress, known as the Dodd–Frank bill, will require 243 new formal rule-makings by 11 different federal agencies.[19] So wide-ranging are regulators’ new powers, in fact, that the Department of Health and Human Services has failed to meet one-third of the deadlines mandated by the new federal health care law, according to a report by the Congressional Research Service.[20]
Meanwhile, the new Consumer Financial Protection Bureau created under the Dodd–Frank measure will wield vaguely defined powers to regulate financial products and services, including mortgages, credit cards, even student loans. And, the Federal Communications Commission is mulling new regulations to limit how Internet service providers manage their networks. Such “net neutrality” rules, if enacted, would undermine investment incentives, thereby robbing the nation of much-needed broadband upgrades.[21]
Taken together, these initiatives embody a stunningly full regulatory agenda—indicating that this year’s record for regulatory increases will not stand for long.
Conclusion
The regulatory burden increased at an unprecedented rate during FY 2010, as measured by both the number of new major rules as well as their reported costs. Even more are on the way in 2011.
A number of steps have been proposed to stem this growth, ranging from automatic sunsetting of rules[22] to requiring congressional approval of all new major rules.[23]
Mere procedural reforms will not be enough to stem this regulatory tide. Regulatory costs will rise until policymakers appreciate the burdens that regulations are imposing on Americans and the economy, and exercise the political will necessary to limit—and reduce—those burdens.
—James L. Gattuso is Senior Research Fellow in Regulatory Policy, Diane Katz is Research Fellow in Regulatory Policy, and Stephen A. Keen is a Research Assistant, in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.
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Appendix
Major Rulemaking Proceedings that Increased Regulatory Burdens, October 2009–September 2010
October 2009
October 30, 2009, Environmental Protection Agency, “Mandatory Reporting of Greenhouse Gases”: $94.9 million annually; $140.7 million start-up.
November 2009
November 17, 2009, Federal Reserve System, “Electronic Fund Transfers”: $10.9 million annually.
December 2009
December 1, 2009, Environmental Protection Agency, “Effluent Limitations Guidelines and Standards for the Construction and Development Point Source Category”: $810.8 million annually.
December 4, 2009, Securities and Exchange Commission, “Amendments to Rules for Nationally Recognized Statistical Rating Organizations”: $34.9 million annually; $16.2 million start-up.
December 4, 2009, Department of Transportation, Pipeline and Hazardous Materials Safety Administration, “Pipeline Safety: Integrity Management Program for Gas Distribution Pipelines”: $101.1 million annually; $130.1 million start-up.
December 23, 2009, Securities and Exchange Commission, “Proxy Disclosure Enhancements”: $66.5 million annually.
January 2010
January 8, 2010, Department of Energy, “Energy Conservation Program: Energy Conservation Standards for Certain Consumer Products (Dishwashers, Dehumidifiers, Microwave Ovens, and Electric and Gas Kitchen Ranges and Ovens) and for Certain Commercial and Industrial Equipment (Commercial Clothes Washers)”: $23.4 million annually.
January 11, 2010, Securities and Exchange Commission, “Custody of Funds or Securities of Clients by Investment Advisers”: $125.1 million annually; $1.2 million start-up.
January 15, 2010, Federal Reserve System and Federal Trade Commission, “Fair Credit Reporting Risk-Based Pricing Regulations”: $252.1 million annually.
January 15, 2010, Department of Transportation, Federal Railroad Administration, “Positive Train Control Systems”: $477.4 million annually.
January 28, 2010, Department of the Treasury, Office of the Comptroller of the Currency; Federal Reserve System; Federal Deposit Insurance Corporation; Department of the Treasury, Office of Thrift Supervision, “Risk-Based Capital Guidelines; Capital Adequacy Guidelines; Capital Maintenance: Regulatory Capital; Impact of Modifications to Generally Accepted Accounting Principles; Consolidation of Asset-Backed Commercial Paper Programs; and Other Related Issues”: cost not quantified.
February 2010
February 9, 2010, Environmental Protection Agency, “Primary National Ambient Air Quality Standards for Nitrogen Dioxide”: cost not quantified.
February 17, 2010, Department of Agriculture, Agricultural Marketing Service, “National Organic Program; Access to Pasture (Livestock)”: cost not quantified.
February 22, 2010, Federal Reserve System, “Truth in Lending”: cost not quantified.
March 2010
March 3, 2010, Environmental Protection Agency, “National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines”: $373.4 million annually; $744.7 million start-up.
March 4, 2010, Securities and Exchange Commission, “Money Market Fund Reform”: $60.2 million annually; $86.9 million start-up.
March 9, 2010, Department of Energy, “Energy Conservation Program: Energy Conservation Standards for Small Electric Motors”: $263.9 million annually.
March 10, 2010, Securities and Exchange Commission, “Amendments to Regulation SHO”: $1.2 billion annually; $1.1 billion start-up.
March 19, 2010, Department of Health and Human Services, Food and Drug Administration, “Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents”: cost not quantified.
March 26, 2010, Environmental Protection Agency, “Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program”: $7.8 billion annually.
April 2010
April 1, 2010, Federal Reserve System, “Electronic Fund Transfers”: cost not quantified.
April 5, 2010, Department of Transportation, Federal Motor Carrier Safety Administration, “Electronic On-Board Recorders for Hours-of-Service Compliance”: $139 million annually.
April 14, 2010, Department of Health and Human Services, Food and Drug Administration, “Use of Ozone-Depleting Substances; Removal of Essential-Use Designation (Flunisolide, etc.)”: $181.9 million annually.
April 16, 2010, Department of Energy: Energy Conservation Program, “Energy Conservation Standards for Residential Water Heaters, Direct Heating Equipment, and Pool Heaters”: $1.3 billion annually.
May 2010
May 6, 2010, Environmental Protection Agency, “Lead; Amendment to the Opt-Out and Recordkeeping Provisions in the Renovation, Repair, and Painting Program”: $419.5 million annually; $552 million start-up.
May 7, 2010, Environmental Protection Agency and Department of Transportation, National Highway Traffic Safety Administration, “Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule”: $10.8 billion annually (2012–2016).
May 13, 2010, Department of the Treasury, Internal Revenue Service; Department of Labor, Employee Benefits Security Administration; Department of Health and Human Services, Office of the Secretary, “Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Dependent Coverage of Children to Age 26 Under the Patient Protection and Affordable Care Act”: $11 million annually.
May 28, 2010, Department of Transportation, Federal Aviation Administration, “Automatic Dependent Surveillance—Broadcast (ADS-B) Out Performance Requirements to Support Air Traffic Control (ATC) Service”: $100 million annually.
June 2010
June 4, 2010, Federal Reserve System, “Electronic Fund Transfers”: cost not quantified.
June 17, 2010, Department of the Treasury, Internal Revenue Service; Department of Labor, Employee Benefits Security Administration; Department of Health and Human Services, “Interim Final Rules for Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act”: $25.2 million annually; $30.2 million start-up.
June 22, 2010, Environmental Protection Agency, “Primary National Ambient Air Quality Standard for Sulfur Dioxide”: $1.6 billion annually.
June 28, 2010, Department of the Treasury, Internal Revenue Service; Department of Labor, Employee Benefits Security Administration; and Department of Health and Human Services, “Patient Protection and Affordable Care Act: Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, and Patient Protections”: $4.8 million annually.
June 29, 2010, Federal Reserve System, “Truth in Lending”: cost not quantified.
July 2010
July 14, 2010, Securities and Exchange Commission, “Political Contributions by Certain Investment Advisers”: $85.1 million annually; $22.6 million start-up.
July 16, 2010, Department of Labor, Employee Benefits Security Administration, “Reasonable Contract or Arrangement Under Section 408(b)(2)—Fee Disclosure”: $57.7 million annually.
July 19, 2010, Department of the Treasury, Internal Revenue Service; Department of Labor, Employee Benefits Security Administration; and Department of Health and Human Services, “Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Coverage of Preventive Services Under the Patient Protection and Affordable Care Act”: cost not quantified.
July 23, 2010, Department of the Treasury, Internal Revenue Service; Department of Labor, Employee Benefits Security Administration; and Department of Health and Human Services, “Interim Final Rules for Group Health Plans and Health Insurance Issuers Relating to Internal Claims and Appeals and External Review Processes Under the Patient Protection and Affordable Care Act”: $75.1 million annually.
July 28, 2010, Department of the Treasury, Office of the Comptroller of the Currency, “Registration of Mortgage Loan Originators”: $123.9 million annually; $283.3 million start-up.
August 2010
August 9, 2010, Department of Labor, Occupational Safety and Health Administration, “Cranes and Derricks in Construction”: $151.6 million annually.
August 12, 2010, Securities and Exchange Commission: “Amendments to Form ADV”: $20.5 million annually; $56.4 million start-up.
August 20, 2010, Environmental Protection Agency, “National Emission Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion Engines”: $253 million annually.
September 2010
September 9, 2010, Environmental Protection Agency, “National Emission Standards for Hazardous Air Pollutants from the Portland Cement Manufacturing Industry and Standards of Performance for Portland Cement Plants”: $1 billion in 2013.
September 16, 2010, Securities and Exchange Commission, “Facilitating Shareholder Director Nominations”: $8 million annually.
Major Rulemaking Proceedings that Decreased Regulatory Burdens, October 2009–September 2010
October 19, 2009, Securities and Exchange Commission, “Internal Control Over Financial Reporting in Exchange Act Periodic Reports of Non-Accelerated Filers”: savings not quantified.
November 2, 2009, Department of Health and Human Services, Centers for Disease Control and Prevention, “Medical Examination of Aliens—Removal of Human Immunodeficiency Virus (HIV) Infection from Definition of Communicable Disease of Public Health Significance”: savings not quantified.
November 13, 2009, Environmental Protection Agency, “Oil Pollution Prevention; Spill Prevention, Control, and Countermeasure (SPCC) Rule—Amendments”: $98.6 million.
March 31, 2010, Department of Justice, Drug Enforcement Administration, “Electronic Prescriptions for Controlled Substances”: $1.4 billion.
June 3, 2010, Environmental Protection Agency, “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule”: savings not quantified.
http://www.heritage.org/Research/Reports/2010/10/Red-Tape-Rising-Obamas-Torrent-of-New-Regulation
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I am amazed the economy hasn't come roaring back with all the new taxes and regulation..... :roll:
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http://www.theglobeandmail.com/report-on-business/economy/a-scary-scenario-what-if-a-us-state-defaults/article1775492/?cmpid=rss1
A scary scenario: What if a U.S. state defaults?
JOANNA SLATER
NEW YORK— From Thursday's Globe and Mail
Published Wednesday, Oct. 27, 2010 7:15PM EDT
Last updated Wednesday, Oct. 27, 2010 7:19PM EDT
It’s the year 2013. A large U.S. state can’t come up with the cash to make a bond payment. A default would ricochet through markets worldwide. What happens next?
That’s the scenario that a high-powered panel gathered to address this week at a conference in New York. For seasoned observers, the chance that a state would default on its debt ranges from remote to impossible. Yet the fact that the risk is being openly discussed shows the depth of the worries over the finances of states and cities.
More related to this story
Strapped for cash and committed to huge spending as their employees age, these governments are a looming vulnerability in the U.S. financial system. They also represent a drag on economic growth as deficits force them to slash services and staff.
The Great Recession left a yawning hole in state budgets as revenues collapsed. California faced a $19-billion (U.S.) shortfall this year. This month, it finally approved a budget, 100 days late, that filled the breach – for now – through cuts, delays and optimistic assumptions.
While California is usually the poster child for fiscal trouble, other states aren’t far behind. By next spring, Illinois will face a deficit of $15-billion, or half of the state’s yearly day-to-day spending. Nevada, too, will confront a budget hole of similar proportions
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http://blogs.reuters.com/james-pethokoukis/2010/11/15/balance-the-u-s-budget-it-did-it-in-under-a-minute/
So I took a crack at the budget simulator cooked up over at the NYTimes Web site. It starts out with a projected 2015 deficit of $418 billion and a projected 2030 deficit of $1.355 trillion. My goal was to do it through 100 percent spending cuts.
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1) "eliminating tax breaks" such as the deductibility of health insurance provided by employers is a huge tax increase. Eliminating any tax break is a tax increase.
2) There are some huge military cuts in here, something which I oppose.
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What Caused the Financial Crisis
by Richard W. Rahn
Was the great financial crisis caused by greedy and reckless bankers and Wall Street players or by a broad range of individuals, financial institutions and governments who became less risk-averse and prudent or by government housing policies that brought on the housing bubble and mismanaged the risks? The lame-duck Congress now in session is about to make some major decisions on spending and taxes — when all too many members still are operating on the idea that greedy bankers and Wall Street players, rather than government housing policies, are the problem.
Without waiting for the evidence, many in the political class, and particularly those on the left, immediately bought into the argument that the financial crisis was caused by greed. This view of the cause provided much of the political energy behind the passage this year of the Dodd-Frank Act, also known as the financial reform act. Somewhat more sophisticated observers have claimed that all of the actors in the financial system are implicated. Peter J. Wallison, a former general counsel of the U.S. Treasury and now a fellow at the American Enterprise Institute (AEI), debunks these arguments and conclusively shows in a study that those were primarily government housing policies that caused the crisis. Mr. Wallison summarized the arguments of the collective responsibility/guilt crowd as follows:
• Wall Street did not put into place sound risk-management processes.
• Government regulators did not properly or effectively oversee these processes or the banks, investment banks, and Fannie Mae and Freddie Mac.
• The rating agencies' models were flawed and the agencies themselves had conflicts of interest, allowing complex and ultimately toxic instruments to be released into the financial market.
• Borrowers obtained mortgages under false pretenses, and unregulated mortgage brokers took advantage of unsophisticated buyers.
• Homebuyers mistakenly believed housing prices would always go up.
All of the above-mentioned factors probably played some small part in the financial crisis, but greed and incompetence have always been with us, and so it is hard to believe that suddenly these factors combined to create the perfect financial storm. Brookings Institution scholars Martin Neil Baily and Douglas J. Elliott have argued that the quarter-century of record prosperity from 1982 to 2007 caused all of the financial players to become less risk-averse, and hence less prudent. Perhaps, but Mr. Wallison has set forth in the AEI October-November 2010 issue of Financial Services Outlook a much stronger and empirically based explanation for the financial meltdown.
Mr. Wallison argues that the housing bubble, driven by U.S. government policy to increase homeownership, is the primary cause of the financial crisis. He notes: "The most recent bubble involved increases in real (not nominal) home prices of 80 percent over 10 years, while the earlier ones involved increases of about 10 percent before they deflated." Starting in the late 1990s, the government, as a social policy to boost homeownership, required Fannie Mae and Freddie Mac to acquire increasing numbers of "affordable" housing loans. (An "affordable loan" is made to people who normally would not qualify.) By 2007, 55 percent of all loans made by Fannie and Freddie had to be "affordable." By June 2008, there were 27 million subprime housing loans outstanding (19.2 million of them directly owed by government or government-sponsored agencies), with an unpaid principal amount of $4.6 trillion. By the middle of this year, foreclosure starts jumped to a record 5 percent, four times higher than any previous housing bubble.
Mr. Wallison concludes his argument: "What we know is that almost 50 percent of all mortgages outstanding in the United States in 2008 were subprime or otherwise deficient and high-risk loans. The fact that two-thirds of these mortgages were on the balance sheets of government agencies, or firms required to buy them by government regulations, is irrefutable evidence that the government's housing policies were responsible for most of the weak mortgages that became delinquent and defaulted in unprecedented numbers when the housing bubble collapsed." The tragedy is that the financial crisis continues because Congress misdiagnosed the problem and came up with a 2,000-page "solution" that will only make matters worse.
Despite the well-known problems with Fannie and Freddie, they were ignored in the Dodd-Frank Act. Why? Because many members of Congress had conflicts of interest in that Fannie and Freddie were very large contributors to the political campaigns of numerous members. More direct conflicts of interest, by Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd and House Financial Services Committee Chairman Barney Frank, were well publicized, forcing Mr. Dodd to retire and causing Mr. Frank to loan personal money to his own re-election campaign.
The numbers show that government policies (including actions by the Fed), not greedy bankers, caused the financial meltdown. As long as the government continues to force its agencies and private parties to give housing loans to those who cannot afford them, taxpayers will be on the hook for hundreds of billions of dollars in additional debt. But Washington is still in denial, from the president to the bureaucrats, including those at the Federal Reserve and, most of all, members of Congress — including, of course, the notorious Barney Frank, Charlie Rangel, Maxine Waters and Nancy Pelosi, all of whom won re-election rather than jail terms.
http://www.cato.org/pub_display.php?pub_id=12557&utm
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Strangling innovation with red tape
By Morris Panner
Friday, November 19, 2010
As a Democrat whose politics are undeniably liberal on social issues, I lamented the outcome of the midterm elections. But as an entrepreneur with two software start-ups under my belt, I couldn't help but celebrate - and more than a little. As the fall campaigns wore on, I had found myself listening closely to the Tea Party, nursing the hope that its message would push both major parties to change the way they do business.
To understand my motivation, pick up the November issue of Washingtonian magazine. The annual Salary Survey notes on Page 81 that top trade association leaders (industry lobbyists) make multimillion-dollar salaries to "keep tabs on what the federal government was doing or might do."
These outsize earnings are symptomatic of a disease that is slowly killing the American economy. We are creating so much regulation - over tax policy, health care, financial activity - that smart people have figured out that they can get rich faster and more easily by manipulating rules on behalf of existing corporations than by creating net new activity and wealth. Gamesmanship pays better than entrepreneurship.
It is always hard to start a business. It is especially hard to start an innovative business, one that will foster a new technology or business method. Incumbent players in a market have an inherent advantage: Momentum counts for a lot, and it takes tremendous effort to get customers comfortable with a new product - or even to hear about it in the first place.
Given the difficulty of starting a company from scratch, and how economic activity is generated today, you can start to see why, if you were a rational market actor, you would be trying to get a piece of the government action.
The combined expenditures of federal, state and local government are rapidly taking over our economy. At the beginning of President Obama's term, government spending made up 35 percent of gross domestic product. Now, it is up to almost 45 percent, which puts us seventh among advanced economies.
And the Obama administration's new regulatory initiatives make this considerably worse in subtle ways.
The two largest pieces of legislation enacted in the past two years - health care and financial reform - are very vague. Take the new Consumer Financial Protection Bureau. It has a broad mandate to protect us from financial abuse, but when it comes to the actual implementation, the Brookings Institution wrote that unelected regulators will decide "almost everything" about how the organization works.
This is highly dangerous to innovation, which depends on clear and transparent rules. The more complexity, the more incumbents are favored. They have the capital to participate in complicated regulatory proceedings. They can hire high-priced lobbyists to present facts in a light most favorable to them. The more incumbents are favored, the harder it is for new companies to gain traction.
For a preview of what a complex regulatory process looks like, consider our tax system. The World Bank ranks the United States 62nd in the world in terms of how easy it is to pay taxes - and with a 16,000-page tax code, this is no surprise. In 2009 and 2010, Capital Tax Partners, a leading lobbyist representing Goldman Sachs, Apple and others, earned about $20 million in fees, according to the Center for Responsive Politics.
So, what is to be done?
From an entrepreneur's perspective, we need a national campaign to create transparency in our legislation and a national moratorium on the creation of commissions, regulators and czars. It is time for Congress to do the hard job of saying what lawmakers mean in clear and easy-to-understand language.
It is also fair to hold our leaders to a standard of transparency. We should reject bills that are thousands of pages or that delegate vast authority to unelected regulators.
Entrepreneurs are in an unusual situation. We are staunchly pro-business, believing that new ideas properly implemented can change the world.
Yet we are hardly represented by the business lobbying interests in Washington. Like most Americans, I recoil at the fact that the man who runs the U.S. Chamber of Commerce earns about $3.9 million a year. He doesn't represent me.
The next two years will be a critical time to see whether all the promises of a more transparent America are realized. If not, maybe it is time to create an entrepreneurs party, where wealth and value creation are prized above rule manipulation and influence peddling.
The writer is chief executive of TownFlier, a software company dedicated to improving digital communication and collaboration.
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/18/AR2010111806073.html
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Government Strangles High-Tech Growth
Published on August 28, 2010 by Ernest Istook
The CEO of Intel has joined the ranks of those labeling big government as
the cause of our economic slump, not the solution.
Paul Otellini says it already costs Intel an extra billion dollars to build
a microchip plant in the U.S., rather than overseas. In his illustration,
it's an extra 25% to create a $4 billion facility.
He told this to an Aspen gathering of the Technology Policy Institute,
adding that government is killing America's leadership for jobs of tomorrow.
Otellini said, "We seemed a generation ahead of the rest of the world in
information technology. That simply is no longer the case."
While promoting education, research, favorable trade policies, and broadband
expansion, he made it clear that tax policies are key--policies that are the
opposite of what Congress and the Obama Administration are promoting:
As CNET reported on his speech, "Take factories. 'I can tell you
definitively that it costs costs1 billion more per factory for me to build,
equip, and operate a semiconductor manufacturing facility in the United
States,' Otellini said. The rub: Ninety percent of that additional cost of a
$4 billion factory is not labor but the cost to comply with taxes and
regulations that other nations don't impose."
How do we get companies to expand in America rather than overseas? The Intel
CEO explained, "Adjust the U.S. corporate tax rate to a rate that is
competitive world-wide. At Intel, we generate 75% of our revenue and much of
our profit abroad. The U.S. tax treatment of that income makes it extremely
expensive to repatriate that profit and invest here. If our tax rate
approached the rest of the world, corporations would have a natural
incentive to invest here given many of the natural advantages that exist in
this country."
He suggested lowering the rate to 25%. That reduction echoes a Heritage
Foundation proposal in its "Solutions for America," which recommends, "The
U.S. corporate tax rate should be set at or below the Organisation for
Economic Co-operation and Development average of 26% to eliminate the
incentive to move businesses and jobs overseas."
Otellini also stressed the need not to penalize companies when they
repatriate their foreign earnings and bring them back to the U.S. He's
joined by many others in the high-tech community who warn that what some
call "closing tax loopholes" actually hurts the ability to create jobs in
America. Sybase CEO John Chen has written, "President Barack Obama has
proposed to raise taxes on the international operations of U.S. businesses.
There is one thing the proposal can effectively achieve: make the United
States an even less friendly place to do business, and thus delay the
economic recovery. . . . Although intended to keep investments and jobs from
leaving our country, in the long run the measures in the proposal will drive
investments away, and kill jobs in the U.S."
The high-tech sector's complaints are part of a growing chorus from job
creators who describe how Washington is smothering economic growth.
The Business Roundtable sent a 50-page letter to the White House describing
how Obama's agenda is stifling growth and killing jobs. A GOP letter
complained of 191 intended rules and regulations that EACH would impose
$100-million or more of growth-killing cost burdens on businesses.
Worried about what their own government is doing to them, businesses
continue to sit on a $1.8-trillion cash stockpile, holding it back for the
extra costs they face from more taxes and more regulation.
The White House happy talk of a "Recovery Summer" grates like nails on a
blackboard. That rhetoric collapses with news that second quarter growth was
at a 1.6% annual rate--less than half the first quarter rate and well below
original White House numbers.
To put America back to work, it's time to heed those who create jobs, rather
than politicians who create more government. Intel and others should not
face a $1-billion hurdle to expanding in the USA instead of overseas.
Former Congressman Ernest Istook is a distinguished fellow at The Heritage
Foundation.
http://www.heritage.org/Research/Commentary/2010/08/Government-Strangles-High-Tech-Growth
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Jut another outrage. An example of 20 billion Federal "grant" money use. We all know this money is used for political gain.
I want my tax money back. I am sick and tired of being robbed to pay for such crap:
http://www.thedailybeast.com/blogs-and-stories/2010-11-22/ground-zero-mosque-applied-for-federal-911-grant-reports-daily-beasts-john-avlon/?cid=hp:mainpromo2
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Couple of weeks ago I have another man around 40 come in with back pain. His MRI shows a disc bulge. Most people his age would show this.
He now wants me to give him a *year" of disability.
I said most of these calm down in 4 or 6 weeks.
Frankly I am fed up with this stuff.
He can't get a job at a burger king like all the illegals?
I should spend the rest of my life working my ass off so he can sit around and get checks on my dime?
People this is totally out of control. Till we have politicians who have some darn guts we will continue to sink to the bottom of the ocean.
As far as I am concerned this country does not deserve better. To think young men and women are risking their lives and limb to defend what - a country of assholes?
And to watch Wall Street honor the medal of honor winner last week. While insider trading is rampant. As I said life is a total joke.
The joke is on the honest hard working people - if there are any left.
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Glenn Beck last night said that the IMF gave/lent $1T each to Greece and Ireland. In that 1/6th comes from the US taxpayer (Can you spell taxation without representation?) that works out to some $320B :-o :x :x :x
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"There is no such thing as a "free" government benefit"
As long as we have a large proportion of the "little guys" voting themselves benefits from the treasury those of us who pay for this have apparantly no rights. Obama is for the "little guy". Yet taxpayers like myself seem to have no say, no rights, are constantly being hounded about helping out and on and on and on.
**** Small-Biz Killers: Who Pays for Jobless Benefits?
By Michelle Malkin
http://www.JewishWorldReview.com | There is no such thing as a "free" government benefit. Ask small-business owners who are footing skyrocketing bills for bottomless jobless benefits. While politicians in Washington negotiate a deal to provide welcome temporary payroll, income and estate tax relief to America's workers, struggling employers wonder how long they'll have to pay for the compassion of others — and whether they can survive.
The Beltway deal hinges on extending federal unemployment insurance for another 13 months. This would mark the sixth time that the deadline has been extended since June 2008.
State unemployment benefits last up to 26 weeks. Bipartisan-supported Washington mandates have raised that to 99 weeks. The current proposal would raise the total to 155 weeks. The cost of the joint federal-state program is borne by employers who pay state and federal taxes on a portion of wages paid to each employee in a calendar year. (At the federal level, employers must pay 6.2 percent of the first $7,000 of income to keep the system afloat.)
The combined burden of these hidden state and federal payroll taxes has exploded during the recession as President Obama's economic recovery interventions backfire and the jobless rate remains stuck near double-digits. State unemployment insurance funds have gone broke in nearly half the states. As of April 2010, unemployment tax analyst Douglas Holmes testified before the Senate, 35 states and jurisdictions had unemployment fund-related debts worth $39.5 billion. Anti-fraud efforts to prevent scams and overpayments are woefully underfunded.
In an interminable money shuffle, these bankrupt state unemployment insurance funds are now borrowing money from the feds, whose own regular unemployment benefits account and extended benefits account are both in the red. Washington is relying on transfers from the federal general revenue fund to cover loan obligations related to all these hemorrhaging accounts.
Who pays? Dentists, tavern owners, maid services, mom-and-pop shops — small businesses that are the backbone of the American economy. In my home state of Colorado, small and mid-size firms have been saddled with eye-popping unemployment insurance bills that have doubled, tripled and more in the past year. The businesses that have the lowest claims histories are getting punished the most to make up the jobless benefits fund deficit.
Greg Howard, owner of McCabe's Tavern in Colorado Springs, told the Colorado Springs Gazette his bill spiked a whopping 600 percent. "It's enough to T you off a little bit," Howard told the newspaper. "The dollar amount isn't tremendous, but it's going up six times."_
A small commercial painting contractor told me this week that her nine-person company's 1st quarter UI bill has gone from $1,000 to more than $6,500 over the past three years. "It's killing us!" she told me. "How can we hire additional employees? This is a big increase in addition to the health insurance annual increases, etc. We had to reduce our employees' wages by 10 percent this year, and who knows when we will be able to bump them back up?"
Lon Gibson, owner of Legalpool, Inc., told me how perverse unemployment insurance incentives led him to shut down his business in Philadelphia:
"We placed legal staff, especially temporary secretaries and paralegals. Part of our business was to place a secretary at a law firm for a short period of time. … Invariably, however, the temp would apply for unemployment benefits after the assignment. The agency would make a profit of $6 to $10 an hour from the assignment. Later, the bill would come in from unemployment for the temp and thus eliminate the profit we made from the temp! Ultimately, unless the temp didn't file, the money we made on the temp was completely subtracted by required unemployment payments. It was exactly like, to use a football analogy, making a 10-yard gain and consistently having it eliminated by a holding penalty. … I can only imagine what other agencies are going through now with this administration."
__John S., president of Vinyl Headlights Inc., shared his plight:
"We are a variety rock band that travels up and down the East Coast. Yes, everyone thinks we're lefty rockers, but that could not be further from the truth. We're all businessmen, and we provide a service. Since Obama's term, I have been watching our cost of business going up (UI, fuel, licenses, etc.), and we've had to modify our rates lower to keep us profitable. … We have let an employee go to further reduce costs. The last resort is to dissolve the company and send every man for himself. More than likely, all employees would take unemployment. If the government just got out of the way, I could employ people and provide the government revenue, but I am better off employing no one to keep from paying UI and the taxes. If a musician can get it, why can't (Obama)? Oh, wait: He's never had to make a payroll, and private enterprise is the enemy."
These unsung Obama jobs death toll stories are amassing across the nation. Alas, the victims of government wealth redistribution never earn as much of Washington's attention as the beneficiaries.****
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http://townhall.com/columnists/JohnStossel/2010/12/22/uncle_sam_will_help_buy_you_an_alpaca/page/full/
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David M Gordon:
The US government enlisted the help of investment bankers this year (2010), as it sold down its stakes in Citigroup, General Motors, AIG, and others. Total fees paid topped an astonishing $3 Billion!
The ugly truth in black and while (and some yellow highlighting)...
http://online.wsj.com/public/resources/documents/GMWorkingforUncleSam.pdf
Scott Grannis:
That's actually not so surprising, considering that the $3 billion in fees represents only 4 bps (0.04%) of the total amount ($7.8 trillion!!!) raised. It's the total that is mind-boggling. Where did that money come from and where did it go??
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The cities of Minneapolis and St. Paul towed more than 1000 cars on Christmas; it is hard to keep track not to park on the even side of the street the second day after a snow emergency when snow emergencies are declared roughly every 3 days.
Good news is that a) we have a whole new diverse group of citizens thinking of joining the anti-government wing of the tea party, and b) we finally have achieved our goal with complete separation of church and state.
For those who did remember and moved their cars on time Christmas day for the 6th time this month, we have bad news. They can't push the snow far enough to park there again and still let cars drive through.
http://www.kare11.com/news/news_article.aspx?storyid=895983
More than 1,000 vehicles towed in this latest snow emergency in the cities of St. Paul and Minneapolis.
"Yeah it's not a merry Christmas at all," Jennifer said in the line at the St. Paul tow lot Sunday night.
That tow lot was packed Sunday night with people in the bitter cold standing in a single file line to pay upwards of two hundred dollars to get a vehicle back that was parked illegally in the city's snow emergency, declared Saturday.
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[youtube]http://www.youtube.com/watch?v=u9ieKL1OijA&feature=player_embedded[/youtube]
http://jammiewearingfool.blogspot.com/2010/12/ny-gov-david-paterson-public-pension.html
**Any questions?
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Here's something most Republicans don't want to hear: There is no way the born-again, straight and sober Republicans of the 112th Congress are going to get spending under control unless they involve the fellow at 1600 Pennsylvania Avenue.
The spending reforms that Speaker John Boehner and his counterinsurgency lieutenants have proposed—spending reductions to offset any mandatory increases or stated budget limits for the current fiscal year—are terrific. But if you think Congress, by itself, is going to sustain this discipline over time, I have a bridge in Alaska I'd like to sell you.
Congress is a legislative body. Like legislative bodies from ancient Rome till now, its DNA is not to forgo things but to do stuff. Everyone agrees that Congress holds something called the "power of the purse." And don't they know it. Nowhere in the Constitution will you find that phrase. Nor in the Constitution that they are reading on the House floor Thursday will you hear the words "spend," "programs" or "outlays." All this, though, is what Congress has been about since anyone can remember.
The reform groups and blogosphere are threatening hellfire for any Republicans who cross them on spending, but take my word for it: Once any Congress makes it to the budgeting "out years," all that hellfire will be just a puff of smoke. James Buchanan, the father of public choice theory, won a Nobel Prize for unraveling this reality.
It is not hopeless. The locus of hope, however, lies with the Executive, a word at least nominally associated with responsibility. In an article on these pages recently ("Time for Emergency Economic Reform"), a successful political executive, Gov. Mitch Daniels of Indiana, identified the sine-qua-non reform to sustain spending discipline: presidential impoundment power.
However you define the idea—impoundment, rescission, the line-item veto—it is the power of a president or governor to zero out some of the spending pile that a legislature dumps on the front lawn. It is executive pushback against wretched legislative excess.
"Presidents once had the authority," Mr. Daniels wrote, "to spend less than Congress made available through appropriation. On reflection, nothing else makes sense."
Ask New Jersey Gov. Chris Christie about the impoundment power. He has it, and he'll tell you it is indispensable to what he is trying to do in his hopelessly profligate state. Absent that impoundment power, a lot of the Christie pitch would be just rhetoric.
Before getting into why 43 governors, but not the U.S. president, have this power, a comment on those who say that impoundment is a pop-gun, that it can't control entitlements or mega-programs.
View Full Image
Corbis
The Roman Senate contemplates bankrupting the empire.
.Perhaps you have heard of the "broken windows" theory of urban chaos. It says that in a neighborhood wracked with murder and mayhem, it is important to repair broken windows. The idea is that leaving small matters like broken windows unrepaired tells criminals that no one cares if they break the neighborhood further, and it tells the people there is no hope of fixing the big things. In New York City, this worked.
Earmarks, pork, corporate carve-outs and all that are Congress's broken windows.
Every knowing article written on this subject points out what a "small" percentage of spending this stuff is. But the behavioral incentives for big-time criminals in the Bronx and big-time spenders in a legislature like Congress are the same. An annual federal budget of $3.5 trillion is a towering monument of broken windows. Federal highway spending has been on automatic pilot for nearly 20 years. Sen. Tom Coburn has a long list of programs uselessly duplicated across the government; nine agencies run 69 early-education programs.
Here is a list of U.S. presidents and public figures who have used or supported the impoundment power: Abe Lincoln, Franklin Roosevelt, Harry Truman, JFK, LBJ, Bill Clinton, the Bushes, John McCain, John Kerry, Al Gore, Pat Buchanan, Jeb Hensarling, Russ Feingold, Joe Lieberman, Judd Gregg, and not least both Paul Ryan, the new House Budget chairman, and Barack Obama.
This crucial executive ballast does not exist mainly for two reasons.
In the early 1970s, Richard Nixon tried aggressively to impound spending, touching off a war with Congress's "prerogatives." Then Watergate broke. In a fury, one of the most liberal Congresses passed the Budget Control Act of 1974 (which should be repealed). It transferred most spending "control" to Congress, which one commentator at the time called "congressional government—and chaos."
Second, the Constitution is ambiguous on how to divide this authority, and the Supreme Court, in coin-flip decisions, has sided with Congress.
All the congressional names above, especially Rep. Ryan, have tried to thread this legal needle. But it doesn't exist because the bipartisan pig-out caucus—in hiding now—won't let it happen.
Yes, this week the GOP Congress is talking about a lollapalooza annual budget cut of $100 billion. Go for it! But let's hear Barack Obama put the impoundment power back in play in his State of the Union address—for this presidency and however many presidents are left in the future of our broken-windows capital.
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The Texas OmenBy PAUL KRUGMAN
Published: January 6, 2011
These are tough times for state governments. Huge deficits loom almost everywhere, from California to New York, from New Jersey to Texas.
Wait — Texas? Wasn’t Texas supposed to be thriving even as the rest of America suffered? Didn’t its governor declare, during his re-election campaign, that “we have billions in surplus”? Yes, it was, and yes, he did. But reality has now intruded, in the form of a deficit expected to run as high as $25 billion over the next two years.
And that reality has implications for the nation as a whole. For Texas is where the modern conservative theory of budgeting — the belief that you should never raise taxes under any circumstances, that you can always balance the budget by cutting wasteful spending — has been implemented most completely. If the theory can’t make it there, it can’t make it anywhere.
How bad is the Texas deficit? Comparing budget crises among states is tricky, for technical reasons. Still, data from the Center on Budget and Policy Priorities suggest that the Texas budget gap is worse than New York’s, about as bad as California’s, but not quite up to New Jersey levels.
The point, however, is that just the other day Texas was being touted as a role model (and still is by commentators who haven’t been keeping up with the news). It was the state the recession supposedly passed by, thanks to its low taxes and business-friendly policies. Its governor boasted that its budget was in good shape thanks to his “tough conservative decisions.”
Oh, and at a time when there’s a full-court press on to demonize public-sector unions as the source of all our woes, Texas is nearly demon-free: less than 20 percent of public-sector workers there are covered by union contracts, compared with almost 75 percent in New York.
So what happened to the “Texas miracle” many people were talking about even a few months ago?
Part of the answer is that reports of a recession-proof state were greatly exaggerated. It’s true that Texas job losses haven’t been as severe as those in the nation as a whole since the recession began in 2007. But Texas has a rapidly growing population — largely, suggests Harvard’s Edward Glaeser, because its liberal land-use and zoning policies have kept housing cheap. There’s nothing wrong with that; but given that rising population, Texas needs to create jobs more rapidly than the rest of the country just to keep up with a growing work force.
And when you look at unemployment, Texas doesn’t seem particularly special: its unemployment rate is below the national average, thanks in part to high oil prices, but it’s about the same as the unemployment rate in New York or Massachusetts.
What about the budget? The truth is that the Texas state government has relied for years on smoke and mirrors to create the illusion of sound finances in the face of a serious “structural” budget deficit — that is, a deficit that persists even when the economy is doing well. When the recession struck, hitting revenue in Texas just as it did everywhere else, that illusion was bound to collapse.
The only thing that let Gov. Rick Perry get away, temporarily, with claims of a surplus was the fact that Texas enacts budgets only once every two years, and the last budget was put in place before the depth of the economic downturn was clear. Now the next budget must be passed — and Texas may have a $25 billion hole to fill. Now what?
Given the complete dominance of conservative ideology in Texas politics, tax increases are out of the question. So it has to be spending cuts.
Yet Mr. Perry wasn’t lying about those “tough conservative decisions”: Texas has indeed taken a hard, you might say brutal, line toward its most vulnerable citizens. Among the states, Texas ranks near the bottom in education spending per pupil, while leading the nation in the percentage of residents without health insurance. It’s hard to imagine what will happen if the state tries to eliminate its huge deficit purely through further cuts.
I don’t know how the mess in Texas will end up being resolved. But the signs don’t look good, either for the state or for the nation.
Right now, triumphant conservatives in Washington are declaring that they can cut taxes and still balance the budget by slashing spending. Yet they haven’t been able to do that even in Texas, which is willing both to impose great pain (by its stinginess on health care) and to shortchange the future (by neglecting education). How are they supposed to pull it off nationally, especially when the incoming Republicans have declared Medicare, Social Security and defense off limits?
People used to say that the future happens first in California, but these days what happens in Texas is probably a better omen. And what we’re seeing right now is a future that doesn’t work.
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I have heard about the deficit in Texas but was not sure what it entailed. So I have done a quick search to educate myself and I stress quick. It was my understanding that Texas has a balance budget amendment, so how can we have a deficit? Well I found the below article. It is from a very left point of view but seems to explain things. Bottom line we cut taxes and have to now cut spending due to the reduced revenue. The left is screaming, they cant conceive of where or that we can cut. They claim our conservative plan to not raise taxes and cut spending doesn't work because we have to cut spending.........but that is the plan to CUT SPENDING! Smaller government!
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Understanding the budget and Texas’ structural deficit
http://eyeonwilliamson.org/?p=7118
Texas has an annual “structural deficit” of about $4.5 billion per year. It was created in 2006 by Gov. Rick Perry and the GOP controlled Texas Legislature. What at the time was billed as a tax-swap of 2006 was nothing of the kind. While it lowered property taxes, the taxes it created to offset that have been way too small to make up the difference – creating the structural deficit. Here’s how it was describes last year during the legislative session, Deficit or awash in cash?
Remember when lawmakers cut school property taxes three years ago? Dropping the maintenance and operation tax rate from $1.50 per $100 valuation costs the state more than $7 billion every year for public education.
And the new business franchise tax and cigarette tax increase generates about $2.5 million more than the old franchise tax – leaving a gap of nearly $5 billion.
“That’s called a structural deficit,” Rep. Scott Hochberg, D-Houston, said. “I don’t think it’s a surprise or any new finding that we have a structural deficit. It was very clear that we passed tax cut bills that had greater costs to them than the replacement tax bills.”
Of course the problems were known with Perry and the Texas GOP’s “tax-swap” scheme when it was passed. From the Center for Public Policy Priorities Policy Page titled Digging a Hole: Special Session Tax and School-Finance Package Creates $10.5 Billion Deficit in 2008-09 Budget
The fiscal notes for the tax and school-finance bills passed during the special session reveal a gap of $10.5 billion between the expected costs of HB 1 and anticipated revenues from HB 3, 4,and 5 in 2008-09. This deficit will place tremendous pressure on the next state budget, which could cause severe budget cutbacks, an increase in the state sales tax or other state taxes, an expansion of gambling as a source of revenue, or all of the above.
[...]
What is the net result?
Combining the estimated costs of HB 1 with the estimated revenue from HB 3, 4, and 5 reveals a potentially disastrous gap in future budgets. As the table below shows, the expected deficit in 2008-09 is $10.48 billion,growing to $11.12 billion in 2010-11. This deficit will place tremendous pressure on the next state budget, which could cause severe budget cutbacks, an increase in the state sales tax or other state taxes, an expansion of gambling as a source of revenue, or all of the above.
Of course Perry and the Texas GOP caught a break last year when it received help from the federal government. The problem was able to be overcome in the last budget cycle by using the federal stimulus money. The point is Perry, Dewhurst, and the rest of the GOP knowingly created a deficit in 2006. Why? Well this has been part of the GOP’s plan since Reagan became president. To create large deficits in order to force cuts to social programs and public education, which have long been the biggest enemy of those on the far right. They don’t believe the government should be involved in giving people a hand up, whether it’s health care for children or an education.
Jason Embry in the AAS on Wednesday put it this way, Budget mess got going with 2006 property tax cuts.
A picture of how the state could look after a budget shortfall hits next year is starting to emerge.
Fewer guards would patrol state prisons. Universities would postpone facility upgrades. Doctors would get less money for seeing Medicaid patients.
[...]
We don’t yet know how deep the cuts will be. What we do know is how we got here, and it’s not for the reason state leaders want you to believe.
The economic downturn isn’t helping the shortfall, but it’s not driving it, either. The driving factor is a decision by Gov. Rick Perry and the Legislature in 2006 to reduce property taxes by $14 billion every two years and raise only about $9 billion to replace that money. In other words, the Legislature committed $5 billion every two years to holding down property taxes instead of spending that money on education, public safety or other priorities.
Then the state’s new business tax brought in drastically less than projected, and that $5 billion gap turned into a nearly $9 billion gap. Lawmakers from both parties did little to address that reality when they met in 2009, and in fact they made the gap a little wider by exempting 40,000 small businesses from the new tax.
And as he goes on to point out, if taxes are not increased there will be sizable cuts in spending. More like the draconian cuts that were made 2003.
Essentially what all of this shows is that much of Texas’ deficit was pre-determined, no matter how the overall economy in Texas and our country overall has been functioning. And while our governor is on TV telling us how many times he “cut” taxes, he won’t say anything about the structural deficit he signed into law in 2006. And Perry’s GOP opponents are quick to chastise him for the 2006 tax swap scheme because it raised taxes on corporations and some business, they don’t mention the fact that it created structural deficit. Probably because if they did they would have to say what the would do to fix it, and they don’t want to debate that.
As another CPPP report points out, “..Texas is a low-tax state, with a structural deficit.” If we want to educate our children it’s going to cost money. And it’s untrue, no matter how many times that guy with the good hair on TV says it, that Texas can provide the essential services to it’s people, do what’s morally right, allow them to live with dignity and have tax cuts too.
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I shared the Krugman piece with Top Dog who now lives in Houston. Here are his comments on it:
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Talk about slanted! True, housing is much cheaper if you simply look at the inital purchase - as we did. Where they make up for it is in the highest property taxes in the Gulf - my taxes here are 3 times more than I paid in Long Beach! We got a boost in population due to the influx of people from Louisiana ( New Orleans/Katrina that doesn't seem to get reported enough) and to some extent the petrochemical industry but oil was ridiculously high for about 4 months before it crashed to the 70's and the jobs remained.
The economy "feels" better here compared, say , to CA but no one thinks it is a gravy train. So, is Krugman's point that neither system works or that Texas is full of it and should be villified? He always struck me as - suprize! - trying to attract attention to himself with edgy statements.
Btw it is still okay to have a gun show - and buy a gun on the spot - every weekend anywhere. The states he mentioned do not allow this. Politicians here know this and respect the fact they have an armed population and not shrill or dependant citizens. - I have 3 and lots of ammo. Ryan is a pretty good shot with his .22 that St. Nick brought him this Christmas (that's right, CHRISTMAS, not "Holidays"!). Santa preffers a W&S .357 revolver long barrel loaded with hollow points. A little old school but hey! it's very effective.
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Please correct me if I am wrong, but lost in this discussion is that Texas has NO INCOME TAX.
http://en.wikipedia.org/wiki/State_income_tax
And that compares HOW with California, NY or my home state??
If Texas added a 1% income tax, the top rate in Calif. would still be roughly 1000% higher.
Regarding Krugman, what a bunch of BS to compare budget struggles and leave that small fact out!
I happen to believe income tax is the best tax (if low, flat, simple and fair) because that is where the money is. Unfortunately once you open that door, endless escalation and abuse of it is your future.
Property taxes don't come with a source of money to pay them so eventually they take your property unless you have an enduring source of - income. Still it sounds like property taxes aren't much worse in Texas than California where by contrast they collect $54 Billion off the personal income tax alone (2008). http://www.lao.ca.gov/2009/tax/revenues_0209/revenues_020609.aspx Calif had Prop 13, the beginning of tax revolt, but I don't know where that stands now.
"Estimated at 10.5% of income, California's state/local tax burden percentage stands at 6th highest national
"California's 2011 Business Tax Climate Ranks 49th "
http://www.taxfoundation.org/research/topic/15.html
Besides leaving no state income tax out of a state budget comparison, Nobel Laureate Prof. Krugman suddenly drops California (at 12%) out of his comparison when he refers to Texas' below average unemployment rate as being no big deal.
I would not buy a used car from this man.
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Property tax is a direct assault on liberty. Liberty is at stake when you have to pay rent(property tax) to the government. Income tax would be unconstitutional without the amendment. It treats people unequally and promotes class warfare. I have not seen a better system than the fair tax. That is my 2 cents
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I am sympathetic to this point. The idea that someone cannot hunker down outside of the money economy is disconcerting to me.
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"Property tax is a direct assault on liberty. Liberty is at stake when you have to pay rent(property tax) to the government." (Freki)
"The idea that someone cannot hunker down outside of the money economy is disconcerting" (CD)
- Very interesting.. If there was once a right to be left alone it sure has passed us by.
The focus now I think has to be just lower spending, lower taxes can follow. Far fewer and more effective programs. Get back to the basics.
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NYT/POTH:
Since the government took over Fannie Mae and Freddie Mac, taxpayers have spent more than $160 million defending the mortgage finance companies and their former top executives in civil lawsuits accusing them of fraud. The cost was a closely guarded secret until last week, when the companies and their regulator produced an accounting at the request of Congress.
The bulk of those expenditures — $132 million — went to defend Fannie Mae and its officials in various securities suits and government investigations into accounting irregularities that occurred years before the subprime lending crisis erupted. The legal payments show no sign of abating.
Documents reviewed by The New York Times indicate that taxpayers have paid $24.2 million to law firms defending three of Fannie’s former top executives: Franklin D. Raines, its former chief executive; Timothy Howard, its former chief financial officer; and Leanne Spencer, the former controller.
Late last year, Randy Neugebauer, Republican of Texas and now chairman of the oversight subcommittee of the House Financial Services Committee, requested the figures from the Federal Housing Finance Agency. It is the regulator charged with overseeing the mortgage finance companies and acts as their conservator, trying to preserve the company’s assets on behalf of taxpayers.
“One of the things I feel very strongly about is we need to be doing everything we can to minimize any further exposure to the taxpayers associated with these companies,” Mr. Neugebauer said in an interview last week.
It is typical for corporations to cover such fees unless an executive is found to be at fault. In this case, if the former executives are found liable, the government can try to recoup the costs, but that could prove challenging.
Since Fannie Mae and Freddie Mac were taken over by the government in September 2008, their losses stemming from bad loans have mounted, totaling about $150 billion in a recent reckoning. Because the financial regulatory overhaul passed last summer did not address how to resolve Fannie and Freddie, Congress is expected to take up that complex matter this year.
In the coming weeks, the Treasury Department is expected to publish a report outlining the administration’s recommendations regarding the future of the companies.
Well before the credit crisis compelled the government to rescue Fannie and Freddie, accounting irregularities had engulfed both companies. Shareholders of Fannie and Freddie sued to recover stock losses incurred after the improprieties came to light.
Freddie’s problems arose in 2003 when it disclosed that it had understated its income from 2000 to 2002; the company revised its results by an additional $5 billion. In 2004, Fannie was found to have overstated its results for the preceding six years; conceding that its accounting was improper, it reduced its past earnings by $6.3 billion.
Mr. Raines retired in December 2004 and Mr. Howard resigned at the same time. Ms. Spencer left her position as controller in early 2005. The following year, the Office of Federal Housing Enterprise Oversight, then the company’s regulator, published an in-depth report on the company’s accounting practices, accusing Fannie’s top executives of taking actions to manipulate profits and generate $115 million in improper bonuses.
The office sued Mr. Raines, Mr. Howard and Ms. Spencer in 2006, seeking $100 million in fines and $115 million in restitution. In 2008, the three former executives settled with the regulator, returning $31.4 million in compensation. Without admitting or denying the regulator’s allegations, Mr. Raines paid $24.7 million and Mr. Howard paid $6.4 million; Ms. Spencer returned $275,000.
Fannie Mae also settled a fraud suit brought by the Securities and Exchange Commission without admitting or denying the allegations; the company paid $400 million in penalties.
Lawyers for the three former Fannie executives did not respond to requests for comment. A company spokeswoman did not return a phone call or e-mail seeking comment.
In addition to the $160 million in taxpayer money, Fannie and Freddie themselves spent millions of dollars to defend former executives and directors before the government takeover. Freddie Mac had spent a total of $27.8 million. The expenses are significantly larger at Fannie Mae.
Legal costs incurred by Mr. Raines, Mr. Howard and Ms. Spencer in the roughly four and a half years prior to the government takeover totaled almost $63 million. The total incurred before the bailout by other high-level executives and board members was around $12 million, while an additional $18 million covered fees for lawyers for Fannie Mae officials below the level of executive vice president. Many of these individuals are provided lawyers because they are witnesses in the matters.
Employment contracts and company by-laws usually protect, or indemnify, executives and directors against liabilities, including legal fees associated with defending against such suits.
After the government moved to back Fannie and Freddie, the Federal Housing Finance Agency agreed to continue paying to defend the executives, with the taxpayers covering the costs.
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But indemnification does not apply across the board. As is the case with many companies, Fannie Mae’s by-laws detail actions that bar indemnification for officers and directors. They include a person’s breach of the duty of loyalty to the company or its stockholders, actions taken that are not in good faith or intentional misconduct.
Richard S. Carnell, an associate professor at Fordham University Law School who was an assistant secretary of the Treasury for financial institutions during the 1990s, questions why Mr. Raines, Mr. Howard and others, given their conduct detailed in the Housing Enterprise Oversight report, are being held harmless by the government and receiving payment of legal bills as a result.
“Their duty of loyalty required them to put shareholders’ interests ahead of their own personal interests,” Mr. Carnell said. “Had they cared about the shareholders, they would not have staked Fannie’s reputation on dubious accounting. They defied their duty of loyalty and served themselves. At a moral level, they don’t deserve indemnification, much less payment of such princely sums.”
Asked why it has not cut off funding for these mounting legal bills, Edward J. DeMarco, the acting director of the Federal Housing Finance Agency, said: “I understand the frustration regarding the advancement of certain legal fees associated with ongoing litigation involving Fannie Mae and certain former employees. It is my responsibility to follow applicable federal and state law. Consequently, on the advice of counsel, I have concluded that the advancement of such fees is in the best interest of the conservatorship.”
If the former executives are found liable, they would be obligated to repay the government. But lawyers familiar with such disputes said it would be difficult to get individuals to repay sums as large as these. Lawyers for Mr. Raines, for example, have received almost $38 million so far, while Ms. Spencer’s bills exceed $31 million.
These individuals could bring further litigation to avoid repaying this money, legal specialists said.
Although the figures are not broken down by case, the largest costs are being generated by a lawsuit centering on accounting improprieties that erupted at Fannie Mae in 2004. This suit, a shareholder class action brought by the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio, is being heard in federal court in Washington. Although it has been going on for six years, the judge has not yet set a trial date. Depositions are still being taken in the case, suggesting that it has much further to go with many more fees to be paid.
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IMHO this is one of the most important issues there is when it comes to rolling back spending and establishing honest, sound policies; I've mentioned it here before, to little effect-- but until we get this, we our without solution to our dilemas:
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Move over, Chris Christie. New York Democratic Governor Andrew Cuomo is bidding to join the New Jersey Republican as the national spokesman for fiscal sanity, and he's doing so in a politically clever way that House Republicans could learn from.
The budget that Mr. Cuomo unveiled this week closes a gaping deficit with major budget reductions, calling for spending cuts in state hiring, education, health care, aid to universities and payments to cities. The plan would balance the Empire State's $135 billion budget without a dime of new taxes or borrowing. Remarkably, if his budget passed, the state would spend $3.5 billion less than it did last year.
And remember, we're talking about politically liberal New York, not New Hampshire. If you're surprised by this, you should see long-time Democratic Assembly Speaker Sheldon Silver, who looks as though he stuck his finger in the electric socket.
These cuts are impressive on their own, but Mr. Cuomo's real conceptual breakthrough is to expose the rigged-game of "baseline budgeting." This is a gambit by which spending increases automatically each year even before a Governor submits his budget. The "baseline" grows each year due to spending formulas that legislatures build into the law even before they take a single vote.
Mr. Cuomo put it this way in a New York Post op-ed on Tuesday: "When a governor takes office, in many ways the die has already been cast. Unbelievably, this year these rates and formulas in total call for a 13 percent increase in Medicaid and a 13 percent increase in education funding next year."
This means that if Mr. Cuomo proposes a spending increase for Medicaid that is less than 13%, he will be attacked for "cutting" spending. Yet overall Medicaid spending would still increase. As Mr. Cuomo notes, "this process frames the dialogue around the budget and biases the political discourse." That is precisely the goal of government unions and the politicians who follow their orders because it allows them to increase spending even as they cry fiscal havoc.
Mr. Cuomo points out that under the automatic baseline formulas, the New York state budget deficit this year is estimated to be $10 billion. Yet if the state operated like families do, with a new budget for each year starting from a base of what the state spent the year before, the deficit would be closer to $2 billion. Closing a deficit of that size suddenly becomes a lot easier, making it much harder to justify the tax increases that Mr. Silver and his cronies are famous for.
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Associated Press
New York Gov. Andrew Cuomo
.The Governor is proposing a reform that would deflate these baselines with more reasonable and affordable spending projections. For example, his budget would base a spending increase for Medicaid on the rate of medical inflation, which is less than half the 13% increase previously assumed in the budget. He would hold education funding to the rate of personal income growth, about half the growth built into the baseline for school budgets. By fixing this fraudulent convention, Mr. Cuomo's budget reduces spending for years to come without having to fight political battles every year.
There's a vital lesson here for House Republicans because the same baseline games have long prevailed in Washington. The Democrats who wrote the budget rules also built in formulas that increase spending each year before Congress even takes a vote. Those same Democrats are now lying in wait for Republicans to propose their budget, and they will describe even increases in spending as brutal "cuts." The media will dutifully play along.
Republicans ought to follow Mr. Cuomo's savvy lead and blow the whistle on this rigged process early and often. Alas, we fear too many Republicans want to brag about their "cuts" to impress the tea party even if they come from an inflated baseline. This is a recipe for letting Democrats frame the budget debate in ways that will make it harder for Republicans to achieve their budget goals, even as the GOP suffers political damage in the process. They would be smarter to take Mr. Cuomo's cue.
This is not to say Mr. Cuomo's budget is perfect. The Governor reduces education aid by 7.3% and tells schools to get their costs under control, thin bloated payrolls, and do more with less. He would also allow New York City and other cities to lay off thousands of "nonteaching teachers." But he doesn't propose to let cities lay off teachers based on merit, as opposed to seniority—which means that many of the youngest and best teachers will lose their jobs. Mr. Cuomo seems to think this would be too difficult to pass given his other priorities, but such a reform will never pass if it isn't part of his first budget when his political capital is at its peak.
Mr. Cuomo nonetheless deserves credit for breaking Democratic type and following through on his campaign promise to shape up Albany. His fight has only begun, but he's off to a shrewd and useful start.
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"Baseline Budgeting - IMHO this is one of the most important issues there is when it comes to rolling back spending and establishing honest, sound policies..."
I agree wholeheartedly but it is easier said than done. I believe this is something Newt promised and could not / did not deliver. We actually should approach him now on answering this.
In my sales past I had the opportunity to sell office systems to government agencies State and Federal. There literally were rushes in certain cases to spend up money at the end of fiscal years to avoid having next year's agency or office budget start lower, in other words a reverse incentive from cost savings, efficiency and results. Now budgets mostly have been squeezed and extra money isn't so freely floating around, but the nature of the beast has not changed.
From my armchair I say we need zero-based budgeting. You justify your mission, your results, your collateral damage and your budget needs each year starting up from zero. In the real world, these people can't even be fired or have their pay cut, leases on office spaces have financial commitments, so do computer systems etc. Still the baseline could be set at zero increase, with some offices, agencies or overlapping functions facing percentage cuts or extinction. The problem there is political. You have to be able to face the advocates of big government who say the usual, food to the hungry, meds to the elderly etc.
Zero increase is how far Obama went (with his latest head fake). But he means lock in the trillions of temporary, emergency increases, call it a freeze, then not stick to it for the same reason, fat children could die of starvation or whatever the latest poll tested line is.
Overlapping functions of govt is huge IMO. Getting the Feds out of many of its current functions and sending it with the money back to the states can get rid of some overlap.
Mostly it is definition of government. If we asked it do less, key functions that remain would be more manageable. Of course we are still headed full steam in the opposite direction, see health care flow chart, cash for clunkers, electric car programs, high speed rail, light bulb selection agency, CO2 is a poison program, insulation credits and monitoring, 1099s for lawn mowing, federal auto manufacturing agency, ownership of the private mortgage market, ATM fee control agency, federal utility bill assistance as a compensator for raising your rates with excessive regulations elsewhere, etc, I could go on.
Back to the first point about immovable costs: some end or control of the public employee union phenomenon will necessarily precede any real budget or efficiency improvements or innovations - and no one has proposed that.
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http://townhall.com/columnists/hughhewitt/2011/02/10/gop_defaults_on_pledge_to_america/page/full/
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The GOP's defense budget mystery
By George Will
http://www.JewishWorldReview.com | Tall, affable Buck McKeon sits, gavel in hand, at the turbulent intersection of two conflicting Republican tendencies. The chairman of the House Armed Services Committee embodies the party's support for a "strong" defense, which is sometimes measured simply by the size of the Pentagon's budget. But the 35 Republicans on his 62-member committee include 13 first-term legislators, some of whom embody the Tea Party's zeal for cutting government spending.
The United States spends almost as much on military capabilities as the rest of the world spends, and at least six times more than the second-biggest spending nation (China). But McKeon says, "A defense budget in decline portends an America in decline." And: "I've been around a long time, and I've seen us cut defense investments over the years after wars. . . . But I've never before seen us make cuts during a war. Cuts to defense investment in the midst of two wars is unacceptable." Asked, however, about the immediate future of the defense budget, he says, after a long pause: "It's probably going to be smaller."
One war, in Iraq, will, the president promises, end this year with the withdrawal of U.S. forces. The other, in Afghanistan, probably will not become more expensive because the number of troops there probably will not be increased. Furthermore, since fiscal 2001, what is called the military's "baseline budget" has increased 80 percent, to $534 billion. That number is, however, much less than what is actually being spent, and not just because it doesn't include much of the spending on the two wars.
The Obama administration wants to cut $78 billion over five years, in addition to cuts already planned. McKeon and others are resisting, starting with Defense Secretary Robert Gates' decision to halt work on a $14.4 billion Marine program for a new Expeditionary Fighting Vehicle, a 39-ton landing craft and tank that can deliver 17 Marines in an amphibious assault.
Although the Marines' last opposed landing was in 1950 in Korea at Inchon, some legislators think ending the EFV program strikes at the Marines' core mission. McKeon wonders: What if the next "denied space" the Marines must enter is along the Strait of Hormuz? The Inchon landing craft, which traveled only 6 mph, had to leave from ships close to shore - too close for today's shores perhaps bristling with anti-ship missiles. The EFV travels 20 knots from 25 miles offshore - and sprints 45 mph on shore.
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The average age of America's amphibious assault vehicles is 38 years, more than that of strategic bombers (34 years) but less than that of tanker aircraft (46 years). Gates favors finding a more affordable ship-to-shore vehicle. Lt. Gen. George Flynn, the Marines' deputy commandant for combat development and integration, says the EFV program "was unaffordable." Was. Past tense.
Such statements are in the subjunctive mood until Congress speaks. But some congressional voices are impatiently insisting that no one can say how much is being spent on defense, or how.
After listening to recent Defense Department testimony, Randy Forbes, a six-term Virginia Republican on McKeon's committee, was exasperated. He said that for four years the department, whose $708 billion budget - his number - is the size of the world's 22nd-largest economy (the Netherlands), has not complied with the law requiring auditable financial statements. And he charged that "none" of the budget is "even in a position to be audited." He said that the department is not "qualified" to talk about efficiencies if it "does not know where our defense dollars are going" and that it cannot comply with the law if it "does not even have mechanisms in place to perform the audits."
Sen. Tom Coburn (R-Okla.), writing to Adm. Gary Roughead, chief of naval operations, said that "the Pentagon is one of the few agencies in the federal government that cannot produce auditable financial statements in accordance with the law." So "I will continue to push for a budget freeze of all base budget non-military personnel accounts at the Defense Department until it complies with the law regarding auditable financial statements."
To govern is to choose, always on the basis of imperfect information. If, however, the strong language of Forbes and Coburn is apposite, Congress cannot make adequately informed choices about the uniquely important matters that come to McKeon's committee. This fact will fuel the fires of controversy that will rage within the ranks of Republicans as they come to terms with the fact that current defense spending cannot be defended until it is understood.
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One of the many things we'll be suffering for as the result of the idiots that voted for Obama.
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http://hotair.com/archives/2011/02/14/video-obama-unveils-surreal-catastrophic-new-budget
It's Cloward-Pivian.
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As evinced by my posts of his work in the Political Economics thread, Wesbury is no doom and gloom bear-- so his words may carry extra weight when it comes to the budget:
The Federal Budget: It's a Mess To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 2/14/2011
If the US federal government were a bank, the FDIC would close them down this Friday night. Earlier today, President Obama submitted next year’s budget. The new budget, despite “cutting” the deficit by $1.1 trillion, will require Congress to pass a large increase in the “debt ceiling.”
In February 2010, the US raised the debt ceiling to $14.3 trillion (up $1.9 trillion) and then promptly borrowed every dime it could. Even with the “cuts” proposed by the President (or those being talked about by Congress), the government will spend roughly $7 trillion more than it receives in income over the next 10 years. Bottom line: The US federal budget is a mess. It’s on an unsustainable course. And that’s a view that takes all the “spin” at face value.
And believe us, there is a ton of spinning taking place. The president’s budget director Jacob Lew says the new budget will “save” $1.1 trillion over the next ten years. But about 1/3 of the “savings” will come from higher taxes. Under this budget, spending will be 49% higher in 2021 than it is in 2011.
In other words, even after tightening its fiscal belt and confiscating more private resources, the federal government will remain huge and out of control. The President’s budget for 2012-2021 forecasts that federal spending will never fall below 22.3% of GDP. Never before in history has the level of non-defense spending been so high for so long.
In effect, the budget proposed by President Obama locks in, like many European states, a deficit of at least 3% of GDP for as far as the eye can see. As a result, growing spending more slowly than GDP or freezing spending is no longer enough. The only way to get government under control is to cut spending outright.
The last time spending grew more slowly than GDP was under President Clinton, when spending fell from over 22% of GDP in 1992 to 18.2% in 2000. The end of the Cold War gave the US a peace dividend, which allowed for defense cuts.
But since President Bush took power in 2000, federal spending has increased by 93% and if we can believe the budgets being proposed in recent days, this spending binge will be locked in place and not reversed.
That’s why we’re cheered by the open rebellion of many newly elected members of the House to both their leadership’s plan and Obama’s plan to slow spending. They know that, after the government binge of the past decade, simply slowing the growth of spending or even “freezing” it is not good enough. They are not looking for excuses to cut spending slowly.
Claiming budget savings by freezing spending at today’s levels is like an alcoholic who says he’s sober because he’ll never drink more than yesterday’s bender. Trouble is, this alcoholic doesn’t even pay his own tab.
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http://andrewsullivan.theatlantic.com/the_daily_dish/2011/02/obama-to-the-obama-generation-youre-on-your-own.html
Jus' spreading the debt around.
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We gonna put Obama's face on it? We can then admire him as we use it to buy a loaf of bread.
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Woof,
And the fat lady is about to sing on Obama's economic agenda. INFLATION!!!!!!! LA LA LA!!! SHOCKA BOOM! SKOCKA BOOM!!! I think I hit a sour note there. :-P
http://www.msnbc.msn.com/id/41591727/ns/business-the_new_york_times
P.C.
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Always a worthwhile read. Yes he is both an avid opponent of the Obama agenda and a predictor of modest growth. I think just being honest in both cases. I think he would tell you growth rates coming out of this type of hole should be 4, 5, 6% of more if we implemented bold, pro-growth policies.
"The last time spending grew more slowly than GDP was under President Clinton, when spending fell from over 22% of GDP in 1992 to 18.2% in 2000."
He goes on to give one valid contributor: "The end of the Cold War gave the US a peace dividend, which allowed for defense cuts." (Put another way, gut intelligence and suffer unprecedented attacks)
Another partial explanation to keep in mind is that the end year 2000 was a bubble economy that was pierced during that year. If you take a longer look and smoothed out the erratic data of the bubble and trough that followed, the change in that ratio would not be so dramatic. A chart at this 2002 CBO link http://www.cbo.gov/doc.cfm?index=3521&type=0 shows how that percentage worsens in 2001 just continuing the path of the same policies. (Note also how wrong they are within a decade even though they had the confidence to forecast out 75 years.)
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We need IMO a budget amendment to cap federal spending at 20% of previous year GDP with a 2/3 supermajority required for every penny above that. Tell Democrats and independents we just want to lock in the success of what worked for President Clinton.
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Interesting idea.
Here's this: I very much consider myself a Tea Party man, but disagree with the not insignificant faction within the movement that tends towards isolationism and Fortress America. Yes we are evolving from the unipolar moment of America in the world but that needs to be thought out on its own terms-- not undercut our troops actively defending us in hard fighting and unprepare for the Chinese challenge simply in order to have cuts that enable BO to continue to piss away our country's future.
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http://www.nytimes.com/2011/02/15/us/politics/15pentagon.html?partner=rss&emc=rss&pagewanted=print
February 14, 2011
Gates Sees Crisis in Current Spending
By THOM SHANKER and CHRISTOPHER DREW
WASHINGTON — Even as the Obama administration on Monday rolled out its budget for 2012, Defense Secretary Robert M. Gates was dueling with Congress over military spending for this year, saying the Pentagon cannot do its job with cuts of more than $9 billion.
Mr. Gates said restrictions on spending “may soon turn into a crisis” for the military, as Congress, deadlocked over the politics of passing a federal budget for 2011, placed the government on a “continuing resolution” that has limited Pentagon spending since last autumn.
If that stopgap budget stays in place for the entire fiscal year, it would result in military spending of $526 billion, not counting the costs of the wars in Afghanistan and Iraq, or a cut of $23 billion from the administration’s request of $549 billion. Mr. Gates demanded that Congress approve 2011 spending of at least $540 billion.
“Suggestions to cut defense by this or that large number have largely become exercises in simple math, divorced from serious considerations of capabilities, risk, and the level of resources needed to protect this country’s security and vital interests around the world,” Mr. Gates said in a Pentagon news conference.
Congressional leaders now say they plan to attach a full military appropriations bill to the continuing resolution that would finance the rest of the government. While that bill would impose cuts of $16 billion, this at least could allow the Pentagon to award new contracts and shift some money around among programs.
But Congress could make some of these allocations, and Mr. Gates said that despite the Pentagon’s reservations, he would continue money for an alternate engine for the F-35 Joint Strike Fighter until Congress acted. The bill being drafted, for example, could include $450 million to keep the engine project alive. Pentagon officials have estimated that it could cost $2 billion to $3 billion to finish developing the engine, which Mr. Gates and President Obama say the military cannot afford.
The dispute has drawn attention recently because the engine work provides jobs in Ohio, the home state of the new House speaker, John A. Boehner. But Democrats in both houses have also repeatedly voted to save the second engine, partly to provide competition for contracts that could ultimately be worth up to $100 billion.
For next year, the Pentagon is requesting $670.6 billion for the 2012 fiscal year, which starts Oct. 1. That includes $553 billion for its base budget and $117.8 billion for military operations in Iraq and Afghanistan.
As a result, the total of $693 billion in 2010 might have represented the peak for the surge in military spending that began after the Sept. 11 terrorist attacks. And Congressional leaders say that new members from the Tea Party movement may try to cut military spending even more.
The biggest cuts for next year would come in the war budget with most of the troops returning from Iraq. The overseas spending would drop by $41.4 billion from the $159.3 billion that the administration proposed for 2011, and it would fall to the lowest level since 2006.
All six members of the Joint Chiefs of Staff also weighed in to the coming budget debate on Monday, signing a letter expressing support for what they described as “modest and manageable” increases in fees for working-age military retirees who have chosen to remain on the Defense Department’s Tricare medical insurance program.
Total health care costs for the Pentagon, which is the nation’s single largest employer, top $50 billion a year, one-tenth of its budget. A decade ago, health care cost the Pentagon $19 billion; five years from now, without changes, it is projected to cost $65 billion. Tricare fees have not increased since 1995.
“We will continue to provide the finest health care benefits in the country for our active and retired military service members and their families while continuing to serve as responsible financial stewards of the taxpayers’ investment in our military,” the letter said.
All six members of the Joint Chiefs of Staff, each a four-star officer, have not signed such a correspondence, known as a “24-star letter,” since 2006. Congress has voted down other plans to increase Tricare fees, which veterans groups oppose.
As pressure mounted to reduce the deficits, Democratic lawmakers began planning last summer to trim the Pentagon’s request for 2011. The Republicans have added to the proposed cuts since they took control of the House last month.
Under the latest proposal, which could be voted on this week, House Republicans would cut about $15 billion from the Pentagon’s main operating accounts. That would include $11 billion in cuts that the Democratic lawmakers had settled on before the midterm elections.
The reductions would also include $2 billion to $3 billion in lawmakers’ pet projects known as earmarks and more than $1 billion in unspent money from various programs. Other cuts would come in military construction and energy projects.
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"Si vis pacem, para bellum"
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By JANET HOOK
WASHINGTON — The Republican-controlled House on Tuesday took up legislation to make unprecedented cuts in federal spending this year, opening a freewheeling debate that will showcase the two parties' views on the size of government in an era of budget deficits.
In early action on the bill, which would cut domestic programs by $61 billion this year, Republicans showed little appetite for making cuts in the Pentagon. The House rejected four amendments to cut defense programs, including one small cut to get rid of some Pentagon advisory commissions.
"If we cannot do this on defense...where can we do it?" asked Rep. Jeff Flake, the Arizona Republican who sponsored the amendment to cut $19 million for commissions.
That was just the beginning of a spending debate that is expected to extend through the week. Lawmakers filed hundreds of amendments seeking even deeper cuts after GOP leaders made an unusual decision to lift restrictions on proposing changes to the legislation.
Most of the amendments would cut domestic programs, but another big defense-spending fight loomed Wednesday, when the House was expected to vote on an amendment to strip from the bill $450 million in funding for an alternate engine for the Joint Strike Fighter.
The Republican bill would cut spending in domestic non-entitlement programs such as high-speed high-speed rail construction, water projects and job training far more deeply and quickly than President Barack Obama and most Democrats favor. The White House issued a veto threat immediately after the bill came to the House floor.
The debate marks the most serious legislative effort yet by the new Republican majority to make good on its campaign promise to slash government spending. It also tests the commitment of House Speaker John Boehner of Ohio to allow a more open legislative process than have other House leaders, who in recent years routinely imposed strict limits on amendments to major bills.
Among the amendments were proposals to block the new health care law, clean air regulations, prisoner transfers from Guantanamo Bay, regulation of the Internet, and on topics that appeared far afield, such as one on the corralling of wild horses and burros.
Mr. Boehner acknowledged that an unpredictable legislative bazaar lay ahead. "We are in some uncharted waters," he said. "I'm ready to expect—whatever."
Mr. Boehner received a quick lesson in the challenges of holding a wide-open floor debate. Faced with the long list of amendments awaiting debate, Democrats systematically delayed a vote on even the first one. For hours, Democrats exercised their right to speak for five minutes each.
The amendment on the alternate engine for the Joint Strike Fighter, which was introduced in debate Tuesday night, would hit Mr. Boehner close to home and illustrated the unpredictable nature of leading the conservative freshmen. The alternate engine would be built in part near Mr. Boehner's district at a General Electric Co. plant in the suburbs of Cincinnati.
The Pentagon has opposed the second engine, as have budget watchdogs who call it wasteful. But a similar effort to kill the project was defeated last year by a 231-193 vote.
A government-wide spending bill is needed because federal operations are currently being funded through a short-term measure that expires March. 4. The Democratic-controlled Senate must also act and is expected to push for a compromise that does not cut so deeply.
The bill does not tackle Social Security or Medicare, the fast-growing entitlement programs. Still, the bill's proposal to set 2011 spending at a level $61 billion below 2010 levels marks the biggest cut in discretionary spending Congress has ever made in one piece of legislation, according to House Appropriations Committee staff.
Democrats have said that, faced with a deficit that the White House estimates will grow to $1.6 trillion this year, Congress needs to curb spending. But they say cuts as quick and deep as the Republicans propose would hurt the economy.
"We all understand we have to get spending under control," said Rep. Norm Dicks of Washington. "When you cut this much spending, you are going to hurt the fragile recovery."
Democrats cited a new report by the liberal-leaning Economic Policy Institute that concluded that the spending cuts would result in the loss of 800,000 public and private jobs. They derided a statement by Mr. Boehner seeming to shrug off the prospect of job losses.
"In the last two years, under President Obama, the federal government has added 200,000 new federal jobs," Mr. Boehner told reporters. "If some of those jobs are lost, so be it. We're broke."
Mr. Flake's amendment to cut $19 million for Pentagon commissions met with bipartisan opposition from senior members of the Appropriations subcommittee that oversees defense programs. But Mr. Flake, one of the most conservative members of the House, found allies in a parade of liberals.
Other defense-spending cut amendments, which were defeated Tuesday by wider margins, would have cut money for the V-22 Osprey helicopter; for grants to encourage innovation and research by small businesses, and for the Pentagon to develop alternative energy sources.
Democrats have said that, faced with a deficit that the White House estimates will grow to $1.6 trillion this year, Congress needs to curb spending. But they say cuts as quick and deep as the Republicans propose would hurt the economy.
"We all understand we have to get spending under control," said Rep. Norm Dicks of Washington. "When you cut this much spending, you are going to hurt the fragile recovery."
Democrats cited a new report by the liberal-leaning Economic Policy Institute that concluded that the spending cuts would result in the loss of 800,000 public and private jobs. They derided a statement by Mr. Boehner seeming to shrug off the prospect of job losses.
"In the last two years, under President Obama, the federal government has added 200,000 new federal jobs," Mr. Boehner told reporters. "If some of those jobs are lost, so be it. We're broke."
Republicans argued that Democrats were exaggerating the impact, noting that the $61 billion is a small part of a $3 trillion federal budget. "Democrats don't like it, but don't call it slashing and burning," said Rep. Jack Kingston (R., Ga.).
——Nathan Hodge, Corey Boles and Naftali Bendavid contributed to this article.
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By KARL ROVE
President Obama's 2012 budget is not a serious governing document. It's a political one, designed to boost his re-election chances.
By repeatedly saying that his budget reduces the deficit by $1 trillion over 10 years, he hopes the numbers make him sound fiscally conservative. But he puts off 95% of the deficit reduction until after his term ends in 2013. And he assumes that economic growth in the next few years will be at least 25% higher than credible economic forecasters estimate.
Mr. Obama's budget includes $1.6 trillion in tax increases that are real enough—but most of the spending cuts are not. For example, as Rep. Paul Ryan, the House Budget Committee chairman pointed out to me, the administration projects war costs for Iraq and Afghanistan at surge levels for the next decade, and then conjures up about $1.3 trillion in defense savings by assuming drawdowns in each theater—drawdowns that were already in the cards. Outside of this sham transaction, according to Mr. Ryan, there are only $104 billion in real spending cuts over the next 10 years.
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Mr. Obama's budget includes $1.6 trillion in tax increases that are real enough—but most of the spending cuts are not.
.Moreover, the administration simply ignores entitlements. This is a dereliction of duty, although it has a certain political logic: The budget is not meant to be taken seriously—it's meant to be quickly forgotten so that the administration can turn attention to, and attack, what congressional Republicans do about federal spending.
Mr. Obama wants House Republicans to take the lead in cutting current spending and proposing future restraint in entitlement and other mandatory spending. He's betting that letting Republicans take the lead will cripple them. This misreads public opinion. But it is plausible to believe that Republican mistakes can help revive Mr. Obama's political fortunes. So it's important that the GOP offers real budget cuts without coming across as angry and frenetic. Republicans need to patiently show what they are doing and why, and to express their sadness and disappointment over Mr. Obama's failure of leadership.
Congressional Republicans need to make methodical and sensible recommendations for cutting discretionary outlays and restraining future entitlement spending. They must explain to the public why the Obama budget will lead to our nation suffering horrific tax increases, massive austerity cuts, and real human suffering. They need to show that the president's fiscal path is, to use a favorite word of his, unsustainable.
Tactically, Republicans should respond to Mr. Obama's agenda as they did to his infatuation with high-speed rail projects. Three days after Vice President Joe Biden touted the magical balm of high-speed trains, House Appropriations Committee Chairman Hal Rogers released the continuing resolution for the balance of fiscal year 2011.
About Karl Rove
Karl Rove served as Senior Advisor to President George W. Bush from 2000–2007 and Deputy Chief of Staff from 2004–2007. At the White House he oversaw the Offices of Strategic Initiatives, Political Affairs, Public Liaison, and Intergovernmental Affairs and was Deputy Chief of Staff for Policy, coordinating the White House policy-making process.
Before Karl became known as "The Architect" of President Bush's 2000 and 2004 campaigns, he was president of Karl Rove + Company, an Austin-based public affairs firm that worked for Republican candidates, nonpartisan causes, and nonprofit groups. His clients included over 75 Republican U.S. Senate, Congressional and gubernatorial candidates in 24 states, as well as the Moderate Party of Sweden.
Karl writes a weekly op-ed for the Wall Street Journal, is a Newsweek columnist and is the author of the book "Courage and Consequence" (Threshold Editions).
Email the author atKarl@Rove.comor visit him on the web atRove.com. Or, you can send a Tweet to @karlrove.
Click here to order his book,Courage and Consequence.
.It cut the rest of this fiscal year's high-speed rail funds, rescinded $3.5 billion appropriated in previous fiscal years but still unspent, and rescinded $3.75 billion in unspent transportation money from the 2009 stimulus, almost all of it from Mr. Obama's high-speed rail plan. Overall, nearly $8 billion was cut from transportation, but none from vital road projects that are real priorities for the states.
The result: Very few Americans believe the billions Mr. Obama wants for speedy trains from Milwaukee to Madison, or Columbus to Cincinnati, will spark economic recovery. This still leaves transportation spending higher than it was two years ago, when Mr. Obama came into office. Republicans can reasonably ask the public: Are we better off with all the spending and red ink Mr. Obama has added over the past two years?
There will be dozens of such confrontations in the months ahead. How Republicans handle these opportunities will go a long way toward determining how popular their agenda is. Politics involves optics as well as policy ideas.
The evidence of the federal government's budget woes is so overwhelming that Americans are ready for tough actions. They understand that failing to make cuts now and to restrain entitlements in the years ahead will doom our children and grandchildren—indeed our country—to a future less prosperous and less free.
Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of "Courage and Consequence" (Threshold Editions, 2010).
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This was written before Obama's budget came out. Rove covered that one above just right. Obama projects wars out 10 years that he already committed to retreat from and then calls it a trillion dollar savings. Then he locks in the temporary flood of emergency stimulus spending to eternity and calls it a domestic spending freeze, with trillion and a half dollar deficits. Both claims make sense - if you own our language.
Ryan introduces reasonable cuts and explains the need.
Elsewhere today, Krugman argues that any cut in the waste and egregious excess of our trillion and a half dollar deficit spending will bring down this fragile American economy.
The correct answer of course is that we have proven the ability to collect about $2.5 trillion in federal revenues. We should all agree then to limit spending to 2.5 trillion dollars in today's dollars and today's economy and argue only about how best to spend that money, not over how much.
http://www.realclearpolitics.com/articles/2011/02/13/the_pro-growth_case_for_spending_cuts_108877.html
February 13, 2011
The Pro-Growth Case for Spending Cuts
By Rep. Paul Ryan
When House Republicans pledged to make cutting spending our top priority, we knew it wouldn't be easy. The President and his party remain committed to the notion that the best way to create jobs and prosperity is to raise your taxes, spend your money, and then borrow some more money and spend that.
After two years, all of this borrowing and spending has not only failed to deliver promised jobs, but also plunged us deeper into debt. The problem is simple: Many families and businesses look at the size of our debt and the state of our economy and fear that we are heading for a diminished future.
If America can't pay its debts, then people, institutions and other nations will stop lending us money, or they will demand such a high rate of interest that our government will be effectively cut off from future borrowing. At that point, spiraling interest rates would force painful tax increases and steep, sudden cuts to vital national priorities.
We can avoid this outcome, and we must.
Addressing the spending problem now is the key to restoring prosperity. Right now, businesses are holding back on hiring and investment, partly because they are worried that we are headed for a future of large tax hikes and interest-rate spikes. Washington's spending spree has fueled this uncertainty.
Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee this week that one of the best things Congress can do to get businesses hiring and the economy growing again is to demonstrate that we have a serious plan for tackling our fiscal problems.
Since being entrusted with the Majority only a month ago, we have been taking steps to do just that. One of our first official acts was to cut Congress's own budget by five percent. Next, we voted to cut trillions in future government spending by repealing the irresponsible new health care law. And when it comes to funding the government for the rest of this year, we are engaged in a debate that is refreshingly different by Washington standards. We are debating, not whether to cut spending, but how much spending to cut.
In these debates, we started with a simple goal: reduce the budgets for most government agencies back to where they were before the bailouts, before the stimulus package, and before the spending binge. Over the last two years, many federal bureaucracies received budget increases of 30 percent, 40 percent, or - in one case -100 percent. The numbers grow even larger when the failed stimulus is added in.
Our spending cuts are critical first steps to earn back the trust of a skeptical public - a skepticism that is surely justified. More must be done to restore confidence to a private sector that will remain cautious until it is convinced that we are serious about controlling spending. As House Budget Committee chairman, it will be my job to help chart a new course: a path to prosperity.
Our forthcoming budget is our obligation to you - to show you how we intend to do things differently. We're going to cut spending to get the debt down, help create jobs and prosperity, and reform government programs. We owe you an honest debate about our biggest fiscal challenges. If we act soon, and if we act responsibly, we can gradually phase in reforms to our major entitlement programs to save them from bankruptcy and ensure that people in and near retirement will be protected.
It appears President Obama will present a very different vision in the coming days - and in my view, one that takes the nation even further in the wrong direction. And he recently asked Congress to raise the debt limit to accommodate all of the spending and borrowing that he and his party have already committed us to. But the debt crisis that is currently crippling Europe teaches us that we cannot keep making unaffordable promises without eventually hitting a real debt limit - a limit on our borrowing imposed by credit markets in a state of panic.
We must act responsibly and send a clear message: Endless borrowing is not a strategy. Spending restraint must come first. It won't be easy, but America is an exceptional nation, and Americans have risen to greater challenges and prevailed in the past. To restore prosperity today, leaders must rise to the occasion and demonstrate to families and entrepreneurs that they need no longer fear for tomorrow. Until we accomplish that, our work will not be done.
Paul Ryan represents Wisconsin's First Congressional District and serves as chairman of the House Budget Committee.
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I am reminded of the ditty found on bathroom stalls.
"Here I sit, broken-hearted. All this way, and I only farted."
Eloquent piece there by Ryan, but , , , where are the cuts?
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The bloated entitlement nightmare is the 3rd. rail.
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http://www.youtube.com/watch?v=NsoVBEl4P8g&feature=player_embedded#at=15
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"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." --Thomas Jefferson
Government & Politics
Fiscal Insanity: The White House Budget
Last year, Democrats in Congress didn't even bother to pass a budget. Given the increases proposed in the White House budget released Monday, it might behoove Congress to rinse, lather and repeat. Last November, Barack Obama's very own deficit commission recommended that federal spending be cut by $4 trillion over the next decade -- which is still far too little for our liking -- but Obama must have misunderstood. He apparently thought they meant he should spend $4 trillion this year.
The administration's budget proposal sets federal spending for fiscal 2012 at $3.73 trillion, yet another dubious new record for this administration. The deficit for the '12 budget would be $1.65 trillion, or 10.9 percent of GDP, also a record. That would bring the total national debt equal to the worth of the entire U.S. economy, or $15 trillion. Yet Obama has the chutzpah to tout the shamelessly inadequate spending cuts in his budget.
Erskine Bowles, a Clinton administration lackey who co-chaired Obama's deficit commission, was far closer to the mark when he said that the White House's proposal is "nowhere near where they will have to go to resolve our fiscal nightmare." Even Treasury Secretary Timothy Geithner asserted that it would leave the nation with "unsustainable obligations over time."
As for the "cuts" and "savings," The Wall Street Journal notes, "Although the White House trumpets $2.18 trillion in deficit reduction over the next decade, those savings are so far off in the magical 'out years' that you can barely see them from here."
Perhaps most appalling is Obama's utter failure to address entitlement spending -- Social Security, Medicare and Medicaid -- which together constitute the majority of federal spending. Even the liberal Washington Post gets it: "President Obama's budget kicks the hard choices further down the road," said the headline of its recent editorial, which also criticized the president for his budgetary "gimmickry." In other words, the necessary cuts won't happen unless House Republicans begin to undertake the hard work right now.
One of the reasons Obama can claim deficit reduction is the old tax trick -- raise taxes and count on exact revenue increases, completely ignoring the negative effect that doing so will have on the economy. In fact, the White House anticipates economic growth of more than 4 percent in the next three to four years, which is a full percentage point higher than most private economists or the Congressional Budget Office project.
The budget anticipates that taxes on the top two income brackets will rise in 2013, and it includes raising the capital gains tax to 20 percent from 15 percent plus new taxes on energy companies totaling $300 billion. On top of that, the administration is seeking 5,100 additional IRS agents to reduce the estimated $300 billion in unpaid taxes. All told, Obama is counting on $1.5 trillion in new tax revenue -- money taken out of the economy to pay for more government. He keeps calling that government spending "investment," as if that makes it acceptable.
Under this budget, the Department of Health and Human Services, which is responsible for overseeing the implementation of ObamaCare (despite a judge's recent ruling that the law is unconstitutional, we might add), will become the nation's first $1 trillion department by 2014. "In fact," says CNSNews editor Terence Jeffrey, "HHS already is costing American taxpayers more per year in inflation-adjusted dollars than the entire federal government cost back in 1965, the year President Lyndon Baines Johnson signed Medicare into law." This year's total is $909.7 billion, which is $170 billion more than the Department of Defense.
About his budget, Obama claimed, "Just like every family in America, the federal government has to do two things at once: It has to live within its means while still investing in the future. If your family [is] trying to cut back, you might skip going out to dinner, you might put off a vacation, but you wouldn't want to sacrifice saving for your kids' college education or making key repairs in your house. So you cut back on what you can't afford to focus on what you can't do without, and that's what we've done with this year's budget." Such a claim is absurd. House Republicans should lead the charge against it.
News From the Swamp: GOP Works to Cut Spending
House Republicans are doing some budget work themselves, debating legislation to fund the government for the remainder of this fiscal year, which ends Sept. 30. The GOP is considering measures that would reduce federal spending by $61 billion this year, including defunding the Corporation for Public Broadcasting and eliminating $450 million for a second engine for the Joint Strike Fighter, though other defense cuts failed. Republicans are also debating blocking funding for ObamaCare, and dethroned nine "czars" Thursday. Some conservative Republicans are pushing for an additional $20 billion in cuts.
Barack Obama issued a veto threat almost as soon as the House began debate on the cuts. The White House said that the GOP's plans "will undermine our ability to out-educate, out-build, and out-innovate the rest of the world." It's important to note that $61 billion is still a pathetically small piece of the $3+ trillion budget, so Democrats might want to tone down their cries of despair -- and Republicans might want to toughen up.
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"Eloquent piece there by Ryan, but , , , where are the cuts?"
I share that frustration. To be fair, I think they voted to defund PelosiObamaCare, a 100 Trillion Dollar value just to put a number on it.
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http://www.theblaze.com/stories/leaked-memo-reveals-white-house-distress-why-dont-schools-want-obama-to-speak/
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Yes this is shocking.
I am certainly no Obama fan but it is still a thrill to have a President come to one's graduation.
I saw Clinton once in West Palm Beach. As a Republican I felt out of place, but there is still a thrill - even for him.
I saw Reagan twice, once on the WH lawn and once in my home town across from my former High School in NJ. The Democratic mayor praised Reagan for bringing back a sense of pride to America. Reagan was so impressed a Dem would cross party lines to compliment him he took time to come to the city of Elizabeth to speak.
I saw GHW Bush play tennis with Chris Evert in Boca Raton in the early ninetees. He was pretty damn good.
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In a back room at half-time at the Army-Navy game in '61 or '62 (I would have been 9 or 10 at the time) my father introduced me to President Kennedy. It was a big deal for me!!! Also, I got to shake the hands of lots of big generals and admirals.
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http://www.youtube.com/watch?feature=player_embedded&v=IelJNgPoX-Q
Simple video from the Cato Institute that brings 60 billion down to the context of the deficit and the total spending. We are talking about cutting 1.6% off of spending that we just grew 100% in ten years.
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Federal Spending has grown 8 times faster than median income. http://www.heritage.org/BudgetChartbook/growth-federal-spending
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One of my patients pointed out this article from a police officer. He points out that Republican governor Christie Whitman raided the pension funds of police and firemen in the 90's and that is the reason for today's shortfall.
****News Item:
Mount Olive Cop: Politicians Caused Pension Woes
12/02/2010
Editor's note: The writer, Michael Poquat, is a police officer in Mount Olive Township.
BUDD LAKE, NJ – As a police officer in the state of New Jersey, I find myself unable to sit by while the current climate of public employee bashing continues under the misinformation fed to the public by the media and our current governor.
While I cannot comment on the teachers' retirement system, I can speak about the Police and Fire Retirement Fund (PFRS), and more specifically, how it has been mishandled by some of our elected officials. The truth should come out, and the public has a right to know how we got to where we are today.
Long before I became a police officer, the state of New Jersey enacted a law which required police officers and firemen to contribute a certain percentage of their salary into the state's "secure" pension fund. Throughout my 22 year career, I have paid 8.5 percent of my salary, as mandated by law, into this fund every pay period.
I was not given the option to place my 8.5 percent in an IRA or other investment fund. Every pay check since I was 25 years old had the 8.5 percent taken out of my pay and placed into the PFRS with the promise that the money would be there when I retired. By law, towns and municipalities were required to match that 8.5 percent.
By the time Gov. Christine Todd Whitman took office, there was over $100 billion in the fund. This meant that at the current rate of retirements, pension costs for police officers and firemen were funded at 104 percent, well into the future. This was a prudent and financially responsible plan that worked, and it provided security for the families of these men and women who risked their lives every day serving and protecting the citizens of New Jersey.
In no way was it heavily over funded or excessive. It covered the costs of promised retirements with a small cushion left over. It was at this time that Whitman stepped in. Gov. Whitman recognized the billions of dollars in our "secure" and "separate" pension fund, and she proceeded to raid that fund. Unknown and unannounced to the public, monies were indiscriminately withdrawn from the PFRS and used to pay for Whitman's tax cuts and to balance the state budget.
Billions of dollars were taken, and to make matters worse, the Whitman administration passed a law allowing towns and municipalities to no longer contribute to the fund. Over $3 billion in contributions were skipped over the next eight years, while the individual police officers and firefighters continued to have their 8.5 percent contribution taken from them and placed into the PFRS.
The state gambled for years, relying heavily on the returns from the stock market to cover the missing funds. Politicians misspoke on the campaign trail, touting the virtues of how their financial genius was able to balance their state and local budgets, and the public was lulled into a sense of false financial security.
But the small print in Whitman's bill was ignored. The funds they failed to contribute would have to be made up at a later date. The pension reprieve was temporary and their contributions would have to be paid back, just like any other loan. It was quietly suggested by the Whitman administration that towns set these contributions aside for when the state called to make good on them. It appears most towns and municipalities failed to heed this advice.
Governors (Donald) DiFrancesco, (James) McGreevy, and (Richard) Codey continued this trend, and all failed to call the towns and municipalities on their "loan" while the PFRS fund continued to dwindle down close to $66 billion. They remained silent. To bring this to light at this point would certainly mean political suicide, knowing that towns and municipalities would have to raise taxes to make up for their error in financial judgment and planning.
It wasn't until Gov. Jon Corzine took office that this trend was stopped, but unfortunately, the damage was done. Gov. Corzine made the call the governors before him were afraid to make. He advised the towns and municipalities that it was time to pay back the monies the towns had been given a temporary reprieve on. And the media jumped on this, printing bold headlines "Towns going broke over police and fire pensions."
This attention grabbing and misleading headline made it appear that your police and firemen were bilking the taxpayers dry, when the truth is totally the opposite. The politicians bilked your police officers and firemen dry and in the long run, the tax payers of New Jersey.
Towns and municipalities knew they were going to have to pay this money back and for them to insinuate otherwise is simply not true. Realizing the gravity of the situation, a new bill was introduced and passed into law. This allowed the towns to pay back the loan given to them by their public employees in increments; starting at 20 percent, 40 percent, 60 percent, 80 percent, and finally 100 percent each proceeding year.
Towns and municipalities continue to act as if they have been caught unaware and shocked by this entire process. The public is being told that payments for police and fire pensions are doubling, tripling and quadrupling and that the public employee system is out of control. What the public needs to know is that they are the victims of a mounting debt that was created by the Whitman administration and compounded by those following her tenure.
To blame your public employees for the abuses of the pension system is ludicrous at best, especially when our elected officials are the ones responsible for raiding the fund and then enacting the legislation on how and when to pay it back.
Gov. Jim Florio recognized the financial hardship facing the state of New Jersey and proceeded to raise the state sales tax to 7 percent. This helped spell political suicide for him, and Gov. Whitman was not going to make the same mistake. She repealed the 7 percent, dropping it back down to the 6 percent, knowing full well this money would have to come from somewhere. Her solution was to raid the Police and Fire Pension System, allowing her to balance the state budget and give the false appearance that all was fiscally sound under her watch.
Our current governor, facing the same financial crisis of those going before him, has chosen a similar route, but one with a more vilifying tone. He has again found the same victim: Your public employees. When asked about the pension situation in the state of New Jersey, Gov. Chris Christie replied "I wasn't going to put $3 billion into a failing pension system. We need pension reform. I passed some already for new hirees, and this fall we are going after the current employees and pension reform and benefits because we are broke."
Nowhere does he mention how the public employees had already bailed out this state years before, and now he is focused on "going after" the current employees to fix a mess created and compounded by politicians. To say otherwise for him would be political suicide should he aspire to higher political office, and as most of those before him, he is not about to risk his future. Rather, he would gamble on the future of those men and woman and their families who have served this state with honor and integrity.
The principals of the pension system are not broken, Mr. Governor. What is broken is the manner in which the politicians have treated and abused it. Yes, the system is failing now, but not because of your police officers and firemen. As of 2009, the pension fund should have assets of $112 billion to meet its obligations, yet it is currently sitting at $66 billion.
It is the largest unfunded liability in the country. New Jersey is the first state ever to be charged with fraud by the Securities and Exchange Commission, and Gov. Christie, strangely, has no comment on this. Yet he continues his rhetoric on the evils done to us by our police officers and firemen, ignoring the truth and lambasting and vilifying us at every turn.
As the saying goes, "Politics has no shame when it comes to preserving your place in office. Why let the truth get in between a good, attention grabbing headline?"
The system is on the brink of collapse, and continued arrogance and mudslinging will not fix it. The truth is what it is, Mr. Governor, and there is no getting around that. Politicians put us in this mess for their own political gain, not our public employees, as you would like the public to believe. You know this and need to stop ignoring the facts. How we deal with it from here is the measure of each of our character and integrity. I know the public is smart enough to recognize this and I hope that you are too. Long after you are gone, we will still be here, protecting and serving as we always have. In the end, all we have left is our name. Let's hope yours is remembered for your integrity and not for what you have slung so far in your race for political aspiration. I challenge you to do the right thing, as so many police officers and firemen strive to do every day for their families and the citizens of New Jersey.
Poquat, Michael. "Mount Olive Cop: Politicians Caused Pension Woes." NewJerseyHills.com. November 12, 2010. <http://newjerseyhills.com/content/tncms/live/newjerseyhills.com/mt_olive_chronicle/opinion/columns/article_487cc442-ec43-11df-8ac0-001cc4c002e0.html>.
Grand Lodge - Building on a Proud Tradition
Copyright © 2004 - 2011 Fraternal Order of Police, Grand Lodge Legal Notice****
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VERY interesting CCP.
"Unknown and unannounced to the public, monies were indiscriminately withdrawn from the PFRS and used to pay for Whitman's tax cuts and to balance the state budget."
This caught my eye. How can this be?
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Largely unreported in detail, so all of this is hard to follow. Please verify and call your congressman. http://clerk.house.gov/evs/2011/roll177.xml
In some symbolic votes, the House has voted to do certain things their supporters sent them there to do, repeal and de-fund Obamacare are examples, de-fund the nation's largest abortion provider, de-fund NPR, etc. In the latest CR, they voted to do the opposite. http://www.gpo.gov/fdsys/pkg/BILLS-112hres167rh/pdf/BILLS-112hres167rh.pdf
54 Republicans would not support the latest continuing resolution, so it was constructed to pass with the support of 85 Democrats. Also had to be something the Senate would also pass in order to succeed in not shutting down the government, so it continues funding for Obamacare, Planned Parenthood etc. - for 3 weeks.
Perhaps this was the wrong time for real confrontation and potential shutdown with Japan in crisis needing our help and while we need to also to dither and then focus on Libya.
I like Sen. Rubio's explanation of his willingness to vote no. Asked repeatedly if he was willing to vote to shut the government down if the bill didn't contain this or that reform, he refused to accept the premise. He was sent there to enact reform and he stands ready and willing to vote yes for responsible funding of the government. It is the other side talking about a willingness to shut down for perceived political gain.
My conclusion is that nothing good has happened in these 2 continuing resolutions except to schedule the unaddressed questions to come right back up to be resolved by April 8.
Within 3 weeks, I will either be reasonably impressed with real progress on spending reform (doubtful) or be calling loudly for new leadership in the House.
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http://www.powerlineblog.com/archives/2011/03/028631.php
Supersized!
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"One-Third of a French Fry Short of a Big Mac Meal"
Thank you GM. Part of winning is to quit giving up the ownership of the language and the terms of the debate. The deficit problem and the debt problem are both measured in the trillions, not billions. Not remotely similar even though they rhyme. And the only time frame worthy of discussion if you are an elected official is the rest of your term, not 10 year budgets or 30 year goals. These cuts are $0.006 trillion (assuming they are cuts at all). Significant maybe, maybe not, but let's call them what they are.
My congressman released the following statement "...after the House of Representatives passed $6 billion in spending cuts..."Today, my colleagues and I took another step forward in curing Washington’s spending problem and removing the barriers to job creation...”
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Now try that again in English. 'After passing spending cuts of $0.006 trillion out of a $1.2 trillion gap, conservative Rep. xxx said he was very pleased with himself and expected to keep moving forward into key committee assignments and leadership positions by caving on all principles including the principles of 2nd grade arithmetic.' - Closer to the truth but doesn't sound as impressive.
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Note reference to Michele Bachman at the end , , ,
http://www.ewg.org/agmag/2011/03/farm-subsidies-paid-to-the-members-of-the-112th-congress/
Cut Spending – But Not My Farm Subsidies!
by Chris Campbell, Amber Hanna and Don Carr
That some members of Congress are farmers is hardly new. Many of the Founding Fathers worked the land. But as the industrial age transformed America’s agrarian society and technology made it possible for fewer farmers to grow more crops on more land, the number of lawmakers actively engaged in agriculture dropped sharply.
We don’t have a firm count of how many farmers are serving in the current Congress, but we do know, based on a recent analysis of the Environmental Working Group’s Farm Subsidy Database, that 23 of them, or their family members, signed up for taxpayer-funded farm subsidy payments between 1995 and 2009.
This would be a good place to point out that just five crops – corn, cotton, rice wheat and soybeans – account for 90 percent of all farm subsidies. Sixty-two percent of American farmers do not receive any direct payments from the federal farm subsidy system, and that group includes most livestock producers and fruit and vegetable growers.
Among the members of the 112th Congress who collect payments from USDA are six Democrats and 17 Republicans. The disparity between the parties is even greater in terms of dollar amounts: $489,856 went to Democrats, but more than 10 times as much, $5,334,565, to Republicans.
One reason for the disproportionate number of Republican lawmakers benefiting from farm subsidy programs is the current scarcity of rural Democrats in Congress – casualties of the Tea Party wave that swept into office in November of 2010. (This was despite the Democrats’ decision to bow to the wishes of the subsidy lobby by passing a status quo 2008 farm bill in a misguided bid to hang on to those seats.)
Several new members of Congress who won with tea party support have been less than eager to talk about farm subsidies ever since the news broke last year that they, or their families, personally benefit from those very taxpayer dollars.
EWG doesn’t believe that the payments to lawmakers are improper or illegal. But the fact that so many more Republicans in Congress receive so much more in farm subsidies than their Democratic colleagues does highlight the GOP’s controversial decision to spare those programs from the budget ax – even as it slashes funding for so many others. Consider:
•In January, David Rogers of Politico, and Phillip Brasher at the Des Moines Register, reported that the Republican Study Committee proposed to eliminate the meager federal funding for an organic food growers’ program without even mentioning the the possibility of cutting spending for entitlements that send checks out to largest producers of corn, cotton and other commodity crops – regardless of need.
•Then last week (March 21), National Journal reported that the Republican-led House Agriculture Committee is backing cuts to the Supplemental Nutrition Assistance Program – previously known as food stamps – in the face of record enrollment levels triggered by high unemployment. But not even minimal reductions were proposed to the excessive payments to wealthy farms.
The GOP-led support for subsidies also comes at a time when big commodity farms clearly don’t need taxpayer funding.
The farm sector is white-hot, and has generally fared extremely well as recession gripped the rest of the economy. Farm income and prices for commodity crops are soaring. In 2008, $210,000 was the average household income of farms that received at least $30,000 in government payments that year. But according to the House Agriculture Committee and the Republic Study Committee, payments to those farms should stay in place while the record 43 million Americans enrolled in SNAP – millions of whom are unemployed for the first time – face slashes in the help they get to put food on the table.
It’s important to note that two of the Republican senators who collect subsidies – Charles Grassley of Iowa and Richard Lugar of Indiana – have been long-time leaders in the effort to reform federal farm programs. Both have fought to right the gross inequity of sending 74 percent of taxpayer-funded payments to the largest and wealthiest 10 percent of farm operations and landlords. The top-heavy support for the biggest operations puts smaller family farms at a serious disadvantage and works against a more diverse and resilient food production system that could stand up against wild swings in weather or global markets – and provide Americans with a healthier food supply.
Of course, Democratic members of Congress have historically been subsidy recipients too, notably former House Agriculture Committee Chairman Charles Stenholm of Texas and former Senate Agriculture Chairwoman Blanche Lincoln of Arkansas.
Nor is the phenomenon of lawmakers receiving farm subsidies limited to the federal level. Recent media reports have shown that direct payments are even more common in state legislatures in Wyoming, Wisconsin, Montana, Idaho and South Dakota.
At EWG, we believe that farmers deserve a reasonable safety net to protect against damage from drought, storms and fickle markets. But the American public’s investment portfolio in agriculture needs to change. It’s indefensible to provide subsidies to well-off farmers and landowners, especially in the face of a booming farm economy and a federal budget squeeze. Meanwhile, farmers seeking modest federal support to protect water, land and wildlife are being turned away for lack of funds.
We’re also committed advocates for government transparency, and it’s deeply disturbing that the public’s ability to see who gets what from the federal farm subsidy system has been curtailed by the Obama administration. Under the Bush administration, the rules allowed the public to see through shell corporations and paper entities to identify the part owners of subsidized farms and show where the money ended up. The transparency pertained to lawmakers as well. For this analysis EWG was forced to resort to harvesting data from members’ disclosure forms. That was an arduous but ultimately worthwhile task when advocating for greater accountability and transparency, and it didn’t use to be necessary.
Some Congress members (or their families) collecting federal farm subsidies are major players in the annual farm subsidy drama, others have only bit parts in terms of the amount of subsidies they receive. Overall, the distribution of subsidies among members of Congress reflects the highly distorted distribution of farm subsidies among farmers and landlords in the United States – between 1995 and 2009, 10 percent of subsidy recipients collected 74 percent of all subsidies.
The current salary for rank-and-file members of the House and Senate is $174,000 per year, and members enjoy robust health benefits. But whether major or bit players, members of Congress who receive farm subsidies are part of a system that cries out for reform and poses stark choices between helping wealthy landowners or doing right by struggling farm and urban families and the environment.
Member of Congress who received big or small checks from the federal government include:
US HOUSE OF REPRESENTATIVES (in alphabetical order)
Rep. Robert Aderholt (R-Ala.)
Aderholt’s wife, Caroline Aderholt, is a 6.3% owner of McDonald Farms, which received a total of $3,059,878 in federal farm subsidies between 1995 and 2009. Additionally she received $338 directly from USDA in 2009.
EWG’s estimate of farm subsidies to Caroline Aderholt, using the percentage share information received by USDA, is $191,580.
Rep. Leonard Boswell (D-Iowa)
Boswell is listed as directly receiving a total of $16,235 in subsidies between 2001 and 2008.
Rep. John Campbell (R-Calif.)
Campbell is listed as a 1.5 percent owner of the Campbell/McNee Family Farm LLC, which received a total of $10,364 in federal farm subsidies between 2007 and 2009.
EWG’s estimate of the farm subsidy benefits Campbell received, based on the percentage share information submitted to USDA, is a total of $155 between 2007 and 2009.
Rep. Jim Costa (D-Calif.)
Costa is listed as a 50 percent owner of Lena E Costa Living Trust, which received $2,494 in federal farm subsidies.
EWG’s estimate of farm subsidy benefits Costa received, based on the percentage share information submitted to USDA, is a total of $1,247 between 2006 and 2007.
Rep. Blake Farenthold (R-Texas)
Farenthold received a total of $1,205 in farm subsidies directly from USDA between 1999 and 2005.
Rep. Stephen Fincher (R-Tenn.)
Fincher is listed as directly receiving a total of $114,519 from USDA between 1995 and 2009. Fincher’s farm, Stephen & Lynn Fincher Farms, is also listed in the EWG database as receiving a total of $3,254,324 between 1999 and 2009. Fincher and his wife Lynn are each 50 percent partners in that farm.
EWG’s estimate of the farm subsidy benefits Fincher and his wife received totaled $3,368,843 between 1995 and 2009.
Rep. Vicky Hartzler (R-Mo.)
Hartzler is listed in the EWG Farm Subsidy Database, but no subsidies were directly paid to her. Her husband, Lowell Hartzler, however, is listed as a 98 percent owner of Hartzler Farms, which received a total of $774,489 in farm subsidies between 1995 and 2009. His ownership percentage rose from 53 percent in the years up to 2005 to 98 percent in 2006.
EWG’s estimate of the farm subsidy benefits Lowell Hartzler received, based on the percentage share information (assumed to be 53 percent prior to 2006) supplied to USDA, totaled $469,292 between 1995 and 2009.
Rep. Rush Holt (D-NJ)
Holt is listed as a 10.5 percent owner of Froelich Land Trust No. 1, which received at total of $33,021 in farm subsidies between 1995 and 2008. Holt’s wife, Margaret Lancefield, is listed as a 25 percent owner of Lancefield Farm, which received a total of $23,478 in subsidies between 1996 and 2009.
EWG’s estimate of the farm subsidy benefits Holt received, using the percentage share information provided to USDA, is a total of $9,337 between 1995 and 2009.
Rep. Timothy Huelskamp (R-Kansas)
Huelskamp is listed as directly receiving $258 in 2002.
Rep. John Kline (R-Minn.)
Kline’s wife, Vicky Sheldon Kline, is listed as a 20 percent owner of Sheldon Family Farms LP, which received a total of $23,667 between 2000 and 2009.
EWG’s estimate of the farm subsidy benefits Ms. Klein received, based on the percentage share information supplied to USDA, is a total of $4,733 between 2000 and 2009.
Rep. Tom Latham (R-Iowa)
Latham is listed as part owner of four entities: 33 percent owner of Latham Seed Co., which received a total of $448,925 in farm subsidies between 1995 and 2003; 25 percent owner in Latham Hospital Farm, which received a total of $76,612 between 1995 and 2001; 25 percent owner in Latham Kanawha Farm, which received a total of $15,648 between 1995 and 2001; and 3 percent owner in DTB Farms LLC, which received a total of $472,018 between 2003 and 2009.
EWG’s estimate of farm subsidy benefits Latham received, based on the percentage share information submitted to USDA, is a total of $330,046 between 1995 and 2009.
Rep. Cynthia Lummis (R-Wyo.)
Lummis is listed as a 31.33 percent owner of Lummis Livestock, which received a total of $47,093 in farm subsidies in between 1996 and 2002. Lummis listed her ownership of Lummis Livestock in her 2009 financial disclosure form.
EWG’s estimate of the farm subsidy benefits Lummis received, based on the percentage share information submitted to USDA, is a total of $14,289 between 1996 and 2002.
Rep. Randy Neugebauer (R-Texas)
Neugebauer is involved in two business entities. He owns 50 percent of Lubbock Land Company Five LTD, which received a total of $3,369 in farm subsidies between 1998 and 1999. He also owns 50 percent of Lubbock Land Company Two LTD, which received a total of $4,608 in farm subsidies in between 1998 and 1999. Neugebauer’s financial disclosure forms for 2009 do not list either company.
EWG’s estimate of farm subsidy benefits Neugubauer received, based on the percentage share information submitted to USDA, is a total of $3,989 between 1998 and 1999.
Rep. Kristi Noem (R-S.D.)
Noem is listed as having a 13.5 percent share in Racota Valley Ranch between 2000 and 2001 and a 16.9 percent share between 2002 and 2008. Racota Valley Ranch received a total of $3,058,152 in farm subsides between 1995 and 2008. Noem’s 2009 financial disclosure form listed her as a partner in Racota Valley Ranch.
EWG’s estimate of farm subsidy benefits Noem received, based on the percentage share information submitted to USDA, is $443,748.
Rep. Collin Peterson (D-Minn.)
Peterson is listed as receiving a total of $828 between 2005 and 2009.
Rep. Dennis Rehberg (R-Mont.)
Rehberg received a total of $7,971 directly from USDA between 1995 and 2002. Rehburg’s wife, Jan Rehberg, also received $51 directly from USDA in 2008. Jan Rehberg also has ownership in two entities that received payments. She has a 33 percent stake in Lenhardt Property LP, which received a total of $517 between 2006 and 2009. She also has a 5.6 percent stake in Teigen Land and Livestock Company, which received a total of $31,890 between 2002 and 2003.
EWG’s estimate of farm subsidy benefits Rehberg and his wife received, based on the percentage share information provided to USDA, is a total of $9,980 between 1995 and 2009.
Rep. Marlin Stutzman (R-Ind.)
Stutzman is listed as directly receiving a total of $179,370 in farm subsidies between 1997 and 2009.
Rep. Mac Thornberry (R-Texas)
Thornberry listed as William M. Thornberry, directly received a total of $4,306 in farm subsidies between 1995 and 1999. Thornberry is also a one-third owner of Thornberry Brothers, which received a total of $65,326 in farm subsidies between 1995 and 2009. His financial disclosure form in 2009 lists him as an owner in Thornberry Brothers Cattle.
EWG’s estimate of the farm subsidy benefits Thornberry received, based on the percentage share information provided to USDA, is a total of $26,081 between 1995 and 2009.
US SENATE (in alphabetical order)
Sen. Michael Bennet (D-Colo.)
Bennet’s wife, Susan Daggett, is listed in his 2010 financial disclosure forms as 5.5 percent owner of Daggett Farms LP and LMD Farms LP. Daggett Farms LP received a total of $258,916 in farm subsidies between 1995 and 2008. LMD Farms LP received a total of $102,291 between 2000 and 2009.
EWG’s estimate of farm subsidy benefits Daggett received, based on the percentage share information provided to USDA, is a total of $19,866 between 1995 and 2009.
Sen. Chuck Grassley (R-Iowa)
Grassley is listed as directly receiving a total of $263,635 in federal farm subsidies between 1995 and 2009.
Sen. Richard Lugar (R-Ind.)
Lugar is listed as a 9.39 percent owner of Lugar Stock Farm. His wife, Charlene Smeltzer Lugar, is listed as a 7.42 percent owner in Lugar Stock Farm. Lugar Stock Farm received a total of $158,892 in farm subsidies in between 1995 and 2009.
EWG’s estimate of the farm subsidy benefits Lugar and his wife received totals $26,710 between 1995 and 2009
Sen. Jon Tester (D-Mont.)
Tester received a total of $159,549 directly from USDA between 1995 and 2009. Testers’ wife, Sharla, is listed as a 50 percent owner of T-Bone Farms – Tester is listed as owning the other 50 percent. T-Bone farms received a total of $282,754 in federal farm subsidies between 1995 and 2009.
EWG’s estimate of the farm subsidy benefits Tester and his wife received, based on percentage share information provided to USDA, is a total of $442,303 between 1995 and 2009.
Sen. Orrin Hatch (R-Utah)
EWG’S estimate of the farm subsidy benefits Hatch and his wife received, based on the share information provided to USDA regarding Ms. Hatch’s share of Edries N Hansen Properties LLC, is a total of $909 between 2008 and 2009.
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Although Rep. Michelle Bachmann (R-Minn.) was the subject of considerable publicity in 2010 over her family’s farm subsidy payments, she is not in this list since she has not received direct payments from USDA. Her late father-in-law, Paul Bachmann, received $259,332 in subsidies between1995 and 2008. Bachmann’s financial disclosure form lists an interest in Bachmann Family Farm LP, receiving subsidy payments income in the $15,001-$50,000 range in 2009, but for unknown reasons, Bachmann Family Farm LP does not appear in the EWG Farm Subsidy Database. If a person is a part owner in a farm, and that farm receives federal subsidies, USDA indicates that that person is a beneficiary of federal farm programs.
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Where is the media on this? We are being lied to. Tax breaks too? Bamster wants to talk about corporate fleecing?
***Kerry Picket
Published on March 31, 2011
Obama has some 'splaining to do about taxpayers' profitable "investment" in General Motors. It turns out the president is imagining things.
Though Democrats tout the auto bailout as a success, recent reports illustrate the taxpayer cost of the GM auto bailout was substantially larger than the Obama administration and a Congressional Oversight report has owned up to.
"American taxpayers are now positioned to recover more than my administration invested in GM,” President Obama said, according to a piece in USA Today last November. Steven Rattner, former head of the Treasury's auto task force agreed, telling CNN in November: “Recent progress at GM gives reason for optimism that it may be possible for taxpayers to get every penny back.”
In fact, Investor's Business Daily reported that even the White House’s Director of the National Economic Council remarked that the Treasury Department Department had a good chance in "recovering most, if not all, of its investment in" GM.
However, a March 16 Congressional Oversight report, tells a different story. It estimates taxpayers will be out of $25 billion. Additionally, the report points out that “full repayment will not be possible unless the government is able to sell its remaining shares at a far higher price.”
That's only the beginning. Both the White House and the Congressional Oversight report omit the fact that during its bankruptcy, GM got a $45 billion tax break, courtesy of the American people.
GM is driving “away from its U.S.-government-financed restructuring with a final gift in its trunk: a tax break that could be worth as much as $45 billion,” reported The Wall Street Journal last November.
Over one year after the promises President Obama and his administration made about the auto bailout, a February piece on AutoBlog also confirms that GM will also get a $14 billion dollar domestic tax break:
GM will be able to skip its tax tab due to years of massive losses. Companies are typically forgiven a portion of future taxes due to their past losses, but that benefit is typically stripped after an organization goes through bankruptcy.
However, the Obama administration and its allies presently continue to celebrate the success of the auto bailout, regardless of the facts. "I don’t think there’s any doubt that this was a success," said (H/T Detroit News) acting assistant secretary at the Treasury Department Tim Massad, who oversees the TARP program at Treasury, to a House panel on Wednesday.
In Obama's world, success mean taxpayers only lost as much as $84 billion.***
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re. Govt Motors, Where is the mainstream media? AWOL. A combination of a) the fact that the tax system and the political goodies are too complex for them, b) they are so naive and untrained on all matters relating to business, and c) bias - make it so they honestly don't know or want to know that $84 billion of taxpayer money was lost. They were scooped by the Washington Times http://www.washingtontimes.com/blog/watercooler/2011/mar/31/barack-obama-losing-84-billion-big-success/ with not even a thought of racing to catch up with the story.
re. Ag Subsidies to members of commerce: On the positive side, this should make it easier for them to cancel the programs and explain to their constituents that they personally had to give this up too. As the article states, this has to do with geography. The heartland is now Republican but the farm subsidies go back to when Dems controlled much of it. Also as pointed out, ag is now big business, not family farms. These members are typically owning smaller shares of large tracts under professional management. Failure to apply for and secure subsidies that are widely available would be dereliction of duty by professional management.
People like Michele Bachmann get into the story, but all it looks she did was inherit through marriage a piece of something from her husband's family. She is a tax attornet. She didn't make a career inventing or promoting government subsidy programs, though she may have votes recorded on the wrong side of this. Pawlenty has past support of ethanol he needs to fix. Schumer supported the wall street bankers. Everyone has baggage. Bachmann isn't going to be President and she isn't going to lose her seat in Minnesota's most conservative district.
Reforms need to be comprehensive. If you tell one constituency or industry their program is canceled, you better to be able to also tell them all the others were too, otherwise it is just a vote against farming. Ag reform alone will lose those seats and skew the primaries.
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Of Space Ships and Bullet Trains
The space shuttle program is a cautionary tale for ambitious infrastructure projects.
6 April 2011
With the final landing of the space shuttle Discovery on March 9, a significant chapter in NASA history came to a close. It’s the beginning of the end for the space shuttle program—the final flights of Endeavour and Atlantis are scheduled for later this year—and thus a fitting occasion to reflect on an effort that dates back to the Nixon administration. As President Obama calls for a new era of “doing big things”—from creating a high-speed rail system to building wind farms—the record of the shuttle program and other “megaprojects” worldwide suggests a simple warning: beware the “unbiased expert.”
Commenting from Kennedy Space Center before Discovery’s final launch, PBS Newshour’s Miles O’Brien gave an unsentimental valediction for the shuttle program: “Well, the promise of the space shuttle program, when you look at how they were selling it in the front of Congress, was just pure fancy. There were all these studies which indicated the space shuttle fleet could be flown on the order of once a week, and that it would have airliner-like capability for turning it around once it got on the ground. But it’s an incredibly complicated system. And there wasn’t a full appreciation at the time for really how difficult it was to fly a reusable spacecraft to and from space.” O’Brien’s skepticism has become more common since the October 2003 release of NASA’s final report on the Columbia disaster. Investigating the causes of Columbia’s tragic disintegration over Texas on February 3, 2003, the Columbia Accident Investigation Board looked beyond the event itself, concluding that the accident’s origins could be found three decades earlier, in the program’s first days: “It is the Board’s view that, in retrospect, the increased complexity of a shuttle designed to be all things to all people created inherently greater risks than if more realistic technical goals had been set at the start. . . . Throughout the history of the program, a gap has persisted between the rhetoric NASA has used to market the Space Shuttle and operational reality.”
During the Columbia investigation, Robert F. Thompson, the shuttle program’s manager from 1970 until just after its first launch in 1981, officially confirmed what many had long suspected: that from their first discussions with Nixon aides, NASA engineers and other interested parties had fudged budget and performance numbers. To gain congressional support for the multibillion-dollar project, NASA had to demonstrate that the shuttle would have a much lower cost “per payload pound” than conventional single-use rockets. As Thompson recounted in his testimony before the Columbia Accident Investigation Board on April 23, 2003: “At the time that we were selling the program [emphasis added] at the start of Phase B, the people in Washington got a company called Mathematica to come in and do an analysis of operating costs. Mathematica discovered that the more you flew, the cheaper it got per flight. Fabulous. . . . So they added as many flights as they could. They got up to 40 or 50 flights a year. Hell, anyone reasonable knew you weren’t going to fly 50 times a year.”
Not everyone was fooled. Even before the shuttle’s first launch, in a prophetically titled cover story—BEAM ME OUT OF THIS DEATH TRAP, SCOTTY—for the Washington Monthly in 1980, Gregg Easterbrook compared the project with Howard Hughes’s “Spruce Goose,” the largest plane ever built, which managed to get only 70 feet off the ground in its sole flight. The magazine dubbed the shuttle program “Battlestar Bureauctica.”
Investigating an agency that had already overspent its original budget and missed its forecasted launch date, Easterbrook found scientists seemingly disconnected from any sense of financial stewardship. Recalling the program’s quest for cash in its early days, Jerry Gray, one of the original members of the shuttle technical team, used an equine metaphor: “First you have to get the horse,” he told Easterbrook, “then you decide where to ride him.” By 1980 the shuttle program had practically doubled its original budget; today, after three decades and almost $200 billion spent, it has missed almost every budget and performance goal.
Yet the shuttle program is just another entry in the ever-expanding file of large, ostensibly public projects that have lurched past deadlines and beyond financial limits. In their book Megaprojects and Risk: An Anatomy of Ambition, European planning and policy professors Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter analyze dozens of public-works projects worldwide—from the “Chunnel” (the British Channel rail tunnel) to a high-speed rail project connecting Berlin and Hamburg to the construction of Denver International Airport. They draw some common lessons.
First, cost overruns are endemic to such massive projects. From the Chunnel, which nearly went bankrupt several times and exceeded original cost estimates by 80 percent, to Boston’s “Big Dig” traffic tunnel upgrade, which ran 200 percent over budget, the impact on state and local coffers can be immense. Overall, the authors report that “the difference between actual and estimated investment cost is often 50-100 percent.”
A second common thread in these ventures is that their advocates, eager to get them financed, vastly overstate projected public usage. Interestingly, this seems especially true of rail systems (both high-speed and standard urban rail) in comparison with road, bridge, and tunnel projects. While road infrastructure projects like the UK’s Humber Bridge (which has seen just 25 percent of its forecast traffic) have underperformed, public rail projects have an especially poor track record when measured against original cost and usage estimates. Transportation secretary Ray LaHood, pushing ahead with a White House plan to build high-speed rail throughout the country, is either unaware of this research or unconvinced by it.
The Megaprojects authors find that blame for these fiascoes lies in a toxic pro-project mix of self-seeking “experts,” politicians, and private-sector interests—combined with a minimum of public input. “It is easy to find motives for producing deceptive forecasts of costs and benefits,” they write. “Politicians may have a ‘monument complex,’ engineers like to build things, and local officials sometimes have the mentality of empire-builders. In addition, when a project goes forward, it creates work for engineers and construction firms, and many stakeholders make money.” So while some might defend the errors as honest mistakes caused by unforeseen circumstances, the authors come to a more prosaic conclusion: “The use of deception and lying as tactics aimed at getting projects started appears to best explain why costs are highly and systematically underestimated and benefits overestimated in transport and infrastructure projects.”
The authors’ solution to the seemingly intractable problems of complex project construction is fairly straightforward: give taxpayers a say. They call for a “participatory and deliberative approach in including publics and stakeholders,” which they argue will result in “decisions about risk that are better informed and more democratic.” Encouragingly, more inclusive practices of this kind seem increasingly common around the world. From “citizen juries” and “public advisory councils” that oversee local- development efforts in Europe and the United States to Stanford professor Jim Fishkin’s “Deliberative Poll” methodology, which has been employed to plan public-construction projects in China, citizens can and should take a larger role in decision-making. Greater public participation will not only result in scuttling some unnecessary projects, but also prioritizing more urgent ones. As Flyvbjerg and his colleagues note, some meritorious projects never see the light of day because they lack the salesmanship and boosterism that have often supported expensive boondoggles.
During World War I, French prime minister Georges Clemenceau famously sniffed that “war is too important to be left to the military.” In the same sense, as President Obama declares that “within 25 years, our goal is to give 80 percent of Americans access to high speed rail,” citizens should understand that such efforts are too important—and costly—to be left to engineers, politicians, and even rocket scientists.
Pete Peterson is executive director of the Davenport Institute for Public Engagement and Civic Leadership at Pepperdine’s School of Public Policy.
http://www.city-journal.org/2011/eon0406pp.html
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Not the Biggest Cut in History. Not by a Long Shot.
David Boaz - April 11, 2011
Pundits and politicians are all in agreement: Those were some big budget cuts in Friday night’s deal. “The largest annual spending cut in our history,” President Obama said. Speaker of the House John Boehner called it the “largest real dollar spending cut in American history.” Saturday’s front-page, upper-right headline in the Washington Post proclaimed:
BIGGEST CUTS
IN U.S. HISTORY
The story went on to say that Obama “said the cuts would be painful but necessary.”
NPR’s Andrea Seabrook reported, “The Republicans got big, big cuts.” “Slashing government,” agreed the Los Angeles Times. The Washington Post added the big picture:
an ascendant Republican Party has managed to impose its small-government agenda on a town still largely controlled by Democrats.
And in a separate story:
Obama and his party felt pressure to show they heard the message that many Americans believe the government spends too much and that deficits are unsustainable.
AP added:
Republican conservatives were the chief winners in the budget deal that forced Democrats to accept historic spending cuts they strongly opposed. Emboldened by last fall’s election victories, fiscal conservatives have changed the debate in Washington. The question no longer is whether to cut spending, but how deeply.
Please. It’s a cut of $38 billion in a budget of $3,819 billion. That’s 1 percent. That’s a rounding error in federal budgeting.
Have you ever seen people so self-congratulatory over such a minor accomplishment? Here’s one graphic representation of the budget cuts—showing the House’s original proposed cut of $61 billion—compared to annual spending and the annual deficit. Here’s another, depicting the $61 billion cut in the context of the rapid growth of spending over the past decade. In fiscal year 2001, which ended in September 2001 but was mostly set in place before President Bush took office, the federal government spent $1,863 billion. After seven years of Bush and a Republican Congress, spending was more than a trillion dollars higher—$2,983 billion in FY2008. Then the financial crisis, TARP, the stimulus, and the omnibus spending bill came along, and FY2011 spending is estimated at $3,819 billion—$836 billion more than just three years earlier, and $1,956 billion more than when Bush took office a decade ago.
So this cut—not of $61 billion but of $38 billion—is a lot of money anywhere except Washington. In Washington, it’s 1 percent of what the federal government will spend this year. It’s less than 5 percent of the three-year spending increase. It’s 10 percent of this year’s spending increase, the increase from 2010 to 2011.
Is it nevertheless the “the largest annual spending cut in our history,” as President Obama says? Not hardly. My Cato Institute colleague Chris Edwards notes:
This federal budget table shows total federal spending since 1901. Total spending fell in 22 years out of the last 110 years. In 19 of those 22 years, spending was cut by more than 1 percent.
And what about the downsizing of the federal government after World War II? That same budget table shows that federal spending fell from $92.7 billion in 1945 to $55.2 billion in 1946, to $34.5 billion in 1947, and to $29.8 billion in 1948 (and all without any of the job losses that we’re told would result from modest reductions today). Check out also the drop in spending from 1919 to 1922, even larger in percentage terms.
The president might be technically correct in this sense: In none of those years did federal spending fall by as much as $38 billion in nominal dollars. But any real comparison would use inflation-adjusted dollars or percentage of the budget, and by those standards there are no “big, big cuts” here. (Boehner specifically called it the “largest real [that is, inflation-adjusted] dollar spending cut in American history,” which is so clearly wrong that it must surely have been a misstatement.)
The fundamental point here is that federal spending rose by more than a trillion dollars during Bush’s first seven years, and then by almost another trillion in barely three fiscal years. And then we had a titanic battle over whether to trim $38 billion.
The idea that the Democrats “have shown that they heard the message that government spends too much” or that the Republicans—the party that increased federal spending by a trillion dollars while nobody was looking during the Bush years—have “imposed a small-government agenda on Washington” is ludicrous. After these meager cuts, the federal government will spend more than twice as much as it did when Bill Clinton left the White House.
Our present fiscal course is unsustainable, as experts across the political spectrum have told us. Projections in the 2010 Financial Report of the U.S. Government indicate that national debt as a percentage of GDP is on course to rise from 62 percent of GDP in 2010 to 130 percent in 2040. If there’s this much resistance to a budget haircut, how can we hope to agree on surgery that would actually reduce spending, balance the budget, and avert national bankruptcy?
http://www.britannica.com/blogs/2011/04/biggest-cut-history-long-shot/
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Stiglitz and the progressive Ouroboros
Apr 11th 2011, 21:30 by W.W. | IOWA CITY
JOSEPH STIGLITZ, an economics professor at Columbia University with a Nobel prize and stints at the White House and the World Bank on his gold-encrusted CV, takes to the perfumed pages of Vanity Fair to decry the alleged rule "Of the 1%, by the 1%, for the 1%". Mr Stiglitz's essay, though riddled with error and confusion, remains an illuminating encapsulation of a certain misguided conception of political economy common on the left.
Scott Winship does us the service of ferreting out Mr Stiglitz's false and misleading claims. The share of national income and wealth accruing to the top 1% has not grown as much as Mr Stiglitz asserts. Median income has declined only if one omits the value of health benefits. The claim that "All the growth in recent decades—and more—has gone to those at the top", is plainly incorrect. There is little evidence that increasing levels of inequality "undermine the efficiency of the economy". Mr Stiglitz maintains that it is "well-documented" that high levels of inequality lead "people outside the top 1 percent" to "increasingly live beyond their means", but the increase in indebtedness is small, and theories, such as Robert Frank's, connecting middle-class consumption and indebtedness to rising inequality remain speculative. There's more, but fact-checking is tedious business. Please do read Mr Winship's post for the details.
I'm more interested in the deep commitments framing Mr Stiglitz's essay. Mr Stiglitz offers yet another voicing of the progressive master narrative: that economic inequality becomes political inequality, empowering the richest to bend the political process to their will at the expence of the commonweal. "Wealth begets power, which begets more wealth", as Mr Stiglitz pithily puts it. Progressives thrill to this sort of vague slogan, but we are rarely offered an intelligible explanation of how exactly wealth begets power, nor are we offered an intelligible approach to reducing the power of wealth over policy and politics.
Mr Stiglitz writes:
Monopolies and near monopolies have always been a source of economic power—from John D. Rockefeller at the beginning of the last century to Bill Gates at the end. Lax enforcement of anti-trust laws, especially during Republican administrations, has been a godsend to the top 1 percent. Much of today’s inequality is due to manipulation of the financial system, enabled by changes in the rules that have been bought and paid for by the financial industry itself—one of its best investments ever. The government lent money to financial institutions at close to 0 percent interest and provided generous bailouts on favorable terms when all else failed. Regulators turned a blind eye to a lack of transparency and to conflicts of interest.
I agree with all of this. But, pray tell, what does it have to do with inequality? Would reducing inequality to, say, Canadian levels by means of progressive redistribution help? No, it would not. Making rich people poorer and poor people richer won't strip the financial industry of the resources needed to "buy" the regulations and regulators it wants. So what does Mr Stiglitz propose we do? He doesn't say, but I'll hazard a guess: get better regulators—regulators who see things Joe Stiglitz's way. If you sense that this is not a serious answer to a serious problem, you are correct. Indeed, it is plausible that economic technocrats such as Mr Stiglitz bear no small part of the blame for the corrupt and baleful state of the financial economy.
As Gabriel Sherman writes in a new New York Magazine article on Peter Orszag and the revolving door between Washington and Wall Street, "The close alliance among Wall Street and the economics departments of the major universities and the West Wing of the White House is the military-industrial complex of our time." Not to say that the military-industrial complex is not the military-industrial complex of our times, nor that the confluence of government and health care is not the military-industrial complex of our times. The problem is that we are multiplying military-industrial complexes. But this explosion in public-private "partnerships", and the inevitable political corruption and economic distortion they produce, is not at bottom due to a plot of the top 1%. It is due in no small part to the success of progressive ideologues like Mr Stiglitz in arguing for ever greater government control over everything.
A political system that enshrines governments' power to grant monopolies and other barriers to economic competition, whether they be direct subsidies to government's chosen champion firms, or less direct subsidies by way of taxes, tariffs, and regulations that disproportionately harm less-favoured firms, inevitably attracts money to politics. Under close inspection, the progressive master narrative is revealed as a tail-chasing, self-consuming progressive Ouroboros. It is an argument against money in politics that argues for precisely the sort of government power that draws money to politics.
The progressive master narrative runs on the fuel of class interest, but it makes an arbitrary exception for members of the progressive technocratic elite, like Mr Stiglitz. This is the loophole through which the Ouroboros escapes self-cannibalism. These men and women, the technocratic elite, in virtue of their superior moral rectitude and mastery of the relevant social science may be trusted with almost unlimited power to manage the nation's economy, wars, and far-flung imperial holdings on behalf of the democratic public. Sure, these godlike king-making powers make professional courtiers of the money men, but not to worry. The public-minded technocrat pledges in his heart of hearts to express only the will of the people, especially the least among us. Thus our Joe Stiglitzes and Samantha Powerses, desiring nothing but the best all of us, stand arm in arm as a sturdy bulwark against the tide of money that threatens to corrupt our politics. Of course, at times the wishes of the people diverge from the opinion of the technocrats. In which case, we cannot but suspect that public opinion has been manipulated by the rich, or by "market fundamentalist" ideologues financed by rich people, such that, as Mr Stiglitz puts it "one big part of the reason we have so much inequality is that the top 1 percent want it that way". If the financial system collapses and cripples the economy, if the American military gets bogged down in a blood-soaked trillion-dollar quagmire, that's because the technocrats in or near positions of power had too little influence, not too much. Or they were the wrong technocrats. Or, if all this seems too far-fetched ... Look! Over there! Inequality!
The nexus of politics and big money is a profound problem, but inequality is at best a manifestation of the problem, not the problem. Inequality is a red herring that draws our attention away from the real, hard task that faces truly public-spirited reformers: how to fix the corrupt and corrupting interface between America's economic and political institutions. We may hope for, but should not expect, useful, impartial advice in this regard from powerful academics holding golden key-cards to the revolving door. And we may hope for, but should not expect, useful advice in this regard from progressives dizzy from chasing their tails. So, instead, we get righteous rants about the injustice and danger of inequality. But should the American public suddenly sweeten to the idea of greater downward redistribution, sending America's Gini coefficient tumbling toward the sweet valley of social justice, it would do little or nothing to alter the venal incentives that account for the multiplying host of military-industrial complexes spreading across America like a cancer.
http://www.economist.com/blogs/democracyinamerica/2011/04/inequality_and_politics
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That was quite lucid.
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"The same prudence which in private life would forbid our paying our own money for unexplained projects, forbids it in the dispensation of the public moneys." --Thomas Jefferson, letter to Shelton Gilliam, 1808
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Half the population pays no Federal taxes? I have people left and right claiming disability, all entitled to retire at 50 or 60. All the while Katherine and I stalked. Had someone in my yard a few days ago looking at a small water problem then get a solicit text a few minutes later from out of state telling me they can help me if I have any flooding problems. Done by those robbing us just to torture us and remind me they are watching. Not a thing I can do about it. Not a thing law enforcement will do about it. Even if they tried they would be bribed. (Hey you want back stage passes to see Toby Keith or Trace Adkins?). I see people singing her stolen lyrics standing right up there with President, President candidates. Claiming how nice they are for the troops, children etc.
I just got my tax bill. I work probably close to half the year to pay taxes have little left over to pay bills and then read this:
****NJ Wastes Millions on Clothing Allowances for State Workers: Report Wednesday, Apr 13, 2011 | Updated 12:57 PM EDT 5
By Beth DeFalco
New Jersey spent more than $3 million this fiscal year on clothing allowances for white-collar workers who aren't required to wear uniforms, according to a new report from the state comptroller.
Under collective bargaining agreements, New Jersey provides an annual clothing allowance for uniforms to certain employees of $700 a year for full-time workers and $350 for part-time workers. The allowance is a flat amount included in payroll checks and doesn't require that employees provide a receipt.
Overall, the state spends more than $22 million a year on clothing allowances, with more than 20 percent going to white-collar workers, such as day care counselors, computer technicians and teaching assistants. About half of them don't wear uniforms, the report said.
"It's absurd," said state comptroller Matthew Boxer. "The state spends millions of dollars every year to cover the cost of uniforms for state employees who don't actually wear uniforms."
advertisement The report said that interviews with administrators at five different New Jersey state departments showed allowances were provided to department employees who are not required to wear uniforms or special clothing.
In one example, 888 white-collar Transportation Department employees received the allowances in the 2011 fiscal year, yet only 49 were required to wear uniforms.
Boxer's office has recommended that the state eliminate the clothing payments for employees who are not required to wear uniforms or other identifiable clothing, but did not recommend whether that be done through legislation or collective bargaining.
According to Boxer's office, New Jersey's clothing allowance is far more generous than other states. New York, Pennsylvania, Ohio, Michigan, Maryland, Connecticut and California don't provide clothing allowances greater than $175, according to collective bargaining agreements, and California will reimburse its employees up to $450 a year if the employee shows a receipt.
Boxer's office said the investigation was the result of an anonymous call made to a tip line.****
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Obama Needs to Look at the Other Side of the Ledger
Posted by Daniel J. Mitchell
In his speech this afternoon, President Obama is expected to call for, among other things, an increase in taxes on investors, entrepreneurs, small business owners, and other “rich” people who make over $250,000 a year. The goal, the President claims, is to reduce deficits.
America has a spending problem, not a revenue problem, as the Congressional Budget Office chart below shows. The federal budget has ballooned nearly $2 trillion in the past 10 years and that increased burden of spending is undermining growth. And if left on autopilot, the spending crisis will get worse in coming decades. Rather than trying to keep up with that growing burden of government — an impossible task — by raising taxes, our leaders should be looking at ways to treat the underlying problem: Our government is too big and it spends too much. We cannot tax our way out of this problem, particularly since politicians will spend any additional revenue.
(http://danieljmitchell.files.wordpress.com/2011/03/long-run-fiscal-problem.jpg?w=500&h=348)
The federal tax burden will rise above the historical average of 18 percent of GDP with no help from President Obama. Even without expiration of the Bush tax cuts or the alternative minimum tax, the tax burden is expected to climb because even modest economic growth slowly but surely pushes more and more people into higher tax brackets.
The chart below shows CBO’s estimate of personal income tax revenue based on current policy (as opposed to estimates based on current law, which includes already legislated tax hikes) . To be more specific, it shows how much revenue the government will collect from the individual income tax even if the 2001 and 2003 tax cuts are made permanent and the AMT is indexed.
(http://danieljmitchell.files.wordpress.com/2011/03/future-income-tax-burden.jpg?w=500&h=382)
The aggregate individual income tax burden will increase by roughly 5 percentage points of GDP when compared to the long-run average of about 8 percent of GDP (the CBO estimate only goes to 2035, so I extrapolated to show the same time period as the first chart). And remember, this is the forecast of what will happen to income tax revenues even if politicians don’t impose any new laws to coercively extract more revenue.
This might not be too bad if other taxes were falling, but that’s not what CBO is projecting. As such, this big increase in revenue from the individual income tax means that the overall tax burden will climb by approximately the same amount.
In other words, revenue likely will rise close to 25 percent of GDP as we approach the next century. So if we use this more realistic baseline, we can say that more than 100 percent of the long-run deficit problem is because spending is out of control.
The second reason for a firm no-tax increase position is that higher taxes are a very ineffective way of reducing budget deficits. Indeed, tax increases generally backfire and lead to more red ink. To understand why, it’s important to put away the calculator and instead consider the real world of politics and public policy. For instance:
Tax increases rarely raise as much revenue as predicted by government forecasters. This is because of “Laffer Curve” effects , as taxpayers change their behavior to earn less income and/or report less income. Simply stated, people respond to incentives, and this means taxable income falls as tax rates increase.
o Tax increases erode pressure to control spending. Why would politicians want to make tough decisions and upset special interest groups, after all, when there is going to be more revenue (or at least the expectation of more revenue)? Using more colloquial language, trying to control spending with higher taxes is like trying to cure alcoholics by giving them keys to a liquor store.
o Milton Friedman was right when he said that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.” In other words, if politicians think they can get away with deficits averaging, say, 5 percent of GDP in the long run, then the the only impact of higher taxes is an equal amount of additional spending – while still retaining deficits of 5 percent of GDP.
The real-world evidence certainly points in this direction. We’ve seen “bipartisan budget summits” several times in Washington, and the result is more spending rather than lower deficits.
America’s fiscal challenge is too much spending. Government is too big and it is wasting too much money. Taking more money from the American people is not the way to solve that problem.
http://www.cato-at-liberty.org/obama-needs-to-look-at-the-other-side-of-the-ledger/
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Good arguments.
Now if we can only get some decent mouthpieces to convince just enough of the 50% who pay no Fed income tax to go along with this and throw the "bums out" before we crash.
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"if we can only get some decent mouthpieces to convince just enough of the 50% who pay no Fed income tax to go along with this"
You appeal to them through their children, not through their current status, the key is income mobility. In the inner city some people grow up believing we are welfare, we will always be welfare people. You never win their vote unless they change their outlook. Turns out the party of welfare didn't have much of a solution for them either. With the few Hispanic immigrants for example that I have gotten to know, they are beaming with pride in their children. You need to ask them if their children will likely be pulling the wagon or riding on it. Will they be producers or dependents of all this mess that won't even be there for them anyway if we keep going like this. It was free money only as long as somebody else paid for it. No one is paying for it all now. This is not free money for you if your own children and grandchildren are the ones left holding the tab.
There is an optimism (missing) that goes with getting this country going again. Conversely there needs to be a shame put on accepting the status quo and letting everything we believed in and worked for go down the drain on our watch.
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I had occasion to be in a California Board of Equalization office today (this is CA's IRS). Lots of purple on the walls and some purple SEIU shirts to be seen. Naturally I was wearing my "Nobama: Keep the change!" t-shirt :wink:
I must say that I was pleasantly shocked at being taken quickly, and treated with considerable humanity by the bureaucrat in question. She definitely let me slide on something that could have been a big inconvenience, and trusted me to phone in to her information that I did not have with me.
With business concluded, she politely queried about my shirt. I commented that BO IMHO was a nice man but was bankrupting us. She answered that he came in at a tough time, when anyone taking office would not have looked good. I allowed that that had merit and we continued the conversation. Naturally, I beat her up with simple facts, which I made sure to do in a nice and respectful way. It was a nice conversation and ended well, in a positive spirit. I had the impression that I had given her some things to think about.
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"California Board of Equalization "
Kafka and Orwell together couldn't come up with a better name than that!
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"From each according to his ability, to each according to his needs"
Is that the slogan?
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One point of a document as subversive as Paul Ryan's 2012 budget is to provoke debate, and has it ever. But amid the thoughtful musings about starving orphans and grandma in a snowbank, could his critics at least get their facts right?
Let's unpack the distortions.
• Deficits and debt. Perhaps the most bizarre complaint is that Mr. Ryan's blueprint would worsen the U.S. fiscal imbalance compared to current law. So the House Budget Chairman has proposed supposedly hideous cuts to popular entitlements at great political risk for . . . the fun of it?
Federal deficits have increased 259% over the last three years and the Ryan budget starts to repair the damage. It would bring next year's deficit below $1 trillion, down from estimates of roughly $1.6 trillion for 2011. The false claim that Mr. Ryan would increase deficits and debt seems to be based on a Congressional Budget Office baseline that assumes $4 trillion in new taxes will land after 2012 with the expiration of all the Bush-era tax rates, that the Alternative Minimum Tax will apply to the middle class, and that Medicare physician payments will fall 20% next year.
No one thinks that baseline is at all realistic, least of all President Obama, so the right comparison is with Mr. Obama's 2012 budget. Mr. Ryan proposes smaller deficits for the next 10 years, falling to 1.6% of GDP in 2021 versus 4.9% for the White House. According to CBO, debt held by the public falls to 67.5% of the economy a decade from now from about 69% today, while it rises to 87.4% in Mr. Obama's version.
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Bloomberg News
Wisconsin Rep. Paul Ryan during a news conference on the House Republican budget.
.• Tax cuts for "the rich." The Ryan budget outline by design does not provide many tax specifics, aside from an instruction to the Ways and Means Committee to propose a reform plan that would swap lower rates for fewer loopholes and special exclusions. This overhaul is not even a net tax cut—the instructions are to design a reform that is revenue neutral. It would hold tax receipts to their post-World War II average of between 18% to 19% as a share of the economy.
The liberal claim that this means a tax cut for the wealthy is based entirely on the fact that marginal tax rates would decline, even though the loopholes primarily benefit higher-income taxpayers. At any rate, Mr. Obama's own deficit commission also favored lowering the rates and broadening the base for a more efficient and competitive tax code.
• Medicare "cuts." The Mediscare machinery is grinding into gear, and the same people who say Mr. Ryan is imposing too much pain on seniors by requiring them to pay a larger portion of their health costs also claim that he's a coward for exempting everyone in or near retirement. In other words, the soup is terrible and the portions are too small.
Mr. Ryan's plan, known as premium support, would gradually bring down health costs and spending, but it's a "cut" only in the sense of slowing the rate of growth. The premium support subsidy—for seniors to choose from a list of regulated private health plans—would start at $15,000 a year and increase annually. It is also means-tested to provide more help for lower-income seniors.
• Real health-care reform. The best way to think about Mr. Ryan's plan is that it offers the true health-care reform that Mr. Obama promised but which vanished in the political drive to put 30 million more Americans on the government rolls. Economists from the center-left to center-right have been recommending premium support for decades, and it was first proposed by Stanford's Alain Enthoven in the New England Journal of Medicine in 1978.
Some version has since been endorsed by everyone from President Clinton's 1999 Medicare commission, chaired by Democrat John Breaux, to Bob Dole and Tom Daschle in 2009. Another iteration was floated this week by a group of Nobel laureates including Ned Phelps, Vernon Smith and George Akerlof.
The core economic distortion in the current health market is that consumers rarely have the incentive to seek the best value for their money. By capping the Medicare subsidy, seniors would pay for the marginal costs of their care, promoting competitive insurance. That would in turn incrementally change how doctors and hospitals provide care, encouraging competition in price and quality.
• Health-care inflation. Aha, retort the critics, Mr. Ryan would only increase Medicare premium support based on the rate of overall inflation, while health costs are growing far faster. This is true, and we can debate whether the annual increase should be indexed to GDP growth or something else.
But the key point is that premium support would reduce health costs over time by changing the incentives of the health market. MIT economist Amy Finkelstein's research suggests that Medicare's 1965 creation led to market-wide changes that explain about half of the increase in real per capita health spending between 1950 and 1990. Mr. Ryan's plan would be as consequential in reverse.
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These attacks amount to false fronts for the real objection, which is over the role of government. Mr. Ryan's critics understand very well that he wants to substitute markets for bureaucratic central planning. What he would dismantle isn't Medicare, but its system of one-size-fits-all coverage and price controls. The liberal answer to runaway costs, passed as part of ObamaCare, is the Independent Payment Advisory Board that will decide how much the government will pay for what treatments and was deliberately shielded from Congressional supervision.
Medicare "as we know it" will change because it must. The only issue is how. Mr. Ryan is offering Americans a reform rooted in consumer choice and private competition, rather than political control and bureaucratic rationing. This is why he is under such ferocious liberal assault.
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Triple digit flaws :wink: recognized in Big Mike youtube on Presidential 2012:
Programs that are popular on PBS will survive fine without subsidy. Also for Planned Parenthood, if its cause is so noble and it needs only a thousandth of what tax rates 'cost' it could easily solicit left wing, free will support from just the leftist rich keeping too much of their own money. What kind of religion are we establishing BTW by forcing the support of these practices, killing the unborn by the millions, onto the half of the populace who abhor that practice?
The '$70 billion cost' of tax cuts coincided with revenue SURGES that closed the deficits to one tenth of what they are now. (That is the opposite of a 'cost'.) Growth stopped when the opposing agenda took power in Washington.
By the end of his little chalk talk, he had it down to the 'cuts that the GOP are trying to make'. FYI, the GOP people are not trying to make cuts, they are trying to balance things and make our government and society healthy and sustainable which cannot happen without economic growth. The status quo he advocates (higher taxes) precludes growth and thus precludes sustainability.
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http://www.cnbc.com/id/42624738
World finance leaders Saturday chastised the United States for not doing enough to shrink its massive overspending and warned that budget strainsin rich nations threaten the global recovery.
Finance ministers in Washington for semi-annual talks took sharper aim than in previous years at the United States' $14 trillion debt.
While most of the criticism came from emerging market economies, some advanced nations joined the chorus.
Dutch Finance Minister Jan Kees de Jager warned that if the United States and other advanced nations move too slowly it could undermine confidence in the global economy.
"Insufficient budgetary consolidation may spark off further escalation of debt sustainability issues, with repercussions on confidence and the still fragile financial sector," de Jager told the International Monetary Fund's steering committee."Debt dynamics in other advanced economies, including the United States, are of concern."
The IMF this week said the U.S. budget deficit was on course to hit 10.8 percent of nation's economic output this year, tying with Ireland for the highest deficit-to-GDP ratio among advanced economies. It urged Washington to move quickly to put a credible plan in place to tighten its belt.
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On a Sunday show I heard another tea party type, Sen. Mike Lee from Utah, call for a balanced budget amendment.
I want a balanced budget, but a proportionally smaller public sector spending burden is more important than the exact balance. I would support one of these proposals to cap spending at 20% of GDP, 19%, or if government were defined closer to its constitutional role maybe about half of that rate.
It is Obama's side who want automatic adjustments (tax increases) to kick in if spending restraints do not realize. That is NOT budgeting. A budget would be to say here is GDP, you can spend no more than 20% of it, or here is $2.6 trillion, you can only argue over how to spend it, not how much to spend, until the economy grows further.
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Balance Budget amendment would be a big mistake. For the Dems its stalking horse for higher taxes and for the Reps a trap to become tax collectors for the welfare state. THE ISSUE IS SPENDING AND ECONOMIC INTERVENTION/MANIPULATION OF THE ECONOMY.
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State Dept. wants to make it harder to get a passport
by EDWARD HASBROUCK on APRIL 22, 2011
If you don’t want it to get even harder for a U.S. citizen to get a passport — now required for travel even to Canada or Mexico — you only have until Monday to let the State Department know.
The U.S. Department of State is proposing a new Biographical Questionnaire for some passport applicants: The proposed new Form DS-5513 asks for all addresses since birth; lifetime employment history including employers’ and supervisors names, addresses, and telephone numbers; personal details of all siblings; mother’s address one year prior to your birth; any “religious ceremony” around the time of birth; and a variety of other information. According to the proposed form, “failure to provide the information requested may result in … the denial of your U.S. passport application.”
The State Department estimated that the average respondent would be able to compile all this information in just 45 minutes, which is obviously absurd given the amount of research that is likely to be required to even attempt to complete the form.
It seems likely that only some, not all, applicants will be required to fill out the new questionnaire, but no criteria have been made public for determining who will be subjected to these additional new written interrogatories. So if the passport examiner wants to deny your application, all they will have to do is give you the impossible new form to complete.
It’s not clear from the supporting statement, statement of legal authorities, or regulatory assessment submitted by the State Department to the Office of Management and Budget (OMB) why declining to discuss one’s siblings or to provide the phone number of your first supervisor when you were a teenager working at McDonalds would be a legitimate basis for denial of a passport to a U.S. citizen.
There’s more information in the Federal Register notice (also available here as a PDF) and from the Identity Project.
You can submit comments to the State Dept. online at Regulations.gov until midnight Eastern time on Monday, April 25, 2011. Go here, then click the “Submit a Comment” button at the upper right of the page. If that link doesn’t work for you, it’s probably a problem with the javascript used on the Regulations.gov website. There are alternate instructions for submitting comments by email here.
(Note that the proposed form itself was not published in the Federal Register. The Identity Project was eventually provided with a copy after requesting it from the Department of State, and posted it here.)
Here’s a draft of the comments (PDF) being submitted by the Consumer Travel Alliance and other consumer, privacy, and civil liberties groups and individuals, if you would like to use it for ideas for comments of your own. (It’s also available in OpenOffice format for easier editing.)
Extra points to the person who gives the best answer in the comments to the question on the proposed form, “Please describe the circumstances of your birth including the names (as well as address and phone number, if available) of persons present or in attendance at your birth.”
http://www.consumertraveler.com/today/state-dept-wants-to-make-it-harder-to-get-a-passport/
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I think that's fair, just so long as presidential candidates are willing to fill out the form as well. Perhaps Obama can lead by example here.
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More HUD Community Development Duds
Posted by Tad DeHaven
Local officials, like their federal and state counterparts, spend other people’s money. Policymakers are naturally unlikely to spend other people’s money as carefully as they would their own. This situation is exacerbated when local officials spend money obtained from federal taxpayers. At least when local taxpayers foot the bill, they have an incentive to keep an eye on how their money is spent. That incentive is largely nonexistent when the money comes from Washington.
HUD community development programs illustrate what happens when the federal government severs the relationship between local officials and local taxpayers. Originally targeted to large cities in decline, community development funding is spread widely to communities rich and poor, large and small.
Local officials love these programs because they amount to a free lunch. As a result, they lobby Washington hard for these subsidies, which means federal policymakers generally only hear wonderful tales of the “economic growth” and “job creation” fostered by the programs. However, a Cato essay on HUD community development programs explains that in addition to complexity and wasteful bureaucracy, these programs are susceptible to financial abuses.
Recent stories in the news provide further evidence.
First, years of mismanaging federal community development funds have caught up to the City of Buffalo. The Buffalo News reports that a HUD inspector general audit says the city “could not provide assurance that more than $20.1 million in transactions was properly accounted for.” According to the article, the audit findings are not surprising:
An investigation published in The News in 2004 found the city had frittered away much of its block grant money through parochial politics and bureaucratic ineptitude.
More than half the spending went to “soft costs” that include covering bad loans, paying city salaries and subsidizing an overblown network of neighborhood agencies, The News found. Relatively little went to brick-and-mortar projects, and what was spent to revitalize downtown and neighborhoods was haphazard, with money sometimes going to risky and futile projects.
The mayor and Common Council failed to make major reforms in the program in recent years, and problems have persisted. Two years ago, a HUD monitoring report found continued shortcomings that included too much spending on bureaucrats, questionable financing for upscale housing developments and sloppy fiscal management of several programs.
Next, LA Weekly reports that the City of Los Angeles plans to give $1 million in federal community development funds to the global architecture firm designing the downtown’s proposed NFL football stadium:
Gensler plans to move from Santa Monica to downtown L.A., where it will use the $1 million in federal community-development block grant funds to create a hip, new atmosphere for its relocated employees at the “jewel box,” a three-story building nestled between two skyscrapers at City National Plaza.
Unfortunately, the “hip, new atmosphere” paid for by federal taxpayers probably won’t be the “job creator” that city officials are claiming:
[Mayor] Villaraigosa and City Council members since February have claimed that enticing Gensler from Santa Monica to downtown L.A. is a job creator. But that’s debatable. Some temporary jobs will be created for the jewel box renovation, but Gensler is moving its offices just 20 miles. Many economists would describe L.A.’s action as merely shifting jobs within an intricately intertwined economic area.
A HUD official called the situation “entirely healthy.”
Finally, HUD recently informed the City of Montebello (California) that it had uncovered 31 violations regarding the city’s use of HOME program funds, which are to be used for affordable housing. According to the Whittier Daily News, the report “was so damning it brought interim city administrator Peter Cosentini to tears”:
Last year, HUD demanded that Montebello repay $1.3 million because the city gave a developer HOME money to help build a housing project with affordable units and reported to the federal agency the project was complete, but construction hasn’t started. And a key document submitted to HUD appeared to have been forged, according to the report.
In February, HUD notified city officials that Montebello must also repay nearly $900,000 it used to purchase another parcel of land. The city failed to give HUD needed documents on the property acquisition, including an appraisal, documentation of expenditures and current ownership, according to a Feb. 18 letter from [HUD official] Vasquez to the city.
Cosentini responded in writing, saying city staff has been sent to training as recommended by HUD. Montebello is also conducting an internal investigation into the possible document forgery. The city’s internal investigation of the $1.3 million has been slowed because the developer isn’t cooperating and is “stonewalling” city staff, he wrote. Cosentini also asked for more time to repay the money.
But the city missed a March 1 deadline to submit a repayment plan, according to a letter from Vasquez. And HUD will seek an additional repayment of $2.7 million, Cosentini wrote in the memo.
Take heart federal taxpayers – Montebello city bureaucrats are being “sent to training” per HUD’s recommendation!
http://www.cato-at-liberty.org/more-hud-community-development-duds/
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The Oil Drill
Three Senate Democrats angry about the high price of gasoline propose to raise taxes on the firms that produce it. No, it does not make any sense to us, either. For Democrats, expensive gas is just the price of scoring a moral victory over Big Oil, and American consumers will be expected to pay any price and bear any burden that Harry Reid & Co. inflict upon them.
The “Close Big Oil Tax Loopholes Act” is a minotaur’s labyrinth of economic illiteracy, with Democratic senators Robert Menendez (N.J.), Sherrod Brown (Ohio), and Claire McCaskill (Mo.) lurking at the center of it. This A-team of financial sophisticates has taken a hard look at rising gasoline prices and concluded that the most reasonable course of action is to increase the cost of producing oil by “closing tax loopholes” for the five biggest oil companies. Why the five biggest? Why not four or six? Why not all oil companies? Because this is not a bill about tax reform, but a bill about Democrats’ bitterness and impotency in the face of unpleasant economic realities.
The first thing you should know about these oil-company loopholes is that the main items under discussion are not exactly oil-company loopholes. In 2004, Congress enacted an ill-considered tax break for manufacturing companies — one of many harebrained efforts to improve the U.S. economy by empowering politicians to hand out favors to their friends — and the definition of manufacturer was written in such a way as to cover just about any firm with investments in physical capital: Starbucks qualifies for manufacturers’ benefits under the relevant section of the law, known as Section 199. If you hire a guy to build a diving board for your home swimming pool, he’s as much a manufacturer as General Motors.
Which is to say, it is a stupid law, but it is not a law that grants special privileges to oil companies. Congress would be wise to repeal Section 199 in its entirety. In truth, our corporate tax code is a Hieronymus Bosch nightmare of political favoritism, market distortion, and rent-seeking representing the worst aspects of the unsavory nexus between Big Business and Big Government. For that matter, so is the individual tax code, and both should be reformed in roughly the same way: by eliminating exemptions, deductions, and hamfisted attempts at imposing economic policy through the tax regime. Such an approach to reform would, intelligently applied, enable us to reduce tax rates without reducing tax revenue, a very happy result indeed for a great many taxpayers.
Don’t count on that happening. The Democrats would rather use the tax code as an enemies list, and they’re already fighting about what to do with the money they foresee expropriating from oil producers and, indirectly, from gasoline consumers. Some want to use the funds to pretend to reduce the deficit. Sen. Max Baucus (D., Mont.), getting in touch with his inner Barack Obama, has his eyes on the money, too, with big plans to use it to subsidize politically favored automobile manufacturers and enterprises engaged in the alternative-fuels business — as though one ethanol boondoggle and one GM bailout were not enough of a national embarrassment.
Consumer gasoline prices are highly responsive to oil producers’ costs. In a meaningful sense, oil companies are not so much taxpayers as tax-collectors. Singling oil companies out for tax-code punishment may give Democrats a political tingle, but it’s drivers and consumers (How do you think your groceries get to the store?) who will pay the freight.
Along with Section 199, there are other aspects of the corporate tax code that cry out for revision. Rules covering operating expenses and investment costs need to be made consistent. Above all, the treatment of foreign income needs to be updated: The United States, alone among the developed world, makes a tax claim on income earned beyond its legal jurisdiction, placing American companies at a great disadvantage — and leaving trillions of dollars of potentially productive investment capital stranded offshore. Investment analysts took note this week of Microsoft’s purchase of the Internet-telephony firm Skype for $8.5 billion. Microsoft, like many U.S. firms, has a lot of international earnings that it does not wish to pay a 35 percent penalty on for the privilege of returning them to the United States, and it was from these exiled funds that it purchased Skype, which is incorporated not in the United States but in Luxembourg. Being incorporated in the United States would have cost Skype billions of dollars on the deal, a fact not lost on venture capitalists and start-up entrepreneurs — the people who create high-paying jobs, along with goods and services in demand in the real economy.
That’s just one example of how bad tax law is costing the United States jobs, growth, investment — and tax revenue, too. We should simply simplify — a fact that ought to be obvious enough even for these simple senators.
http://www.nationalreview.com/articles/267021/oil-drill-editors
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They should immediately place price controls on gasoline. I like 1 dollar a gallon! :roll:
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As Used-Car Prices Soar, ‘Clunkers’ Are Missed
Posted by Walter Olson
Cato scholars have been appropriately scathing about the federal government’s 2009 “cash for clunkers” program, which paid several billion taxpayer dollars to have older cars scrapped and their engines destroyed, with owners getting vouchers toward new vehicles. When Chris Edwards nominated cash-for-clunkers as the “dumbest government program ever,” he listed among its effects: “Low-income families, who tend to buy used cars, were harmed because the clunkers program will push up used car prices.”
Guess what’s the newest trouble to hit the car business? As news outlets around the country are reporting, the price of used cars has lately soared to a modern-day record, with some cars commanding more used than they sold for when new. News accounts commonly finger the Japanese earthquake and high gas prices as reasons, but there are some problems fitting either reason to the case. While the earthquake affected the supply of new cars, it’s the previously driven kind that has scored the more impressive price jump. And while the rise in gas prices would explain a relative shift in buyer demand from SUVs and trucks toward smaller vehicles — which has indeed happened — the strength of the used-vehicle market lately has been such that even the thirstier vehicles have advanced in price, $4 gas or no.
No doubt there are multiple reasons for the price spike, including the severe general slump in new-auto sales in recent years, which has reduced the volume of newer cars coming onto the resale market. But — as Washington scrambles to take undeserved credit for whatever passes for normalization in the auto business these days — it’s worth remembering that an artificial scarcity of used cars isn’t just bad for the poor as a group: it’s bad in particular for the upwardly mobile poor, since in most of the country landing a job means needing to line up transportation to get to that job. When it suddenly costs $6,000 instead of $3,000 to get wheels, the move from unemployment to a paying job faces a new and discouraging barrier.
There’s a further irony too. Just as the federal housing stimulus lured many buyers into unwise house purchases at a time when home prices still had a good distance to fall — leaving them worse off in retrospect — so many owners who jumped for the cash-for-clunkers program would have been better off holding on to their cars a while longer. At least that’s what one might conclude from what Frederick, Maryland used-car dealer Robert Cox told his local paper, the News-Post:
People who got $3,500 for the cars they turned in would probably get $5,000 to $7,000 for the same trade today, Cox said.
Nice going, Washington.
http://www.cato-at-liberty.org/as-used-car-prices-soar-clunkers-are-missed/
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I'm rich!!! My truck is 21 years old!!!
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Everyone should just buy a Volt. There, problem solved.
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A trail of stalled or abandoned HUD projects
By Debbie Cenziper and Jonathan Mummolo, Published: May 14
The federal government’s largest housing construction program for the poor has squandered hundreds of millions of dollars on stalled or abandoned projects and routinely failed to crack down on derelict developers or the local housing agencies that funded them.
Nationwide, nearly 700 projects awarded $400 million have been idling for years, a Washington Post investigation found. Some have languished for a decade or longer even as much of the country struggles with record-high foreclosures and a dramatic loss of affordable housing.
The U.S. Department of Housing and Urban Development, which oversees the nation’s housing fund, has largely looked the other way: It does not track the pace of construction and often fails to spot defunct deals, instead trusting local agencies to police projects.
The result is a trail of failed developments in every corner of the country. Fields where apartment complexes were promised are empty and neglected. Houses that were supposed to be renovated are boarded up and crumbling, eyesores in decaying neighborhoods.
In Inglewood, Calif., a sprawling, overgrown lot two blocks from city hall frustrates senior citizens who were promised a state-of-the-art housing complex more than four years ago. Although the city invested $2 million in HUD funds, the developer doesn’t have the financing to move forward.
In Newark, two partially completed duplexes sit empty in a neighborhood blighted by boarded-up homes lost to foreclosure. The city paid nearly $400,000 to build the houses, but after a decade of delays, the developer folded and never finished. The money has not been repaid.
In Orange, Tex., 35-year-old laborer Jay Breed lives next to a dumping ground littered with tires and other trash, where a nonprofit developer was supposed to build 50 houses for the poor. Five years later, with $140,000 in HUD money gone, no homes have gone up.
“It’s a wasteland,” Breed said.
The Post examined every major project currently funded under the HUD program, analyzing a database of 5,100 projects worth $3.2 billion, studying more than 600 satellite images and collecting information from 165 housing agencies nationwide.
The yearlong investigation uncovered a dysfunctional system that delivers billions of dollars to local housing agencies with few rules, safeguards or even a reliable way to track projects. The lapses have led to widespread misspending and delays in a two-decade-old program meant to deliver decent housing to the working poor.
The Post found breakdowns at every level:
• Local housing agencies have doled out millions to troubled developers, including novice builders, fledgling nonprofits and groups accused of fraud or delivering shoddy work.
• Checks were cut even when projects were still on the drawing boards, without land, financing or permits to move forward. In at least 55 cases, developers drew HUD money but left behind only barren lots.
• Overall, nearly one in seven projects shows signs of significant delay. Time and again, housing agencies failed to cancel bad deals or alert HUD when projects foundered.
• HUD has known about the problems for years but still imposes few requirements on local housing agencies and relies on a data system that makes it difficult to determine which developments are stalled.
• Even when HUD learns of a botched deal, federal law does not give the agency the authority to demand repayment. HUD can ask local authorities to voluntarily repay, but the agency was unable to say how much money has been returned.
The D.C. region has a particularly troubled track record. In Prince George’s County, the nonprofit Kairos Development Corp., received $750,000 in 2005 to build dozens of homes. Six years later, Kairos has not built a single house.
“When Kairos came along, I thought this would be something that would help the community,” said Clinton Adams, a local landowner who discussed selling property to Kairos. “What did they do with the money?”
Dozens of housing agencies nationwide acknowledge botched deals and often blame the economy for leaving developers without financing to finish the work.
But hundreds of stalled projects predate the troubled financial markets, with developers tapping HUD’s program for easy money and then escaping even rudimentary oversight from local and federal authorities. The agency’s inspector general for years has chronicled scores of delayed projects and millions in waste.
“We need to reduce the risk for HUD funding in development deals,” said Annemarie Maiorano, who manages HUD money for Wake County, N.C. “There needs to be basic standards.”
HUD officials said they have recently tried to determine why developments are delayed and have begun to cancel projects. In response to inquiries from The Post, the agency last month launched investigations into a series of defunct deals, finding questionable payments and excessive delays, and in recent weeks has sought the return of more than $4 million from housing agencies in the District and Prince George’s County.
“We can do better and we will,” said Mercedes Marquez, HUD’s assistant secretary for community planning and development, who was nominated by President Obama in 2009. “HUD, the Congress and every taxpayer I know expects these funds to be put to work. . . . I won’t hesitate to do what’s necessary.”
A program that began with great promise for the poor
Past HUD scandals have involved misused vouchers for rental properties, unsafe conditions in public housing and corruption in grant-making programs. The Post’s investigation is the first systemic look at the progress of construction in HUD’s affordable-housing fund, known as the HOME Investment Partnerships Program.
The program launched with great promise two decades ago, when Congress vowed to fund the construction or renovation of thousands of apartments and houses for working-poor families.
Since 1992, HUD’s vast main office on 7th Street in Southwest Washington and its 43 field offices have overseen $32 billion in funding, which is distributed in block grants to 642 cities, counties and states. They, in turn, partner with developers, giving out grants or loans with generous terms such as delayed repayment, low interest rates and outright forgiveness of debt.
HUD’s money typically doesn’t cover all construction costs. The program is meant to provide partial funding for developers who are expected to draw additional financing from banks and other sources.
Clearly, building in blighted neighborhoods can be challenging, with private financing and political will hard to come by. Over the years, local housing agencies and their development partners have completed thousands of projects.
But hundreds of current projects have faced years-long delays, with a similar pattern playing out in city after city.
Behind many of the deals are developers who didn’t have land, permits, financial capacity or commitments for private financing. HUD has few underwriting standards: Housing agencies are required to ensure that developers have a proposed budget and construction schedule — but not proof that they have the money to start building.
Other developers have had little housing experience or were dogged by foreclosures, cost overruns, liens and allegations of defective work. In most cases, HUD requires only that housing agencies ensure that developers have not been barred from doing business with the federal government.
HUD officials say local agencies are supposed to apply their own rules and choose developers capable of beginning construction within a year and eventually completing the job. “This is what comes with having the flexibility of a block grant, where you respect local decisions,” Marquez said.
In the District, which receives $9 million annually in HUD housing construction funds, the lapses have produced a series of troubled projects.
Alicia Marshall was a 33-year-old novice landlord in 2004 when she bought an aging, six-unit apartment building on Foote Street NE for $245,000. Within months, city inspectors cited Marshall for code violations that included leaks, cracked ceilings, broken doors and no heat.
Marshall agreed to renovate if tenants gave up their rent-controlled units. Although she had little construction experience, the District gave her $600,000 in HUD funds in 2008.
A project plan in city files noted that Vincent Ford, the former D.C. chief building inspector, would oversee the renovation. Ford, however, told The Post that he did not act as the project manager. “Didn’t happen,” he said.
The plan also noted that the construction work would be done by Calvert County resident Richard Hagler, 54, whose company, according to the plan, had worked for government agencies, built custom homes and refurbished apartment buildings. The Post found that Hagler and his companies have faced a string of civil judgments, and in 2006 agreed to a $250,000 settlement after being sued for shoddy construction. He has declared bankruptcy three times in the last decade, records show.
Neither Marshall nor Hagler responded to calls or letters seeking comment.
In 2009, Marshall’s building twice failed District construction inspections, a city official said. Later that year, after months of delays, the city approved a certificate of occupancy.
But evidence of substandard work continues to crop up. Soon after retired truck driver Grady Baxter moved in last year, part of his bathroom ceiling collapsed and sewage from the apartment upstairs soaked the walls.
“They started work on it,” he said, “but didn’t come back.”
The D.C. Department of Housing and Community Development defended the project. “Marshall assembled a skilled team to manage the renovations,” spokeswoman Najuma Thorpe said.
When contacted by The Post last month, HUD officials initiated an investigation into the quality of construction.
Many nonprofit agencies lacking in experience
One of the few rules HUD imposes actually contributes to the number of failing projects. Federal law mandates that housing agencies give 15 percent of their funding to community-based nonprofit groups, which are often undercapitalized and lack experience.
“Development is hard for developers. It’s complex. It’s risky,” said Maiorano of Wake County. “Then there are these mom and pops who don’t know things . . . we’re asking them to try to do something that they have no experience in.”
In Newark, the Department of Economic and Housing Development invested more than $2 million since 1995 in five projects that promised dozens of new homes. But every development ran aground when the developers, mostly small nonprofits, could not complete the work or fell into foreclosure, records show.
On South 13th Street in the shadow of downtown Newark, children play next to an empty lot filled with trash and mattresses, where a nonprofit developer drew $50,000 but built nothing. “It’s just dirt,” said eight-year-old Shakina Boulding. “There should be grass and flowers.”
One mile away, on a distressed stretch of Littleton Avenue, two partially completed duplexes that cost the city nearly $400,000 sit empty behind an unlatched fence.
“They’ve been like that for over seven years now,” said Wade Tapp, 45, a recreation center director who owns an apartment building across the street. “It’s quite shameful.”
Newark’s new housing chief, Michael Meyer, said he is trying to recoup money and change the city’s policies. “The public has not gotten what it intended to get when we started these projects,” he said.
Two of the most troubled projects in the D.C. region were proposed by Kairos Development Corp., which won $400,000 in HUD funding from Prince George’s County in May 2005 after promising several houses and an apartment complex with as many as 150 units on a winding, rural stretch of Middleton Lane in Camp Springs.
The nonprofit had little construction experience, offered none of its own money and had no other funding committed to the project, records show.
Kairos eventually bought two properties with the HUD money, but six years later, nothing has been built.
At the same time in 2005, Kairos received a second HUD loan from the county, for $350,000, for 56 condominiums proposed on a wooded hillside on Naylor Road near the District line. The nonprofit did not own the land or have permission to build on it.
The owners of the property were Lashelle Adams, a hairdresser, and her father, Clinton, who ultimately decided not to sell to Kairos.
The project exists now only as a three-digit number on HUD’s books.
Harold Davis, executive director at Kairos, blamed the delays on the economic downturn and a surplus of condominiums in the region, adding that the money was spent on architectural, development, legal and consulting fees. In a written response to The Post, he said the Naylor Road project became “unfeasible due to significant change in selling prices.” He said the Middleton Lane project is still viable.
County spokeswoman Angela Wright said a new administration has no knowledge of either project. Kairos was allowed to keep the HUD money; the county wrote off both loans. It is unlikely that the group could repay anyway: On its 2009 tax return, the nonprofit reported that it was $1.2 million in the red.
When contacted by The Post, HUD officials said the loans made to Kairos were excessive. Last month, federal officials sent a letter to Prince George’s County seeking the return of nearly $550,000. HUD has also banned Prince George’s County from awarding any more money to community-based groups without the agency’s approval.
“I’m appalled, just appalled,” said Marquez, HUD assistant secretary. “We’re just not standing for it.”
A resident asks,
‘Where did the money go?’
At the heart of the problem lies HUD’s failure to track the pace of construction.
HUD monitors only when local agencies draw money from their federal accounts, not what is actually being built. That leaves HUD with little way of knowing when projects stall or die. Local housing agencies are supposed to notify the federal government, but they often fail to say anything.
“If [housing agencies] fail to terminate projects as they should, we may not be aware of them right away,” Marquez said.
She said that it is not feasible for HUD to monitor thousands of ongoing developments and that local agencies should have their own project-tracking systems.
The Post independently analyzed HUD data to find about 700 troubled projects that were awarded $400 million.
But the actual number of stalled or terminated projects is likely to be much higher. The Post identified an additional 2,800 projects worth $1 billion that are in “final draw,” meaning the projects drew all of their allotted HUD funding but are still listed as open and ongoing in HUD’s records.
In some cases, the work was completed, but local agencies had failed to tell HUD. In other cases, however, projects were delayed or scrapped. The Post found abandoned projects in final draw from Texas to Florida to the D.C. region.
One dead project listed in final draw was proposed for downtown Rockville, where the nonprofit Montgomery Housing Partnership received $550,000 in 2008 to build a 109-unit apartment building.
The project struggled with funding gaps, opposition from neighbors and a lack of support from elected officials. Three years later, nothing has been built.
Montgomery Housing Partnership President Robert Goldman said the development is no longer viable and the nonprofit is hoping to roll the money into a future project. “This is really a very unusual circumstance,” he said.
The nonprofit had another project go bad adjacent to that empty lot.
In the 1990s, the group renovated a 14-unit building that was later condemned with leaks and mold. It is still shuttered, with a sign on the front door that warns, “Dangerous and Unsafe.”
One of the oldest unfinished projects in the country sits on a desolate stretch of High Street in Southeast Washington, where the shells of three apartment buildings rise above overgrown brush and rotting heaps of trash. In 2001, the District delivered nearly $800,000 in HUD funding to the nonprofit Safe Haven Outreach Ministry, but a decade later, no renovations have been done.
A neighbor posted a makeshift sign in front of the rubble: “Celebrating Life in Anacostia.”
Nearby resident Bernadine Thomas wants to move into a refurbished apartment but can’t find one that she can afford in a region with some of the highest rents in the country. She drives by the unfinished buildings on High Street and imagines a different life.
“Where did the money go?” said Thomas, a 60-year-old retired apartment manager who has lived for three years in a leaky complex that reeks of sewage. “I’ve worked all my life. All I want is a decent place to live.”
Marsha Richerson, Safe Haven’s executive director, said that the nonprofit did not anticipate problems getting permits and private funding, and that the housing agency was aware of the delays.
“They knew everything,” she said. “They knew we had a credible defense.”
City officials extended Safe Haven’s construction deadlines, hoping the project would eventually be completed. The agency “makes every attempt to work with developers to bring these projects to fruition,” said Thorpe, the D.C. housing agency spokeswoman.
In December, HUD identified the project as stalled through an audit and asked the District to repay the $800,000. So far, no money has been repaid. District officials said they are going to ask HUD to reconsider.
HUD can’t compel local authorities to repay
Even when HUD learns of a bungled deal, federal law does not give the agency the ability to compel local authorities to repay. HUD can only ask agencies to voluntarily return money by replenishing their federal accounts from local funds, essentially moving their own money around. HUD officials said local authorities almost always comply when asked to repay. HUD, however, could not provide statistics on how much has been returned. Officials said they have not felt a need to compile the data because it is tracked by HUD field offices.
The agency can reduce grants to housing agencies if HUD funding is not spent quickly enough, which creates pressure to move money out but does not ensure that construction is completed. Grant reductions for missed spending deadlines have happened just 20 times since 1992, with HUD taking back a total of $7.5 million, The Post found. Much of the money came from Prince George’s County, which last year forfeited $2.2 million.
HUD also has an enforcement center staffed with lawyers who can pursue repayments before an administrative law judge or in a criminal case in federal court. The agency has taken five cases to enforcement since the program began two decades ago, recouping about $19 million, The Post found. The agency has never taken a case to court.
HUD officials said they don’t need a more robust enforcement effort, again citing the success of voluntary repayments.
Marquez said the agency is focused more than ever on delayed projects and recouping money.
“This will get cleaned up,” she said.
Staff researchers Jennifer Jenkins, Meg Smith and Julie Tate contributed to this report.
http://www.washingtonpost.com/investigations/a-pattern-of-hud-projects-stalled-or-abandoned/2011/03/14/AFWelh3G_story.html
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(From Political Economics)
"This could also belong in the Budget thread.
Maybe I am missing something, but IIRC all spending bills must originate in the House of Representataives-- which is controlled by the Republicans. So why don't they just pass spending bills as they see fit and leave it to the Senate and BO to take the blame for not passing it?"
You are correct. It doesn't get spent without originating in the House. The President's budget (if there was one) gets a hearing only if a house member introduces it in committee (as I understand it).
The problems are spin and ownership.
If Republicans suddenly did what I just suggested - spend within our means (2.2 trillion/yr) now by not raising the debt limit - they will look insincere and inconsistent. They were willing to spend 3.6T a minute ago.
If Republicans force something like a 3.6T budget, take it or leave it, then the trillion and half dollar deficit becomes theirs, along with all the allege hardship that 'underspending' will cause, hitting women and children the hardest.
Our lead-from-behind President wanted R's to go first so he could accuse and attack. R's want the Pres. to go first to show they are making serious cuts - while still authorizing trillion plus dollar deficits.
It's an ugly situation.
The answer pragmatically is to identify everything federal that needs to end and everything federal that needs to be downsized, then write a multi-year phaseout that gets us to a balanced budget and full employment in a short period of time. And stick to it.
One principle they could try to uphold would be to end everything now that they told us was temporary emergency spending.
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http://www.powerlineblog.com/archives/2011/05/029042.php
A Verdict on Obama's "Stimulus" Plan
May 15, 2011Posted by John at 9:08 PM
Economists Timothy Conley and Bill Dupor have studied the effects of the American Recovery and Reinvestment Act (the purported stimulus bill) with great rigor. Earlier this week, they reported their findings in a paper titled "The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled." The paper is dense and rather lengthy, and requires considerable study. Here, however, is the bottom line:
Our benchmark results suggest that the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs. State and local government jobs were saved because ARRA funds were largely used to offset state revenue shortfalls and Medicaid increases rather than boost private sector employment. The majority of destroyed/forestalled jobs were in growth industries including health, education, professional and business services.
So the American people borrowed and spent close to a trillion dollars to destroy a net of more than one-half million jobs. Does President Obama understand this? I very much doubt it. When he expressed puzzlement at the idea that the stimulus money may not have been well-spent, and said that "spending equals stimulus," he betrayed a shocking level of economic ignorance.
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No, they aren't bionic:
Family Facing $4 Million in Fines for Selling Bunnies
by Bob McCarty
Almost nine months after a Missouri dairy was ordered to stop selling cheese made from raw milk, I share details of another hare-raising story from the Show-Me State: John Dollarhite and his wife Judy of tiny Nixa, Mo., have been told by the USDA that, by Monday, they must pay a fine exceeding $90,000. If they don’t pay that fine, they could face additional fines of almost $4 million. Why? Because they sold more than $500 worth of bunnies — $4,600 worth to be exact — in a single calendar year.
About six years ago, the Dollarhites wanted to teach their young teenage son responsibility and the value of the dollar. So they rescued a pair of rabbits — one male and one female — and those rabbits did what rabbits do; they reproduced. Before long, things were literally hopping on the three-acre homestead 30 miles south of Springfield, and Dollarvalue Rabbitry was launched as more of a hobby than a business.
“We’d sell ‘em for 10 or 15 dollars a piece,” John said during a phone interview Tuesday afternoon, comparing the venture to a kid running a lemonade stand. In addition, they set up a web site and posted a “Rabbits for Sale” sign in their front yard. Most customers, however, came via word of mouth.
In the early stages, some of the bunnies were raised and sold for their meat. Much further down the road, John said, they determined it more profitable to sell live bunnies at four weeks old than to feed bunnies for 12 weeks and then sell them as meat.
“We started becoming the go-to people” for rabbits in the Springfield area, John said. “If you wanted a rabbit, you’d go to Dollarvalue Rabbitry.” He added that the family even made the local television news just before Easter in 2008 for a report about the care and feeding of “Easter bunnies.”
Initially, the Dollarhites sold the large, white, pink-eyed variety of rabbits. Eventually, however, they switched to selling a couple of different varieties of miniature rabbits, the mating pairs of which were purchased from breeders across the state. Not only did their “show-quality” miniatures reproduce well, but they ate less and seemed to be more popular with theme park visitors and retail buyers.
During the summer of 2009, the Dollarhites bought the rabbitry from their son who had grown tired of managing it. They paid him what he asked for it, $200. Things kept growing, however, and the Dollarhite’s landed a pair of big accounts in 2009.
A well-known Branson theme park, Silver Dollar City, asked the Dollarhites to have them provide four-week-old bunnies per week to their petting zoo May through September. When the bunnies turned six weeks old, they were sold to park visitors. The Springfield location of a national pet store chain, Petland, purchased rabbits from the Dollarhites as well.
In the fall of 2009, the theme park deliveries ended for the year and the Dollarhites scaled back their operation. At about the same time, the folks at Petland asked the Dollarhites to raise guinea pigs that the store would purchase from them. No big deal.
By the year’s end, the Dollarhites had moved approximately 440 rabbits and grossed about $4,600 for a profit of approximately $200 — enough, John said, to provide the family “pocket money” to do things such as eat out at Red Lobster once in a while. That was better than the loss they experienced in 2008.
Then some unexpected matters began demanding their attention.
It’s an understatement to describe the Dollarhites as being “beyond surprised” when, in the fall of 2009, a female inspector from the U.S. Department of Agriculture showed up at the front door of the family home, wanting to do a “spot inspection” of their rabbitry. She said she had come across Dollarhite Rabbitry invoices while inspecting the petting zoo at Silver Dollar City.
“She did not tell us that we were in violation of any laws, rules, anything whatsoever,” John said, explaining that the inspector said she just wanted to see what type of operation they had. Having nothing to hide or any reason to fear they were doing anything wrong, the Dollarhites allowed the inspection to proceed.
John said he had to go to work at the family’s computer store, so Judy took the inspector to the back of their property where the rabbits were raised. There, the inspector began running the width of her finger across the cage and told the Dollarhites they would need to replace the cage, because it was a quarter-inch too small and, therefore, did not meet federal regulations.
Such a requirement came as a shock to the Dollarhites, because they had just invested in new cages to ensure the bunnies had a healthy amount of space to develop, John explained. Though raising dwarf breed varieties of rabbits which require less space, they had opted to purchase cages designed for “large breed rabbits” so the dwarfs would have plenty of room. All for naught.
Not only was the cage too small, according to the inspector, but she noted a small rust spot on a feeder and cited it as being out of compliance. When the Dollarhites told the inspector that rabbit urine causes the cages to rust and that they worked hard to keep the rabbits cages in top shape, she told them it didn’t matter. The rust spot would count as an infraction.
The inspector then asked how the cages were sanitized, John said, and Judy explained how she moved the bunnies to travel carriers and powerwashed the cages, using bleach when necessary. Afterward, she allowed the cages to dry in the sun before putting the bunnies back inside them.
The Dollarhites’ practice was much safer than that used by some breeders who used blow torches to burn hair and manure from the cages — a practice that can lead to rusting metal and produce toxic fumes from burning metal.
During the course of the spot inspection, John said, the inspector asked his wife if she and John would like to have their operation certified by USDA. Judy said she wasn’t sure and asked what certification would entail and if it would help them sell more rabbits. The inspector responded, telling her it would involve monthly inspections and was completely voluntary. The inspection ended with the inspector telling Judy that the Dollarhites rabbits looked healthy and well-cared for.
After the inspection, the Dollarhites didn’t hear from the USDA again until January 2010, John said, when he received a phone call from a Kansas City-based investigator from the USDA’s Animal and Plant Health Inspection Service.
“He called us and said, ‘I need to have a meeting with you and your wife,’” John recalled.
After explaining that he asked the investigator to come after the workday at the computer store had ended, John said he asked the investigator about the purpose of the meeting,
“He said, ‘Well, it’s because you’re selling rabbits and you’ve exceeded more than $500 dollars in a year,’” John said, “and I went, ‘Okay, what does that have to do with anything?’”
John said the investigator refused to discuss details over the phone and made it clear that rejecting his request for a meeting would be a costly error in judgment.
When Judy asked if they should have an attorney present, the investigator responded, saying, “Well, that might be a good thing.”
“At that point, we kind of set back, (wondering) what in the world is going on,” John said. Then he found an attorney who is also a farmer.
“I didn’t want a ‘city slicker,’” said John, a farmer himself until 1996 when he sold his farm to build a home in Nixa. “I wanted someone that had been around the agriculture and farm business.”
John found a guy and they met for the first time a couple of days later — at the same time both met the APHIS investigator in person at John’s home.
“The first thing (the investigator) said was ‘My name is so and so, I’ve been in the USDA for 30-plus years, and I’ve never lost a case,’” John recalled, continuing. “He said, ‘I’m not here to debate the law, interpret the law or discuss the law, I’m here just to do an investigation.’”
John said the investigator went on to explain that he would ask questions, write a report based on the answers and send that report to his superiors at the USDA regional office in Colorado Springs, Colo. The entire process was suppose to take about a month, and John was told to contact the regional office if he had not heard anything in six weeks.
“At this point in time, we were still not knowing anything about the law he was talking about,” John explained, adding that his rabbitry had never had any issues with any animal welfare agencies.
Eight weeks passed, and John decided to call Colorado Springs. Immediately, he was given the number to a USDA office in the nation’s capitol. He called the new number, and the lady he reached there was blunt, John said.
“She said, ‘Well, Mr. Dollarhite, I’ve got the report on my desk, and I’m just gonna tell you that, once I review it, it’s our intent to prosecute you to the maximum that we can’ and that ‘we will make an example out of you.”
When John once again tried to determine which law he and his wife had violated, he said the USDA lady replied, “We’ll forward you everything.”
“Ma’am, what law have we broken,” John said.
“Well, you sold more than $500 worth of rabbits in one calendar year,” she replied, according to John.
“Okay, what does that have to do with anything?” John countered.
The lady replied by saying there is a guideline which prohibits anyone from selling more than $500 worth of rabbits per year, John recalled, but she refused to cite any specific law and, instead, promised to send him the report containing details.
At that point, John said he called his attorney and was told not to worry about it, because he couldn’t find evidence of any law or regulation the Dollarhites had violated.
Soon after the meeting with the APHIS investigator and with the stress of the investigation hanging over their heads, John said he and his wife traded everything associated with the rabbit operation for other agricultural equipment.
At this point, some important facts about the manner in which the Dollarhites conducted their operation are worth reviewing:
The business was carefully conducted on the property of their Missouri home;
The business complied with all applicable state laws;
The bunnies were kept in large, clean and well-maintained cages; and
Not a single bunny was sold across state lines.
Recently, the Dollarhites received a “Certified Mail Return Receipt” letter (dated April 19, 2011) from the USDA informing them that they had broken the law and must pay USDA a fine of $90,643. Their crime? Violating violating 9 C.F.R. § 2.1 (a) (1): Selling more than $500 worth of rabbits in a calendar year.
At this point, Dollarvalue Rabbitry is expected to produced a $90,643 certified check to cover the fine issued by the Department of Agriculture. The USDA was, however, kind enough to provide in the letter the web address for a website — www.pay.gov — where they could go to pay their fine by credit card by May 23, 2011. Now, that’s convenient!
Based on an average price per rabbit sold being $10.45, the fine comes out to more than $206 per rabbit. In addition, the letter contains the following statement:
APHIS laws and regulations provide for administrative and criminal penalties to enforce these regulatory requirements, including civil penalties of up to $10,000 for each of the violations documented in our investigation.
If the threat contained in the letter is to be believed, the family could be fined as much as $10,000 per rabbit beyond the first 50 bunnies that netted the family its first $500. Do the math (390 rabbits x $10,000 each) and, if they don’t pay the initial fine, they could face additional fines totaling $3.9 million.
Needless to say, the Dollarhites stopped selling rabbits in January 2010 and are considering setting up a legal defense fund.
To see what the USDA has to say about the matter, read my follow-up post, USDA Stands Behind Hare-Raising Fine.
Hat tip: Bungalow Bill’s Conservative Wisdom
http://biggovernment.com/bmccarty/2011/05/20/family-facing-4-million-in-fines-for-selling-bunnies/
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http://www.washingtonpost.com/business/economy/china-food-choices-reshaping-world-markets/2011/04/27/AFX2EH9G_print.html
China food choices reshaping world markets
By Howard Schneider, Published: May 22
Beijing — For a sense of how this country’s changing demand for food is reshaping world markets, Liu Shuwen’s journey from street chicken vendor to poultry industrialist is a good start.
There are the 24,000 hens he currently raises, triple what he had a few years ago. There’s the expansion to 60,000 he is planning. Then there’s the feed factory that’s under construction, where Liu and his partner will add to growing world grain demand by mixing hundreds of tons of soybeans and corn a year into a recipe he feeds his chickens and sells to other farmers.
It’s a dramatic turn for a man who grew up incubating chicks under his bed, and one that shows why farmers, food economists and others conclude that the world may be entering an era of steadily rising food prices. As developing countries become richer, so do their diets, shifting from traditional staples such as rice and wheat to meat and dairy products, which require more grain as feedstock. That trend, along with the increasing use of corn in fuel, is taxing world grain supplies.
SNIP____
“We are keeping up with the world,” said Liu, who migrated to Beijing from the countryside 30 years ago. He once roamed the streets selling baby chicks out of a bucket. Then he and a veterinarian named Zhang Huaicheng took over a bankrupt state-owned chicken farm. The pair specialize in brood hens, incubating millions of eggs a year into hatchlings for sale to other farmers who want to produce eggs or broilers.
Is this a clue things have gone seriously wrong here?
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Yeah, but are they free range, vegetarian feed, organic chickens? :-D
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http://pajamasmedia.com/rogerkimball/2011/05/20/president-obama%E2%80%99s-excellent-idea/
President Obama’s Excellent Idea
May 20, 2011 - 9:22 am - by Roger Kimball
So, Barack Obama thinks Israel should give up the land it acquired in the Six-Day War, rolling back to its 1967 borders. Good going, Barack! In less than a minute, you not only infuriated another staunch ally of the United States, but you (if I might employ an image you favor) “moved the goal posts” in the Middle East such that Israel’s enemies will henceforth cite you when demanding that Israel neuter itself.
Suicide, national or personal, is rarely a wise career move, so I believe we can be pretty certain that Israel will ignore your suggestion. But your invocation of 1967 is by no means barren. I was talking to a friend last night who had this alternative suggestion. Leave Israel alone and roll back the U.S. Government to its 1967 size.
I wish he had said 1965: that was the annus mirabilis when Lyndon Johnson, with a profligacy that still, even now in the age of Barack “Have-a-Trillion” Obama, makes one pause and wonder. Remember the “Great Society”? Money, meet toilet. The “war on poverty”: back in mid-Sixties 1965 it cost only $1 billion per year (about $7 billion in today’s dollars). But the government was wasting as much as it could as fast as it could. And of course, the “war on poverty” was only the tip of the iceberg. There was also the department of education—what a waste of money that has been! And don’t forget about “Public Broadcasting,” also a silly idea but also, in the age of the internet and cable TV, a completely superannuated one. And then there were the real biggies: Medicare and Medicaid, which together cost the taxpayer some $700 billion per year.
There were other, many other stupid ideas to come out of the “Great Society” years, the National Endowments, for example, and let’s not forget that stupendous blight on the economy, Environmental Protection Agency.
The President’s remarks about Israel were both silly and dangerously irresponsible. But his idea of returning to the strictures of an earlier time has great possibilities on home front. I hope concerned citizens will start to make the case: 1965 or bust!
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By KARL ROVE
Five and a half weeks after House Republicans passed their budget, Democrats and liberal pundits have decided it is political kryptonite that will fatally weaken the GOP.
Their evidence is Tuesday's special election in New York's 26th district, where Democrat Kathy Hochul defeated Republican Jane Corwin for a vacant congressional seat. This is not just any congressional district, but one carried by George W. Bush and John McCain in the last two presidential elections, and one represented for 58 years by a Republican.
Liberals can barely contain their glee. MSNBC's Ed Schultz said the outcome left "Republicans scrambling" while the Washington Post's E.J. Dionne said "it will petrify" Republicans. Sen. Patty Murray (D., Wash.) said it proved "Democrats have the keys to drive the budget debate and play offense in 2012."
Most, but not all, of this is wishful thinking. Ms. Hochul won a plurality (47%) of the votes, not a majority, getting only one percentage point more than Barack Obama as he was losing the district in 2008. Not exactly a compelling performance.
Democrats won only because a third-party candidate—self-proclaimed tea partier Jack Davis—spent a reported $3 million of his own money. Absent Mr. Davis as a spoiler—he got 9% of the vote—Democrats would never have made a serious bid for this district, nor won if they did. Ironically, Mr. Davis ran for the same seat in the last three elections as a Democrat. This year he ran as a populist conservative.
Still the question remains: Did the Medicare reforms proposed by House Budget Committee Chairman Paul Ryan and supported by Ms. Corwin play a role in the outcome? The answer is yes, though not with the blunt force and trauma some Democrats are claiming.
Polling by American Crossroads (an independent expenditure group with which I'm associated) showed that while Ms. Hochul's Medicare attacks galvanized Democrats, they swayed few independents. Among voters who had an unfavorable view of Ms. Corwin, just 20% focused on Medicare, with most Democrats already voting for Ms. Hochul.
View Full Image
Associated Press
Jane Corwin
.A larger percentage of those voters with an unfavorable opinion of Ms. Corwin's campaign—26%—were concerned about an ugly on-camera incident involving her chief of staff yelling at Mr. Davis in a parking lot. These voters felt Mr. Davis was being unfairly harassed. The defection of these overwhelmingly Republican and independent voters doomed Ms. Corwin.
That's not to say Medicare didn't play an important role. Ms. Hochul pummeled Ms. Corwin over it. The GOP candidate did not respond with TV ads until the campaign's closing week, and only then with an ad many voters thought lacked credibility. It alleged Ms. Hochul had endorsed Medicare and Social Security cuts that she claimed she had not.
An earlier, more aggressive explanation and defense of the Ryan plan would have turned the issue: 55% in the Crossroads survey agreed with GOP arguments for the Ryan reforms while just 36% agreed with the Democrats' arguments against it.
Next year, Republicans must describe their Medicare reforms plainly, set the record straight vigorously when Democrats demagogue, and go on the attack. Congressional Republicans—especially in the House—need a political war college that schools incumbents and challengers in the best way to explain, defend and attack on the issue of Medicare reform. They have to become as comfortable talking about Medicare in the coming year as they did in talking about health-care reform last year.
There needs to be preparation and self-education, followed by extensive town halls, outreach meetings, visits to senior citizen centers, and the use of every available communications tool to get the reform message across.
A good starting point is Mr. Ryan's message from his speech at the Economic Club of Chicago that his Medicare reform package "makes no changes for those in or near retirement, and offers future generations a strengthened Medicare program they can count on, with guaranteed coverage options, less help for the wealthy, and more help for the poor and the sick."
The populist note is especially important: When he starts receiving Medicare, Bill Gates should bear a greater share of his health-care costs than the less healthy or less wealthy.
Defense, no matter how robust, well-informed and persistent, is insufficient. Republicans must also go on offense. Democratic nonchalance towards Medicare's bankruptcy in 2024 and the crushing debt it will leave for our children gives the GOP the chance to depict Democrats as tone deaf, irresponsible and reckless. The country can't afford Democratic leaders who simply order the orchestra to play louder as the Titanic tilts and begins to slide under.
Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of "Courage and Consequence" (Threshold Editions, 2010).
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second post of the day:
Saw Paul Ryan interviewed by Bret Baier this evening. Very impressive guy, able to express himself clearly, briefly, confidently, and effectively-- but I agree where he is right now (Chairman of House Budget Committee IIRC) is where he can do the most good.
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We're at a funny place. The American establishment has finally come around, in unison, to admitting that America is in crisis, that our debt actually threatens our ability to endure, that if we don't make progress on this, we are going to near our endpoint as a nation. I am struck very recently by the number of leaders in American business, politics and journalism who now get a certain faraway look at the end of an evening or a meal and say, "It's worse than people think, you know." The debt crisis in Europe is not easing but worsening, the U.S. bond markets could bail tomorrow, the culture of Washington will kill any serious attempts at reform . . .
The American establishment, on both sides of the political divide, is admitting as never before that we are in an existential challenge. And this is progress. It was not always so! It wasn't so two years ago.
That's one takeaway from this week's Peterson Foundation fiscal summit in Washington. Bill Clinton spoke of "permanent structural deficits" and warned that "arithmetic still matters." We must focus on entitlement spending, he said, "for the same reason Willie Sutton robbed banks: That's where the money is." Virginia's Democratic Sen. Mark Warner: "Congress is Thelma and Louise in that car headed for the cliff." Obama administration economic adviser Gene Sperling—more on him in a minute—called for "serious discussion" of the specifics of a debt-reducing plan.
Republicans were on the same page. No one said, "We can grow our way out of this thing," or "The negative effects of chronic debt are exaggerated, let's look at the positive side." They would have been laughed out of the room.
The people, of course, saw the crisis coming before most politicians did, and every elected official in Washington is now quick to preface interviews with, "The people were ahead of us on this." They say this with an air of discovery, the little Sherlocks. The people were ahead of them. Public concern began to deepen in the polls after the introduction of the new spending bills that followed the crash of 2008. Voter concern was made vivid in the 2009 and 2010 elections, when centrists voted like old-style Republicans who worried about red ink.
Elected officials began to get the message. Now they've got it. Our spending and debt are—and it is interesting that this is the first great buzzword of the new decade—"unsustainable."
But here's how we're in a funny place. The great question now is whether the people who alerted the establishment to the crisis will trust that establishment to deal with it. The people have been like Paul Revere riding through the night warning, "The bankruptcy is coming!" It's unclear whether they'll now trust the politicians to take the right action.
There are many reasons the public might resist Washington's prescriptions, and we know what they are. There are data demonstrating that people like government programs but not government costs. Many people feel they've personally played by all the rules and will reject any specific cuts or taxes that will put new burdens on them.
There's also this. The very politicians who are trying to get us out of the mess are the politicians who got us into the mess. Why would anyone trust them? As Alan Simpson admitted, for generations politicians "were told to go to Washington and bring home the bacon. Go get the money!" Now they must change: "You can't bring home the bacon anymore, because the pig is dead."
Some of the politicians talking about how to stop the spending crisis are the same politicians who, for many years, said there was no crisis. They're like forest creatures who denied there was a fire when everyone else could smell the smoke and hear the crackle. Then the flames roar in, and the politicians say, "Follow me, I know the path out of the blaze!" It will be hard for them to win the trust that will get the American people to back a path out and through.
Rep. Paul Ryan was at the summit, soldiering on. His main problem on Medicare is that people fear the complexities and demands of a new delivery system.
People who draw up legislation, people capable of mastering the facts of the huge and complicated federal budget, often think other people are just like them. It's almost sweet. But normal people don't wear green eyeshades. Republicans think people will say, when presented with new options for coverage, "Oh good, another way to express my freedom! I can study health insurance now and get a policy that will benefit not only me but our long-term solvency!" But normal people are more likely to sit slouched at the kitchen table with their head in their hands. "Oh no, another big decision, another headache, 50 calls to an insurance company, another go-round with the passive-aggressive phone answerer who, even though she's never met me, calls me Freddy as she puts me on hold."
Republicans believe government gives insufficient respect to the ability of people to decide things for themselves, and that's true. But it's also true that normal humans don't relish making informed decisions about things they're not sure of, and that carry big personal implications.Here's the great thing about Medicare: You turn 65 and it's there. They give you a card and the nurse takes it. (MARC: This seems to me to be a very perceptive observation.)
Supporters of Mr. Ryan's Medicare plan must talk very specifically about how this would all work, and why it would make your life better, not worse. They also have to make two things clearer. One is that if nothing is done to change Medicare, the system will collapse. You'll give the card to the nurse and she'll laugh: "We don't take that anymore." This already happens in doctors offices. Without reform it will happen more often.
Democrats, on the other hand, should be forced to answer a question. If you oppose the highly specific Ryan plan, fine, but tell us your specific proposal. How will you save Medicare? Will you let it die?
If Obama economic adviser Gene Sperling's presentation at the summit was indicative of White House strategy, then we're in trouble. Because that strategy comes down to windy and manipulative statements about how "we're all in this together" but GOP proposals "will lead to millions of children . . . losing their coverage." He added: "We are not criticizing their plan, we are explaining it."
It is a long time since I've seen such transparent demagoguery, such determined dodging. It's obvious the White House political plan for 2012 is this: The Democrats will call for fiscal discipline and offer no specifics or good-faith starting points. They will leave the Republicans to be specific, and then let them be hanged with their candor. Democrats will speak not of what they'll do but only of what they would never do, such as throw grandma out in the snow. In honeyed tones, Mr. Sperling said both parties should "hold hands and jump together," like Butch and Sundance. But it was clear Sundance was going to stop at the edge of the cliff and hope Butch gets broken on the rocks.
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"It is a wise rule and should be fundamental in a government disposed to cherish its credit, and at the same time to restrain the use of it within the limits of its faculties." --Thomas Jefferson
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Whitewashing the Auto Bailouts
Posted by Daniel Ikenson
With his appearance at a Toledo factory today, President Obama seems to want to make the auto bailout a campaign issue. Let’s welcome that. Americans should understand what transpired.
Fancying himself “Savior of the Auto Industry,” the president deserves credit only for choosing to insulate two companies (and the UAW) from the consequences of their decisions. But with that credit he must accept responsibility for sluggish U.S. business investment, limited job creation, and the anemic economic recovery, which is due in no small measure to the regime uncertainty that descends from his intervention in the auto industry.
The administration suggests that the entire cost of the auto bailout is captured by the outlays that haven’t or won’t be returned. Despite much smaller claims from the administration, that figure will be about $5.5 billion in Chrysler’s case (the administration is overlooking $4 billion written off when New Chrysler emerged from bankruptcy), and somewhere from $7-$15 billion in GM’s case (depending on average share price for 500 million shares). Should that loss have to be reported to the FEC on a dollar-per-auto-worker-vote basis?
But the costs are much greater than these outlays.
The most compelling objections to the bailout were not rooted in the belief that the government couldn’t use its assumed power to help Chrysler and GM. On the contrary, the most compelling objections were over concerns that the government would do just that. It is the consequences of that intervention—the undermining of the rule of law, the confiscations, the politically driven decisions, and the distortion of market signals—that animated the most serious objections. Ford never publicly objected to the interventions to rescue its rivals. Do you think Ford may feel entitled to a future bailout if needed, having foregone the recent one? Does Ford think it has a pretty good insurance policy if it takes excessive risks that go awry? This is a cost that’s tough to measure, but an important cost nonetheless.
Any verdict on the outcome of the auto industry intervention must take into account, among other things, the billions of dollars in property confiscated from the auto companies’ debt-holders; the higher risk premium built into U.S. corporate debt as a result; the costs of denying the other more successful auto producers the spoils of competition (including additional market share and access to the resources misallocated at Chrysler and GM); the costs of rewarding irresponsible actors, like the UAW, by insulating them from the outcomes of what should have been an apolitical bankruptcy proceeding; the effects of GM’s nationalization on production, investment, and public policy decisions; the diminution of U.S. moral authority to counsel foreign governments against market interventions that can adversely affect U.S. businesses competing abroad, and; the corrosive impact on America’s institutions of the illegal diversion of TARP funds to achieve politically desirable outcomes.
Let’s make the auto bailout a campaign issue and see if we can’t reconcile all of its costs.
http://www.cato-at-liberty.org/whitewashing-the-auto-bailouts/
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Paul Rubio was on and saying how we need to save Medicare. This is a good strategy turning the debate around right into the faces of the pandering party.
The seniors don't seem to get it. The ones who voted in NY for the Democrat. They fell hook line and sinker for the Dem charge that their medicare is in danger. Well it is - if we do nothing to change it.
Seniors guard their medicare like a dog guards his bone.
You would think it is a GOd given gift that grows on trees.
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"somewhere from $7-$15 billion in GM’s case (depending on average share price for 500 million shares). Should that loss have to be reported to the FEC on a dollar-per-auto-worker-vote basis?"
I'd like to do that calculation. Would someone come up with the total number of GM employees please?
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"Would someone come up with the total number of GM employees please?"
GM is saying more than 205,000, but that is in every major region of the world. For US employment, this is the formula: take the total number of people on their healthcare expense roll and divide that by 10 to get the number of people who actually work.
The argument of that side is that they are also saving the jobs of all the supporting industry subcontractors, the guys that make the connectors for the radio and the intermittent wiper people, and the sandwich makers in and around the factories. The argument goes that all these people will never again work and that GM car buyers will never again buy cars if the nameplate on this one company is ever allowed to change. Try refuting that - to people who refuse to use logic or history as a guide. I wonder if all the people who manufactured 8 track tape players have been unemployed ever since the rise of the compact cassette.
I like your logic though. A similar exercise was done by the opponents of wasteful light rail being built in the twin cities. They calculated that for each projected rider that doesn't have a vehicle available for the commute, taxpayers could instead lease them a new Lexus at a substantially lower cost.
The line went in and now they are building a second one.
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Doug, I didn't quite follow that. Doug, or anyone, what is the total number of GM employees in America?
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Dunno how reliable this site is, but sounds reasonable.
http://www.numberof.net/number-of-gm-employees-in-the-us/
How many employees does General Motors have in the United States?
68,500 employees
General Motors filed for Chapter 11 bankruptcy on July 1, 2009. Before filing for bankruptcy, GM employs 91,000 employees in the United States. After the reorganization, General Motors trimmed down its employee base to 68,500 people. It also closed down some of its manufacturing plants and car dealerships due to economic conditions.
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Taking the mid-way point between the$5B and the $15B, i.e. $10B and dividing that by 68,500 I am coming up with about $146,000 per job saved.
This is a veritable bargain comparted to the 3,000,000 jobs BO claims to have saved ( an unfalsifiable number if ever there were one!) with $600,000,000 in stimulus spending, which works out to $200,000 per job saved.
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I don't necessarily agree with bailouts and I'm not sure how many jobs were saved, but it was a lot more than 68,500.
It isn't just the employees of GM. Think of all the 100,000's of suppliers and downstream people whose jobs were saved, from parts suppliers to caterers, to janitorial cleaning, etc.
Further, think of all the small shop owners in the area whose business is dependent upon GM and GM's employees.
I remember being in Seattle when Boeing was headquartered there and did manufacturing there. When Boing's business was slow, the town almost shut down, 10,000s of non Boeing people were unemployed, lot's of places closed, etc. And when Boeing received a big order, business picked up for everyone.
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Well my biggest beef is that Obama is taking credit for *saving* the American auto industry. He did no such thing. The American taxpayer saved their tookesses (sp?).
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JDN:
Forgive me, but the whole construct of your answer assumes that these jobs would have been vaporized altogether which misses the fundamental point that if GM had been reorganized under bankruptcy that management, the unions, creditors, and stockholders (I think I have the order correct there, but do not swear to it) would each take a haircut according to the determination of the bankruptcy judge.
The simple fact is that BO and the Dems simply bypassed the well-established legal procedures already in place of our bankruptcy laws so as to benefit their union friends, (and fcuk over the secured creditors) and get government people put on the Board of Directors. So much for the rule of law!
Of course my little calculation does the same thing in a sense, but it assumed (error mine it would appear given your post :lol: ) that this was understood in order to make the tongue-in-cheek point of pointing out how stupid and deranged the whole thing was even if we were to accept BO and the Dems pretense that GM would have simply dissappeared off the face of the earth, that no other company would have expanded to fill in the purported void, and that a $10B loss was/is a "success".
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Great points Crafty.
I would hope we can have a Republican candidate blow away Obama on this topic in a debate with exactly your perfect pointers.
If one really wants to win independents IMHO this is one perfect example that falls into my oft stated theme of fairness *for all*. A system that benefits and works the same (as best as possible) for everyone no matter their economic class, their political connections, celebrity status, as well as the political correct race, religion, sexual orientation.
No special deals for insiders, Wall Streeters, hedge funds, union bosses, as well as those on the lower ends of the government dole/corruption/free loader spectrum.
I still haven't noticed any Repubs or Tea partiers for that matter highlighting such a theme.
Recently Spitzer had someone on, I can't recall, and asked him what new can any of the Republican candidates offer to Americans except the same theme of "consitution", "smaller governemnt", etc. He is right that this theme is getting old and already, by itself, may have run its course.
If we haven't seen independents rushing to the right by now they are on hold because they do not really accept the Repub positions as already are out there. We can see how they will rush back to the Bamster on a dime of good news. The message must be modified as I have suggested. I think Crafty's points about the auto industry are perfect in this modified theme. I do think many independents are probably annoyed about big auto/ union bailouts. Why them? Why not the independent voters?
Also why do the bankers and wall street get off scot free? What about those government mortgages? What about those people getting special favors from the bottom up?
People do not want the Bama again. But they have not heard from the Repubs an alternative that hits their fancy. (I am talking about the independents not tea partiers or strict Repubs).
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JDN started with: "I don't necessarily agree with bailouts..."
That highly overshadows what follows. Some good perhaps came out of it - at the expense of our principles. We can argue over how many jobs were saved or perhaps pushed further down the road and lost later as is more commonly the case. I would prefer to argue over which principles we compromised to achieve some unknown, unmeasurable 'good'.
1) Most obvious is 'equal protection under the law'. Who else was in an equally tough situation and didn't get theirs? Unless you are connected like Gldman Sachs or General Motors, you didn't get yours.
2) As Crafty pointed out, the principle of laws regulating capitalism. There already was an orderly process for doing this, bankruptcy, reorganization, or sometimes just the threat of bankruptcy and reorganization is enough to renegotiate debts instead of lose them entirely. A new buyer might have made an honest go of it after some of the unbearable burdens were lifted, actually saving jobs instead of pushing issues down the road.
3) The constitution. Where did it authorize the government to participate in interstate commerce. So far we only found the clause authorizing it to regulate it.
If I rob the local bank and use the money for a reasonably good cause like paying for my daughter's expenses, am I a thief or a loving father? In that situation the main focus would be on the thievery. At sentencing someone can say what great intentions I had.
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"I remember being in Seattle when Boeing was headquartered there and did manufacturing there. When Boing's business was slow, the town almost shut down, 10,000s of non Boeing people were unemployed, lot's of places closed, etc. And when Boeing received a big order, business picked up for everyone."
One town too dependent on one employer is not a good thing, Again, does that make it right to trample on all founding or current legal principles? Not in my opinion.
A forest fire is a horrible thing, but part of clearing out dead wood and re-growing a forest. Those who reject bankruptcy, reject capitalism, in my opinion. In the case of Obama, it is more a case of just hating capitalism before learning or knowing about it. He has never to my knowledge read a book about capitalism that didn't oppose it.
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I understand and basically agree with everything Doug said....
As for Crafty.....
As Doug and you pointed out, I too feel for rules of law and secured creditors. And I too question the legality and the cost....
That said, secured creditors by definition have no heart and usually (strange not in this case) are on top.
They can strip the company and do as they please even in bankruptcy court. Unsecured creditors would be screwed; therefore they too would
be reluctant to continue doing business with GM Overall, it would be devastating for Detroit which was already reeling in this economy.
Yes, the jobs would come back. Seattle now has Microsoft. But that takes time. Families are destroyed. And do the former employees of Boeing
have the training and ability to work for Microsoft or one of Microsoft's suppliers? Hundred's of thousands of employees would have been
laid off in Detroit. Technically fair, I understand, and maybe in the long run good, but in the short run devastating. And the "short run" in
this economy is important if you are President, either Republican or Democrat.
I support bankruptcy. It is a sort of cleansing process. I don't understand saving the bankers, let Goldman fail, they ARE in the risk business, and very very well paid, but employees i.e. average people are important....
As CCP says, take care of the middle class.
I don't know if some compromise could have been worked out. It still remains to be seen how much money, if any, the government
lost by making this "investment". Maybe it will be a gain in the long run?
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JDN: "I understand and basically agree with everything Doug said" - Should have stopped there. :-D
"secured creditors by definition have no heart"
That is not fair. Maybe they will foreclose what's left of this loser of an investment and donate all that capital to a charity or research that will save a family member's life. How do we know that enforcing their rights under a contract is heartless? It wasn't the secured creditor who didn't meet their obligations under the contract. Maybe it was the greedy, short-sighted, self-centered union benefit negotiators who really were the heartless ones, shorting out the oven where the pies are baked.
Every time a tenant thanks me for my kindness and patience (aka stupidity) for allowing them to fall behind on rent, and further behind, it comes back to bite both of us. Too much debt burden to handle the ups and downs of your business is too much debt burden. You don't have to fall on a sword and they don't take your first born in bankruptcy. You get to walk away and start over. WIth all the unemployment compensation and social programs to confuse people, they end up walking and not starting over.
If secured debt isn't secure, who gets hurt next? The elephant in the room is all the other new financing and new plants in every other industry that aren't being built and this kind of unpredictability, uncertainty, and uneven application of the law is part of the reason IMO.
Putting the unions ahead of secured creditors was criminal.
Places where laws are applied unevenly depending on who you know and how much political clout you have are called third world countries. We're getting there.
"average people are important....take care of the middle class."
No. Every obligation in a contract and every party to a contract is important. Chief Justice John Roberts put it this way answering Dick Durbin in his Supreme Court confirmation hearings:
"Somebody asked me, you know, 'Are you going to be on the side of the little guy?' And you obviously want to give an immediate answer. But as you reflect on it, if the Constitution says that the little guy should win, the little guy is going to win in court before me. But if the Constitution says that the big guy should win, well, then the big guy is going to win, because my obligation is to the Constitution."
In contract law, it is what's in the contract that counts - if it is a legal, valid, binding contract. What right did the executive branch of the federal government have to intervene and pick winners and losers? What article in the constitution authorizes that power?
If you are a highly paid professional in Seattle working for Microsoft or Boeing and you are one paycheck away from starving to death, I would recommend taking night classes at the local technical college in a different field before the next downturn. It's a cold, cruel world out there and runaway capitalism is the worst system on earth, except for all the alternatives.
Someone should also point out that in Flint and Detroit Michigan, people voted for the policies that put their industries under. Cry me a river. How about accepting the consequences of our actions??
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With no offense meant, I notice that you said your tenant's who are behind in their rent thank you for kindness and patience (your heart) for letting them pay a little late, yet I doubt if anyone thanks your after you serve eviction notices. When serving papers, you are not being kind or patient, or heartfelt, you are merely, (and rightfully so) protecting your monetary investment. Heart is irrelevant; the tenant might be left on the street and homeless; contractually that is not your problem I understand. I doubt however if they are grateful for the opportunity to "walk away and start over".
I too believe in the overall sanctity of a contract, however you seem to forget that GM was in Chapter 11 Bankruptcy. While secured creditors are usually a priority, Bankruptcy Judges have wide
leeway, and their actions are legal, not "criminal". One can argue the secured creditors were steamrolled, but they were big boys; they had choices and chose to accept the terms.
One could call this a bankruptcy combined with a bailout. Everyone on this forum seems to conveniently forget it was lame-duck President George W. Bush and Treasury Secretary Henry Paulson who initially intervened. To help the automakers through that phase (and a possible Chapter 11 bankruptcy), the administration extended them $17.4 billion from the Troubled Asset Relief Program, which had originally been set up to buy assets and equities from the financial sector in the wake of the mortgage crisis. Mind you, I don't think we should have helped the financial sector either. Only the rich got richer at Goldman et al. But those were Bush's cronies and Paulson's old firm and friends. Where is the outrage? :-o
Only after Bush did Obama exacerbate the problem by giving even more money.
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To create, capitalism must also destroy.
You don't have to spend hours comparing this year's Fortune magazine list of top 500 U.S. companies with the list from 50 years ago to understand that cruel truth.
The fact that capitalism has to destroy old things in order to create new wealth and higher standards of living for the masses should be obvious to every breathing, thinking adult over 30. It isn't.
Many people - mainly the economic illiterates of mainstream journalism and the economic medicine men of politics who call for things like the outlawing of outsourcing - constantly decry or try to thwart the paradoxical process that economist Joseph Schumpeter long ago dubbed "the creative destruction of capitalism."
Schumpeter used the term to describe the heartless but ultimately beneficial waves of competition, innovation and entrepreneurial ferment that create and destroy and re-create our economic and social world.
Capitalism's creative hurricane is unstoppable. In 250 years, it has transformed us from a nation of sweating dirt farmers to a wealthy post-industrial service economy run by callous-free knowledge workers.
The evidence of the damage capitalism does to society is found in history books and on our main streets. Whole industries were destroyed.
Canals were made obsolete by railroads. Railroads were nearly wiped out by trucks and cars. Computers murdered the typewriter industry. Digital cameras are destroying Eastman Kodak's 100-year hegemony.
Capitalism's mighty wind blows away corner drug stores and topples corporate giants with equal ease. Look at Fortune's list of 10 largest corporations from 1954. General Motors, Ford and General Electric were there, as they are today. So was Esso (now Exxon-Mobil).
But so was mighty Gulf Oil, since 1984 a forgotten meal of No. 6 ChevronTexaco. So was U.S. Steel, now 209th on Fortune's list. Swift meats, today part of No. 85 ConAgra, was No. 5 in 1954. Wal-Mart, today's No. 1, did not exist.
Remember the Great Atlantic & Pacific Tea Company? Government trust-busters once worried it would monopolize America's grocery sector. Today A&P is virtually extinct, thanks to leaner, smarter chains like Safeway and Giant Eagle - which face the cutthroat predations of Wal-Mart and Costco.
Around here, former icons of local commerce like Isaly's, the Joseph Horne Co. and Hechinger's have disappeared. But now we buy what we need at Bruster's, Kohl's and Lowe's, often in greater variety for less. And when poor US Airways joins Pan Am in inefficient-airline heaven, we'll be flying JetBlue or AirTran.
The creative destruction of capitalism is not a pretty or tender process, as Pittsburgh's lost armies of manufacturing workers know too well. But the ever-grinding "churn" of capitalism, which simultaneously destroys and creates millions of jobs each year, ultimately produces more winners than losers in the long run.
It's a shame when the short-term price of progress is paid in lost jobs or fortunes by people you know and love. But capitalism - even the increasingly impure and over-regulated form we practice -- has made hundreds of millions of Americans rich, healthy and spoiled.
Read more: The creative destruction of capitalism - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/steigerwald/s_186520.html
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"the tenant might be left on the street and homeless"
Homeless, lol, there's a term that has lost all meaning in Scandinavian-based Minnesota. No. They just move on and do it again. Eviction means front of the line for emergency assistance - your money. The question is how soon it happens and what is learned from the experience. What is learned is that payment deadlines come and go without consequence and that the free money not used on rent can be spent on everything else, guns, drugs, booze, cigarettes, whatever one is into. The larger point is that the investor quits investing when the system prevents you from enforcing the agreed terms of a contract. How do you measure the economic damage done by investments that are never made?
"Bankruptcy Judges have wide leeway..."?? Not THAT wide!
IIRC, Obama brokered a deal with taxpayer money that kept the company out of the judge's reach, and reordering winners and losers based on political favors and something that resembles your idea of helping the little guy. What could be smaller than a 200,000 person union that wins healthcare rights for hundreds of thousands of people who don't even work there. By criminal, I meant that in the general sense of illegal trespassing on private property, and executive branch treason - undermining our economic system and our country from within. Show me persuasively where they derived lawful power to do that and I will be happy to retract and correct.
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Creative destruction, yes. If you don't continuously innovate, someone else will and eat your lunch. But when you lose your market share, lose your business, lose your risk capital, you still get to pull yourself back up and try something else - with valuable lessons learned.
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Answering my own question, how do you measure the economic damage done by investments that are never made?
If economic growth of a 14 trillion dollar economy is 2% and should be 7% coming out of a hole like this, the damage is $700 billion of production per year compounding continuously.
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A "secured creditor" is a creditor who loan is secured by defined assets. Period.
I suppose I could be wrong, but my clear understanding is that this is something that a bankruptcy judge cannot interfere with. Period.
Thought experiment. Someone declares bankruptcy. He has a home with a mortgage by a bank in which is in in default. Do his other creditors get to take a piece of what the home sells for?
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A "secured creditor" is a creditor who loan is secured by defined assets. Period.
I suppose I could be wrong, but my clear understanding is that this is something that a bankruptcy judge cannot interfere with. Period.
So should a contract be a contract be sacrosanct. The rules change in Bankruptcy Court. A Judge in Bankruptcy Court has wide leeway to "interfere" as he/she sees fit. Very wide leeway.
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Someone declares bankruptcy. He has a home with a mortgage by a bank in which is in in default. Do his other creditors get to take a piece of what the home sells for?
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Can only guess. If there is cash back, then yes. Assuming he is underwater on the mortgage, no; I can't see how unsecured creditors or creditors with other collateral could get ahead of the secured liens already in place on the house.
If the homeowner gets to keep the house, then the judge would have to allow funds to be used for that redemption, or write down the amount owed with Stalinist leeway. Court proceedings no doubt could be used to delay the foreclosure - at least that is how it worked with a cancellation of a Contract for Deed.
If Obama intervenes, all bets are off.
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JDN: I would be very surprised if a secured loan could be interfered with. Anyone have anything definitive on this?
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Secured Loan Definition
By Joseph Nicholson, eHow Contributor
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Lenders are a lot more comfortable putting up money when there's something specific they can repossess if they're not repaid. This is what's called a secured loan, and may be the only kind of credit a person with a poor credit rating can get.
Features
A secured loan is one in which the borrowed funds are linked to a specific asset, which acts as collateral against the loan. The primary feature of a secured loan is the lender's right to possess the asset if the terms of the loan are materially breached and payment is not made. A mortgage loan is a popular example, where the house is the security. But, if the value of the collateral does not retire the loan, the lender can go after other assets. A nonrecourse loan is a special type of mortgage loan that limits the lender's claim against the borrower to the collateral and nothing else.
Function
The purpose of securing a debt is to reduce the risk to the lender by creating a strong incentive for the borrower to repay the loan. Individuals with excellent credit history may be able to avoid secured debts by virtue of their credit score. A poor credit history will make it virtually impossible to obtain an unsecured loan, even for routine borrowing such as through credit cards. If the loan principal is large, such as when buying a house or car, the item being purchased is almost always used as collateral against the loan no matter how strong the borrower's credit.
Significance
The difference between secured and unsecured loans is perhaps most significant in the case of a bankruptcy. Secured lenders have priority over unsecured lenders, and can make a claim against an asset to prevent it from being liquidated and applied to unsecured debts. In the case of good credit, the borrower may receive better terms by opting for a secured instead of unsecured loan.
Considerations
Individuals emerging from bankruptcy or otherwise encumbered by a poor credit history are only likely to receive offers for secured credit cards. These not only charge a high interest rate for carried balances, up to 20 percent or more, they also require a deposit in a separate savings account that can be possessed if regular payments on the card are not forthcoming. Such an individual will not qualify for standard loans, but may be able to receive a payday loan by proving their employment and promising a future paycheck to secure a present loan.
Types
A secured debt is distinct from a lien in that a lienor does not necessarily have right of possession. A mechanic, for example, has a statutory lien on the automobile they worked on if they are not paid, but cannot repossess and sell the vehicle without a judgment. The secured lender who provided the loan to buy the automobile, however, can repossess the car and dispose of it as they wish, assuming no other encumbrances.
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Read more: Secured Loan Definition | eHow.com http://www.ehow.com/about_4680048_secured-loan-definition.html
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Over to you JDN :-D
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I"m repeating myself; I thought I was clear. :? In Bankruptcy Court the Judge has extreme flexibility especially in complicated and large bankruptcies. If you and I do a BK, we
lose our house, our car, etc. If a complicated large corporation does it, well, it's up to the Judge to determine how the money is to be divided.
Contrary to the common assumption in the contracting literature that the creditor can seize the collateral on demand, these assets are subject to an automatic stay
which restricts the lender’s collection rights. The collateral can then be used to support the reorganization, provided the secured lender is given “adequate protection”, a flexible
standard determined by a bankruptcy judge.
With secured debt, the creditor’s rights are determined during the bankruptcy process and vary with the realized liquidation value of the collateral. Secured creditors are subject
to dilution in bankruptcy at the Court's discretion."
Is that not clear enough? :-D
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http://www.scsuscholars.com/2009/05/sanction-of-victim.html
The sanction of the victim
I found utterly contemptible this statement from President Obama yesterday while addressing the filing of bankruptcy by Chrysler.
While many stakeholders made sacrifices and worked constructively, I have to tell you some did not. In particular, a group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout. They were hoping that everybody else would make sacrifices, and they would have to make none. Some demanded twice the return that other lenders were getting. I don't stand with them. I stand with Chrysler's employees and their families and communities. I stand with Chrysler's management, its dealers and its suppliers. I stand with the millions of Americans who own and want to buy Chrysler cars. I don't stand with those who held out when everybody else is making sacrifices. And that's why I'm supporting Chrysler's plans to use our bankruptcy laws to clear away its remaining obligations so the company can get back on its feet and onto a path of success.
The group was spooked enough yesterday to put out an unsigned statement of their position. Today in the filing in bankruptcy court we know something of who these thugs who "held out for the prospect of an unjustified taxpayer-funded bailout" are:
Yale University's endowment;
the University of Kentucky's endowment;
the Bill and Melissa Gates Foundation.
Many others bought the debt on the prospect of making money. In so doing they enabled those who might have been burdened by Chrysler debt to receive something now for their bonds: Those buyers provided liquidity to an illiquid market. Those investors are now being vilified by an administration who wanted to use political muscle, having Congressmen call them "vultures" who "will now be dealt with accordingly in court."
Many bought the debt knowing that bankruptcy was possible. They did so under the expectation that the rule of law would apply in America, that their place in line under bankruptcy law was purchased with that debt. President Obama's ire over their unwillingness to give away that place in line -- a place purchased by those endowments and foundations and pensions not for themselves but for students, pensioners and grant recipients -- is an indication that the president thinks his noble ends are superior to theirs. And Rep. Dingell joins him in hoping for what? the equivalent of hoping these creditors end up in a cell with a guy named Butch? And for what? The Journal explains:
The Chrysler creditors at least represent teachers, pensioners and retirees, among others. The Administration is advancing its own social and political agenda through its ever-deeper entanglement with Chrysler and General Motors. That explains why the government is giving 55% of the new Chrysler to the UAW's retiree-benefit trust, a junior creditor, while those ahead of the trust in line get a mere 30 cents on the dollar.
The president is trained in the law and understands the rights senior creditors have. He may hope he gets a better deal in bankruptcy court, but if the creditors are able to force liquidation, the 2012 Republican nominee can remind Detroit that Obama let this go to bankruptcy court because he wouldn't give these creditors an extra $250 million for a right they had paid for.
Labels: economics, rule of law
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Sour grapes of the losers. :-D
Yale and Bill Gates are big boys with high powered attorneys. They don't like being called names. So what? They could have fought and argued; they didn't and that was their choice.
In BK court, some people win, some lose....
That is my point.
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WASHINGTON, June 2 (UPI) -- U.S. taxpayers may lose $14 billion of the money spent on bailing out the U.S. auto industry, despite the industry's recent recovery, the White House said.
The loss -- 17.5 percent of the $80 billion in bailout money given to the industry -- was down from $48 billion, or 60 percent of the bailout money, projected two years ago, the White House said in a report titled "The Resurgence of the American Automotive Industry."
President Barack Obama Friday visits a Chrysler Group LLC facility in Toledo, Ohio.
"There is no joy ... in recognizing that all of this money will not be returned," top White House auto and manufacturing adviser Ron Bloom told reporters Wednesday.
But the bailout saved jobs and prevented a broader industry collapse, he said.
"So while we are obviously extremely conscious of our obligation to get every penny we can for the taxpayer, we're also not going to apologize for the fact that there are literally hundreds and hundreds of thousands of Americans who are working today" because of the bailouts, Bloom said.
The White House report cited "independent analysts" as saying the money invested in General Motors Co. and Chrysler ultimately saved taxpayers "tens of billions of dollars in direct and indirect costs," including the cost of unemployment insurance, taxes the government would have lost if the big Detroit automakers had collapsed "and costs to state and local governments."
"Since GM and Chrysler emerged from bankruptcy, the auto industry has created 115,000 jobs, its strongest period of job growth since the late 1990s," the report said.
Read more: http://www.upi.com/Top_News/US/2011/06/02/Auto-bailout-US-taxpayers-may-lose-14B/UPI-88431307003400/
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"In BK court, some people win, some lose...."
In this case, the rule of law, the American taxpayers, future generations.....
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Your use of BOLD is interesting. Why didn't you highlight.....
But the bailout saved jobs and prevented a broader industry collapse, he said.
The White House report cited "independent analysts" as saying the money invested in General Motors Co. and Chrysler ultimately saved taxpayers "tens of billions of dollars in direct and indirect costs," including the cost of unemployment insurance, taxes the government would have lost if the big Detroit automakers had collapsed "and costs to state and local governments."
Also, if I remember reading, the government actually made money on the bailouts to many financial corporations. Win some lose some; like buying stock I guess.
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Your use of BOLD is interesting. Why didn't you highlight.....
But the bailout saved jobs and prevented a broader industry collapse, he said.
The White House report cited "independent analysts" as saying the money invested in General Motors Co. and Chrysler ultimately saved taxpayers "tens of billions of dollars in direct and indirect costs," including the cost of unemployment insurance, taxes the government would have lost if the big Detroit automakers had collapsed "and costs to state and local governments."
Also, if I remember reading, the government actually made money on the bailouts to many financial corporations. Win some lose some; like buying stock I guess.
Because the white house talking points were bullshiite? Should the US gov't have bailed out the buggy whip companies when the Model T came out and people started buying cars instead of horses?
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Gee now that's a good analogy too. Your sharp wit is off tonight. :evil:
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It's a simple question. Should the taxpayers have bailed out the makers of buggy whips when the automobile killed their market share? What of all the candlemakers that lost their jobs when Edison's light bulb made candles a decorative item only?
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But we are still driving cars! And will be for some time. No new product is "killing their market share". So there is a difference. Your analogy is flawed. What is your point?
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Should the gov't be subsidizing the failures of private business with our money? What of all the other car companies that went out of business? What of the car companies that don't need a bailout, should they get the same access to taxpayer funds as the badly run ones?
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Boy, if I didn't know better, I'd think there was some sort of pattern here......
June 2, 2011
How to Win Payoffs and Intimidate Enemies in Obama's America
By Gary Jason
Some recent stories instruct us anew on the cardinal tenets of Obamanomics, a.k.a, pay for play the Chicago way.
Consider first the story reviewing the rush of organizations to get exemptions from Obamacare. So far, nearly 1,400 different entities (businesses, unions, insurers, and state and local governments), covering over three million people, have been given exemptions from the bill by Obama's HHS Secretary Sebelius, and those waivers have a disturbing pattern.
The Obama regime clearly played the crony capitalist card in granting these waivers. While unions represent only a small portion of the workforce (12% overall, and a trivial 7% of all private industry employees), they gave over $400 million in the 2008 election cycle to elect Democrats (especially Obama), and they have been rewarded with over half of all the waivers given out so far. Put another way, if you are a member of a union that puts cash into Obama's campaign coffers, you are four times more likely than the average citizen to get an exemption from the very law your corrupt, rent-seeking organization helped inflict upon an unwilling public in the first place.
Moreover, last month alone saw the Obama regime grant nearly forty exemptions to various tony nightclubs, restaurants, and hotels in Nancy Pelosi's district. How ironic can you get: Pelosi was the loopy leftist shrew who jammed the law through the House of Representatives, cackling that we had to pass the damn thing in order to find out what was in it. Apparently even she didn't know what was in it, or maybe just her constituents didn't know.
Turning to Obamanomics and taxation, it has often been observed that the jokes a person makes are always an indication of what that person deeply believes. If that's the case, Obama's recent remarks in his commencement speech at Arizona State University (ASU) -- when he joked about ASU's basketball team defeating his pick in the NCAA tournament -- is revealing. He "joked" that ASU's president and Board of Regents "will soon learn all about being audited by the IRS."
Now, as Glenn Harlan Reynolds noted in his discussion of this incident, this is a repellent and ominous joke. Reynolds notes that the history of some recent presidents (Kennedy, Johnson, and Nixon come to mind here) who used the IRS to harass opponents makes this sort of joke worse than tasteless -- it threatens the already limited trust the public has in the IRS. But it is worse than that: the joke indicates that the Chicago Way punish-our-enemies-and-reward-our-friends attitude is never far from Obama's mind. And the IRS has indeed been more menacing under the Obama regime's stewardship.
Consider the recent report that the IRS is increasing its demands on small businesses. Now, small businesses are Obama's least favorite form of business -- they aren't unionized, their principals have an annoying degree of independence, and they don't tend to contribute much to his campaign coffers. Well, the IRS is now demanding of small companies being audited that they turn over the entirety of their QuickBooks or other accounting software files. In other words, the IRS is demanding that audited companies turn over not just the documents pertaining to the issues in the audit, but all files. These would include customer lists, confidential client information, sales records, and personnel records.
Not unnaturally, small businesses are worried about the IRS being able to conduct "fishing expeditions," trawling the data for evidence of something that might bring the IRS more money in fines and penalties. Even worse, clients could then be targeted for investigation, which could be devastating for the viability of those small businesses.
Again, there is the authoritarian rage the Obama regime has shown after last year's Citizen United ruling by the U.S. Supreme Court which -- quelle horreur! -- held that businesses have the same rights as other groups in America to spend their money to plead their cases. Obama obviously feels that only leftist special interest groups such as unions and environmentalist organizations have this right.
The Congress, with Obama's support, tried to overturn the ruling legislatively with the Orwellian-named DISCLOSE Act, but that failed. So Obama has repeatedly promised to issue an executive order to the effect that all businesses bidding for government contracts must reveal the recipients of all their campaign donations -- a clear effort to intimidate businesses into contributing only to "politically correct" causes, such as the Obama reelection campaign.
Moreover, as a recent piece reveals, the IRS is now involved in the attempt by the regime to suppress the free speech of opponents. The IRS has just announced that it plans to retroactively require that political donations to certain 501(c)(4) non-profit political organizations be subject to gift taxes. As the piece rightly notes, the gift tax has hitherto been used to stop wealthy people from escaping the estate tax by giving their assets away to relatives. So the sudden, selective, and ex post facto use of this tool to target and intimidate donors to conservative organizations (such as Americans for Prosperity and Crossroads GPS) seems clearly political.
Also testifying to the political nature of this IRS program is the fact that the idea was first proposed by leftist advocacy groups such as Democracy 21 and liberal politicians such as Sen. Max Baucus (D-MT).
Finally, we should note a sad coda to the whole crony car capitalism that was the Obama's takeover of GM and Chrysler. I won't repeat the story about how the original secured creditors were stiffed in favor of the UAW, a big supporter of Obama. But this new story discusses another group of people who got the shaft so that the UAW would score big: namely, unsecured creditors.
Overlooked in the auto company bailouts were those people who had received court judgments for harms they suffered from GM and Chrysler vehicles. The article recounts a number of the thousands of such sad cases. These debts were largely expunged by the bankruptcy.
To be precise, Motors Liquidation Company, the name of the bankruptcy estate for the old GM, which has as assets only 10% of the stock in the new GM, faces $3.3 billion in liabilities from 2,500 claimants, and those victims often are forced to take only 30% of what they were awarded in the form of shares in the trust. That trust also faces other unsecured creditors (such as those who suffered from asbestos ailments, and owners of defunct dealerships). Worse, Chrysler claimants have no recourse, because no assets were set aside for unsecured creditors.
As Professor Skeel, a bankruptcy law specialist at the University of Pennsylvania, put it, "[t]his was not a normal case. The government was deciding who was going to be taken care of and who was not. ... It would have been easy to put something aside for [the victims of product liability]." But the good professor overlooks the fact that the people harmed by the defective products made by GM and Chrysler weren't organized into a rent-seeking block that gave tens of millions of dollars to Obama's campaign. The UAW -- which went to great lengths to protect the drunken, incompetent, and negligent workers who produced many cars that maimed consumers -- was so organized and had given the millions, so the UAW got the spoils.
Obama's approach is clear: he employs economic policy to advance his leftist political agenda. This is crony capitalism in its rankest, most corrupt form. It is not worthy of even a corrupt machine-run cesspool such as Chicago, much less a nation governed by the rule of law.
What is amazing is that the various Republican candidates aren't hammering this issue.
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I dislike the term "crony capitalism". The correct name IMHO is economic fascism and using the word "capitalism" in this context helps smear the name.
"With secured debt, the creditor’s rights are determined during the bankruptcy process and vary with the realized liquidation value of the collateral. Secured creditors are subject to dilution in bankruptcy at the Court's discretion."
Citation for this JDN? I thought "secured" meant "secured".
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"But we are still driving cars! And will be for some time. No new product is "killing their market share"."
Cars change somewhat every year. For the most part it seems to me that competitors Honda and Toyota, along with buying no new car at all, is what is killing their market share. Really it is their own non-competitiveness killing their market share and profit. Running our economy at less that 80% efficiency also means the difference for large companies of not making the sales at the margin that pushes you into the black. In other words, government wrongheadedness is a big part of what is killing them in first place.
How does someone say with certainty what new life would or would not have flourished if we weren't propping up dinosaurs. Most likely the GM brand(s) and most GM employees that would have flourished just fine if the company were allowed to go through the normal, time tested process of reorganization.
Do you really favor government picking winners and losers or just in this case, or are you just picking away at the edges of the real issue? Did you ever get back to me on where they derive that power, to invest in one business and not others? Do you agree or disagree with John Roberts point that all people have the same rights and they are not tied to being a little guy or middle class? Do you agree with my math that the US economy has missed out on roughly $1.5 trillion dollars of new innovation and new production since the end of the recession in June 2009 by shunning pro-growth, freedom-based economic policies and choosing instead to move toward a state directed economy?
Why would it be companies on the brink of failure where we want to put our public investment, if it was constitutional? Why wouldn't we double down instead on successful companies if we want to leverage our growth? Just curious.
When we are wishy-washy on principles, the choices we face get really complicated.
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"I dislike the term "crony capitalism".
Agree! Crony capitalism as it is used is the opposite of capitalism, not a version of it. Like compassionate-conservative (big government conservative). Why not just honestly say you aren't a conservative.
Not catchy but I like to call it a state run economy or at least moving toward one. Allowing capital to move freely to its most valuable use is the opposite of these policies in question.
fascism is just as valid in its second definition in Merriam Webster: http://www.merriam-webster.com/dictionary/fascism a tendency toward or actual exercise of strong autocratic or dictatorial control, but in its first definition it seems too strong, true totalitarianism. Misguided swing voters went to Pelosi-Reid in '06, Obama in '08; we want them back in '012. Calling them fascists or former fascists is probably not helpful IMHO.
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(More famous people reading the forum)
http://online.wsj.com/article/SB10001424052702303745304576361663907855834.html
The Real Cost of the Auto Bailouts
The government's unnecessary disruption of the bankruptcy laws will do long-term damage to the economy.
By DAVID SKEEL
President Obama's visit to a Chrysler plant in Toledo, Ohio, on Friday was the culmination of a campaign to portray the auto bailouts as a brilliant success with no unpleasant side effects. "The industry is back on its feet," the president said, "repaying its debt, gaining ground."
If the government hadn't stepped in and dictated the terms of the restructuring, the story goes, General Motors and Chrysler would have collapsed, and at least a million jobs would have been lost. The bailouts averted disaster, and they did so at remarkably little cost.
The problem with this happy story is that neither of its parts is accurate. Commandeering the bankruptcy process was not, as apologists for the bailouts claim, the only hope for GM and Chrysler. And the long-term costs of the bailouts will be enormous.
In late 2008, then-Treasury Secretary Henry Paulson tapped the $700 billion Troubled Asset Relief Fund to lend more than $17 billion to General Motors and Chrysler. With the fate of the car companies still uncertain at the outset of the Obama administration in 2009, Mr. Obama set up an auto task force headed by "car czar" Steve Rattner.
Under the strategy that was chosen, each of the companies was required to file for bankruptcy as a condition of receiving additional funding. Rather than undergo a restructuring under ordinary bankruptcy rules, however, each corporation pretended to "sell" its assets to a new entity that was set up for the purposes of the sale.
With Chrysler, the new entity paid $2 billion, which went to Chrysler's senior lenders, giving them a small portion of the $6.9 billion they were owed. (Fiat was given a large stake in the new entity, although it did not contribute any money). But the "sale" also ensured that Chrysler's unionized retirees would receive a big recovery on their $10 billion claim—a $4.6 billion promissory note and 55% of Chrysler's stock—even though they were lower priority creditors.
If other bidders were given a legitimate opportunity to top the $2 billion of government money on offer, this might have been a legitimate transaction. But they weren't. A bid wouldn't count as "qualified" unless it had the same strings as the government bid—a sizeable payment to union retirees and full payment of trade debt. If a bidder wanted to offer $2.5 billion for Chrysler's Jeep division, he was out of luck. With General Motors, senior creditors didn't get trampled in the same way. But the "sale," which left the government with 61% of GM's stock, was even more of a sham.
If the government wanted to "sell" the companies in bankruptcy, it should have held real auctions and invited anyone to bid. But the government decided that there was no need to let pesky rule-of-law considerations interfere with its plan to help out the unions and other favored creditors. Victims of defective GM and Chrysler cars waiting to be paid damages weren't so fortunate—they'll end up getting nothing or next to nothing.
Nor would both companies simply have collapsed if the government hadn't orchestrated the two transactions. General Motors was a perfectly viable company that could have been restructured under the ordinary reorganization process. The only serious question was GM's ability to obtain financing for its bankruptcy, given the credit market conditions in 2008. But even if financing were not available—and there's a very good chance it would have been—the government could have provided funds without also usurping the bankruptcy process.
Although Chrysler wasn't nearly so healthy, its best divisions—Jeep in particular—would have survived in a normal bankruptcy, either through restructuring or through a sale to a more viable company. This is very similar to what the government bailout did, given that Chrysler is essentially being turned over to Fiat.
The claim that the bailouts were done at little cost is even more dubious. This side of the story rests on the observation that GM's success in selling a significant amount of stock, reducing the government's stake, and Chrysler's repayment of its loans, show that the direct costs to taxpayers may be lower than many originally feared. But this doesn't mean that taxpayers are off the hook. They are still likely to end up with a multibillion dollar bill—nearly $14 billion, according to current White House estimates.
But the $14 billion figure omits the cost of the previously accumulated tax losses GM can apply against future profits, thanks to a special post-bailout government gift. The ordinary rule is that these losses can only be preserved after bankruptcy if the company is restructured—not if it's sold. By waiving this rule, the government saved GM at least $12 billion to $13 billion in future taxes, a large chunk of which (not all, because taxpayers also own GM stock) came straight out of taxpayers' pockets.
The indirect costs may be the worst problem here. The car bailouts have sent the message that, if a politically important industry is in trouble, the government may step in, rearrange the existing creditors' normal priorities, and dictate the result it wants. Lenders will be very hesitant to extend credit under these conditions.
This will make it much harder, and much more costly, for a company in a politically sensitive industry to borrow money when it is in trouble. As a result, the government will face even more pressure to step in with a bailout in the future. In effect, the government is crowding out the ordinary credit markets.
None of this suggests that we should be unhappy with the recent success of General Motors and Chrysler. Their revival is a very encouraging development. But to claim that the car companies would have collapsed if the government hadn't intervened in the way it did, and to suggest that the intervention came at very little cost, is a dangerous misreading of our recent history.
Mr. Skeel, a professor of law at the University of Pennsylvania, is the author of "The New Financial Deal: Understanding the Dodd-Frank Act and its (Unintended) Consequences" (Wiley, 2010).
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We keep hearing people on TV advising us to buy American brands. My view is the American taxpayer was screwed over by GM and Chrysler. And now this. I will never buy a GM car. Ever.
***June 07. 2011 6:17AM
GM chief pushing for higher gas taxes
David Shepardson and Christina Rogers/ The Detroit News
Detroit — General Motors Co. CEO Dan Akerson wants the federal gas tax boosted as much as $1 a gallon to nudge consumers toward more fuel-efficient cars, and he's confident the government will soon shed its remaining 26 percent stake in the once-bankrupt automaker.
"I actually think the government will be out this year — within the next 12 months, hopefully within the next six months," Akerson said in a two-hour interview with The Detroit News last week.
He is grateful for the government's rescue of GM — "I have nothing but good things to say about them" — but Akerson said the time for that relationship to end is coming because it's wearing on GM.
"It's kind of like your in-laws: It was a nice long weekend. We didn't say a week," Akerson said with a laugh.
And while he is eager to say goodbye to the government as a part owner of GM, Akerson would like to see it step up to the challenge of setting a higher gas tax, as part of a comprehensive energy policy.
A government-imposed tax hike, Akerson believes, will prompt more people to buy small cars and do more good for the environment than forcing automakers to comply with higher gas-mileage standards.
"There ought to be a discussion on the cost versus the benefits," he said. "What we are going to do is tax production here, and that will cost us jobs."
For the years 2017-25, federal officials are considering 3 percent to 6 percent annual fuel efficiency increases, or 47 mpg to 62 mpg. That could boost the cost of vehicles by up to $3,500.
"You know what I'd rather have them do — this will make my Republican friends puke — as gas is going to go down here now, we ought to just slap a 50-cent or a dollar tax on a gallon of gas," Akerson said.
"People will start buying more Cruzes and they will start buying less Suburbans."
With gas already over $4 a gallon in parts of the country, a higher gas tax is a hard sell.
Rebecca Lindland, an analyst with IHS Global Insight, said higher gas taxes in Europe did lead consumers to buy more fuel-efficient cars.
But she acknowledged that's virtually impossible to see in the United States.
"It's career suicide for a politician to call for raising gas taxes," Lindland said.
Akerson isn't the first auto exec to float the idea of a gas tax to encourage consumers to buy fuel-efficient vehicles. Ford Chairman Bill Ford Jr. has previously advocated a gas tax increase.
On Monday, a Ford spokeswoman said the company "will leave the policy decision to Congress"; in 2009, GM CEO Rick Wagoner called a higher gas tax "worthy of consideration."
Stock boost sought
Akerson believes the Treasury's continued ownership stake in GM — 500 million shares — is dragging down its stock price, which has fallen 23 percent this year, and closed Monday at $28.56. That's well below the $33-per-share it fetched in November's $23 billion initial public stock offering.
"I think that it is an overhang — to have 500 million shares sitting out there — it's a problem," Akerson said, adding that unrest in the Middle East and oil prices also are depressing GM's share price. "They don't know when (the Treasury is) going to come out. Investors hate uncertainty."
David Whiston, an auto analyst at Morningstar, agrees that government ownership is impacting investors' interest in GM.
"There are a lot of money managers that are waiting for the government to exit before jumping in," Whiston said.
The Treasury, which rescued GM with a $49.5 billion bailout and once held a 61 percent majority stake, "will likely look at another (stock) sale in August, after second-quarter earnings are announced, Akerson said.
The Obama administration has made clear it is eager to exit GM — but hasn't laid out a precise timetable.
Asked if GM is considering buying back its stock, Akerson paused for eight seconds before declining to answer directly. "But we have a lot of cash," he added.
At the current stock price, U.S. taxpayers would be out more than $12 billion on GM's bailout. Still, Akerson believes that, in the end, taxpayers will see the government made the right call in saving the automaker, as well as crosstown rival Chrysler.
"We are in the midst of transforming an iconic American company so 20 and 30 years from now (taxpayers) will look at this company and they'll say, 'Absolutely it was the right thing to do,'" Akerson said. "And it shouldn't be measured on did it sell for $43 or $53 (a share) or did they lose a couple billion dollars?"
GM was saved, he said, because of the extreme generosity of Americans — a spirit that helped restore Europe and Japan after World War II and rebuild cities such as New Orleans after natural disasters.
"We're the most generous country, even in terrible times," Akerson said. "We don't walk to the disaster as a nation. … We can't wait to help."
Things are looking up for GM's image, he said. Pollster Peter Hart, conducting research for GM, found 16 percent had a positive view of GM before the bailout. But that had risen to 65 percent early this year, Akerson said.
"I couldn't believe the press we got on the IPO — it was like a $100 million gift," Akerson said.
GM's rebound, he believes, was a "proxy" for the U.S.
"OK, we took the blow as a nation, we weathered the worst, and my God, we're back," Akerson said. "It's why I came here. It was a story of underdog that tripped as we all have in our lives — it was a good feel-good story."
Call for tax hikes
In his interview with The News, Akerson also weighed in on the nation's debt ceiling, saying Congress should raise it from its current $14.3 trillion mark. The government could default on its debt on Aug. 2.
"We're too good a nation to let ourselves be a banana republic," Akerson said, warning that a default would be "unimaginable" and could hurt auto sales.
But he agrees with those who say the country has been spending money it can't afford.
"Now, we need practical decisions," Akerson said. "I think you need to cut the hell out of the budget and you've got to increase taxes … on everybody — including the middle class and the rich people."
Akerson, who describes himself as "a Colin Powell Republican — not a Sarah Palin Republican" — said President Barack Obama has "done a pretty good job on the economy," which, he said, was "a nightmare.
"I don't think he can fix it in four years and I think we just have to stay the course," he said.
Despite his Republican stripes, Akerson is frustrated with the political climate and the media.
He was invited to appear on CBS' "Face the Nation," but said: "I can't go on it. I'm toxic. I'm like a lightning rod. I couldn't have an intelligent discussion without someone saying, 'He's a welfare guy from the bailout.'"
But he noted the bipartisan spirit of GM's rescue and the rest of the U.S. auto industry.
"If we had gone down," he said, "the supply chain would have gone down. … And Ford was hanging on by its fingernails, too."
GM's failure also would have led to Detroit's collapse, Akerson said. "I have not seen a city in this bad a shape since I went to East Berlin in 1969."***
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http://www.washingtonpost.com/blogs/fact-checker/post/president-obamas-phony-accounting-on-the-auto-industry-bailout/2011/06/06/AG3nefKH_blog.html
Pants on fire.
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IMO this is another example of government perks that is distinctly unfair. States giving the film industry tax breaks that no one else gets. Yes I understand the upside down reasoning that the idea was to bring business, recognition and money into a targeted area that would benefit the entire state. Nonetheless this is government meddling, this is unfair tax code manipulation that benefits peopel who do not need the benefit while smaller bussinesses and tax payers get stuck with the burden far more than any benefit to them. I would like to hear Repubs address this crap. Newt has a point when he notes "conservative social engineering". I believe this is a perfect example of what he is saying. Stossel could have a field day on this:
After a decade of escalation, a stupid trend may have peaked
Jun 9th 2011 | LOS ANGELES | from the print edition
Lights, cameras, subsidies, action!LOTS of states would love to be California and have their own little Hollywood. Film crews would then come to town and spend money in hair salons and hotels, and local politicians could pose with film stars. So why not call it “economic development” to justify the huge tax credits that lure film producers? As of last year, more than 40 states had such incentives, costing them a record $1.4 billion.
Even California itself plays the game, believing that it has to defend itself against the poachers. In 2003, when only a handful of states (principally Louisiana and New Mexico) offered incentives, California made two-thirds of America’s big-studio films. Now it makes far fewer than half. Film LA, an organisation that co-ordinates permits for film shoots in Los Angeles, says that without California’s own tax credit, “2010 would have been the worst year” since the mid-1990s for filming in Hollywood. As its marketing blog gibes: “It is extraordinarily unlikely that the 137 productions that filmed in Michigan since 2007 chose to shoot there for creative reasons, a favourable climate or a deep and talented film-crew base.”
All this costs money, which legislators volunteer on behalf of taxpayers. Many tax credits (a percentage of a film crew’s local expenditures) exceed the filmmaker’s total tax liability to that state. The credits have even become an industry unto themselves: brokers slice them into tranches and trade them. In Iowa filmmakers were selling their credits until that state shut its programme in 2009. Last month an Iowa judge sentenced a producer to ten years in prison for fiddling credits.
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Iowa
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Incentives do not have to involve tax credits. Some states simplify the paperwork by just giving out cash (calling it “rebates” or “grants”). Others exempt film-makers from sales or hotel taxes or give them other perks.
All this is silly. First, as Joseph Henchman at the Tax Foundation, a non-partisan think-tank, puts it, even when a state succeeds in luring film crews, they rarely boost the economy or tax revenues enough to justify the costs of the incentives. Film companies usually import their staff (stars, stuntmen, etc) and export them again when the shoot is over. The local jobs they create (hairdressers, sound technicians, pizza deliverers) are mostly temporary.
Second, since virtually all states are at it, the programmes largely cancel out one another; no state gets a lasting advantage. The craze resembles a beggar-thy-neighbour trade war (with mutually destructive tariffs) or the federal tax code with its loopholes for every lobby and thus higher rates for all. In the language of cold-war nukes, it would be mutually assured destruction (MAD). The only winner is the film industry. In essence, a rich bloke in a Brentwood villa gets money from a poor taxpayer in West Virginia.
Fortunately, this has begun sinking in. Arizona, Arkansas, Idaho, Kansas, Maine, New Jersey and Washington have recently ended, suspended or shrunk their programmes. Many others, struggling with budget deficits, are considering doing the same, investing the money in something permanent or even leaving it to taxpayers. “2010 will likely stand as the peak year,” thinks Mr Henchman.
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President Obama's re-election machine is already running full bore, but has his entire Administration also decamped for the campaign trail? We ask because the towering ambitions of Mr. Obama's first two years have suddenly gone into abeyance in his third, apparently to be deferred until years five through eight. The White House is more or less conceding that it doesn't have a chance of winning a second term unless his major policies go on hiatus.
This holiday from committing liberal history began in December with the White House-GOP deal that extended the Bush tax rates through the 2012 election and added a payroll tax cut on employees to 4.2% from 6.2%. These proposals came from the same Democrats who only months earlier had increased payroll taxes to finance their health-care bill and routinely claim that tax rates don't matter to the private economy. But then, 9.1% joblessness and 1.8% growth have a way of concentrating the political mind.
Next came the much-ballyhooed White House scrub for "excessive" regulation, even as hundreds of new rules mandated by the legislation of the first two years continue to be written and to slow business investment. But at least the rule review persuaded the Environmental Protection Agency to stop treating dairy farm milk spills as if they were Gulf oil leaks. That should help next year in Wisconsin.
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Associated Press
The White House is more or less conceding that Mr. Obama's major policies must go on hiatus.
.Picking up the vacation pace, this week the EPA delayed by two months the carbon regulations that it wants to impose, even as it resists bipartisan attempts on Capitol Hill to kill them altogether. Next up may be a delay in pending regulations meant to harm coal-fired power, before opponents gather enough votes to kill them. The EPA has already yanked an entire rule that would have forced thousands of businesses to install new industrial boilers.
Maybe the White House should short-circuit all this by dispatching EPA administrator Lisa Jackson to an undisclosed location through November 2012.
Also this week, the Commodity Futures Trading Commission voted—five to zero—to delay by six months the derivatives swap rules that were due this month under the Dodd-Frank financial re-regulation. The alphabet soup of financial regulators will eventually add tens of thousands of pages to the Federal Register, but for now they are conceding that the derivatives market isn't the calamity they claimed it was in the rush to pass the bill.
Then there's health care. Over the last year, the Health and Human Services Department has granted at least 1,372 temporary waivers to ObamaCare mandates, most notably for price controls on private insurance companies. Many have gone to Democratic allies like unions, but many more went to ordinary businesses and even states. HHS has already given a pass to Nevada, New Hampshire and Maine, and another dozen or so have applied or are expected to ask for exemptions.
Opinion Journal Columnist John Fund on the GOP presidential debate.
.This is less political favoritism than a panicked, ad hoc bid to minimize pre-election insurance disruptions that can be attributed to a law that is still widely reviled. If the law isn't enforced, maybe voters will forget it passed. In its New Hampshire reprieve, HHS admitted that ObamaCare would "destabilize the individual market," though it neglected to mention that this is what ObamaCare is meant to do. Just not yet.
By the way, this waiver process isn't in the law's statutory language. HHS has simply created it via regulation. In other words, the health bureaucracy knew the rules they were writing would be destructive and have created a political safety valve. They have even found a way to override ObamaCare's cuts to the Medicare Advantage program that were counted as "savings" to make the health bill look less spendthrift. Medicare Advantage offers insurance choices to one in four seniors and is popular in, well, Florida, so seniors also get a two-year reprieve.
Why aren't liberals deploring this betrayal of their programs? Perhaps because even they can't ignore reality forever. Mr. Obama's epic fiscal binge, waves of new industrial policy and the political allocation of credit haven't created the boom they promised. If business can now be persuaded that the government assault is over and start to invest again so the economy improves enough for Mr. Obama to win a second term, then a two-year delay in fulfilling their dreams is well worth it.
Liberals figure that as long as Mr. Obama can be re-elected next year on another hope-and-change platform, it will be too late to hope to change anything and he can then return to his legacy project of building a tax and entitlement state on the European model. The economy may benefit from Mr. Obama's temporary amnesty, but the real lesson of this hiatus from liberalism is that it should be shut down permanently.
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"It is a wise rule and should be fundamental in a government disposed to cherish its
credit, and at the same time to restrain the use of it within the limits of its
faculties, 'never to borrow a dollar without laying a tax in the same instant for
paying the interest annually, and the principal within a given term; and to consider
that tax as pledged to the creditors on the public faith.'" --Thomas Jefferson,
letter to John Wayles Eppes, 1813
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By MICHAEL J. BOSKIN
Bipartisan budget negotiations to raise the debt ceiling are focused on deficit reduction. That's progress. It's imperative that we rein in spending given the risks posed by our growing debt, ongoing deficits and President Obama's spending binge. But we should be wary of "balanced" spending-cut/tax-hike proposals promising phony future savings. Lawmakers should pay heed to five vital lessons from the history of attempts to consolidate the budget and reform major programs:
1) Cut spending, don't raise taxes. In a comprehensive study of post-World War II fiscal consolidations in developed economies published last year by the National Bureau of Economic Research, economists Alberto Alesina and Silvia Ardagna conclude that successful deficit reduction averaged $5 to $6 in spending cuts for every $1 of tax hikes. Higher taxes more often led to recession. President Obama's and Senate Budget Committee Chairman Kent Conrad's proposals to balance spending cuts with large tax hikes are thus a recipe for failure.
2) Control spending with enforceable procedures. President Reagan twice negotiated large spending cuts in exchange for modest tax hikes (after historic tax-rate reductions in 1981), but much of the spending control never materialized. The Gramm-Rudman-Hollings Act of 1985 required projections of gradual deficit decline to a balanced budget over several years. Not surprisingly, the result was rosy forecasts but little deficit reduction. So lawmakers revised and stretched out the targets, but fared no better.
Similarly, the European Union's Stability and Growth Pact, which in 1997 set deficit and debt limits, was routinely violated long before the current financial crisis and recession.
Some state balanced-budget rules have succeeded by requiring that any shortfalls be made up the following year, thereby decreasing the incentive to fudge in the first place. President George H.W. Bush's controversial 1990 budget deal with a Democratic Congress included caps on discretionary spending and sequestration of funds if they were exceeded. President Bill Clinton and a Republican Congress later renewed the rules. New entitlement programs and tax cuts had to be "paid for"—i.e., there was a "marginal balanced budget" requirement.
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Martin Kozlowski
3) Be wary of baselines and budget gimmicks. Projected savings are usually measured from baselines with rapid increases in spending and rising taxes. The current Congressional Budget Office baseline assumes large automatic tax hikes, far beyond historic GDP shares. The hikes come from the expiration of the Bush tax cuts in 2013, growth of the Alternative Minimum Tax, and continuing "bracket creep," which pushes middle-income families into higher tax brackets. That's how President Obama can call a large tax increase (from today) a tax cut (from baseline).
Conversely, propose slowing projected spending growth (say, to 6% from 7%, as the House Republican Budget Resolution did this year) and you are accused of draconian slashing. We should end autopilot budgeting, and force justification of all spending or tax hikes.
4) Watch out for unintended consequences. Surprises tend to compound and, as Albert Einstein once said, compound interest is the most powerful force in the universe. In the 1970s, with little analysis or discussion, Social Security benefits at retirement were indexed to wage rather than price growth. Because wages generally grow more quickly than prices, price indexing has led to a higher rate of benefit growth. Today, with the baby boomers retiring, wage indexing creates trillions of dollars of future unfunded Social Security liabilities by projecting large benefit increases far beyond tax revenues. Switching to price indexing would eliminate this deficit while maintaining the real level of benefits.
Perhaps an even riskier consequence derives from the explosion, under Democratic and Republican administrations, in the number of people paying no income tax, in part because of refundable tax credits. Last year a majority of Americans paid no income tax. What is really unbalanced is the current revenue system. Partly due to the aftermath of the severe recession, transfer payments are at an all-time high as a share of personal income. These are ominous trends for budget dynamics in a democracy. We need both a broader base of economic activity and a larger fraction of the population financing government spending if we are to preserve a prosperous capitalist democracy.
5) Tackle fundamentals. If spending is projected to grow exponentially, President Obama's proposed temporary freeze on one-sixth of the budget, or even modest cuts, won't help much. We need changes that compound and cumulate over time, especially in Social Security and Medicare, or they will crowd out all other federal spending or drive marginal tax rates over 70%.
We've had successful, farsighted policy reforms that also dealt with pressing short-run issues. President Reagan's 1981 reform of indexing tax brackets to offset inflation still pays dividends by preventing even larger automatic tax hikes. The 1983 Greenspan Commission's phased-in gradual increases in Social Security retirement age were prescient. We can and must immediately address the debt-ceiling issue while focusing on long-term deficit reduction.
Events are rarely kind to those who keep kicking the can down the road, expanding spending and exploding the national debt. Payment ultimately comes from higher taxes, eroding the debt through inflation, or outright default and debt restructuring. The cost of any of these actions will be severe. Just ask taxpayers in Greece or Portugal facing a decade of depressed living standards. Or the Japanese, whose stagnation is measured in decades, not quarters or years.
Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.
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Boskin is right, hitting hard on the big picture of spending and on a great point Crafty has made often - the wrongheadedness of baseline budgeting.
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This (below) easily could go under glibness, dissonance or Pres 2012, but the main theme is regulations destroying manufacturing. The administration has a stated goal of quadrupling exports. Hard to do that while you prohibit or cripple the manufacturing of everything.
Bill Daley is the new Obama Chief of Staff. Going before the National Assn of Mfrs probably wasn't a good idea given the administrations track record and (unintended?) direction of stomping out production and new hiring.
http://dailycaller.com/2011/06/17/daley-can%E2%80%99t-defend-obama%E2%80%99s-%E2%80%98indefensible%E2%80%99-economic-policies/
White House Chief of Staff Bill Daley took heat from business executives Thursday for the Obama administration’s regulatory expansions. Daley also said he didn’t have any good answers for some of what President Obama is doing and expressed frustration about the “bureaucratic stuff that’s hard to defend.”
“Sometimes you can’t defend the indefensible,” Daley said at a National Association of Manufacturers (NAM) meeting.
Daley couldn’t answer basic questions and continually faced criticism from the executives in the room. The business leaders even applauded each other’s criticism of the administration. “At one point, the room erupted in applause when Massachusetts utility executive Doug Starrett, his voice shaking with emotion, accused the administration of blocking construction on one of his facilities to protect fish, saying government ‘throws sand into the gears of progress,’” wrote Peter Wallsten and Jia Lynn Yang in the Washington Post.
Americans for Limited Government Communications Director and former Labor Department Public Affairs Chief of Staff Rick Manning told The Daily Caller that Daley’s inability to defend Obama’s regulations is an indication that the administration’s plans aren’t working. Manning also points out that Daley’s meeting may have large political implications.
“Business community to William Daley, your Jedi tricks don’t work on us,” Manning said in an email. “The chickens are coming home to roost from the wholesale assault by Obama on the free enterprise system and the private job creators who make it run. The meeting itself is incredible in that it demonstrates just how vulnerable Obama feels in 2012.”
The Workforce Fairness Institute’s Fred Wszolek told The Daily Caller that Daley’s lackluster performance is even more questionable when comes to the National Labor Relations Board (NLRB) and its campaign against the Boeing Company. The NLRB has gone after the Boeing Company for opening a new plant in South Carolina. Boeing’s new plant is an addition to its already-existing production lines in Washington state. The NLRB’s case hinges on whether Boeing made the decision to open the new plant as “retaliation” against machinist unions in Washington, even though no jobs were lost there. In fact, Boeing has added thousands of new jobs in Washington.
As a former Boeing board member before taking on his White House job, Daley voted in favor of opening the new South Carolina plant. Republican Sen. Lindsey Graham has challenged Daley to come out and defend his vote in the face of the NLRB’s case, but he hasn’t yet done so.
“Bill Daley is White House chief of staff in an administration that is accusing a company where he served on the board of violating Federal labor law,” Wszolek said in an email. “The individual who launched the complaint against the Boeing Company was appointed to the post by President Obama and is currently a nominee. Now, to top it all off, Daley states he cannot defend the ‘indefensible’ conduct of his own administration, which presumably speaks to the Boeing matter.”
Wszolek questions Daley’s ability to continue “ethically” serving the president.
“All of this leads to one question: how can Daley serve in an administration that he cannot defend and believes his actions were unethical?,” Wszolek said.
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CBO’s Long-Term Budget Outlook
Posted by Tad DeHaven
The Congressional Budget Office released the latest edition of its annual forecast of where the federal government’s budget is headed. The numbers are new but the message is the same: the budget is on an unsustainable path. According to the CBO’s more politically-realistic “alternative scenario,” federal debt as a share of GDP will hit 109 percent in 2021 and would approach 190 percent in 2035.
For those mistaken souls who believe that merely eliminating “waste, fraud, and abuse” in government programs can solve the problem, the CBO has news for you:
In the Congressional Budget Office’s (CBO’s) long-term projections of spending, growth in noninterest spending as a share of gross domestic product (GDP) is attributable entirely to increases in spending on several large mandatory programs: Social Security, Medicare, Medicaid, and (to a lesser extent) insurance subsidies that will be provided through the health insurance exchanges established by the March 2010 health care legislation. The health care programs are the main drivers of that growth; they are responsible for 80 percent of the total projected rise in spending on those mandatory programs over the next 25 years.
Others believe that “tax cuts for the rich” are the source of the problem. But according to the CBO’s alternative scenario, if the Bush tax cuts are extended and the Alternative Minimum Tax continues to be patched, federal revenues as a share of GDP will still exceed the post-war average by the decade’s end. Under the CBO’s standard baseline, which assumes that those policies will not be continued, federal revenues as a share of GDP will go zooming by the historic average. That might be good for politicians, bureaucrats, and other “tax eaters,” but it wouldn’t be good for the country’s economic welfare.
The problem is clearly spending and the GOP has rightly made spending cuts a key condition to lifting the debt ceiling. The magic number being reported is $2 trillion in cuts. That sounds like a lot of money – and it is – but it’s likely that those cuts are to be achieved over 10 years. According to the CBO’s most recent estimates, the federal government will spend almost $46 trillion over the next 10 years. And as Chris Edwards has been repeatedly warning (see here, here, and here), there’s a possibility that the cuts will be of the “phony” variety.
http://www.cato-at-liberty.org/cbos-long-term-budget-outlook/
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"take steps to strengthen the safety net. The alternative is unconscionable harm"
(It's already a hammock that has swallowed up 4 going on 5 generations!)
Can you imagine, if you subscribed to the NY Times, and read every word cover to cover everyday, and nothing else, just how miserably uninformed you would be?
I honestly believe you know more in total if you spent that time wandering around observing with your own eyes and ears.
Our own CCP has pointed out that 50% of the people pay nothing whatsoever in federal income taxes and that percentage is rising. Absolutely no mention of that in this story.
We are spending roughly a trillion and a half a year more than we take in, close to $4 trillion a year in total, most of that is in the form of government checks to individuals, robbing Peter to pay Paul so to speak. No mention of that in this story.
We are arguing at the margin about ending some things that were TEMPORARY and containing the increases of some other excess spending items.
The World Bank definition of poverty has been raised from $1.08 to $1.25 per day. There is no one in America anywhere near that level unless they are refusing government help and these caps and containments on spending have NOTHING to with that.
In walks the NY Times to the discussion:
"Republicans are targeting poverty-fighting programs for deep cuts... Exempting low-income programs has been a major feature of deficit deals going back to 1985. Both sides should publicly commit to that now, and take steps to strengthen the safety net. The alternative is unconscionable harm"
http://www.nytimes.com/2011/06/25/opinion/25sat1.html?_r=1
"Making the poor carry a heavy part of the deficit burden is intolerable."
We have no measurable poor by any global standard. The ones we call poor are receiving a lot before, during and after any so-called budget cutting conference. The poor are paying NOTHING!! (in direct federal income tax) Punishing potential employers for the excesses of government transfer payments creates even more 'poor'. No mention of that.
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Liberals are up in arms because it contains an 18% of GDP cap on spending.
Conservatives should beware of Balanced Budget Amendment talk because without the cap on spending, the amendment is certain to cause tax increases forever.
If adopted exactly as written, it would solve most of our problems. Current GDP 14.12 T times 18% is 2.5T, coincidentally What we already take in now in a down economy. Implementation of the amendment as written is Jan 2017, time to phase things in and get our house in order. Super majority required to raise taxes makes sense because most increases are not across the board to they already lack consent of the governed. Forces priorities and choices, not just layering of additional spending every time someone has a great idea. Higher dollar spending is achieved by - growing the economy. This has no chance of passing 2/3 House, 2/3 Senate and 3/4 state legislatures as written. And to change the terms is to destroy it, IMO.
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http://www.fedsmith.com/article/2957/house-judiciary-committee-approves-balanced-budget.html
The House Judiciary Committee on Thursday approved a balanced budget amendment (H.J. Res. 1) to the Constitution to restore fiscal responsibility and accountability to federal government spending. The proposal for a balanced budget amendment passed the Committee by a vote of 20-12.
The amendment:
* Requires Congress never to spend more than it takes in
* Requires a 3/5 majority vote to raise the debt ceiling, with an exception in times of national emergency
* Requires a supermajority to raise taxes
* Requires Spending as a Percentage of GDP to not Exceed 18% - Preventing Tax Increases to Balance the Budget
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Full text:
http://thomas.loc.gov/cgi-bin/query/z?c112:H.J.RES.1:
Proposing a balanced budget amendment to the Constitution of the United States.
Resolved by the Senate and House of Representatives of the United States of America in Congress assembled (two-thirds of each House concurring therein),
That the following article is proposed as an amendment to the Constitution of the United States, which shall be valid to all intents and purposes as part of the Constitution when ratified by the legislatures of three-fourths of the several States within seven years after the date of its submission for ratification:
`Article--
`Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.
`Section 2. Total outlays for any fiscal year shall not exceed 18 percent of economic output of the United States, unless two-thirds of each House of Congress shall provide for a specific increase of outlays above this amount.
`Section 3. The limit on the debt of the United States held by the public shall not be increased unless three-fifths of the whole number of each House shall provide by law for such an increase by a rollcall vote.
`Section 4. Prior to each fiscal year, the President shall transmit to the Congress a proposed budget for the United States Government for that fiscal year in which total outlays do not exceed total receipts.
`Section 5. A bill to increase revenue shall not become law unless two-thirds of the whole number of each House shall provide by law for such an increase by a rollcall vote.
`Section 6. The Congress may waive the provisions of this article for any fiscal year in which a declaration of war is in effect. The provisions of this article may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by a joint resolution, adopted by a majority of the whole number of each House, which becomes law.
`Section 7. The Congress shall enforce and implement this article by appropriate legislation, which may rely on estimates of outlays and receipts.
`Section 8. Total receipts shall include all receipts of the United States Government except those derived from borrowing. Total outlays shall include all outlays of the United States Government except for those for repayment of debt principal.
`Section 9. This article shall take effect beginning with the later of the second fiscal year beginning after its ratification or the first fiscal year beginning after December 31, 2016.'.
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No, The US Is Not Greece To view this article, Click Here
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Date: 6/27/2011
Two-hundred and thirty-five July 4th’s ago, the United States became reality. While there have been plenty of stumbles along the way, other than during the Civil War, doubts about its continued existence have been few and far between. Lately, however, government spending and debt levels have created a mainstream fear that the US is possibly on its last legs – destined to become a future version of Greece.
We don’t agree and, no, we are not sticking our heads in the sand. Our problems are clear. The budget deficit will be about 8.5% of GDP in 2011, down slightly from 9% in 2010 and 10% in 2009. These deficits are impossible to sustain over the longer run.
Meanwhile, the total public debt of the US is now $14.3 trillion and future promised, but as yet unfunded, Social Security and Medicare benefits amount to about $60 trillion in present value terms. Combined, this $75 trillion is roughly five times annual GDP. With numbers like these, how could we not think serious, economy-threatening problems are on the way?
Well, for one thing, the very obvious problems in Greece (and other countries and the states) and the fact that politicians can’t hide from the Internet are forcing the issue. Second, the political landscape in the US has changed – perhaps because of point one. Third, the solutions are relatively simple in reality, even though very complicated politically.
Part of the solution is higher revenues, and this will happen even if tax rates are not increased. In the past 12 months, revenues have climbed by about $220 billion over the previous 12 months – or, about 0.5% of GDP. We expect revenues to continue this trend, rising from their current level of 14.5% of GDP back to about 18.5% of GDP (a 4% move).
Meanwhile, current debt-limit negotiations are likely to cut federal discretionary (non-entitlement, non-interest) spending. In the 1990s, discretionary spending fell from about 9% of GDP to 6%. So let’s say, we go from 9% today to 7.5%, which could be a “low hurdle” given the eventual reduction in operations in Iraq and Afghanistan. Combining this 1.5% of GDP cut with the 4% rise in revenues (total of 5.5%), could bring the annual deficit down to 3% of GDP.
Of course, that still leaves the long-term entitlement problem. But even there we can see the outlines of solutions looming in the distance. For Medicare and Medicaid, which are much bigger problems than Social Security, we think ultimately the forces of smaller government win. We do not know whether it will be in 2012, 2016, or 2020. But one of those elections is likely to result in a Republican in the White House with control of both the US Senate and House. And at that point, they can enact major reforms along the lines of some recent proposals to turn Medicare into premium support and turn Medicaid into block grants to the states.
Parliamentary rules will allow the GOP to enact these changes with only a simple majority in the Senate (with no chance for a Democratic filibuster). And to reverse these reforms, because it would make future budget deficits larger, Democrats would need 60 votes in the Senate!
On Social Security, any change requires 60 votes in the Senate. This means tax hikes (to fill the gap) are as much in play as benefit cuts and this is why it will likely be put off for many years into the future. In the meantime, news stories suggest even AARP is now willing to consider some reductions in benefits. In other words, fiscal reality is beginning to bite.
In the end, the road to fiscal redemption is a long one and we’ll be on it for many years. But we think the ultimate destination will be smaller government and more manageable deficits than most investors realize.
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Twitter question for the President from Iowahawk. (He did not answer this one.)
"An $8 billion high speed train leaves Chicago for Iowa City at 8:15am at 40mph. Why?"
http://iowahawk.typepad.com/iowahawk/2011/07/questions-so-many-questions.html
Much more at the link!
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Twitter question for the President from Iowahawk. (He did not answer this one.)
"An $8 billion high speed train leaves Chicago for Iowa City at 8:15am at 40mph. Why?"
http://iowahawk.typepad.com/iowahawk/2011/07/questions-so-many-questions.html
Much more at the link!
Iowahawk is a genius!
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President Obama wants Congress to raise the $14.3 trillion national debt limit, which means he needs House Republican votes. Yet Mr. Obama and the Washington chorus are insisting that in return for doing him the favor of voting to raise that limit, Republicans must also do him another favor by raising taxes.
That's the larger political context for the news that House Speaker John Boehner and Mr. Obama have agreed to go for a big bang debt-limit deal that cuts spending and raises taxes far more than everyone expected. The target is now said to be $4 trillion over 10 years, though that's far less important than the details, which are still murky.
But we're told that the essence of the deal is that Mr. Obama is willing to put larger cuts in Medicare and Social Security and the promise of tax reform on the table, if Mr. Boehner agrees to let the current tax rates on capital gains, dividends and the top two tax brackets expire after 2012.
We can't fault Mr. Boehner for trying, and his arguments for doing so carry some weight. The thinking is that cuts in entitlements must be done on a bipartisan basis, Mr. Obama has incentive to deal to shed his big-spending reputation, and even if Republicans win Congress and the White House in 2012 they won't be able to do much against united Democrats. The Speaker thinks that if he can get Mr. Obama's consent now to put spending on a downward path to 19% of GDP over time (from 24% or so), it is worth moving on taxes.
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Reuters
We trust Mr. Boehner also realizes this is a high-risk game for the economy and his House majority. Especially risky is his willingness to "decouple" the Bush tax rates for the middle class and upper incomes. The White House is insisting that as part of any deal the current tax rates on the middle class—the child tax credit, etc.—would be made permanent, while the lower rates on capital gains, dividends and the higher income brackets would expire after 2012. Taken by itself this would be a tax increase pure and simple and violate the GOP's campaign pledge.
But here's what we're told is Mr. Boehner's political kicker: The proposed deal would also include some kind of "trigger" device, so far undefined, that would compel House and Senate negotiators to complete tax reform discussions over the next several months. We're told the White House has said it is open in principle to a top rate of 35% on individuals and something like 26% or 27% on corporations—in return for closing various loopholes.
More troubling than these details is the staggered timing. Republicans would be putting their fingerprints on a tax increase in return for spending cuts as a first order of business, which would raise the dividend and top income tax rates to 39.6% (from 35%), or 41% if you include the phase-out of deductions. (Plus the 3.8% payroll tax hike baked into ObamaCare.) Only then would Mr. Obama and the Democrats negotiate the details of tax reform and lower overall rates.
But why at that point would Democrats want tax reform? They'd have achieved their main political goals of a huge debt-reduction deal, getting GOP cover for a tax increase, and putting Republicans cross-wise with the tea party. Raising tax rates first also makes the math of tax reform that much harder to negotiate on both revenue and income-distribution grounds. Under the Beltway's scoring rules, cutting rates would look like an even bigger gain for higher-income folks and an even bigger revenue loss for the Treasury.
In other words, Mr. Boehner would make his ultimate goal—tax reform—that much more difficult to achieve politically. And that's assuming the entitlement cuts he gets are genuine—not merely cuts to doctors or hospitals that won't happen in practice. It also assumes that the "trigger" for tax reform is strong enough to override liberal obstruction in the Senate. We'll see a unicorn first.
Meantime, such a deal would signal that tax rates are more likely to rise in 2013, which won't help the listless economy. Only yesterday, in response to the June 9.2% jobless rate, Mr. Obama called for an extension of this year's payroll tax cut. So he wants to increase the deficit by extending a payroll tax cut that has coincided with higher joblessness, while raising other taxes in a way that would reduce investment that would create jobs. Republicans who embrace this logic deserve the tea party's disdain.
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Tax reform is a worthwhile policy goal, and Mr. Boehner is right to pursue it. But the only way he can avoid being taken for a ride by Democrats is if all parts of any deal are negotiated, voted on and then implemented immediately. Two men, one deal, once. Promises of future action aren't credible.
Even if Mr. Obama is sincere on tax reform, he can't guarantee he can deliver Senate Democrats who are desperate to keep their majority in 2012, much less Nancy Pelosi. We're told that in Thursday's White House meeting, Mr. Obama promised to veto any short-term debt-limit deal to give the two sides more time to negotiate. If that's true, then the President isn't serious. It means he is using the pressure of the August 2 deadline to bull-rush Mr. Boehner into a bad deal.
If Mr. Obama is sincere about a long-term spending and tax reform agreement, he'll take the time to get it right. If he insists on issuing ultimatums, then House Republicans would be better off passing a debt-limit ceiling for a few months with comparable spending cuts and letting Senate Democrats do the same. Mr. Boehner shouldn't bet his majority on Mr. Obama's promises.
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"We are voting on the budget today. It’s a sad state of affairs, we just voted to increase the debt limit. The U.S. total debt at this point exceeds eight trillion dollars. That’s eight trillion with a “t”. So we’ve got to get our fiscal house in order here in Washington. I’m not sure it’s going to happen under the current leadership in Congress. But we’re going to see what kind of difference we can make. To make sure that veterans programs, student loan programs, low income housing assistance programs, homeland security dollars, are receiving the highest priority , not just tax cuts for the wealthiest .1% of the population."
This little lecture, remember, came after the Senator had the political fortitude to vote against the debt limit increase.
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The junior senator from Illinois, I would guess...
Obama: "The U.S. total debt at this point exceeds eight trillion dollars. That’s eight trillion with a “t”."
No, Senator, that would now be fourteen trillion with an 'F'.
Mentioned previously but I strongly believe that Obama in particular and Dems in general are getting a free pass for their part in bad governance and direction in the 2 years prior to his Presidency. Everybody knew then that power had shifted and the lame duck became totally inconsequential on all matters domestic. Debt was 8 trillion and unemployment was 4.4%! THAT was the mess Republicans left when Obama et al took power. Welfare rights advocates were empowered and investors were preparing to head for the hills. Whatever the jobs program was before these guys came in is hope and change we are looking for.
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http://money.cnn.com/2006/11/03/news/economy/jobs_october/
Unemployment sinks to 5-year low
Rate posts unexpected drop to lowest since May 2001; job growth revised higher.
By Chris Isidore, CNNMoney.com senior writer
November 3 2006
NEW YORK (CNNMoney.com) -- The unemployment rate fell to the lowest level in more than five years in October, the government reported Friday, a sign of unexpected strength in the job market. The jobless rate sank to 4.4 percent from 4.6 percent in September, the Labor Department said. It was the lowest since May 2001.
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Winnah! :-D
The junior senator from Illinois, I would guess...
Obama: "The U.S. total debt at this point exceeds eight trillion dollars. That’s eight trillion with a “t”."
No, Senator, that would now be fourteen trillion with an 'F'.
Mentioned previously but I strongly believe that Obama in particular and Dems in general are getting a free pass for their part in bad governance and direction in the 2 years prior to his Presidency. Everybody knew then that power had shifted and the lame duck became totally inconsequential on all matters domestic. Debt was 8 trillion and unemployment was 4.4%! THAT was the mess Republicans left when Obama et al took power. Welfare rights advocates were empowered and investors were preparing to head for the hills. Whatever the jobs program was before these guys came in is hope and change we are looking for.
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http://money.cnn.com/2006/11/03/news/economy/jobs_october/
Unemployment sinks to 5-year low
Rate posts unexpected drop to lowest since May 2001; job growth revised higher.
By Chris Isidore, CNNMoney.com senior writer
November 3 2006
NEW YORK (CNNMoney.com) -- The unemployment rate fell to the lowest level in more than five years in October, the government reported Friday, a sign of unexpected strength in the job market. The jobless rate sank to 4.4 percent from 4.6 percent in September, the Labor Department said. It was the lowest since May 2001.
http://www.verumserum.com/?p=26815
Obama on 2006 Debt Limit Increase (to $8T): “We’ve Got to Get our Fiscal House in Order…Not Sure It’s Going to Happen Under Current Leadership”
Morgen on July 8, 2011 at 6:30 am
From a March 16, 2006 podcast on then Senator Obama’s congressional web site: (click to play)
Flashback: Obama on Debt Ceiling Increase in 2006
We are voting on the budget today. It’s a sad state of affairs, we just voted to increase the debt limit. The U.S. total debt at this point exceeds eight trillion dollars. That’s eight trillion with a “t”. So we’ve got to get our fiscal house in order here in Washington. I’m not sure it’s going to happen under the current leadership in Congress. But we’re going to see what kind of difference we can make. To make sure that veterans programs, student loan programs, low income housing assistance programs, homeland security dollars, are receiving the highest priority , not just tax cuts for the wealthiest .1% of the population.
This little lecture, remember, came after the Senator had the political fortitude to vote against the debt limit increase. Six trillion dollars in deficit spending later, after 2-1/2 years as president, and 4 years of majority rule in Congress by his party, Barack Obama is once again trying to portray himself as the adult in the room in dealing with the current debt limit crisis. He shouldn’t be allowed to get away with this. Because America has had the opportunity to see what kind of difference he and his party have made, and it has been utterly disastrous.
He told us exactly what his priorities were, but too few were paying attention. It was always spending – and more spending. To the spending “priorities” he listed above we can add: government healthcare, auto industry bailouts, public sector unions, green jobs, Fannie/Freddie, wine trains, robotic bees, and apparently even guns for Mexican cartels. Billions upon billions of dollars of net new spending for virtually no lasting economic benefit, and at a price tag of nearly $4 trillion in additional debt just since he entered office.
It is a sad state of affairs, and its preposterous that the person chiefly responsible for this explosion in deficit spending should have any credibility in crafting the solution. It’s even sadder that a genuine debt reduction plan is not even being discussed. At best it looks like there may be a deal for a $4 trillion reduction in the total amount of deficit spending over the next decade, which means we are still likely to add at least another $6-8 trillion in additional debt over this period.
At some point this profligate spending simply has to end. Hopefully with the election of a more responsible Administration next year, but it seems increasingly likely that its going to take another serious financial crisis to force a solution.
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So the fondest Washington hopes for a grand debt-limit deal have broken down over taxes. House Speaker John Boehner said late Saturday that he couldn't move ahead with a $4 trillion deal because President Obama was insisting on a $1 trillion tax increase, and the White House quickly denounced House Republicans for scuttling debt reduction and preventing "the very wealthiest and special interests from paying their fair share."
How dare Republicans not agree to break their campaign promises and raise taxes when the jobless rate is 9.2% and President Obama's economic recovery is in jeopardy?
Related Video
Senior Economics Writer Steve Moore maps out the potential agreement for raising the debt ceiling.
We think Mr. Boehner is making the sensible choice. No one wants to reform the tax code more than we do, but passing a $1 trillion tax increase first on the promise of tax reform later is a political trap. If the President were really sincere about reform and a willingness to keep the top tax rate at or below 35%, he'd negotiate that at the same time he does a debt deal. Mr. Boehner will have a hard enough time getting any debt-limit increase through the House, much less one that raises tax rates.
Keep in mind that Mr. Obama has already signed the largest tax increase since 1993. While everyone focuses on the Bush tax rates that expire after 2012, other tax increases are already set to hit the economy thanks to the 2010 Affordable Care Act. As a refresher, here's a non-exhaustive list of ObamaCare's tax increases:
• Starting in 2013, the bill adds an additional 0.9% to the 2.9% Medicare tax for singles who earn more than $200,000 and couples making more than $250,000.
• For first time, the bill also applies Medicare's 2.9% payroll tax rate to investment income, including dividends, interest income and capital gains. Added to the 0.9% payroll surcharge, that means a 3.8-percentage point tax hike on "the rich." Oh, and these new taxes aren't indexed for inflation, so many middle-class families will soon be considered rich and pay the surcharge as their incomes rise past $250,000 due to tax-bracket creep. Remember how the Alternative Minimum Tax was supposed to apply only to a handful of millionaires?
View Full Image
Associated Press
House Speaker John Boehner
Taxpayer cost over 10 years: $210 billion.
• Also starting in 2013 is a 2.3% excise tax on medical device manufacturers and importers. That's estimated to raise $20 billion.
• Already underway this year is the new annual fee on "branded" drug makers and importers, which will raise $27 billion.
• Another $15.2 billion will come from raising the floor on allowable medical deductions to 10% of adjusted gross income from 7.5%.
• Starting in 2018, the bill imposes a whopping 40% "excise tax" on high-cost health insurance plans. Though it only applies to two years in the 2010-2019 window of ObamaCare's original budget score, this tax would still raise $32 billion—and much more in future years.
• And don't forget a new annual fee on health insurance providers starting in 2014 and estimated to raise $60 billion. This tax, like many others on this list, will be passed along to consumers in higher health-care costs.
There are numerous other new taxes in the bill, all adding up to some $438 billion in new revenue over 10 years. But even that is understated because by 2019 the annual revenue increase is nearly $90 billion, or $900 billion in the 10 years after that. Yet Mr. Obama wants to add another $1 trillion in new taxes on top of this.
The economic ironies are also, well, rich. Mr. Obama is now pushing to reduce the payroll tax by two-percentage points for another year to boost the economy, but he's already built in a big increase in that same payroll tax for 2013. So if a payroll tax cut creates jobs this year, why doesn't a payroll tax increase destroy jobs after 2013?
Mr. Obama is also touting spending cuts he's willing to make in entitlements in return for bigger tax increases, yet the spending increases built into ObamaCare aren't even up for discussion in the debt-limit talks. The Affordable Care Act adds more than 30 million more Americans onto Medicaid's rolls, when that program is already growing by 6.5% this year. So Mr. Obama is willing to cut current entitlements on grounds that they are unaffordable, but he's taken what may be the most expensive entitlement off the table.
We think this was the President's spend-and-tax plan from the very first. Run up spending and debt in the name of stimulus and health-care reform, then count on Wall Street bond holders and the political establishment to browbeat Republicans into paying for it all. He apparently didn't figure on the rise of the tea party, or 1.9% GDP growth and 9.2% unemployment two years after the recession ended.
Last November Republicans won the House and landslide gains in many states in large part because of the deep unpopularity of the stimulus and ObamaCare. Mr. Boehner has a mandate for spending cuts and repealing the Affordable Care Act. If Republicans instead agree to raise taxes in return for future spending cuts that may or may not happen, they will simply be the tax collectors for Mr. Obama's much expanded entitlement society.
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http://pajamasmedia.com/tatler/2011/07/11/video-president-obama-promises-massive-job-killing-taxes-if-re-elected/
Video: President Obama promises ‘massive job killing taxes’ if re-elected
From today’s presser on the debt ceiling debate. Check out how the prez frames the debate over taxes.
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We have a shutdown currently at the state level over the exact same issues. I don't see what is so complicated. Obama may or may not want tax increases to kill jobs in a bad economy. Same with our new governor. Both had every opportunity to travel state to state (or county to county) and make certain that like minded candidates would win House and Senate elections of Nov 2010.
You don't raise taxes (or lower them) without consent of the House, Senate and executive. 1 out of 3, and 2 out of 3 is nothing when 3 out of 3 are required. Obama should know that; it took all 3 bodies, a temporary 60th votes in the Senate, along with deeming things to be passed that weren't to get Pelosi-you have to pass it to read it-healthcare.
You don't borrow over $14.294 trillion federally under current law without consent of the House, Senate and Executive. Two of three ain't bad is a song not a clause in the constitution.
I suppose you can try to bully your way with the other parties, but why should they support new laws they fundamentally oppose, laws that will guarantee their own political defeat.
The answer to deadlock from our new Dem governor not getting his way should have been live within your means, instead it was total shutdown, the public can be damned. Shutdown the cash registers at profitable state enterprises, shutdown the tourism department in summer, shutdown the wayside rests - motorists can pee in a bottle, and shutdown the treasured safety net for the disabled.
Obama in the model of Bill Clinton wants the same thing. Shut it all down, why waste a crisis, blame someone else. But he is wrong. His view did not prevail in the last election. A Republican House does not get to appoint Supreme Court Justices and a Democrat President (alone) does not get to raise taxes, increase debt or spend what does not go through a difficult and contentious congressional budget process. Grow up and govern.
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Obama: "this is not just a matter of Social Security checks. These are veterans checks, these are folks on disability and their checks. There are about 70 million checks that go out."
You don't f-in' suppose that is part of the problem?
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"These are veterans checks, these are folks on disability and their checks"
How about his check? And the other, Lord knows how many, DC employees - our masters.
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Moving this over from cognitive dissonance of Republicans thread. The ink is barely dry on our discussion and the WSJ has already taken most of it for tomorrow's lead editorial:
"The entitlement state can't be reformed by one house of Congress in one year against a determined President and Senate held by the other party. It requires more than one election."
http://online.wsj.com/article/SB10001424052702303678704576442231815463502.html?mod=WSJ_Opinion_LEADTop
Debt-Limit Harakiri
Mitch McConnell isn't selling out Republicans.
Republican Senate leader Mitch McConnell said yesterday he's concluded that no deal to raise the debt ceiling in return for serious spending restraint is possible with President Obama, and who can blame him? We've never thought the debt ceiling was the best leverage for a showdown over the entitlement state, and now it looks like Mr. Obama is trying to use it as a way to blame the GOP for the lousy economy.
This may have been the President's strategy all along: Take the debt-limit talks behind closed doors, make major spending cuts seem possible in the early days, but then hammer Republicans publicly as the deadline nears for refusing to raise taxes on business and "the rich."
This would explain the President's newly discovered fondness for press conferences, which he has rarely held but now rolls out before negotiating sessions. It would also explain why Mr. Obama's tax demands have escalated as the August 2 deadline nears. Yesterday he played the Grandma Card, telling CBS that seniors may not get their August retirement checks. Next he'll send home the food inspectors and stop paying the troops.
The reality is that Mr. Obama is trying to present Republicans with a Hobson's choice: Either repudiate their campaign pledge by raising taxes, or take the blame for any economic turmoil and government shutdown as the U.S. nears a debt default. In the former case Mr. Obama takes the tax issue off the table and demoralizes the tea party for 2012, and in the latter he makes Republicans share the blame for 9.2% unemployment.
This is the political context in which to understand Mr. McConnell's proposal yesterday to force Mr. Obama to take ownership of any debt-limit increase. If the President still insists on a tax increase, then Republicans will walk away from the talks.
Mr. McConnell would then let the President propose three debt-limit increases adding up to $2.5 trillion over the coming months. Senate Republicans (with Majority Leader Harry Reid's cooperation) would use a convoluted procedure to vote for three resolutions of disapproval on the bills. Mr. Obama could veto the resolutions and 34 Democrats could vote to sustain. The President would get his debt-limit increase, but without Republicans serving as his political wingmen.
The hotter precincts of the blogosphere were calling this a sellout yesterday, though they might want to think before they shout. The debt ceiling is going to be increased one way or another, and the only question has been what if anything Republicans could get in return. If Mr. Obama insists on a tax increase, and Republicans won't vote for one, then what's the alternative to Mr. McConnell's maneuver?
Republicans who say they can use the debt limit to force Democrats to agree to a balanced budget amendment are dreaming. Such an amendment won't get the two-thirds vote to pass the Senate, but it would give every Democrat running for re-election next year a chance to vote for it and claim to be a fiscal conservative.
We agree with those who say that Treasury Secretary Tim Geithner can cut other federal spending before he allows a technical default on U.S. debt. No doubt that is what he will do. We'd even support a showdown over technical default if we thought it might yield some major government reforms. But Mr. Obama clearly has no such intention.
Instead he and Mr. Geithner will gradually shut down government services, the more painful the better. The polls that now find that voters oppose a debt-limit increase will turn on a dime when Americans start learning that they won't get Social Security checks. Republicans will then run like they're fleeing the Pamplona bulls, and chaotic retreats are the ugliest kind. By then they might end up having to vote for a debt-limit increase and a tax increase.
The tea party/talk-radio expectations for what Republicans can accomplish over the debt-limit showdown have always been unrealistic. As former Senator Phil Gramm once told us, never take a hostage you're not prepared to shoot. Republicans aren't prepared to stop a debt-limit increase because the political costs are unbearable. Republicans might have played this game better, but the truth is that Mr. Obama has more cards to play.
The entitlement state can't be reformed by one house of Congress in one year against a determined President and Senate held by the other party. It requires more than one election. The Obama Democrats have staged a spending blowout to 24% of GDP and rising, and now they want to find a way to finance it to make it permanent. Those are the real stakes of 2012.
Even if Mr. Obama gets his debt-limit increase without any spending cuts, he will pay a price for the privilege. He'll have reinforced his well-earned reputation as a spender with no modern peer. He'll own the record deficits and fast-rising debt. And he'll own the U.S. credit-rating downgrade to AA if Standard & Poor's so decides.
We'd far prefer a bipartisan deal to cut spending and reform entitlements without a tax increase. But if Mr. Obama won't go along, there's no reason Republicans should help him dodge the political consequences by committing debt-limit harakiri.
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grumble , , , grumble , , , grumble , , , I suppose that makes sense , , , grumble , , ,
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"grumble , , , grumble , , , grumble , , , I suppose that makes sense , , , grumble , , ,"
Yeah, it's frustrating (and this deal isn't done). We can't force a solution against an unwilling President and Senate now because of fickle and lacking support of the public - with moderates/independents wavering from about 60/40 Dem to maybe 60/40 against the Obama-agenda, but not fully on board with any principles yet to be articulated about how this country should be driven forward out of the ditch. If people were demanding a trillion in cuts now or a new flat tax code now or a re-write of the entire regulatory scheme including energy now, then it would be at least possible to try to ram it through the other body and the other branch. There isn't even a full plan on the table. Paul Ryan was trying to start a conversation, not end it. No leaders stepped forward to expand it, run with it or sell it. Just caution. (Where is Romney's plan?! He's the front runner. And Bachmann is unrealistic. Boehner is Boehner, I don't dislike him as much as some do but he isn't the answer or the messenger.) When Dems hear the uproar now they just think tea party meaning only extremists and activists. They have their own extremists and activists to appease.
Similar disarray at this point in Jimmy Carter's 3rd year, though there were no elected Republicans. Reagan was one of many candidates with many messages. No one knew what to think of Kemp-Roth or anything else, just barely starting to admit that the current direction was wrong. We couldn't solve it without a clear message and a messenger stepping forward. And we never did tackle spending or big government in those years, just defense and growth.
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"Where is Romney's plan?! He's the front runner"
Finger in the air, waiting to see what everyone else comes out with and the way public opinion falls.
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Finger in the air, waiting to see what everyone else comes out with and the way public opinion falls.
Sounds familiar. Isn't that the same reason why Clinton and Obama have been criticized?
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"Sounds familiar. Isn't that the same reason why Clinton and Obama have been criticized?"
Yes! Obama needed political advice to take out bin Laden! How will it poll if we shoot him in the head versus the saga of capturing and holding...
Yet centrists despise ideologues with a backbone, at least on the right. So we get deals that perpetuate the status quo, stagnation with trillions more debt, spending increases on programs that exacerbate the same problems, and all real reform on all topics tabled for another day - that never comes. The centrists win again.
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"Sounds familiar. Isn't that the same reason why Clinton and Obama have been criticized?"
Yes! Obama needed political advice to take out bin Laden! How will it poll if we shoot him in the head versus the saga of capturing and holding...
Yet centrists despise ideologues with a backbone, at least on the right. So we get deals that perpetuate the status quo, stagnation with trillions more debt, spending increases on programs that exacerbate the same problems, and all real reform on all topics tabled for another day - that never comes. The centrists win again.
Yup, we've compromised for decades until the future of this country is compromised.
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In precisely that vein , , ,
Posted by Erick Erickson (Profile)
Wednesday, July 13th at 5:00AM EDT
47 Comments
Everyone is using the hostage metaphor these days regarding the debt ceiling. Barack Obama started it back in December when he called the GOP hostage takers before the GOP gave him everything he wanted.
Well, I hope the GOP noticed Barack Obama yesterday upped the ante and declared his willingness to shoot his hostages, i.e. senior citizens. Yes, if the GOP dares to hold the line on spending cuts, Barack Obama will balk, the debt limit will not be raised, and Obama will refuse to pay senior citizens.
Jim Pethokoukis notes a Goldman Sachs report showing there will be plenty of money flowing into the treasury in August for the government to pay its debt obligations, pay social security obligations, pay military obligations, and avoid default. But Obama won’t let facts stand in the way of starving senior citizens to score political points against the GOP.
Of course, it is not just Obama willing to score political points. Mitch McConnell wants to give Barack Obama the right to automatically raise the debt ceiling. The only caveat is McConnell wants everyone to know it’ll be Obama who does it, not the GOP. Just how bad is McConnell’s plan? After David Hauptmann, a staffer in McConnell’s office, sent out an email linking to a National Review Online column that said Grover Norquist “supported” Mitch McConnell’s capitulation, Americans for Tax Reform rapidly sent out a press release saying Norquist did not support the plan, just “the goals.” They also asked NRO to clarify.
Undeterred, McConnell enlisted the support of the Wall Street Journal’s editorial page, which came out swinging not just in favor of McConnell’s plan, but also pretty directly against me. I can console myself that they also supported McConnell’s push for TARP.The Journal’s editorial opines
The hotter precincts of the blogosphere were calling this a sellout yesterday, though they might want to think before they shout. The debt ceiling is going to be increased one way or another, and the only question has been what if anything Republicans could get in return.
As I first out of the gate and drew the most ire from McConnell supporters, I think it is safe to conclude they are unhappy with me. Nonetheless, let’s move beyond the rather snotty “we are the adults and the rest of you are unwashed ignorant masses” tone of the editorial and get right to what they actually say.
They might not like my use of the word “sellout,” but McConnell’s plan is exactly what Barack Obama wants. He’ll get to raise the debt ceiling with no obligations to do anything else, except conduct a dog and pony show.
I have written repeated — not that the crack editorialists care — that the debt ceiling is going to go up. I have also written that, however admirable the opposition to any increase is, it is not realistic.
I have then gone on to say that the GOP must hold the line on their cut, cap, and balance plan.
The Wall Street Journal’s editorial goes on to note this:
The tea party/talk-radio expectations for what Republicans can accomplish over the debt-limit showdown have always been unrealistic. As former Senator Phil Gramm once told us, never take a hostage you’re not prepared to shoot. Republicans aren’t prepared to stop a debt-limit increase because the political costs are unbearable. Republicans might have played this game better, but the truth is that Mr. Obama has more cards to play
The President today signaled his willingness to shoot the hostage. The GOP should do the same — show an absolute unwillingness to raise the debt ceiling without their balanced budget amendment passing out of Congress to the states.
Again and again, Congress folds to the doomsday scenarios. The Wall Street Journal again and again claims the sky will fall and the markets will crash. The suits come down from New York and paint the disaster scenario. The GOP falls in line. TARP is passed. What else will be passed?
This time, the GOP should embrace the apocalyptic future, call B.S. on the fear mongering, and shoot their debt ceiling hostage. if they engage in politics as usual as the Wall Street Journal and Mitch McConnell would have them, we’ll be back in this mess again next year.
Politics as usual usually gets us here. If we want to move back to fiscal sanity, we need to try a different approach.
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Surely Rep candidates should be making these points with the same gusto , , ,
Editorial Exegesis
"Republicans seemed warily confident that they might get a [debt-ceiling] deal over
the weekend on cutting future spending without raising taxes -- a deal that would
likely lead to smaller future deficits, the possibility of badly needed tax reforms
and the resumption of economic and jobs growth. No such luck. Not only did Obama not
really put any specific major cuts on the table, he reportedly surprised negotiators
by asking them to agree to a 'balanced approach' to deficit-cutting by including a
job-killing $1.7 trillion in potential new tax hikes. ... As a new Heritage
Foundation study shows, the government's tax take under Obama's current budget plans
will 'increase rapidly' from its long-term average of about 18% of GDP to a ruinous
26% of GDP in coming decades. That's why he seemed desperate, saying we need to
'tear the Band-Aid' off and 'eat our peas' to get a deal done by Aug. 2, the phony
deadline established by Democrats for fiscal Armageddon. ... During the press
conference Monday in which he made his case for 'revenue increases' -- that is, tax
hikes -- in deficit talks, Obama suggested why: He wants to spend even more in the
future. He's not shy about airing his many ideas for this, among them what he calls
'investments' in Head Start and student loan programs, more government funding of
medical research, and even an 'infrastructure bank.' Such programs aren't possible,
Obama said, 'if we haven't gotten our fiscal house in order.' This almost defies
belief. This is how we got into the problem in the first place. Too much government,
too much spending, too many regulations, too many taxes. Is Obama really that out of
touch with Americans? It seems so." --Investor's Business Daily
(http://www.investors.com/NewsAndAnalysis/Article/577932/201107111858/Compromise-Not-On-Taxes.htm
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http://www.daybydaycartoon.com/2011/07/13/
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http://www.daybydaycartoon.com/2011/07/13/
:-D :-o :cry:
It would be funny if we were not watching this country go off a cliff.
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http://mercatus.org/publication/how-much-federal-spending-borrowed-every-dollar
How long could you survive if 43 cents of every dollar you spent was borrowed?
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Ummm , , , that's a tough one. Do I get to print the money with which I pay off the debts incurred?
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Ummm , , , that's a tough one. Do I get to print the money with which I pay off the debts incurred?
If you could, it would allow you to get away with it for a bit longer, but the endgame plays out the same, I think.
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"How long could you survive if 43 cents of every dollar you spent was borrowed?"
"Do I get to print the money with which I pay off the debts incurred?"
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There is a guy on the radio (Rush L) who says there is only one Democrat who runs his business the way Democrats run the government (Ponzi scheme). Maybe we can ask him how long you can survive (Bernie Madoff). BTW, where are they now (in federal prison until 2139, assuming early release for good behavior).
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http://frontpagemag.com/2011/07/15/debt-ceiling-demagoguery-or-extortion-2/print/
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Who was fired from MSNBC for calling Brock for what he is, a "dick"?
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That would be for the Media thread please :-)
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http://online.wsj.com/article/SB10001424052702304203304576446332084493902.html?mod=WSJ_Opinion_LEADTop
The Obama Downgrade
The real reason the U.S. could lose its AAA rating..
So the credit-rating agencies that helped to create the financial crisis that led to a deep recession are now warning that the U.S. could lose the AAA rating it has had since 1917. As painfully ironic as this is, there's no benefit in shooting the messengers. The real culprit is the U.S. political class, especially the President who has presided over this historic collapse of fiscal credibility.
Moody's and the boys are citing the risk of a default on August 2 as the proximate reason for their warning. But Americans should understand that the debt ceiling is merely the trigger. The gun is the spending boom of the last three years and the prospect that Washington lacks the political will to reduce it in the years to come.
On spending, it is important to recall how extraordinary the blowout of the last three years has been. We've seen nothing like it since World War II. Nothing close. The nearby chart tracks federal outlays as a share of GDP since 1960. The early peaks coincide with the rise of the Great Society, the recession of 1974-75, and then a high of 23.5% with the recession of 1982 and the Reagan defense buildup.
From there, spending declines, most rapidly during the 1990s as defense outlays fell to 3% of GDP in 2000 from its Reagan peak of 6.2% in 1986. The early George W. Bush years saw spending bounce up to a plateau of roughly 20% of GDP, but no more than 20.7% as recently as 2008.
Then came the Obama blowout, in league with Nancy Pelosi's Congress. With the recession as a rationale, Democrats consciously blew up the national balance sheet, lifting federal outlays to 25% in 2009, the highest level since 1945. (Even in 1946, with millions still in the military, spending was only 24.8% of GDP. In 1947 it fell to 14.8%.) Though the recession ended in June 2009, spending in 2010 stayed high at nearly 24%, and this year it is heading back toward 25%.
This is the main reason that federal debt held by the public as a share of GDP has climbed from 40.3% in 2008, to 53.5% in 2009, 62.2% in 2010 and an estimated 72% this year, and is expected to keep rising in the future. These are heights not seen since the Korean War, and many analysts think U.S. debt will soon hit 90% or 100% of GDP.
...
Congress is responsible for the way so much of this spending was wasted, resulting in little job creation and the slowest economic recovery since the 1930s. But in the U.S. political system, Presidents are supposed to be the fiscal adults. When they abdicate, the teenagers invite over their special interest friends and blow the inheritance.
The President is now claiming to have found fiscal virtue, but notice how hard he has fought House Republicans as they've sought to abate the spending boom. First he used the threat of a government shutdown to whittle the fiscal 2011 spending cuts down to very little. Then he invited Paul Ryan to sit in the front row for a speech while he called his House budget un-American.
Now Mr. Obama is using the debt-ceiling debate as a battering ram not to control spending but to command a tax increase. We're told the White House list of immediate budget savings, the ones that matter most because they are enforceable by the current Congress, are negligible. His offer for immediate domestic nondefense discretionary cuts: $2 billion.
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The compromise, if there is one, needs to be 3 dimensional, debt limit, spending cuts and movement on pro-growth. Republicans are talking about only the first 2 and Dems want pretend spending cuts combined with a worsening of growth policies.
a) Limiting and raising the debt limit is a lever to exchange for real improvements on the underlying budget problems: spending and growth.
b) Spending is out of control and future cuts don't count. Cuts need to be immediate with some structural changes in entitlements and in process. It's not realistic to get the full fix in an emergency session with divided government, but real movement has to be in the right direction - or why compromise? One report is that Dem cuts offered equal $1 billion immediate - that is less than 1/1000th of the immediate problem and 1/14,000th of the debt problem. We would go from borrowing 43% of what we spend to borrowing 43% of what we spend and from owing 14.3 trillion to owing 16, 17, 18 trillion in short order. Why give an inch for that?
c) Pro-growth policies: there has to be some movement toward alleviating the burden of our anti-growth laws or the deficit and debt burden crises will NEVER ease. Tax rate increases move us in the opposite direction. If not tax cuts, if not a total re-write of the tax code, if not repeal of bad regulations, then perhaps a moratorium on one thousand of the most counter-productive regulations. Real movement on energy alone that would increase production and lower the costs would stimulate nearly all businesses and households. There will never be a balanced budget again in this country without new growth.
The House vote needs to address all 3 areas in a reasonable and realistic fashion to put the pressure back on the senate and president.
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http://www.theblaze.com/stories/judge-napolitanos-open-letter-to-john-boehner-a-common-sense-guide-to-what-needs-to-be-done/
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"[T]he present Constitution is the standard to which we are to cling. Under its banners, bona fide must we combat our political foes -- rejecting all changes but through the channel itself provides for amendments." --Alexander Hamilton
Government & Politics
The Debt Ceiling and the Constitution
"C'mon, man!" Joe Biden exclaimed Monday, "Let's get real!" On Wednesday, Barack Obama was so upset that he took his ball and went home, shoving his chair away from the table and saying tersely, "I'll see you tomorrow." The topic, of course, is the debt ceiling, which Obama and his pals at the Treasury Department insist must be raised by Aug. 2 to prevent default on U.S. debt. But this isn't your father's debt ceiling; it's $14.3 trillion currently, and Democrats want $2 trillion more. It's no wonder that tensions are running high. This is where ideological rubber hits the road and either builds America or tears it down.
The sticking points aren't new. Democrats want to raise taxes by as much as $2 trillion in addition to making cuts to various budget items, not least of which is defense. Republicans want cuts with no tax increases. Obama is so insistent on tax increases that, according to a GOP aide in the discussions, he declared, "This may bring my presidency down, but I will not yield on this." He didn't yield as he demagogued Social Security, either. "I cannot guarantee that [Social Security] checks go out on August 3rd if we haven't resolved this issue," he shamelessly warned. Who's throwing grandma off the cliff now?
After that snit, he audaciously criticized Republicans' "my way or the highway" approach.
As for the cuts under discussion, they aren't genuine cuts like those average Americans are making -- buying less milk and fewer eggs, for example. Called base-line budgeting, Washington's cuts are merely reductions in projected growth, as in, "We're still going to buy more milk and eggs than we did last year, but not quite as much as we would have under better political circumstances."
To put it in perspective, spending over the next decade is projected to reach about $46 trillion, including $13 trillion in new debt. The haggling is over $2-4 trillion in cuts to that projected increase. Spreading $2 trillion over 10 years "saves" just $200 billion a year, or less than the interest payment on the debt, and even by reducing projected growth by that much, we still end up with an increase in spending. That, in a nutshell, is Washington-speak.
As for the status of compromise, it has succeeded only in Minnesota, where the Democrat governor and Republican legislature just agreed to end a government shutdown. At the federal level, Republicans have all but given up on a comprehensive reform package. As many as 60 House Republicans might vote against any increase to the debt ceiling, and Democrats control the Senate and the White House, making a deal without their support impossible. What to do?
McConnell's Plan
Senate Minority Leader Mitch McConnell (R-KY) concluded this week, "[A]fter years of discussions and months of negotiations, I have little question that as long as this president is in the Oval Office, a real solution is unattainable. I was one of those who had hoped we could do something big for the country. But in my view the president has presented us with three choices: smoke and mirrors, tax hikes or default." McConnell is absolutely correct. However, his solution is questionable.
He outlined a complicated legislative maneuver in which Congress would permit the president to raise the debt ceiling unilaterally in three increments totaling $2.5 trillion, provided that he offer equivalent spending cuts each time. Each increase would be subject to a resolution of disapproval from Congress. The president would almost certainly veto that, but he would also then "own" the debt increase, and Congress -- particularly Republicans -- could be absolved, in theory, of responsibility for raising the debt ceiling. The plan has caused a split on both sides of the aisle. Senate Majority Leader Harry Reid (D-NV) and Sen. John McCain (R-AZ) both praised the deal, and Reid is working to make it reality. Sen. Jim DeMint (R-SC), not so much. Many House Republicans indicate it's a non-starter.
The Wall Street Journal asks, "The debt ceiling is going to be increased one way or another, and the only question has been what if anything Republicans could get in return. If Mr. Obama insists on a tax increase, and Republicans won't vote for one, then what's the alternative to Mr. McConnell's maneuver?"
"Ugly and unpleasant as it is," writes Daniel Foster of National Review, "not all retreats are capitulations. McConnell clearly thinks of this as a tactical retreat in the service of his overarching strategic objective: to make President Obama a one-term president."
On the other hand, there are constitutional concerns with McConnell's plan. The Constitution (Article I, Section 8) puts budget responsibility directly in the hands of Congress, not the president. Technically, the deal would leave Congress with the authority to dictate the amount of the increases and to "disapprove" if they choose, but there's a real sense that one of the three co-equal branches of government is abdicating its constitutional duty for political gain.
Rory Cooper of the Heritage Foundation writes, "Depending on exactly how the legislative language is drafted, it well might violate the Bicameralism and Presentment Clauses for the making of law, the separation of powers regarding Congress's control over the budget and spending, [and] the legislative Recommendations Clause, and it might also be struck down as an attempt to grant the President the equivalent of a line-item veto. It is also unclear whether the unconstitutional portion would be struck down by the courts and severed from the rest of the statute (which would eliminate Congress's ability to veto the cuts) or if the entire scheme would be struck down. But, at a minimum, the proposal is highly dubious as a matter of constitutional law."
Call us crazy, but we think the Constitution trumps political concerns. Regardless of the worthy strategic objective of limiting Obama to one term in office, or of limiting blame in the polls, the ends don't justify the means. The debt was run up by politicians who have ignored their sacred oaths to support and defend the Constitution. Congress and the president must take their oaths seriously, and solidify the full faith and credit of the United States by cutting excessive and unconstitutional spending. The goal should be to lower the debt ceiling, not bicker about how high to raise it. Following the Constitution -- not skirting it -- is the proper path to arrive there.
(Comment here.)
Essential Liberty
"Republicans have been neatly set up to take the fall if a deal is not reached by Aug. 2. Obama is already waving the red flag, warning ominously that Social Security, disabled veterans' benefits, 'critical' medical research, food inspection -- without which agriculture shuts down -- are in jeopardy. The Republicans are being totally outmaneuvered. The House speaker appears disoriented. It's time to act. Time to call Obama's bluff. A long-term deal or nothing? The Republican House should immediately pass a short-term debt-ceiling hike of $500 billion containing $500 billion in budget cuts. That would give us about five months to work on something larger. ... Will the Democratic Senate or the Democratic president refuse this offer and allow the country to default -- with all the cataclysmic consequences that the Democrats have been warning about for months -- because Obama insists on a deal that is 10 months and seven days longer? That's indefensible and transparently self-serving. Dare the president to make that case. Dare him to veto -- or the Democratic Senate to block -- a short-term debt-limit increase." --columnist Charles Krauthammer
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"The Republican House should immediately pass a short-term debt-ceiling hike of $500 billion containing $500 billion in budget cuts."
Even Krauthammer smells Democratic blood in the air! Time to lock the armbar and break their arm!
Mark Levin was right all along. Time to go for the kill. It is now or never and they are on the run.
As Bachman said the other night to a grinning OReilly she has a titanium spine. Time for all Repubs to get titanium rods implanted in their/our spines.
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Reich was in Clinton's cabinet.
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By ROBERT REICH
After a bruising midterm election, the president moves to the political center. He distances himself from his Democratic base. He calls for cuts in Social Security and signs historic legislation ending a major entitlement program. He agrees to balance the budget with major cuts in domestic discretionary spending. He has a showdown with Republicans who threaten to bring government to its knees if their budget demands aren't met. He wins the showdown, successfully painting them as radicals. He goes on to win re-election.
Barack Obama in 2012? Maybe. But the president who actually did it was Bill Clinton. (The program he ended was Title IV of the Social Security Act, Aid to Families with Dependent Children.)
It's no accident that President Obama appears to be following the Clinton script. After all, it worked. Despite a 1994 midterm election that delivered Congress to the GOP and was widely seen as a repudiation of his presidency, President Clinton went on to win re-election. And many of Mr. Obama's top aides—including Chief of Staff Bill Daley, National Economic Council head Gene Sperling and Pentagon chief Leon Panetta—are Clinton veterans who know the 1995-96 story line by heart.
Republicans have obligingly been playing their parts this time. In the fall of 1995, Speaker Newt Gingrich was the firebrand, making budget demands that the public interpreted as causing two government shutdowns—while President Clinton appeared to be the great compromiser. This time it's House Majority Leader Eric Cantor and his Republican allies who appear unwilling to bend and risk defaulting on the nation's bills—while President Obama offers to cut Social Security and reduce $3 of spending for every dollar of tax increase.
And with Moody's threatening to downgrade the nation's debt if the debt limit isn't raised soon, Republicans appear all the more radical.
So will Barack Obama pull a Bill Clinton? His real problem is one Mr. Clinton didn't have to contend with: a continuing terrible economy. The recession in 1991-92 was relatively mild, and by the spring of 1995, the economy was averaging 200,000 new jobs per month. By early 1996, it was roaring—with 434,000 new jobs added in February alone.
View Full Image
Martin Kozlowski
.I remember suggesting to Mr. Clinton's then-political adviser, Dick Morris, that the president come up with some new policy ideas for the election. Mr. Morris wasn't interested. The election will be about the economy—nothing more, nothing less, he said. He knew voters didn't care much about policy. They cared about jobs.
President Obama isn't as fortunate. The economy remains hampered by the Great Recession, brought on not by overshooting by the Federal Reserve but by the bursting of a giant housing bubble. As such, the downturn has proven resistant to reversal by low interest rates. The Fed has kept interest rates near zero for more than two years, opened the spigots of its discount window, and undertaken two rounds of quantitative easing—all with little to show for it.
Some in the White House and on Wall Street assume the anemic recovery will turn stronger in the second half of the year, emerging full strength in 2012. They blame the anemia on disruptions in Japanese supply chains, bad weather, high oil prices, European debt crises, and whatever else they can come up with. These factors have contributed, but they're not the big story.
When the Great Recession wiped out $7.8 trillion of home values, it crushed the nest eggs and eliminated the collateral of America's middle class. As a result, consumer spending has been decimated. Households have been forced to reduce their debt to 115% of disposable personal income from 130% in 2007, and there's more to come. Household debt averaged 75% of personal income between 1975 and 2000.
We're in a vicious cycle in which job and wage losses further reduce Americans' willingness to spend, which further slows the economy. Job growth has effectively stopped. The fraction of the population now working (58.2%) is near a 25-year low—lower than it was when recession officially ended in June 2009.
Wage growth has stopped as well. Average real hourly earnings for all employees declined by 1.1% between June 2009, when the recovery began, and May 2011. For the first time since World War II, there has been a decline in aggregate wages and salaries over seven quarters of post-recession recovery.
This is not Bill Clinton's economy. So many jobs have been lost since Mr. Obama was elected that, even if job growth were to match the extraordinary pace of the late 1990s—averaging 300,000 to 350,000 per month—the unemployment rate wouldn't fall below 6% until 2016. That pace of job growth is unlikely, to say the least. If Republicans manage to cut federal spending significantly between now and Election Day, while state outlays continue to shrink, the certain result is continued high unemployment and anemic growth.
So Mr. Obama's challenge in 2012 has nothing to do with Mr. Clinton's in 1996. Most Americans care far more about jobs and wages than they do about budget deficits and debt ceilings. Even if Mr. Obama is seen to win the contest over raising the debt limit and succeeds in painting Republicans as radicals, he risks losing the upcoming election unless he directly addresses the horrendous employment problem.
How can he do this while continuing to appear more reasonable than Republicans on the deficit? By coming up with a bold jobs plan that would increase outlays over the next year or two but would credibly begin a long-term plan to shrink the budget. To the extent the jobs plan spurs growth, the long-term ratio of debt to GDP will improve.
Elements of the plan might include putting more money into peoples' pockets by exempting the first $20,000 of income from payroll taxes for the next year, recreating a Works Progress Administration and Civilian Conservation Corps to employ the long-term jobless, creating an infrastructure bank to finance improvements to roads and bridges, enacting partial unemployment benefits for those who have been laid off from part-time jobs, and giving employers tax credits for net new hires.
The fight over the debt ceiling will be over very soon. Most Washington hands know it will be raised. Political tacticians know President Obama will likely appear to win the battle, and his apparent move to the center will make Republicans look like radicals. But the Clinton script will take the president only so far. If he wants a second term, he'll have to come out swinging on jobs.
Mr. Reich, a former U.S. secretary of labor, is professor of public policy at the University of California, Berkeley and author of "Aftershock: The Next Economy and America's Future" (Alfred A. Knopf, 2010).
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http://www.foxnews.com/opinion/2011/07/15/seven-myths-about-looming-debt-ceiling-disaster/
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MARK STEYN
JULY 16, 2011 7:00 A.M.
The Great Charade
The spenders are negotiating among themselves how much debt they’re going to burden you with.
There is something surreal and unnerving about the so-called “debt ceiling” negotiations staggering on in Washington. In the real world, negotiations on an increase in one’s debt limit are conducted between the borrower and the lender. Only in Washington is a debt increase negotiated between two groups of borrowers.
Actually, it’s more accurate to call them two groups of spenders. On the one side are Obama and the Democrats, who in a negotiation supposedly intended to reduce American indebtedness are (surprise!) proposing massive increasing in spending (an extra $33 billion for Pell Grants, for example). The Democrat position is: You guys always complain that we spend spend spend like there’s (what’s the phrase again?) no tomorrow, so be grateful that we’re now proposing to spend spend spend spend like there’s no this evening.
On the other side are the Republicans, who are the closest anybody gets to representing, albeit somewhat tentatively and less than fullthroatedly, the actual borrowers — that’s to say, you and your children and grandchildren. But in essence the spenders are negotiating among themselves how much debt they’re going to burden you with. It’s like you and your missus announcing you’ve set your new credit limit at $1.3 million, and then telling the bank to send demands for repayment to Mr. and Mrs. Smith’s kindergartner next door.
Nothing good is going to come from these ludicrously protracted negotiations over laughably meaningless accounting sleights-of-hand scheduled to kick in circa 2020. All the charade does is confirm to prudent analysts around the world that the depraved ruling class of the United States cannot self-correct, and, indeed, has no desire to.
When the 44th president took office, he made a decision that it was time for the already unsustainable levels of government spending finally to break the bounds of reality and frolic and gambol in the magical fairy kingdom of Spendaholica: This year, the federal government borrows 43 cents of every dollar it spends, a ratio that is unprecedented. Barack Obama would like this to be, as they say, “the new normal” — at least until that 43 cents creeps up a nickel or so, and the United States government is spending twice as much as it takes in, year in, year out, now and forever. If the Republicans refuse to go along with that, well, then the negotiations will collapse and, as he told Scott Pelley on CBS the other night, Gran’ma gets it. That monthly Social Security check? Fuhgeddabouddit. “I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue,” declared the president. “Because there may simply not be the money in the coffers to do it.”
But hang on. I thought the Social Security checks came out of the famous “Social Security trust fund,” whose “trustees” assure us there’s currently $2.6 trillion in there. Which should be enough for the August 3rd check run, shouldn’t it? Golly, to listen to the president, you’d almost get the impression that, by the time you saw the padlock off the old Social Security lockbox, there’s nothing in there but a yellowing IOU and a couple of moths. Indeed, to listen to Obama, one might easily conclude that the whole rotten, stinking edifice of federal government is an accounting trick. And that can’t possibly be so, can it?
For the Most Gifted Orator in Human History, the president these days speaks largely in clichés, most of which he doesn’t seem to be quite on top of. “Eric, don’t call my bluff,” he sternly reprimanded the GOP’s Eric Cantor. Usually, if you’re bluffing, the trick is not to announce it upfront. But, in fact, in his threat to have Granny eating dog food by Labor Day, Obama was calling his own bluff. The giant bluff against the future that is government spending.
How many of “the wealthy” do you require to cover a one-and-a-half trillion-dollar shortfall every single year? When you need this big a fix, there aren’t enough people to stick it to. “We are not broke,” insists Van Jones, Obama’s former “green jobs” czar and bespoke Communist. “We were robbed, we were robbed. And somebody has our money!”
The somebody who has our money is the government. They waste it on self-aggrandizing ideologue nitwits like Van Jones and his “green jobs” racket. How’s the “green jobs” scene in your town? Going gangbusters, is it? Every day these guys burn through so much that they can never bridge the gap. By that, I don’t mean that an American government that raises $2 trillion but spends $4 trillion has outspent America, but that it’s outspent the planet. In my soon to be imminently forthcoming book, I discuss a study published last year by John Kitchen of the U.S. Treasury and Menzie Chinn of the University of Wisconsin. Its very title is a testament to where we’re headed:
“Financing U.S. Debt: Is There Enough Money In The World — And At What Cost?”
The authors’ answer is yes, technically, there is enough money in the world — in the sense that, on current projections, by 2020 all it will take to finance the government of the United States is for the rest of the planet to be willing to sink 19 percent of its GDP into U.S. Treasury debt. Which Kitchen and Chinn say is technically doable. Yeah. In the same sense that me dating Scarlett Johansson is technically doable.
Unfortunately, neither Scarlett nor the rest of the planet is willing to do it. It’s not 2020 and we’re not yet asking the rest of the planet for a fifth of its GDP. But already the world is imposing its own debt ceiling. Most of the debt issued by the Treasury so far this year has been borrowed from the Federal Reserve. That adds another absurd wrinkle to the D.C. charade: Washington is negotiating with itself over how much money to lend itself.
Meanwhile, the World’s Greatest Orator bemoans the “intransigence” of Republicans. Okay, what’s your plan? Give us one actual program you’re willing to cut, right now. Oh, don’t worry, says Barack Obluffer. To demonstrate how serious he is, he’s offered to put on the table for fiscal year 2012 spending cuts of (stand well back now) $2 billion. That would be a lot in, say, Iceland or even Australia. Once upon a time it would have been a lot even in Washington. But today $2 billion is what the Brokest Nation in History borrows every ten hours. In other words, in less time than he spends sitting across the table negotiating his $2 billion cut, he’s already borrowed it all back. A negotiation with Obama is literally not worth the time.
In order to fund Obamacare and the other opiates of Big Government dependency, the feds need to take 25 percent of GDP, now and forever: The “new normal.” It can’t be done. Look around you. The new normal’s already here: flatline jobs market, negative equity, the dead-parrot economy. What comes next will be profoundly abnormal. His name was Obamandias, King of Kings. Look upon his works, ye mighty, and despair. Round the decay of that colossal wreck, boundless and bare, the lone and level sands stretch far away.
Do they still teach Shelley in high school? Or just the “diversity manual” about “social justice” the Omaha Public Schools paid for with $130,000 of “stimulus” funding?
— Mark Steyn, a National Review columnist, is author of America Alone. © 2011 Mark Steyn.
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http://www.nationalpost.com/news/Destroying+itself+from+within/5111564/story.html
Rex Murphy, National Post · Jul. 16, 2011 | Last Updated: Jul. 16, 2011 3:03 AM ET
If America falls, it will not be from external enemies. It will be by her own hand. That is the inescapable conclusion one carries away from a reading of Reckless Endangerment, an account of the ferocious financial crisis that exploded in 2008 and through which, to this very day, the United States is still struggling to find safe and solid ground. It surely isn't over yet. Witness the current tussle between the White House and the Republicans on whether or not to "raise the debt ceiling," which is already over the incomprehensible level of $14-trillion.
First, a note about Reckless Endangerment's authors. They are, respectively, Gretchen Morgenson, a Pulitzer Prizewinning New York Times business reporter, and Joshua Rosner, a financial analyst -solidly competent and authoritative both. Reckless Endangerment does not come, in other words, out of the wild territory of hyper-partisanship or the backwaters of conspiracism.
Any person with a regard for the United States, or with some surviving faith in the virtues of representative democracy, will finish this book severely angry. It's a good game to play, should you start to read it, to keep count of the number of times you lay the book down in exasperated wonder that the American system could have been so twisted, so abused and so turned against itself.
What brought on the sub-prime crisis, as the meltdown of 2008 has become known? What brought about the worst crash since 1929, impoverished millions, tipped the government of the world's most powerful country into near window-ledge panic, pushed its Treasury into unprecedented outlays to forestall absolute collapse and left most of America with an almost broken faith in the integrity of its financial institutions and those who preside over them?
The most obvious villain is the one we all know. Wall Street is everything its wildest detractors want to label it.
It is a dog of greed and self-interest. The investment houses, the brokers, the great wizards of the street: Once the great sub-prime market began to swell, and once the great tranches of excessive earnings and those wonderful bonuses began to fill, they abandoned all scrutiny, flouted their own best practices and pushed the ever more risky market with all the adrenalin that hypergreed can supply.
But equally deserving of blame are the two federal institutions somewhat infantilely known (from a phoneticization of their acronyms) as Fannie Mae and Freddie Mac -whose ostensible purpose is to expand home ownership by providing a buyer for mortgage-backed securities. Originally, these entities were designed in 1938, in the aftermath -irony alert -of the Great Depression. By the early 1990s, they had mutated into weird, almost autonomous, speculative, rules-defying and ruthlessly aggressive money-making machines for the benefit of the handful of executives who ran them.
This space does not have length enough to tell how Fannie Mae and Freddie Mac were so thoroughly hijacked. The accounts given in Reckless Endangerment of executives James Johnson and Franklin Raines, just to pick two examples, are astonishing. These two were/ are monsters of rapaciousness and arrogance. They so brazenly used the truly vast resources of their mortgage retailing to launch public relations campaigns, hire relatives of the politicians who oversaw them, fund lobbyists by the dozens, and orchestrate fake campaigns of "public support" every time two or three brave regulators began the Sisyphean task of calling them to account.
Reckless Endangerment tells us which elected officials did their bidding. If there is ever a Mount Rushmore for hypocrites, the face of Democratic Congressman Barney Frank -Fannie Mae's friend in every sordid scrape (until nothing could be hidden anymore) -should be the first to go up. It was the complaisance and complicity of elected politicians like him that enabled Fannie Mae and Freddie Mac to achieve the power they did, to violate so utterly their own charters, to defy and slander their regulators (they set rumours afloat that one honest overseer was having "mental problems") as long as the mortgage giants tossed funds into their political kitties, gave them ribbon cutting ceremonies for "minority housing," and greased their re-election efforts.
The real story of Reckless Endangerment is more a story of democracy corrupted than it is a story of financial fraud. It is a story of America's great wounding of herself. And even now, with this book, the full account is not nearly as known as it should be; and as the authors so sadly point out, nearly every one of the principals who brought such misery and shame upon their countrymen are free, prosperous, in many cases highly honoured and "serving" still at the highest levels of political and financial power.
One weeps and despairs.
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Obama wil plunge us into a second dip just like FDR in his second term plunged the country into a sceond depression:
http://www.dickmorris.com/blog/dick-morris-tv-lunch-alert-fdr-obama-compared/
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Yes.
Concerning Baraq and Fannie & Freddie, in a mere 18 months in the US Senate he become the #2 all time recipient of donations :-o and the Franklin Raines mentioned in the piece (who, IIRC acclerated Fannie earnings so he could get an even huger bonus) was selected by Baraq to , , , something important, but I forget what.
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Posted here because of its connection to govt programs and spending:
What Is Poverty in America?
As Congress struggles to find a way to cut spending as part of raising the $14 trillion debt ceiling, they should take a close look at the more than $1 trillion spent every year on welfare. You'll be surprised to learn that many of the 30 million Americans defined as "poor" and in need of government assistance aren't quite what you'd expect—rather than homeless and on the streets, the average poor American household has luxuries like air conditioning, cable TV, and X-box video game consoles.
In their new report, What Is Poverty?, The Heritage Foundation's Robert Rector and Rachel Sheffield analyze what it really means to be poor in America. The reality they found is much different than the picture painted in movies and on TV:
According to the government’s own survey data, in 2005, the average household defined as poor by the government lived in a house or apartment equipped with air conditioning and cable TV. The family had a car (a third of the poor have two or more cars). For entertainment, the household had two color televisions, a DVD player, and a VCR.
If there were children in the home (especially boys), the family had a game system, such as an Xbox or PlayStation. In the kitchen, the household had a microwave, refrigerator, and an oven and stove. Other household conveniences included a washer and dryer, ceiling fans, a cordless phone, and a coffee maker.
The home of the average poor family was in good repair and not overcrowded. In fact, the typical poor American had more living space than the average European. (Note: That’s average European, not poor European.) The average poor family was able to obtain medical care when needed. When asked, most poor families stated they had had sufficient funds during the past year to meet all essential needs.
By its own report, the family was not hungry. The average intake of protein, vitamins, and minerals by poor children is indistinguishable from children in the upper middle class and, in most cases, is well above recommended norms. Poor boys today at ages 18 and 19 are actually taller and heavier than middle-class boys of similar age in the late 1950s and are a full one inch taller and 10 pounds heavier than American soldiers who fought in World War II. The major dietary problem facing poor Americans is eating too much, not too little; the majority of poor adults, like most Americans, are overweight.
That's a far cry from the images the news media conjure up on TV. But it's the reality of those who are defined as poor in America.
To be sure, the average poor family does not represent every poor family, and there are some who are better off and some who are worse off. Though most of the poor are well-housed, at any given point during the recession in 2009, about one in 70 poor persons was homeless, and one in five experienced temporary food shortages. Those individuals have serious concerns. But the fact remains that U.S. government statistics on poverty misrepresent the reality.
That misrepresentation has international implications. Rector and Sheffield explain that U.S. government poverty statistics portray a misleading negative image around the world. Al Jazeera, Iran's Teheran Times, Chinese and Russian media have latched on to U.S. poverty statistics to depict the United States as a failed, nightmarish society. And nothing could be further from the truth.
President Obama plans to make this situation worse by creating a new "poverty" measure that deliberately severs all connection between "poverty" and actual deprivation. Rector and Sheffield say that the goal is to measure income "inequality," not poverty—giving the President public relations ammunition for his "spread-the-wealth" agenda.
Rector and Sheffield write that when it comes to making policy, the broader reality of what poverty in America means should be taken into consideration: "Sound public policy cannot be based on faulty information or misunderstanding . . . In the long term, grossly exaggerating the extent and severity of material deprivation in the U.S. will benefit neither the poor, the economy, nor society as a whole."
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Second post of the morning:
The Foundation
"The battle, sir, is not to the strong alone; it is to the vigilant, the active, the brave." --Patrick Henry
Government
Bullet train to bankruptcy"The country is on a high-speed bullet train to bankruptcy (the only kind of bullets liberals approve of), and the Democrats' motto is: Spend! Spend! Spend! Democrats are at an advantage in the 'should the U.S. go bankrupt or not?' debate because, based on their economic policies so far, they obviously favor bankruptcy. This allows them to sit back and demand that Republicans propose all the spending cuts and then turn around and scream that Republicans have declared war on the poor and disadvantaged. It's a nice trick, especially considering Republicans control only the House. Meanwhile, the Democrats control all other branches of our government: the Senate, the White House, and The New York Times op/ed page. What's their plan? Their plan is to keep spending, while blaming tax breaks for corporate jets for the entire $14.3 trillion deficit. The Democrats will never suggest any cuts to a budget that has put the country another $4 trillion in debt only since Obama became president. So Republicans keep proposing cuts and Democrats keep riling up the increasingly large number of people who get checks from the government. Nothing ever gets cut, but more people hate Republicans for having proposed any cuts at all. ... If Republicans cut government spending, recipients of government checks come after them with pitchforks. If the Republicans refuse to raise the debt ceiling to force spending cuts, the economy collapses. In general, the trend seems to be in the direction of higher spending and endless debt." --columnist Ann Coulter
Essential Liberty
"The depressing debate over the debt ceiling underscores just how recklessly the ruling class has squandered America's sacred heritage -- a heritage I had the privilege of revisiting up close this past week on a family vacation. The contrast between the sublime historical locations we experienced during the day and the alarming news we ingested each night about the dire state of our nation's financial condition couldn't have been starker. Upon witnessing the majesty of our historical sites, it's difficult not to be outraged at the irresponsible stewardship of our do-gooder ruling class. These elites are on the final leg of their long journey to uproot our founding principles and remake the nation in their quest for moral self-realization through public acts of philanthropy with other people's money and liberty. In the name of compassion, they have systematically undermined our founding ideals of life, liberty, the pursuit of happiness and equal opportunity under the law. ... I am more convinced than ever that words alone are insufficient to express the richness of America's heritage and the debt we owe our Founding Fathers and all others who sacrificed so much so that we could be free. As we measure the forces determined to structurally change this nation, divest us of our liberties and, in the process, inevitably bankrupt us, let us always be mindful of the sacrifice of these great men, who bequeathed to us our liberties, and honor them and our posterity by redoubling our commitment to fight to the end to preserve them." --columnist David Limbaugh
Opinion in Brief
"[P]resident Obama's statements that he may have to stop Social Security checks, veterans' checks and disability checks shows just how bankrupt our country is. If we literally don't have the cash to pay those checks out of our current stockpiles, how is borrowing more money going to cure the problem? ... By tacitly admitting that government benefit schemes are month-to-month, [Obama's] admitting that the underlying structure of these systems is not self-sustaining. That's a major shift for a man who, in August 2010, proclaimed, 'Social Security is not in crisis.' ... President Obama has now embraced a binary choice: either he can screw current taxpayers or he can screw past taxpayers. Those who depend on their Social Security check to pay the rent are now being asked to suffer a double burden: The burden of paying their original Social Security tax as well as the burden of forgoing their expected return. The alternative is asking those who currently pay taxes to suffer a double burden: paying a higher tax rate and then forgoing their check somewhere down the road." --columnist Ben Shapiro
Political Futures
"Rarely ... has any administration been so disconnected from Reality as is the one now lecturing us. Who strong-armed through Congress a health insurance measure on the supposition that somehow we, the taxpayers, will cough up the hundreds and hundreds and hundreds of billions necessary to pay for it forever? As everyone and his dog knows, the Affordable Care Act was the Obama administration's bright idea. Ironically, the president plans next year, while seeking re-election, to pat himself enthusiastically on the back for winning passage of the very measure that makes control of federal spending so devilishly hard. Having told us to eat our peas, he plans next to remind us how good they tasted." --columnist William Murchison
Re: The Left
"In the midst of testy debt-limit negotiations, Obama told House Majority Leader Eric Cantor, 'Don't call my bluff.' The first rule in bluffing is to keep it a secret that you're bluffing. So, technically speaking, that's like a con man saying, 'Don't give any weight to the fact that I'm lying.' ... His remark about not calling his bluff notwithstanding, Obama has at least demonstrated the political professionalism to read his lines. His refusal to sign a short-term debt-ceiling extension is, according to him, an act of moral leadership, high-minded pragmatism and flat-out bravery. 'I've reached my limit. This may bring my presidency down, but I will not yield on this,' Obama reportedly said about his determination to have a long-term deal. He says he wants the deal because America can't continue to kick the can down the road, even though that's what he did during his entire presidency until the GOP got in the way. My suspicion is that if he read his stage direction instead of his lines, it would sound very different. Something like: 'I want to be positioned as if I'm taking the high road, but I'm really just trying to kick this can past the 2012 election. I want to keep asking for things Republicans won't agree to so I can paint them as irresponsible. So, whatever you do, don't call my bluff.'" --columnist Jonah Goldberg
For the Record
"Let me start by saying American should pay its debts. If the debts are really, really large -- that's too bad. We owe the money and we have to pay it. We're the richest, most blessed nation in the history of the world and we have to pay what we owe. Period. ... On Wednesday a company known as a ratings agency, Standard & Poor's, weighed in on this debt limit business by putting the whole U.S. of A. on what it calls a 'credit watch.' If we slip into the Wayback Machine we will see that S&P along with its partner in crime, Moody's Investor Services, were two of the major players in pretending that all those securitized mortgage instruments that were being bought and sold up until the whole world went broke had 'AAA' ratings even though they turned out to have the accumulated value of a bucket of beach sand. Standard & Poor's either lied about the value of all those mortgages, or it didn't understand how to value them, or it did understand that they were worthless but it (and Moody's) collected fees from the geniuses who almost made our ATM cards as useful as baseball cards in our bicycle spokes. ... If I were in a position to do so, I would haul the heads of Moody's and S&P in front of Congress, make them swear to tell the truth, and ask them if they had any conversations with Treasury Secretary Timothy Geithner or any of his people prior to issuing this warning. My strong suspicion is that the White House, looking for leverage, told Geithner to call his buds at Moody's and S&P and get them to issue a warning hoping it would weaken the resolve of Congressional Republicans." --political analyst Rich Galen
Insight
"The only freedom deserving the name, is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it. Each is the proper guardian of his own health, whether bodily, or mental and spiritual. Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest." --British philosopher and economist John Stuart Mill (1806-1873)
The Gipper
"I have wondered at times about what the Ten Commandment's would have looked like if Moses had run them through the U.S. Congress." --Ronald Reagan
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Third post of the day:
No matter where we stand on the War on Drugs, I think we can all agree with this one.
MAN! A BIG 10-4 FOR THIS ONE!
We need this in all the states.
Florida is the first state that will require drug testing when applying for welfare (effective July 1st)! Some people are crying this is unconstitutional. How is this unconstitutional yet it's okay that every working person had to pass a drug test in order to support those on welfare?
Re-post if you… agree. Let's get Welfare back to the one's who NEED it, not those who W A NT it...
http://www.politifact.com/florida/promises/scott-o-meter/promise/600/require-drug-screening-for-welfare-recipients/
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This makes a lot of sense to me:
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Republicans this week plan to force votes in the House and Senate on a balanced budget amendment to the U.S. Constitution. The last time Congress voted on a BBA was in 1997. It failed. The first unsuccessful BBA was proposed in 1936. All efforts between now and then to vote a balanced budget amendment into the Constitution have failed. This one will as well, as there are sufficient Democratic votes in the Senate to block it.
What, then, is the point?
The point is that many Republicans—and we suspect silently more than a few Democrats—are frustrated and sickened at the spectacle of the nation's debt bursting past $14 trillion, with the prospect that the debt soon may reach 100% of GDP. They are upset as well that the Obama Presidency has pushed federal spending upward, from its historic postwar level around 20% of GDP to near 25% this year. Proponents of the BBA argue that only a spending limitation embedded in the Constitution can stop the U.S. fisc from going over the cliff.
These pages bear enough scars from the spending wars—against both political parties—to have won Milton Friedman spending-limitation citations many times over. But we have been writing since at least the 1995 vote on a balanced budget amendment that we do not believe this mechanism can achieve its desired result. Its effects may even prove perverse. We see no reason to change that view now.
The newest versions of the BBA include a strong provision requiring a two-thirds supermajority vote to increase taxes. That said, we doubt the historic 1981 Reagan tax cuts within the Kemp-Roth bill, once subjected to Congress's revenue-neutrality accountants, could have survived the balanced budget mandate. Even with deficits, the U.S. grew strongly for seven years, adding to GDP as much as the entire West German economy.
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.Nor is it clear that the amendment could avoid unintended consequences. In the current fight over spending and the debt, the GOP Congressional leadership has worked well to protect the defense budget from a President who constantly cites the need to cut it. But under a mandated need to balance spending, the inevitable horse-trading would likely default to cutting defense while ducking fights on domestic programs.
The Senate and House versions both contain waivers in times of military conflict, but these are fraught with problems. The supermajority requirement for taxes is waived if a "declaration of war" is in effect, or if a majority votes to support spending for a conflict "which causes an imminent and serious military threat" as described in a joint resolution of Congress. Sounds complicated. Would Ronald Reagan's spending that did so much to end the Cold War have survived these hurdles?
Tea party Republicans, to their credit, want to pass a BBA that would include the supermajority tax limitation. But it has no chance of passing, and absent that rule, political pressure could turn the amendment into a driver for the entitlement state as successive Democratic governments raised taxes, most likely with a European-style value-added tax to balance spending commitments.
The new Members who are intent on fiscal responsibility should visit with Congressional historians to discover a root cause of this modern spending catastrophe—the 1974 Congressional Budget and Impoundment Control Act, the most laughable title ever placed on a federal law.
Passed amid Richard Nixon's struggles over spending with Congress, the law eviscerated the President's ability to impound Congressional spending. The law itself was an act of rage against Nixon's impoundments. "Control" over spending tipped into the hands of Congress, as is clear from the upward path of federal spending post-1974. This was the start of the infamous "baseline" budgeting rules, which automatically ratchet up spending from one year to the next.
Rather than trying to scale the impossibly high cliff of a Constitutional amendment, younger Members should revisit that bad law and fix it. Tom DeLay never wanted to fix it, but Paul Ryan does. The goal of an achievable reform act would be to put spending on a downward slope. That would include getting rid of baseline budgeting, restoring the Presidential impoundment power (if liberal Congresses hated it, it must have been good), and requiring the two-thirds majority for tax increases.
The BBA's supporters are right that the U.S. is riding a runaway entitlement train. That train, however, is the product of politics, and politics is the way it will have to be stopped. The main political impact of the BBA, however, will be to give "moderate" Senate Democrats up for re-election next year a chance to enhance their prospects by voting "for" spending control they don't believe in.
We certainly support the House GOP's plan today to vote to cut spending by $111 billion in fiscal 2012, and to cap spending in future years at a gradually smaller share of the economy. They should make this plan their main political argument, and leave the Constitution out of it.
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The BBA (IMO) is a misnomer like Dems usually do. I oppose a simple balanced budget amendment, but this one has a hook in it, an 18% cap on spending. I favor the cap and I favor the supermajority required to raise taxes. So I favor it the way it is, but if it were amending to just a BBAthat becomes mostly a prescription for unlimited spending and automatic tax increases to match.
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SC Gov. Nikki Haley in this video - Must see, IMO. There are some tough Republican Governors out there. Haley with TX Gov Rick Perry has coauthored support of the BBA from the states or which 3/4 would be required if it ever got 2/3 vote House and Senate. http://www.realclearpolitics.com/video/2011/07/18/sc_gov_nikki_haley_pushes_for_balanced_budget_amendment.html
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Sorry to be a broken record, but the House plan leaves out one crucial leg of the stool. Growth doesn't need to be in this package but the spokespeople need to relentlessly remind people that the problem is not solved and will never be solved until there is a earthquake scale move toward pro-growth policies. We aren't moving backwards to balance the budget at last year's revenue numbers. We need a SURGE of investment, employment and revenues. Please the bill, but people on notice that nothing in cut, cap and balance alone addresses that. We can do the rest now or after the next election, whenever the national will and the votes are there.
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Crafty has often pointed out the problems and deceptions caused by 'baseline budgeting'. In St. Paul they have admitted that the baseline is far greater than simply adding in population growth and inflation adjustment. In fact the $5 billion 'shortfall' was merely the invention of highly paid big government biased forecasters who should be prosecuted. There were no actual cuts or spending hikes required, but the anger and fireworks and shutdown over nothing went on until today. In the spirit of let no crisis go to waste, Gov. Mark Dayton wanted to raise the highest marginal rate by a factor of 62.5% - over nothing. Oblivious to the fact that we border a state with no income tax that runs ads here constantly enticing businesses to re-locate, where the Governor's own trust fund is located.
20 days without government, I noticed the bathrooms had to be closed at the wayside rests (do those janitors get back pay for work that didn't happen?) and traffic was a little lighter with the state's largest employer idle.
http://online.wsj.com/article/SB10001424052702303661904576454130534664732.html?mod=WSJ_Opinion_LEFTThirdBucket
The St. Paul Solution
Republicans in Congress might learn a political lesson from the budget agreement in Minnesota.
By STEPHEN MOORE
The longest government shutdown in any state in at least a decade appears to have ended, as Democratic Gov. Mark Dayton of Minnesota has agreed to key budget demands by the Republican-controlled legislature. Republicans in Congress might learn a political lesson from what happened.
On Thursday Mr. Dayton took new taxes off the table and in the end agreed to a spending ceiling very close to the original GOP target. Republicans made concessions, too, but there can be no mistake that in this two-week long St. Paul stare down it was Mr. Dayton who blinked.
From the start, the newly elected governor wanted giant tax increases. Under his proposal, the top income tax rate would have risen to almost 11% (initially, he proposed 13%) from the current top rate of just below 8%. Republicans didn't cave to the class warfare, even as the press carped at how unreasonable they were being. But Minnesota voters seemed to understand that the state would only make its economic troubles worse by increasing costs to employers.
Republicans also set spending at $34 billion for two years, compared to the $37 billion that the Democrats sought. But after two weeks that saw everything from the parks to most government agencies to pubs shut down (no business permits), Mr. Dayton agreed to GOP demands with "serious reservations."
Republicans did agree to new revenues through bonding tobacco settlement money and shifting education payments -- an accounting trick to create the fiction of savings... Republicans remained committed to the principles that won them legislative majorities in November for the first time in more than two decades. Let's hope lawmakers in Washington were watching.
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First a followup on the MN shutdown over draconian cuts and refusal to expand the punishment of wealth, (same issues as at the national level): The Republican offer that the Dem Governor finally agreed to, breaking the deadlock, includes a 10% actual increase in spending. As you follow all these arguments at all levels, remember that words no longer have real meanings.
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"A $2 trillion cut is only about a four percent reduction in spending that is set to increase almost sixty percent."
Budget Myths:
http://www.powerlineblog.com/archives/2011/07/budget-myths.php
Ranking Budget Committee Republican Jeff Sessions has been our most consistent and reliable voice on this issue. [Thursday] he gave a speech on the Senate floor that exposed some of the myths that are circulating in the budget debate:
First, I would like to address the myth that the president has a $4 trillion deficit-reduction plan. The only plan the White House has ever put on paper is his February budget, which doubles our national debt.
The president has never put a single spending cut plan on paper and he has no proposal to slash the deficit. If he does, it’s a closely guarded secret. And if such a secret plan does exist it should be made public this very afternoon. I’d like to see it. I’m sure millions of Americans feel the same.
We also have no debt plan from Senate Democrats. In fact, they haven’t even passed a budget in 813 days.
As of now, there is only one debt limit plan on paper. Only one plan available for public scrutiny and review. That’s the plan we are debating today: cut, cap, and balance. It cuts spending immediately, it caps it so it doesn’t go up, and it requires the passage of a balanced budget amendment to ensure Washington ends the deficit spending once and for all. The American people do not trust Washington to pass some grand budget deal with tax hikes that never go away and spending cuts that never materialize. …
Another myth I’d like to address is the idea that our current budget crisis is the result of two wars and a tax cut. Let’s consider that claim. The total cost of the wars in Afghanistan and Iraq, over the entire last decade, is $1.3 trillion. Again, that’s over the last decade. This year alone the deficit is expected to be $1.4 trillion dollars. War costs represent only 4 percent of total outlays over the last ten years. The total amount of money spent since the president took office is $8.5 trillion dollars. By the end of his first three years in office we will have added $5 trillion to our gross federal debt. We are borrowing almost half of what we’re spending every single day. In the last two years, non-defense discretionary spending has soared 24 percent. The stimulus package alone—enacted into law in a single day in 2009—cost more than the entire war in Iraq. Annual spending when President Bush took office was less than $2 trillion. Today, it’s almost $4 trillion. It will be almost $6 trillion by the end of the decade.
There is only one honest answer to the question over why our debt is rising so fast: out-of-control domestic spending.
Another myth that’s circulating which I’d like to address concerns the budget summary from the Gang of Six. The authors of the summary claim that their approach would reduce the deficit by $3.7 trillion. But my staff on the Budget Committee can only find $1.2 trillion in reduced spending, along with a tax increase of $1 trillion. Where does the other $1.5 trillion in deficit reduction come from? Chairman Conrad, one of the members of the Gang of Six, even says the outline has a $1.5 trillion tax cut. But this is compared against a baseline that assumes a $3.5 trillion tax increase. It’s just an accounting gimmick. The real cost of the tax changes could be an increase as large as $2 trillion.
This is why we need more than a handout—we need legislative text.
The last myth that I’d like to address is perhaps the most important of all. This is the myth that we only need about $2 trillion in spending cuts over the next ten years.
Democrats have said—although no plan has ever been made public—that they could get behind a budget deal that reduces the deficit $4 trillion over the next ten years, half of it comprised of spending cuts. I’m skeptical that even this minimal level of spending cuts would occur. But even if it did, it’s not even close to what is needed to ultimately balance our budget. We are projected to spend $46 trillion over the next ten years. A $2 trillion cut is only about a four percent reduction in spending that is set to increase almost sixty percent.
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http://www.slate.com/id/2299845/
You know we are in deep kimchee when Slate is talking about debt rather than the usual leftist talking points.
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It is cognitive dissonance to talk about debt ceiling increases in time periods instead of dollar increments as if the rate of deficit spending was fixed beyond our control. Would a credit card company or business bank loan bump you up by thousands from being maxed out and call it a 6 month increase? No. You would argue and they would need to believe you that the amount they are willing to do will be enough for you to get your act together, get through this temporary period of revenue shortfall, that you will make necessary changes on spending, and soon be breaking even and starting to paying back - or you wouldn't get the loan.
Republicans should bump up the debt ceiling only by the amount the US government should need this remaining cycle, not by the amount they say they need. Let's say it's a trillion, then make it last a year and half instead of a year. The government would have existing revenues of 2.5 trillion/yr plus another trillion in new borrowing to operate. Make do. The legislation should call for corresponding economic growth policies and public spending curtailments required to make it work.
A larger economy with increasing assets and income can support greater debt; that is not the case now as wealth is decreasing. Congress has raised the debt ceiling 89 times since 1939, 18 times for Reagan and 19 times for Bush it is argued. What's the big deal this time? (Because he is black? No. Because we 43% unfunded and not even pretending to end the ponzi-scheme.) With Reagan the congress was Democrat and the domestic spending was the Dem agenda. Of course they passed increases. With Bush, it started with reasons/excuses: there was the recession he inherited and the economic crisis in the aftermath of the 9/11. But then compassionate non-conservative spending escalated. It should have been stopped and it wasn't. That congress was punished and that President lost his credibility and power. Still Bush's ending deficit was 1/10th of Obama's typical one, roughly 160 billion to 1.6 trillion.
When this house, senate and administration runs through another trillion without changing course, they deserve to face this argument again - before an angry electorate. If the cuts are promised and do not materialize, if growth is promised and does not materialize, then the hard issues for the next election will be front and center.
44% growth in revenues over a relatively short period is very possible, we did it between 2003 and 2007. Next time we need to do it without the spending increases. That will take a change of political will and a change of government.
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http://online.wsj.com/article/SB10001424053111903554904576457880527361612.html?mod=WSJ_Opinion_LEFTTopOpinion
How Spending Cuts—Not Higher Taxes—Saved Canada
Liberals up there listened to voters, and their economy is now growing faster than ours.
By FRED BARNES
When Jean Chretien became prime minister in 1993, Canada faced a fiscal and economic breakdown. The government's share of the economy had climbed to 53% in 1992, from 28% in 1960. Deficits had tripled as a percentage of gross domestic product over the prior two decades. Government debt was nearly 70% of GDP and growing rapidly. Interest payments on the debt took up 35 cents of every tax dollar.
Mr. Chretien and his finance minister, Paul Martin, took decisive action. "Canadians have told us that they want the deficit brought down by reducing government spending, not by raising taxes, and we agree," Mr. Martin said. The new administration slashed spending. Unemployment benefits were cut by nearly 40%. The ratio of spending cuts to tax increases was nearly 7-to-1. Federal employment was reduced by 14%. Canada's national railway and air-traffic-control system were privatized.
The economy rebounded. Between 1995 and 1998, a $36.6 billion deficit turned into a $3 billion surplus. Canada's debt-to-GDP ratio was cut in half in a decade. Canada now has faster economic growth than America (3.3% in 2010, compared to 2.9% in the U.S.), a lower jobless rate (7.2% in June, when the U.S. rate was 9.2%), a deficit-to-GDP ratio that's a quarter of ours, and a stronger dollar.
What's most remarkable about the Canadian turnaround: It was led by liberals. Mr. Chretien and Mr. Martin were leaders of the Liberal Party. Yet they responded to the clear wishes of Canadians and, to the surprise of the political class, shifted to the right. Or to the center, the two leaders would say.
Today the United States is in a situation almost identical to Canada's in the 1990s. Government spending is surging, a huge deficit and national debt are setting peacetime records, interest payments are soaring, the economy is stagnant, and unemployment is stuck at around 9%. Yet one thing is missing: Liberals in America refuse to lead.
Led by President Obama, liberals have held back, leaving conservatives to lead and then stymieing conservative proposals because they rely on spending cuts. Liberals have sought to protect domestic programs, including entitlements, from even small cuts.
It's increased spending that is largely responsible for deficits exceeding $1 trillion for three consecutive years and thus for the rise in the national debt's percentage of GDP from 40% in 2008 to 62% in 2011 and toward an estimated 72% next year. The public, in the 2010 election and in poll after poll, is insisting on spending cuts.
But the president has declined to present a specific plan of his own. The 2012 budget he sent to Congress in February is inoperative. His tack now is to comment on the debt-reduction plans of others. Just this week, the White House said Mr. Obama would veto the "cut, cap and balance" proposal approved by the House and attached to the $2.4 trillion hike in the debt limit the president has asked for.
Earlier, the president attacked the Republican budget passed by the House. And in five days of negotiations with congressional leaders last week, he backed away from some of the spending reductions that had been agreed to in talks led by Vice President Biden. Mr. Obama had already taken major spending programs, like his health-care program, the $53 billion rapid rail project, and funding for "green jobs," off the table.
As the Aug. 2 deadline for a debt-limit increase nears, Mr. Obama has combined a very public role with an absence of upfront leadership. He's had three press conferences in the past month without offering clear guidance. But since he has no plan, he's less of a target for criticism, and he has tried to limit his accountability.
At his session with reporters last week he minimized the severity of the debt problem. "Here's the good news," he said. "It turns out we don't have to do anything radical to solve this problem. Contrary to what some folks say, we're not Greece. We're not Portugal."
The fiscal trouble was caused over the past decade, Mr. Obama explained, by the Bush tax cuts, "a prescription drug program for seniors that was not paid for," the wars in Iraq and Afghanistan, and "a bad recession that required a Recovery Act and stimulus spending and helping states . . . and there's interest on top of that." In other words, it wasn't Mr. Obama's fault.
What the president left out were the biggest drivers of spending and debt—entitlements. The Congressional Budget Office (CBO) projects Medicare, Medicaid and other health-care spending to jump to 9.5% of GDP over the next two decades from 5.6% in 2011. The CBO says Medicare will run out of money in 2020.
Like Mr. Obama, House Minority Leader Nancy Pelosi downplays the fiscal difficulty and recommends against offering a plan. "Once you put another proposal on the table, you're conceding that there must be some big problem," she said in April.
Senate Majority Leader Harry Reid is also a minimizer. He said this spring that changes in Social Security shouldn't be considered until the program fails. "Two decades from now, I'm willing to take a look at it," Mr. Reid said.
As America struggles over spending and debt, Canadians watch with wonderment. A new book, "The Canadian Century: Moving Out of America's Shadow," points to a role reversal—a strong Canada and a weak America.
In the foreword, former Canadian Ambassador to the U.S. Allan Gottleib writes: "If we want to see what would have become of Canada had we not lived through the difficult changes, we need look no further than Washington, D.C., where unreformed entitlements and undisciplined borrowing are hobbling America's power to be a world leader."
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I asked for clarity from the Republicans, really from all sides, about a year ago. Here it is, finally, from the most unlikely of sources - the Speaker of the House John Boehner. Probably could have unleashed this speech a couple of weeks earlier if not for the golf summit.
http://www.realclearpolitics.com/video/2011/07/25/boehner_balanced_approach_means_spend_more_you_pay_more.html
The president has often said we need a 'balanced' approach -- which in Washington means: we spend more. . .you pay more. Having run a small business, I know those tax increases will destroy jobs.
The House and Senate can pass this bipartisan bill and send it to the President for his signature. And if the President signs it, and crisis atmosphere that he created will simply disappear.
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"My friend just did a major $500K+ renovation. Among minor issues was an expansion of his garage. It seems it is now 24' feet from the street. The inspector this week told him to tear it down; the code says 24'. My friend is not very happy."
The codes here in NJ obnoxious. I can't even put in an electical line from one side of my basement to the other without having to clear it with code "enforcement".
This is a great example of government gone too far. I say get government the hell off my property. There is no end to the government expanding its power its reach, its taxation, in a self fulfilling cycle. I say enough.
You say what?
They are looking out for us?
I am tired of being a victim of the Democrat/lawyer/union trifecta taxes.
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I agree government building codes often go too far. However, I think safety codes, i.e. electrical, structural, etc. have some merit.
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"However, I think safety codes, i.e. electrical, structural, etc. have some merit"
I knew you would. That is why I asked if you say the giov. is looking out for us?
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Yes, I do think to some small degree think government's job is to "look out for us".
For example, it is my understanding that Doug is a Landlord. While I don't think the city should meddle in color choice (my hometown is considering
an ordinance that requires approval of all colors) I do think his tenants are entitled to electrical work that is safe, i.e. not prone to cause a fire. Further, I think they are entitled to clean running water and a toilet that works. Also structural changes need to be examined so that they do not cause a collapse of the building.
Basic health, safety and sanitation laws/rules are important.
But I concede many if not the majority of codes seem rather intrusive.
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"I do think his tenants are entitled to electrical work that is safe, i.e. not prone to cause a fire"
OK his tenants can get an outside opinion at their expense.
Rather than have *everyone* else pay up and go through a bureacracy.
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"I do think his tenants are entitled to electrical work that is safe, i.e. not prone to cause a fire"
OK his tenants can get an outside opinion at their expense.
Rather than have *everyone* else pay up and go through a bureacracy.
People shouldn't be expected to have to do that. You shouldn't have to watch your back where you live. You know that the majority of land lords would turn their places into wrecks so that their tenants wouldn't have a better place to go.
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Scott Grannis <> wrote:
Here's my latest blog post, which I thought I would share with everyone. Everything
is so misleading, and both parties are to blame. I try to put things into
common-sense terms here. Solving our budget problem shouldn't have to be a big deal.
For example, by just allowing spending to grow 2% a year, we could easily balance
the budget in 7 years without raising anybody's tax rate.
Nobody is proposing actual spending cuts
When the history of the Great Debt Limit Debate is written, one of the key villains
will be the definition of "cut." (He is discussing baseline budgeting here) For everyone who lives outside the halls of
Congress, "cut" means to reduce. But inside Congress, "cut" means to spend less than
your baseline projection of future spending. Since spending always tends to rise by
at least the growth of nominal GDP, which has averaged about 5.5% for the past 30
years, the baseline that everyone compares their budget proposals to tends to
project increased spending of about 5-6% per year.
Over the past 12 months the federal government has spent $3.56 trillion. A typical
baseline would project spending to increase about 5.5% a year, reaching some $6
trillion a year by 2021 (budget scoring generally focuses on what happens over the
next 10 years). That would equate to total expenditures of $48.4 trillion over the
next decade. So when one party proposes to "cut" spending by, say, $4 trillion, what
they really mean is that they propose to spend $44.4 trillion over the next 10 years
instead of $48.4 trillion. The $4 trillion "cut" they are proposing actually works
out to a 4% annual increase in spending, instead of a 5.5% annual increase in
spending.
So even the most radical of "cuts" that are being proposed today would still allow
government spending to increase by 4% a year. How hard or draconian is that?
I suspect the great majority of Americans would be stunned to realize that if we
allowed government spending to increase by only 2% a year, then we could probably
balance the budget in about 7 years, without any need to increase tax rates or
actually cut anybody's spending. No real cuts and no real tax hikes are needed to
balance the budget within a reasonable time frame. Why is there so much sound and
fury surrounding this debate?
(My calculations assume that tax revenues as a percent of GDP rise naturally to
about 18% of GDP over the next 7 years, which is close to the long-term average and
the same level that was achieved a few years after the Bush tax cuts. Tax revenue as
a % of GDP always rises during the expansion phase of a business cycle, and we know
that the current level of tax rates can generate 18% of GDP if the economy is
healthy.)
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So, if we slow the growth of total federal government spending to about the
current rate of CPI inflation and tax revenues revert to the mean, we’ll be
OK. However, in order to accomplish that target, won’t we have to reduce
non-Medicare/Medicaid expenditures significantly in order to offset the
normal rate of growth in those expenses?
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There are some important points in here with which I disagree (e.g. on foreign affairs) but RP brings up some very interesting reminders of previous defaults by the US govt.
Friday, July 22, 2011
> From Ron Paul on Bloomberg:
Debate over the debt ceiling has reached a fever pitch in recent weeks,
with each side trying to outdo the other in a game of political chicken. If
you believe some of the things that are being written, the world will come
to an end if the U.S. defaults on even the tiniest portion of its debt.
In strict terms, the default being discussed will occur if the U.S. fails
to meet its debt obligations, through failure to pay either interest or
principal due a bondholder. Proponents of raising the debt ceiling claim that
a default on Aug. 2 is unprecedented and will result in calamity (never mind
that this is simply an arbitrary date, easily changed, marking a
congressional recess). My expectations of such a scenario are more sanguine.
The U.S. government defaulted at least three times on its obligations
during the 20th century.
-- In 1934, the government banned ownership of gold and eliminated the
right to exchange gold certificates for gold coins. It then immediately
revalued gold from $20.67 per troy ounce to $35, thus devaluing the dollar
holdings of all Americans by 40 percent.
-- From 1934 to 1968, the federal government continued to issue and redeem
silver certificates, notes that circulated as legal tender that could be
redeemed for silver coins or silver bars. In 1968, Congress unilaterally
reneged on this obligation, too.
-- From 1934 to 1971, foreign governments were permitted by the U.S.
government to exchange their dollars for gold through the gold window. In 1971,
President Richard Nixon severed this final link between the dollar and gold
by closing the gold window, thus in effect defaulting once again on a debt
obligation of the U.S. government.
Unlimited Spending
No longer constrained by any sort of commodity backing, the federal
government was now free to engage in almost unlimited fiscal profligacy, the only
check on its spending being the market's appetite for Treasury debt.
Despite the defaults in 1934, 1968 and 1971, world markets have been only too
willing to purchase Treasury debt and thereby fund the government's deficit
spending. If these major defaults didn't result in decreased investor
appetite for U.S. obligations, I see no reason why defaulting on a small amount
of debt this August would cause any major changes.
The national debt now stands at just over $14 trillion, while net total
liabilities are estimated at over $200 trillion. The government is insolvent,
as there is no way that this massive sum of liabilities can ever be paid
off. Successive Congresses and administrations have shown absolutely no
restraint when it comes to the budget process, and the idea that either of the
two parties is serious about getting our fiscal house in order is
laughable.
Boom and Bust
The Austrian School's theory of the business cycle describes how loose
central bank monetary policy causes booms and busts: It drives down interest
rates below the market rate, lowering the cost of borrowing; encourages
malinvestment; and causes economic miscalculation as resources are diverted
from the highest value use as reflected in true consumer preferences. Loose
monetary policy caused the dot-com bubble and the housing bubble, and now is
causing the government debt bubble.
For far too long, the Federal Reserve's monetary policy and quantitative
easing have kept interest rates artificially low, enabling the government to
drastically increase its spending by funding its profligacy through new
debt whose service costs were lower than they otherwise would have been.
Neither Republicans nor Democrats sought to end this gravy train, with one
party prioritizing war spending and the other prioritizing welfare
spending, and with both supporting both types of spending. But now, with the end
of the second round of quantitative easing, the federal funds rate at the
zero bound, and the debt limit maxed out, Congress finds itself in a real
quandary.
Hard Decisions
It isn't too late to return to fiscal sanity. We could start by canceling
out the debt held by the Federal Reserve, which would clear $1.6 trillion
under the debt ceiling. Or we could cut trillions of dollars in spending by
bringing our troops home from overseas, making gradual reforms to Social
Security and Medicare, and bringing the federal government back within the
limits envisioned by the Constitution. Yet no one is willing to step up to
the plate and make the hard decisions that are necessary. Everyone wants to
kick the can down the road and believe that deficit spending can continue
unabated.
Unless major changes are made today, the U.S. will default on its debt
sooner or later, and it is certainly preferable that it be sooner rather than
later.
If the government defaults on its debt now, the consequences undoubtedly
will be painful in the short term. The loss of its AAA rating will raise the
cost of issuing new debt, but this is not altogether a bad thing. Higher
borrowing costs will ensure that the government cannot continue the same old
spending policies. Budgets will have to be brought into balance (as the
cost of servicing debt will be so expensive as to preclude future debt
financing of government operations), so hopefully, in the long term, the
government will return to sound financial footing.
Raising the Ceiling
The alternative to defaulting now is to keep increasing the debt ceiling,
keep spending like a drunken sailor, and hope that the default comes after
we die. A future default won't take the form of a missed payment, but
rather will come through hyperinflation. The already incestuous relationship
between the Federal Reserve and the Treasury will grow even closer as the Fed
begins to purchase debt directly from the Treasury and monetizes debt on a
scale that makes QE2 look like a drop in the bucket. Imagine the societal
breakdown of Weimar Germany, but in a country five times as large. That is
what we face if we do not come to terms with our debt problem immediately.
Default will be painful, but it is all but inevitable for a country as
heavily indebted as the U.S. Just as pumping money into the system to combat a
recession only ensures an unsustainable economic boom and a future
recession worse than the first, so too does continuously raising the debt ceiling
only forestall the day of reckoning and ensure that, when it comes, it will
be cataclysmic.
We have a choice: default now and take our medicine, or put it off as long
as possible, when the effects will be much worse.
(Ron Paul is a Republican representative from Texas and a candidate for
the 2012 Republican presidential nomination. The opinions expressed are his
own.)
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Scott G wrote,
"I suspect the great majority of Americans would be stunned to realize that if we
allowed government spending to increase by only 2% a year, then we could probably
balance the budget in about 7 years, without any need to increase tax rates or
actually cut anybody's spending."
Is it possible we can get rid of all our debt and not just " balance the budget?"
Why is it good taxation has to continouosly be done to cover interest rates?
Understand I am a novice so I am not sure my question is clear.
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© Ongo Inc. up12345678downLori Montgomery, Paul Kane and William Branigin
The Washington Post
July 29, 2011 ET
President Obama, warning that time is running out to lift the federal debt ceiling, said Friday that a House GOP plan has "no chance of becoming law," and he urged Senate Democrats and Republicans to come together on a "bipartisan compromise."
Obama spoke as House Republican leaders labored Friday to rescue a debt-limit plan opposed by their party's arch-conservatives. But he reiterated that the House leaders are wasting their time by trying to pass a measure that includes a short-term raise of the debt ceiling.
On Capitol Hill, the House GOP leaders offered party members a reworked plan Friday morning designed to appeal to the tea party-allied conservatives, and several previously skeptical lawmakers said they would now support it. Members who exited a House Republican Conference meeting said the new proposal would not change the first step of their original two-stage plan to raise the debt limit but would call for Congress to send to the states a balanced-budget amendment to the Constitution as a prerequisite for the second stage of the debt-ceiling increase to take effect early next year.
The House is expected to vote on the plan sometime Friday, members said.
However, Obama warned, the two-step House plan "does not solve the problem." He urged the American people to keep up the pressure on their elected representatives to reach a compromise and said the two sides in the Senate are not far apart.
Reentering the fray on the negotiations to avert a potentially disastrous U.S. default that is now only four days away, Obama delivered his hastily scheduled statement in the Diplomatic Reception Room at the White House. He did not take questions afterward.
"Today I urge Democrats and Republicans in the Senate to find common ground on a plan that can get support from both parties in the House, a plan that I can sign by Tuesday," Obama said. "There are plenty of ways out of this mess, but we are almost out of time."
Administration officials indicated earlier that Obama and fellow Democrats remain opposed to the House GOP plan and its provision for a two-stage increase in the federal debt ceiling tied to large spending cuts. The White House wants a single increase in the $14.3 trillion debt limit that would last into 2013, arguing that a series of short-term raises would fail to calm the markets, possibly trigger a credit-rating downgrade and become embroiled in election-year politics.
House Speaker John A. Boehner (R-Ohio) called a 10 a.m. meeting with his party members to plot the way forward after he was forced to cancel a vote on his plan late Thursday in the face of persistent opposition from recalcitrant conservatives.
In the Senate, Majority Leader Harry M. Reid (D-Nev.) vowed to proceed Friday with his own bill to raise the debt ceiling. He appealed to his chamber's Republicans to help him pass the bill, which he described as a compromise that meets key GOP demands, and he invited Minority Leader Mitch McConnell (R-Ky.) to a new round of negotiations to modify it so it can obtain the needed 60-vote supermajority in the Senate. He urged House Republicans to "break away from the shrill voices of the tea party" and return to the party of Ronald Reagan.
"The last train is leaving the station, and this is a last chance to avert a default," Reid said in a morning floor speech. "I ask my Republican friends, break away from this thing going on in the House of Representatives." He said a vote against the Senate compromise proposal would be "a vote to default on the full faith and credit of the United States."
Sen. Charles E. Schumer (D-N.Y.) said that even if the House Republicans get together and pass their bill, it will not pass the Senate and will not become law. The House, he said, "is pursuing a path to nowhere."
After a night of legislative chaos, with control of his caucus slipping in dramatic fashion from his grasp, Boehner yanked the bill from the House floor and prepared to make changes aimed at appealing to his tea-party-influenced right flank. Republican aides said they hoped for a Friday vote.
In his White House comments Friday, Obama made clear that the House effort is a nonstarter.
"Right now, the House of Representatives is still trying to pass a bill that the majority of Republicans and Democrats in the Senate have already said they won't vote for," he said. "It's a plan that would force us to relive this crisis in just a few short months, holding our economy captive to Washington politics once again. In other words, it does not solve the problem, and it has no chance of becoming law. What's clear now is that any solution to avoid default must be bipartisan."
Obama said there are "plenty of modifications" that can be made to either Reid's plan or one offered by McConnell to produce an acceptable compromise.
"This is not a situation where the two parties are miles apart," he said. "We're in rough agreement about how much spending can be cut responsibly as a first step toward reducing our deficit. We agree on a process where the next step is a debate in the coming months on tax reform and entitlement reform, and I'm ready and willing to have that debate. And if we need to put in place some kind of enforcement mechanism to hold us all accountable for making these reforms, I'll support that too if it's done in a smart and balanced way."
Without an agreement, Obama warned, the United States could lose its AAA credit rating. "Not because we didn't have the capacity to pay our bills; we do. But because we didn't have a triple-A political system to match our triple-A credit rating."
He cautioned those who oppose any tax increases on anyone that a lower credit rating could effectively raise taxes on everyone in the form of higher interest rates for consumers.
"And that's inexcusable," Obama said. "There are a lot of crises in the world that we can't always predict or avoid. . . . This isn't one of these crises. The power to solve this is in our hands."
He urged Americans to "make a phone call, send an e-mail, tweet, keep the pressure on Washington, and we can get past this." He said he was prepared to work with congressional Republicans and Democrats "all weekend long until we find a solution."
House GOP members, for their part, continued to ignore the warnings from the White House and the Senate that their bill stands no chance of becoming law.
"I don't have the time, but we will vote today, and it will pass with a significant majority in my judgment," said Rep. Mo Brooks (R-Ala.). He said he had switched from "lean no" to "yes" on the plan at Friday's House Republican meeting.
Several other members also said they had changed their minds and were now backing the new Boehner plan.
Rep. Jeff Flake (R-Ariz.), who for days had been leaning "no" on the Boehner plan, said as he left the basement meeting room Friday morning that he was now a "yes."
"I've always said I came to this town not looking for a view, but for a solution," said Rep. Jeffrey M. Landry (R-La.), who opposed the Boehner plan earlier this week. "And you know what, the speaker and the leadership, I think at the end of the day, I think that's what's in their hearts." He added: "We went in there and we kept discussing it, and we got to where we realized both the American people and hopefully that conference is."
In the Senate, meanwhile, Democrats laid plans to proceed with their own debt-ceiling plan in hopes of pushing a measure through Congress by Tuesday, when the U.S. Treasury says it could begin running short of cash to pay the nation's bills.
The late-night drama Thursday developed after debate on Boehner's debt-limit bill had concluded and lawmakers were minutes away from what was expected to be a cliffhanger vote. Suddenly, action on the House floor shifted to a series of non-controversial measures, leaving befuddled lawmakers debating whether to rename a post office in Hawaii.
Outside the House chamber, Boehner summoned members of the holdout GOP South Carolina delegation to his second-floor office just off the Capitol Rotunda. But he appeared to make little headway and, within minutes, freshman Reps. Mick Mulvaney and Jeff Duncan left the meeting, saying they were heading to a nearby chapel to pray for their leaders.
Rep. Tim Scott (R-S.C.) later joined them, and the trio, stalwart conservatives who have steadfastly opposed efforts to grant the Treasury additional borrowing authority, told reporters that Boehner's pitch had not been persuasive.
"Divine inspiration already happened," said Scott, a liaison to party leadership for the Republican freshman class in the House. "I'm a no."
A short while later, the South Carolinians gathered with other undecided Republicans in the first-floor offices of House Majority Whip Kevin McCarthy (R-Calif.), a usual hangout for many of the 87 freshmen. There, Boehner, McCarthy and House Majority Leader Eric Cantor (R-Va.) pleaded with their fellow Republicans for support.
Aides said that some holdouts objected to an item in the bill related to the Pell grant college loan program, complaining that it amounted to a $17 billion spending increase. Some members also wanted to see stronger language calling for a constitutional amendment to require a balanced federal budget, aides said.
Across the Capitol, Senate Democrats had been waiting to put the Boehner bill to a quick death in a late-night vote of their own. But with House Republicans locked in yet another closed-door meeting, Reid said on the Senate floor that Boehner and his allies appeared to be "having trouble passing their bill" and warned that Congress faced the prospect of yet another wasted day.
Deadline looming
The chaos in the House left Washington no closer to a resolution over the debt limit just days before the Aug. 2 deadline. The national debt hit the current $14.3 trillion limit in mid-May. Unless Congress acts, the government will be in danger of defaulting on its obligations as early as Tuesday.
The partisan impasse is shaking Wall Street and the confidence of top business leaders. Early Thursday, chief executives of some of the largest U.S. financial companies — including Brian Moynihan from Bank of America, Jamie Dimon from J.P. Morgan Chase and John R. Strangfeld of Prudential — wrote a letter to President Obama and members of Congress urging them to strike a deal this week.
"The consequences of inaction — for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America's global economic leadership — would be very grave," they wrote.
Liberal activists and tea party organizers large and small found themselves aligned in opposition to the Boehner bill. MoveOn.org staged a rally on the Capitol grounds, where Democratic lawmakers decried the legislation's deep cuts to government agencies. They also complained that the measure would set up a second fight over the debt limit next year, forcing Obama to endure another harrowing budget battle in the heat of the presidential election campaign.
Meanwhile, FreedomWorks Chairman Richard K. Armey, the former House majority leader and a tea party backer, called congressmen from Texas and urged them to vote no. Mark Meckler and Jenny Beth Martin, the co-founders of Tea Party Patriots, traveled to Washington to decry the spending cuts in Boehner's bill as "fake" and "phantom."
And during a lunchtime speech at the National Press Club, Rep. Michele Bachmann, the Minnesota Republican who is running for president, repeated her assertion that the country would not suffer in the event of a default.
"I don't believe for a moment we will lose the full faith and credit of the United States," said Bachmann, who has previously argued that the Treasury would be left with enough cash for critical needs while the rest of government would be subjected to "tough love." "I am committed to not raising the debt ceiling."
If the House proves unable to pass its bill, action is likely to shift to the Senate, where Reid was preparing to proceed with his own debt limit measure, perhaps as soon as Friday evening. But it was not clear the Reid bill could win approval, either, and talks over a bipartisan compromise have so far failed to yield results.
Throughout the day, House Republican leaders had predicted their legislation would pass the House and move on to the Senate. At an early-afternoon news conference, Boehner challenged Reid to drop his plans to kill the House bill and beseeched "my colleagues in the Senate" to "pass this bill and end this crisis."
"We have a reasonable, responsible bill put together by the bipartisan leaders here in Congress. There's no reason for them to say no," Boehner said. "It's time for somebody in this town to say yes. . . . When is somebody on the other side of the aisle going to take yes for an answer?"
But House Democrats appeared united in opposition to the measure, which would set up a two-stage process for raising the debt limit. The first stage would cut spending by $917 billion over the next decade, primarily by making deep cuts to government agencies. The debt limit, meanwhile, would be raised by $900 billion, granting the Treasury a reprieve until February or March.
The second stage would involve the creation of a new committee made up of 12 lawmakers from both parties and both chambers. The committee would be tasked with identifying another $1.8 trillion in cuts before the end of the year. If the committee made recommendations and they were adopted, Obama would be authorized to raise the debt limit into early 2013 without explicit congressional approval.
White House officials and other Democrats blasted the plan, arguing that it would hold a fragile economy hostage to partisan sniping over the budget at a time when the unemployment rate is stuck above 9 percent and businesses are looking for certainty to begin hiring. Democrats also noted that, under the Boehner bill, the next debt-limit battle stands a chance of consuming the Christmas holidays, traditionally the brightest spot of the year for consumer spending.
In a speech Thursday morning on the Senate floor, Reid said: "Republicans cannot get the short-term Band-Aid they will vote on in the House today. It will not get one Democratic vote in the Senate. . . . The economy needs more certainty than the speaker's proposal would provide."
The White House also lashed out against Boehner's bill, with press secretary Jay Carney calling it a "political act" that guarantees another "three-ring circus" over the debt limit in a matter of months.
In a White House news briefing, Carney said the measure would further damage the economy, increasing the "uncertainty" that Republicans often point to as a damper on economic growth.
"It's incredibly bad for the economy to have this kind of circus go on in Washington," he said.
The Senate bill
Democrats were instead backing a variant of the Boehner bill that Reid planned to introduce. That measure would make the same cuts to agency budgets and establish the same debt-reduction committee. But Reid's legislation would also count more than $1 trillion in savings from winding down the wars in Iraq and Afghanistan, an accounting move Republicans decried as a gimmick. More important, the Democratic bill would extend the debt limit into 2013.
McConnell pledged his support for the Boehner bill. Though he spoke Wednesday with Vice President Biden, McConnell's aides denied that he was working to forge a compromise with Democrats.
In a speech Thursday morning, McConnell argued that Democrats would support the Boehner legislation if not for the requirement for a second debt limit vote early next year.
"It doesn't allow the president to avoid another national debate about spending and debt until after the next presidential election," McConnell said. "This assurance is the only thing the president and Senate Democrats are holding out for right now."
Democrats highlighted the concerns of market experts, releasing a video Thursday in which several warned that Boehner's plan could prolong the feuding over the debt ceiling and prompt credit-rating agencies to downgrade the nation's AAA rating.
As the debt-limit drama stretched on, one truth became apparent: House leaders had come face to face with the realities of governing in a new Washington, where trading earmarks for votes was no longer an option and Boehner's pledge to let the House work its will was making it far more difficult for leaders to impose theirs.
Shortly before 9 p.m., Rep. Jeff Flake (R-Ariz.), who had expressed opposition to the Boehner plan, exited McCarthy's office. He declined to tell reporters if his views had changed. But he praised the lack of horse-trading of the type that marred passage of Obama's health-care legislation. "It is the most refreshing thing in the world to see what's going on in there," Flake said. "This kind of negotiation a couple years ago would have cost about $20 billion."
Meanwhile, Rep. Louise M. Slaughter (D-N.Y.) waxed philosophical about the situation, saying the GOP theatrics have convinced her that Congress should not have the power to put limits on Treasury borrowing at all. After all, Democrats have argued, the debt is the result of budget decisions Congress itself has made over the years.
"Frankly, I have pondered all this day. Why does the United States of America go through this process?" Slaughter told a reporter. "Nobody else in the world does. It makes no sense at all."
Staff writers Felicia Sonmez and Amy Gardner contributed to this report.
http://www.ongo.com/v/1489468/9933/4222E76223123123249D/obama-urges-senate-to-forge-ompromise-on-debt-limit-rejects-house-efforts?gclid=CNXAgcz_pqoCFdMn2godbh3KYQ (http://www.ongo.com/v/1489468/9933/4222E76223123123249D/obama-urges-senate-to-forge-ompromise-on-debt-limit-rejects-house-efforts?gclid=CNXAgcz_pqoCFdMn2godbh3KYQ)
That last comment by Slaughter certainly doesn't show a Leftist agenda in all of this does it? :-P
P.C.
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=================================
The Patriot Post
Digest -- Friday, July 29, 2011
=================================
On the Web: http://patriotpost.us/edition/2011/07/29/digest/
Printer Friendly: http://patriotpost.us/edition/2011/07/29/digest/print
PDF Version: http://pdf.patriotpost.us.s3.amazonaws.com/2011-07-29-digest.pdf
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The Foundation
"[W]ith respect to future debt; would it not be wise and just for that nation to
declare in the constitution they are forming that neither the legislature, nor the
nation itself can validly contract more debt, than they may pay within their own
age." --Thomas Jefferson
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Government & Politics
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Congress Is Still Stuck in Neutral on Debt
Five days and counting until the end of the world. At least that's what Democrats
would have us believe with regard to the federal debt ceiling. "What we're trying to
do is save the world from the Republican budget," declared House Minority Leader
Nancy Pelosi (D-CA). "We're trying to save life on this planet as we know it today."
Well, Pelosi and her tax-and-spend ilk "succeeded" for one more day when the House
postponed a vote on Speaker John Boehner's plan of spending cuts and debt-ceiling
increase Thursday night. But it was because Boehner (R-OH) couldn't get enough
Republicans to go along with his plan that it faltered. Even if the plan had passed
the House, though, all 53 Senate Democrats had promised to torpedo it in favor of
Majority Leader Harry Reid's plan.
Boehner's plan, revised Wednesday to improve its score with the Congressional Budget
Office, included projected cuts of $917 billion over 10 years with no tax increases.
Most Republicans got in line behind their leader, hoping to win the battle by
offering something to the Senate after the upper chamber defeated Cut, Cap and
Balance
(http://patriotpost.us/alexander/2011/07/21/a-sign-of-sanity-amid-the-budget-banter/
). Others concluded that the dollar amount stretched over too many years was
woefully insufficient, and insisted on passage of a balanced budget amendment
(http://patriotpost.us/alexander/2011/07/28/what-power-to-tax-and-spend/ ). We
happen to think both sides are right.
Republicans control just one-half of one branch of the government, and they have to
start somewhere. Yet $22 billion in cuts this year in exchange for $900 billion more
in debt this year is a sorry deal. Trying to sell it by saying that the $900 billion
increase is conditional on $917 billion in cuts is just Washington math. Even with
the deal, the federal debt would rise several trillion over 10 years, meaning the
ceiling would need to be raised many more times, including again in 2012.
Reid (D-NV) also has a plan to counter those "radical, right-wing, Tea Party
extremists"
(http://www.youtube.com/user/PatriotPost?feature=mhee#p/c/9AF160D8E5444DEC/43/QFUvrX5uaBQ
): Raise the ceiling by $2.4 trillion now, in exchange for cutting $2.2 trillion
over a decade. That likely would avoid having to address the issue again before next
year's presidential election, which President Barack Obama and his fellow Democrats
want to avoid at all costs. However, Reid's plan has more than its fair share of
accounting gimmicks. For instance, half the "cuts" in his plan are the savings from
ending the wars in Afghanistan and Iraq. As columnist Charles Krauthammer quipped,
"I'm told there's an extra $10 billion in here of savings from not invading Normandy
a second time."
For his part, Obama has been remarkably silent this week following his speech Monday
night (http://www.cbsnews.com/8301-503544_162-20083265-503544.html ), which offered
nothing new -- just blame for everyone but him. Perhaps his advisers have concluded
that we're all tired of hearing him read from the teleprompter.
Meanwhile, House Minority Whip Steny Hoyer (D-MD) and Assistant Minority Leader Rep.
James Clyburn (D-SC) are floating a "14th Amendment solution," which they say would
allow Obama to raise the debt ceiling unilaterally. Section 4 of the 14th Amendment
(http://patriotpost.us/document/amendments-11-27-to-the-constitution-of-the-united-states/
) reads, "The validity of the public debt of the United States ... shall not be
questioned." Only a leftist using the "living constitution" could construe such
language to mean that the president can unilaterally incur more debt, a power still
left to Congress. Fortunately, even Obama acknowledges that using the 14th Amendment
isn't "a winning argument."
Besides, even if the nation passes Aug. 2 without a deal, there will still be money
to pay the interest on the debt and other vital obligations. We're pretty sure that,
despite Nancy Pelosi's dire warnings to the contrary, "life on this planet as we
know it today" will continue even without bureaucracies such as the EPA or HUD. The
nation managed for two centuries without either one.
Finally, the White House is prodding the three major credit rating agencies to back
the Reid plan. It's not just the debt ceiling that could cause a credit downgrade,
however. Our long-term trajectory is not sustainable, which is likely why Obama long
ago gave up on his demand for a "clean" increase in the debt ceiling -- meaning no
spending cuts whatsoever.
What remains to be seen in the coming days is whether Congress can pass a deal --
any deal -- to address the issue, however timidly. Indeed, after being stymied
Thursday night, the House turned to the urgent matter of re-naming post offices
(http://blogs.abcnews.com/thenote/2011/07/with-no-debt-limit-vote-house-turns-to-naming-post-offices.html
). The tragedy of it all is that real solutions and fidelity to the Constitution
seem far beyond the grasp of so many of our elected representatives.
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Essential Liberty
"The national debt-ceiling law should be judged by what it actually does, not by how
good an idea it seems to be. The one thing that the national debt-ceiling has never
done is to put a ceiling on the rising national debt. Time and time again, for years
on end, the national debt-ceiling has been raised whenever the national debt gets
near whatever the current ceiling might be. Regardless of what it is supposed to do,
what the national debt-ceiling actually does is enable any administration to get all
the political benefits of runaway spending for the benefit of their favorite
constituencies -- and then invite the opposition party to share the blame, by either
raising the national debt ceiling, or by voting for unpopular cutbacks in spending
or increases in taxes." --economist Thomas Sowell
(http://patriotpost.us/opinion/thomas-sowell/2011/07/26/debt-ceiling-chicken/ )
-------------
On Cross-Examination
In arguing the debt ceiling issue on the Senate floor, Sen. John McCain (R-AZ)
quoted a Wall Street Journal editorial
(http://online.wsj.com/article/SB10001424053111903591104576470061986837494.html ) --
specifically the part criticizing "tea-party Hobbits" for wanting too much. It was a
reference to J.R.R. Tolkien's novel "The Lord of the Rings."
Sen. Rand Paul (R-KY) fired back, "I think in reading the books, the hobbits were
the heroes. They overcame great obstacles, and I think I'd rather be a hobbit than a
troll."
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and circumvent Congress which otherwise has the *sole constitutional authority* to do so. Accodring to Politico below Brock's attorneys do not feel this a winning argument however (thank God!). PS: Clyburn was reported by Rand Paul on the Mark Levin radio talk show yesterday to have said something to the effect "we do things around here in Washington outside the Constitution all the time":
***'Something like this will bring calm to the American people,' Clyburn said. | Niko Duffy/POLITICO Close
By JENNIFER EPSTEIN | 7/27/11 12:14 PM EDT Updated: 7/27/11 10:33 PM EDT
Rep. James Clyburn and a group of House Democrats are urging President Barack Obama to invoke the 14th Amendment to raise the debt ceiling if Congress can’t come up with a satisfactory plan before the Tuesday deadline.
Clyburn, the third-ranking House Democrat, said Wednesday that if the president is delivered a bill to raise the debt ceiling for only a short period of time, he should instead veto it and turn to the phrase in the Constitution that says the validity of the U.S. government’s debt “shall not be questioned.”
Continue Reading Text Size
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Carney: 14th Amendment 'not an option'
Boxer on 14th Amendment
Geithner on invoking the 14th Amendment - May 25th, 2011
POLITICO 44
“If that’s what lands on his desk, a short-term lifting of the ceiling, the debt ceiling, he should put it on his desk next to an executive order,” Clyburn said at a press conference. “He should sign an executive order invoking the 14th Amendment to this issue.” The Associated Press reported that he was applauded when he suggested the idea at a caucus meeting earlier in the day.
“I believe that something like this will bring calm to the American people and will bring needed stability to our financial markets,” Clyburn added, noting that President Harry Truman did it once during his presidency after Congress was unable to pass a bill to raise the debt ceiling.
Obama and others in his administration have said they will not rely on the 14th Amendment. At a town hall last week, Obama said that he has “talked to my lawyers” and “they are not persuaded that that is a winning argument.”
At his daily briefing Wednesday afternoon, White House press secretary Jay Carney knocked down any suggestion that the president would reconsider.
“Our position hasn’t changed. There are not off-ramps, there’s no way around this, there’s no escape,” Carney said. “You know, having an esoteric constitutional argument won’t reduce the fact that the borrowing authority is due to expire on August 2nd and Congress has the legal authority and only Congress has the legal authority to extend that borrowing authority.”
“The president stood here and told you,” Carney added. “We consulted to see what this was about, but this is not an option.”
But Clyburn and several other liberal Democrats urged the president to reconsider.
“We’re getting down to decision time,” said Rep. John Larson (D-Conn.), the chairman of the Democratic caucus. “We have to have a failsafe mechanism and we believe that failsafe mechanism is the 14th Amendment and the president of the United States.”
Appearing on MSNBC later Wednesday morning, Sen. Barbara Boxer (D-Calif.) suggested that it should be the president’s last resort. “As far as the 14th Amendment is concerned, I urge everybody to get their Constitution and read it. It says the debts of the United States shall not be questioned,” she said.
“If [Republicans] want to make this country a deadbeat nation, this president shouldn’t allow it, none of us should allow it. And I think he should seriously look at whatever options he has.”***
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FWIW, the WSJ's analysis here. I am unpersuaded, particularly with regard to the risks to the defense budget. We could eliminate the defense budget 100% and still be fuct. To have it go 50-50 with cutting Baraq's inflated spending is madness.
=======If a good political compromise is one that has something for everyone to hate, then last night's bipartisan debt-ceiling deal is a triumph. The bargain is nonetheless better than what seemed achievable in recent days, especially given the revolt of some GOP conservatives that gave the White House and Democrats more political leverage.
***
The big picture is that the deal is a victory for the cause of smaller government, arguably the biggest since welfare reform in 1996. Most bipartisan budget deals trade tax increases that are immediate for spending cuts that turn out to be fictional. This one includes no immediate tax increases, despite President Obama's demand as recently as last Monday. The immediate spending cuts are real, if smaller than we'd prefer, and the longer-term cuts could be real if Republicans hold Congress and continue to enforce the deal's spending caps.
The framework (we haven't seen all the details) calls for an initial step of some $900 billion in domestic discretionary cuts over 10 years from the Congressional Budget Office (CBO) baseline puffed up by recent spending. If the cuts hold, this would go some way to erasing the fiscal damage from the Obama-Nancy Pelosi stimulus. This is no small achievement considering that Republicans control neither the Senate nor the White House, and it underscores how much the GOP victory in November has reshaped the U.S. fiscal debate.
No wonder liberals are howling. They have come to believe in the upward spending ratchet, under which all spending increases are permanent. Not any more.
The second phase of the deal is less clear cut, though it also could turn out to shrink Leviathan. Party leaders in both houses of Congress will each appoint three Members to a special committee that will recommend another round of deficit reduction of between $1.2 trillion and $1.5 trillion, also over 10 years. Their mandate is broad, and we're told very little is off the table, but at least seven of the 12 Members would have to agree on a package to force an up-or-down vote in Congress.
If the committee can't agree on enough deficit reduction, then automatic spending cuts would ensue to make up the difference to reach the $1.2 trillion minimum deficit-reduction target. One key point is that the committee's failure to agree would not automatically "trigger" (in Beltway parlance) revenue increases, as the White House was insisting on as recently as this weekend. That would have guaranteed that Democrats would never agree to enough cuts, and Republicans were right to resist.
Instead the automatic cuts would be divided equally between defense and nondefense. So, for example, if the committee agrees to deficit reduction of only $600 billion, then another $300 billion would be cut automatically from defense and domestic accounts (excluding Medicare beneficiaries) to reach at least $1.2 trillion.
This trigger is intended to be an incentive for committee Members of both parties to agree on more cuts, but defense cuts of this magnitude would do far more harm to national security than they would to domestic accounts that have been fattened by stimulus. This is the worst part of the deal, and Mr. Obama's political goal will be to press Republicans to choose between tax increases and destructive defense cuts. The GOP will have to fight back and make the choice between domestic cuts and harm to our troops fighting multiple wars.
While the "trigger" includes no revenue increases, the committee itself could agree to raise taxes to meet the $1.2 trillion deficit reduction target. This means GOP leaders Mitch McConnell and John Boehner have to be especially careful in their choice of appointees. No one from the Senate Gang of Six, who proposed tax increases, need apply. The GOP choices should start with Arizona Senator Jon Kyl and House Budget Chairman Paul Ryan, adding four others who will follow their lead.
One reason to think tax increases are unlikely, however, is that the 12-Member committee will operate from CBO's baseline that assumes that the Bush tax rates expire in 2013. CBO assumes that taxes will rise by $3.5 trillion over the next decade, including huge increases for middle-class earners. Since any elimination of those tax increases would increase the deficit under CBO's math, the strong incentive for the Members will be to avoid the tax issue. This increases the political incentive for deficit reduction to come from spending cuts.
Mr. Obama's biggest gain in the deal is that he gets his highest priority of not having to repeat this debt-limit fight again before the 2012 election. The deal stipulates that the debt ceiling will rise automatically by $900 billion this year, and at least $1.2 trillion next year, unless two-thirds of Congress disapproves it. Congress will not do so.
Given how much the current debate has damaged the public perception of Mr. Obama's leadership, this will be a relief at the White House. This is part of the negotiating price that Mr. Boehner had to pay because of the back-bench revolt that showed he couldn't guarantee a debt-limit increase with only GOP votes. This gave Democrats more leverage.
***
The same supposedly conservative Republicans and their talk radio minders may denounce this deal as a sellout, but we'll be charitable and assume they've climbed so far out on the political ledge they don't know how to climb back without admitting they were wrong. They're right that this deal doesn't "solve" our fiscal crisis, but no such deal is possible as long as liberals run the Senate and White House.
The debt ceiling is a political hostage the GOP could never afford to shoot, and this deal is about the best Republicans could have hoped for given that the limit had to be raised. The Jim DeMint-Michele Bachmann-Sean Hannity alternative of refusing to raise the debt limit without a balanced-budget amendment and betting that Mr. Obama would get all the blame vanishes upon contact with any thought. Sooner or later the GOP had to give up the hostage.
The tea partiers pride themselves on adhering to the Constitution, which was intended to make political change difficult. Yet in this deal they've forced both parties to make the biggest spending cuts in 15 years, with more cuts likely next year. The U.S. is engaged in an epic debate over the size and scope of government that will play out over several years, and the most important battle comes in the election of 2012.
Tea partiers will do more for their cause by applauding this victory and working toward the next, rather than diminishing what they've accomplished because it didn't solve every fiscal problem in one impossible swoop.
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My thoughts at this moment:
(I think I have my numbers right, but unverified numbers are flying fast and loose at the moment.)
"Default" and "Downgrade" are distinct issues, though certainly defaulting would lead to downgrading.
The "deal" is nowhere near the $4T minimum that the credit rating agencies stated that they wanted for them to not downgrade the US.
Even under the rosy scenario numbers of the deal,(e.g. the economy is not sliding into another recession, which may well be the case) the national debt will increase 50% (by $7T).
Should the deal proffered by the proposed committee not pass, the burden of the cuts falls disproportionately, and greatly so, upon defense. The Republicans will likely have to vote between raising taxes-- with the attendant consequences for the economy-- or gutting defense.
If I were a Congressman I would vote NO.
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This just came into my mailbox after I made my previous post. Sadly, it makes a lot of sense to me.
Not Playing The Fool
Posted by Erick Erickson (Profile)
Monday, August 1st at 4:46AM EDT
There are a lot of Republicans tonight willing to play the fool for the GOP in this
debt ceiling plan. They say, for example, that there will be no tax increases from
this super committee. Never mind that the Democrats are saying otherwise.
I can prove to you right now that there will be tax increases.
The Congressional Budget Office (CBO) expects the Bush tax cuts to expire. So all
the commission has to do is two things: extend middle class Bush tax cuts and enact
a permanent alternative minimum tax (AMT) patch. Those two together would look like
an increase to the deficit in CBO scoring. So then the commission can start out of
the gate with the ability to create several trillion dollars in new tax hikes to
equal out to the cuts — cuts that will happen even without the commission most
likely. And where will those cuts come from? Those making $250,000.00 or more, of
course. And probably the Gang of 6′s ideas to eliminate most deductions to income
taxes without revenue neutral rate reductions and the Gang of 6′s pièce de
résistance — raising capital gains taxes from 15% to 28%.
Have people not been paying attention? In every single address the President has
given on the debt ceiling, he has insisted on new tax revenue. John Boehner even put
$800 billion on the table, so it is already there.
The House and Senate GOP leadership may have convinced themselves that they have
snookered the Democrats, but even little ole me, a non-budget genius, can drive a
truck through their argument. And their best response probably comes from Ryan Ellis
of Americans for Tax Reform. That counter argument is best summed up as but . . .
but . . . but . . . the House Leadership says so. And if puppies were unicorns, we’d
all live in a fantasy land.
Apparently, young lefty Ezra Klein who thinks no one pays attention to the
constitution because, dude, it’s so old, is brighter than Ryan Ellis at ATR. Klein
writes, “Boehner is misleading his members to make them think taxes are impossible
under this deal. The Joint Committee could close loopholes and cap tax expenditures.
It could impose a value-added tax, or even a tax on carbon.”
There will be tax increases. The Deficit Commission will have at least one weak
kneed Republican and the commission will only be as strong as its weakest link. The
Bush tax cuts will also absolutely expire and not be renewed.
The alternative for the GOP would be seeing massive defense cuts and being blamed
for senior citizens seeing their medicare cut. “But,” House Republican leaders
exclaim, “the cuts would not be to beneficiaries.”
True, the cuts would be punishing doctors who will respond by denying access to
medicare patients.
The Democrats are happy to force through taxes in the committee and then, when the
GOP opposes them, claim the GOP would rather hurt our soldiers and seniors than
raise taxes on “fat cat millionaires.”
And if we’ve learned nothing else these past few weeks, the GOP fears more than
anything else what the Democrats say about them. Don’t believe me on taxes? then ask
GOP leadership why they haven’t put in a clear statement prohibiting them or, even
better, why there is no prohibition on decoupling the middle class Bush tax cuts
from the upper income Bush taxes cuts.Last week in the Washington Post, the GOP
Leadership in Congress planted a hit job about me. How do I know they planted it? If
not obvious from the story itself, it was from the conversation between the reporter
and those she talked to.
One of the “attacks” on me was that I was too predictable. Yes, it is true. I am
predictable conservative and am not willing to sell out my conservatism for the
team. I hate to break it to you.
I was sorely tempted to do so now with this deal as our guys are running scared and
are convinced the August 2nd deadline is real. But the GOP is in denial, excited by
left wing hyperbole against the deal, and unable to see what is on the horizon.
There are stories in the press that (A) the White House and Treasury Department
won’t give the GOP information about how much money the U.S. has on hand and (B)
that both Democrat and Republican leaders are mad as hell that the markets haven’t
crashed so they could scare conservatives into taking a deal.
It is true — Republican and Democrat leaders are upset the market has not crashed.
Now, having run out the clock and admitted that Harry Reid and Mitch McConnell wrote
John Boehner’s plan (that was in the Washington Post), they now want to go back to a
grand compromise that yet again includes a super committee of Congress that can pass
tax increases with no way to block the committee.
And if they do somehow stop the committee or kill its idea, then our soldiers in the
field would see punitive cuts to the defense budget, even more so than seniors who
will see cuts to medicare. In other words, cuts so painful to right and left that
both will have to take the committee recommendation.
“But it’s okay,” they tell us. “The committee is structured in such a way that they
can’t get tax increases.” Having considered the matter carefully — this is utter
bullcrap.
So here’s what will happen. The people who are predictably willing to fold to save
face with the GOP will ridicule you, me, and the tea party. And in November, when
the chickens come home to roost and what I predict comes true yet again, they’ll
pretend yet again that they were with us the whole time.
But taxes will go up and the Democrats will have won, left wing hysteria
notwithstanding.
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We just passed the last exit before crashville.
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"We just passed the last exit before crashville."
Agreed. Thank God for the tea party without which this country would have no chance.
The Democrat party has succeeded in nearly bankrupting us. The Republicans trying to keep up with them in buying votes (I admit I was not against this strategy in the past) have contributed to it under Bush 2.
I am not sure we can correct this without some tax hikes however. The numbers are so astoungingly bad I just don't see how we can do this otherwise unless we want to see the breadlines and people begging in the streets again.
Washington has to come clean and tell us forget about retirement till 70 and just wait till the seniors see what real HMO medicine is like. I've seen it and know they will not like what they see. It will be worse under the private sector with companies like Humana who are brutally cruel when it comes to scimping on providing care.
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As CCP implied, it is too bad the big issues are not being addressed, merely postponed, like Medicare and Social Security.
All the discretionary money discussed this round is minimal in comparison.
Merely cutting what you pay doctors for Medicare is not a solution. More doctors will simply drop out;
better to raise the age to 67 or ....
I long for the old days of compromise. We need a joint committee finding a solution to cutting entitlements. It's not
a Democrat or Republican issue; it's an American issue.
As a side note, cut the defense budget. I am tired of spending billions upon billions of dollars when they are all added up on Iraq, Afghanistan and now Libya. Who is next? We don't even get a thank you. Rather, we are being told to leave. Quit being the world's policeman and imposing our opinion/beliefs. Save the lives and money and spend it on Americans in America.
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The power vacuum will be filled. Isolationism means you don't get into a war until it's quite possible you lose. Do you think the global jihad will just forget about us, JDN?
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I understand your point. But we are almost being kicked out of Iraq (who is to say what happens after we leave), Afghanistan is and has been a quagmire for hundreds of years (we aren't going to change it; ask the Russians) and Libya, et al, while I feel sorry for the freedom fighters, it's not our fight. Nor is upheavals in Africa, et al our fight. Save American lives, save the money and spend it on America. I'm not sure our efforts one way or the other make a difference, oddly we seem to create even more enemies, nor do I think if most of the Middle East fell under Sharia Law (isn't it already?) that it would directly affect America. If you don't like it, don't go there. Let them rot. I worry far more about China both economically and militarily than "global jihad". I worry about America's future, not the Middle East except we need their oil.
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REturning to the subject of the debt farce deal, a key question: Does the "Read our lips, no new taxes in this deal" apply to the expiration of the Bush Tax Rates?
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First this: "Returning to the subject of the debt farce deal, a key question: Does the "Read our lips, no new taxes in this deal" apply to the expiration of the Bush Tax Rates?"
Of course the 'Bush tax cuts already expired. These extensions therefore are the Obama rates! In spite of me being told repeatedly by a liberal that expiration of tax cuts (from a previous decade) is NOT an increase of any kind, I can answer only for my own opinion of how Republicans will be judged - YES!
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Here is Sen. Marco Rubio (R-FL) addressing the partisanship of the moment and the need for a budget and putting controls on spending: http://www.youtube.com/watch?v=_68GjR6V6zI
"Compromise that is not a solution is a waste of time. If my house was on fire, I can't compromise about which part of the house I'm going to save. You save the whole house - or it will all burn down. We either save this country or we do not. And to save it, we must seek solutions."
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If you freeze spending at current levels under current Washington DC-speak, it is a 9 1/2 trillion dollar cut.
In the real world, almost nothing ever called a 'cut' has actually been a case of spending that actually goes down - on anything!
Both Rand Paul and Rush Limbaugh are saying it is all about baseline budgeting - more famous people caught reading the forum because that has been Crafty's focus for quite some time:
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http://www.rushlimbaugh.com/home/daily/site_080211/content/01125106.guest.html
Rand Paul: The deal that is pending before us now," get this, "Adds at least $7 trillion to our debt over the next 10 years." Not $2.4 trillion; $7 trillion. "The deal purports to 'cut' $2.1 trillion, but the 'cut' is from a baseline that adds $10 trillion to the debt." (Doug: How can you have a baseline - where things should be - that adds trillions to the debt. The 'baseline' should add ZERO to the debt and the elected officials can start from there!)
Rush L: As you well know, because we've been explaining this in easily understandable detail all week. I love the illustration. We could prepare a budget that is a freeze next year that doesn't spend a dime more than this year, and it would be scored as a nine and a half trillion-dollar cut because of the baseline, because of how the budget is expected to grow. This deal, even if all targets are met and the Super Committee wields its mandate - results in a BEST case scenario of still adding more than $7 trillion more in debt over the next 10 years. That is sickening.
-------------------
I say everybody take a deep breath, enjoy your August, understand that we are still taking on $4 billion dollars a day of new debt accumulating with interest to eternity, and come back angry, focused, and committed to do whatever each of us can do to try to make a difference and solve this. The debt ceiling wasn't really the big opportunity to change course although both sides pretended for a while that it was. Even the Ryan plan involves taking on significant new debt for about as far as the eye can see. These things are settled in elections and we have a short time to put together a team, an agenda, and a message. The problem in past elections is that they simply have pitted 'our' big spenders against their big spenders. This time maybe we can offer a combination of real spending restraint and pro-growth economics up against their same old stagnation/class-envy agenda of tax more, regulate more, and spend without limits, and we can try to win!
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Tail wags for the recognition.
BTW I often struggle to concisely explain BLB. I like the "If you freeze spending, that would be called a $9.5T cut" approach. Not bad!
BTW here this from Senator Rand Paul. Some important details to be noted in here e.g. how it is now easier for Baraq to raise the debt ceiling.
========
Open Letter: Why I Oppose the Debt Ceiling Compromise
Published on 01 August 2011 by admin in Press Releases
0
WASHINGTON, D.C. – Today Sen. Rand Paul issued an open letter on the subject of the
debt ceiling compromise facing the Senate. Below is that letter.
To paraphrase Jim DeMint: When you’re speeding toward the edge of a cliff, you don’t
set the cruise control. You stop the car.
The current deal to raise the debt ceiling doesn’t stop us from going over the
fiscal cliff. At best, it slows us from going over it at 80 mph to going over it at
60 mph.
This plan never balances. The President called for a “balanced approach.” But the
American people are calling for a balanced budget.
This deal does nothing to fix the overreaches of both parties over the past few
years: Obamacare, TARP, trillion-dollar wars, runaway entitlement spending. They are
all cemented into place with this deal, and their legacy will be trillions of
dollars in new debt.
The deal that is pending before us now:
· Adds at least $7 trillion to our debt over the next 10 years. The deal purports to
“cut” $2.5 trillion, but the “cut” is from a baseline that adds $10 trillion to the
debt. This deal, even if all targets are met and the Super Committee wields its
mandate – the BEST case scenario is still $7 trillion more in debt over the next 10
years. That is sickening.
· Never, ever balances.
· The Super Committee’s mandate is to add $7 trillion in new debt. Let’s be clear:
$2.5 trillion in reductions off a nearly $10 trillion,10-year debt is still $7
trillion in debt. The Super Committee limits the Constitutional check of the
filibuster by expediting passage of bills with a simple majority. The Super
Committee is not precluded from any issue therefore the filibuster could be rendered
most. In addition, the plan harms the possible passage of a Balanced Budget
Amendment. Since the goal is never to balance, having the BBA as a “trigger” ensures
that the Committee will simply report its $7 trillion in new debt and never move to
a BBA vote.
· Cuts too slowly. Even if you believe cutting $2.5 trillion out of $10 trillion is
a good compromise, surely we can start cutting quickly, say $200 billion-$300
billion per year, right? Wrong. This plan so badly backloads the alleged savings
that the cuts are simply meaningless. Why do we believe that the goal of $2.5
trillion over 10 years (that’s an average of $250 billion per year) will EVER be met
if the first two years cuts are $20 billion and $50 billion. There is simply no path
in this bill even to the meager savings they are alleging will take place.
Buried in the details of this bill there also appears to be the automatic Debt
increase as proposed a few weeks ago. Second half of the debt ceiling is increased
by President automatically and can only be stopped by two-thirds of Congress. This
shifts the Constitutional check on borrowing from Congress to the President and
makes it easier to raise the debt ceiling. This would cede debt ceiling to the
President, and none of the triggers in this deal include withholding the second
limit increase.
Debt agencies have clearly stated the type of so-called cuts envisioned in this plan
result in our AAA bond rating being downgraded. Ironically then, the only way to
avoid our debt from downgrading and the resulting economic problems that stem from
that is for this bill or the resulting Super Committee to fail, so that a Balanced
Budget Amendment can save our country.
This plan does not solve our problem. Not even close. I cannot abide the destruction
of our economy, therefore I vigorously oppose this deal and I urge my colleagues and
the American people to do the same.
Sincerely,
Rand Paul, M.D.
U.S. Senator
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Rand Paul: "This plan never balances. The President called for a “balanced approach. But the American people are calling for a balanced budget."
Yes and no. This bipartisan farce passed easily at the end because the people really are not calling for an immediate balance to the budget which would effectively be a 43% across the board cut in spending.
Also, most of these 'cuts' are unnamed, hence the power of the 'super'committee.
So we passed the most pretend cuts that we can with this cast of characters. The next step is to grow the economy and keep the President on the defensive - too busy to propose or sell another round of faux-stimuli.
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"This bipartisan farce passed easily at the end because the people really are not calling for an immediate balance to the budget which would effectively be a 43% across the board cut in spending."
Exactly right! Don't touch my Soc sec! Don't touch my Medicare! Don't touch my retirement! I'm entiltled to retirement, unionization, paid time off, health care, food, cell phone and internet connections, safe food and water driving and flying (to avoid being the 1 in 10 million who might suffer from an accident), unemployment, education, college, and on and on and on (except *free* legal care).
I don't think there is real hope till we crash and people wake up.
Again only the tea party has any legs. And the left demonizes them to preserve their power. And the center right likes their power too and is trying to keep up with the vote buying of the left in trying to appear "compromising" and "reasonable".
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Yup.
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The country's debt situation in real terms actually got worse this week under the continuing anchor of Obamanomics. Debt is measured in dollars but most judged as a percentage of income. Because of sudden new borrowings and the economic growth downgrades and the past economic results downgrades, total debt now exceeds total GDP of the US economy for the first time since 1947 according to US Treasury figures:
http://news.yahoo.com/us-aaa-rating-still-under-threat-204040123.html
US borrowing tops 100% of GDP: Treasury AFP
US debt shot up $238 billion to reach 100 percent of gross domestic project after the government's debt ceiling was lifted, Treasury figures showed Wednesday.
Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country's spending commitments reached a breaking point and it threatened to default on its debt.
The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.
Public debt subject to the official debt limit -- a slightly tighter definition -- was $14.53 trillion as of the end of Tuesday, rising from the previous official cap of $14.29 trillion a day earlier.
Treasury had used extraordinary measures to hold under the $14.29 trillion cap since reaching it on May 16, while politicians battled over it and over addressing the country's bloating deficit.
The official limit was hiked $400 billion on Tuesday and will be increased in stages over the next 18 months.
The last time US debt topped the size of its annual economy was in 1947 just after World War II.
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http://www.usnews.com/news/washington-whispers/articles/2011/08/03/report-obama-administration-added-95-billion-in-red-tape-in-july
http://static.usnews.com/documents/whispers/8-2-11-31-days-updated.pdf
Report: Obama Administration Added $9.5 Billion in Red Tape in July
Many House and Senate conservatives are reviving their battle against federal regulations, claiming that the president hasn't stopped issuing job-killing rules during the debt ceiling fight. "While Washington and Americans have been focused on the debt ceiling, the Obama administration has continued to roll out more crushing red tape," said a spokesperson for Wyoming Republican Sen. John Barrasso, who's been championing the regulation fight.
At Tuesday's GOP Senate caucus lunch, the lawmakers said that they will renew their efforts, supported by business groups like the U.S. Chamber of Commerce. In a memo Barasso handed out to the lawmakers, he claimed that the administration in July only has put in $9.5 billion in new regulatory costs by proposing 229 new rules and finalizing 379 rules. Among those he cited were EPA, healthcare reform, and financial regulatory reform rules.
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Well the champion of women's rights Brock at least got us all to chip in for birth control.
So what if we go bankrupt.
***Jewish World Review August 3, 2011 / 3 Menachem-Av, 5771
Timid establishment chooses incrementalism over saving the future
By Tony Blankley
http://www.JewishWorldReview.com | The debt deal, if it sticks, is a triumph for the bipartisan, status quo-clinging Washington establishment. Here is a prediction: Between now and January 2013, total actual spending cuts will be minimal. That will result from the following: (1) The $900 billion deficit reduction is almost all back-loaded to the years beyond 2012. (2) The select committee created by the budget deal will fail to pass a "second tranche" deficit-cut package of an additional $1.5 trillion. (3) The "trigger" will be pulled that will identify an additional $1.2 trillion. (4) The pulled trigger won't require any more deficit reductions to go into effect until 2013, when a new Congress and either a new president or a re-elected President Obama will be able to re-decide (or repeal) all these decisions. That president will also have to decide what to do with the expiring Bush tax cuts, which if extended would be scored to increase deficit by $3.5 trillion over ten years. (5) The debt ceiling will not need to be raised until 2013.
It is true that the Tea Party has "won" within the context of what constitutes a political win in Washington. But have they accomplished enough to change our future? No, by this deal, they have not.
To have a chance at actually changing our future, Washington would have to risk shocking and unpredictable change that might rock, temporarily, the financial prosperity of the nation. The establishment is not ready for that. To wit: Whether to risk radical change now or not is the measure of whether to support the deal.
Thus, Washington politicians and politically alert citizens across the country can be broadly divided into those who fear losing the status quo and those who fear losing the future. But it is less a matter of ideology (for both left and right) and more a matter of urgency.
It's not that pro status quo Republicans, for instance, don't worry about the state and debt getting ever bigger and more intrusive - they do - just as left wing Democratic establishment politicians worry about income disparities and insufficient social welfare programs.
What divides the GOP establishment types from the Tea Party people on the right is that the GOP establishment types don't feel sufficiently urgent about intrusive statism and unbearable debt to risk action now that would radically change the status quo governing process, policies and politics. Similarly, the Democratic establishment is not prepared to fight now for a radical change to the left.
The establishment explains — rather condescendingly — to the "unsophisticated" tea party and similar people that political change under our constitutional system is incremental. Take what you can get and come back for a little more next season. That is an argument about American political history that has usually been right, but not always.
When the insistent demands of the near future require more than incremental change, the American political process can become quite radical. For example, the demands of the common man against the aristocratic federalist policies from the 1790s to the early 1800s forced radical change, ending federalists and bringing in first Jeffersonianism (in the revolution of 1800) and Jacksonianism in the 1830s. The old order was overthrown by democratic radicalism. Most conspicuously, the urgent demands of abolition and secession brought on the shocking radical solution of the Civil War in 1861.
The vast immigration to post-Civil War America brought on radical progressivism, which caused the suppression of some of the democratic power of the new immigrants and closed the immigration door to non-Northern Europeans almost entirely in 1924. Obviously, the shock of the Great Depression brought on radical statism in Washington — again overthrowing many status quo interests.
So, who's the fool: The Tea party people, who say we must do much more now to avert the coming debt and statism disaster, or the status quo establishment who say don't rock the fiscal, debt-ceiling boat — we'll get to fixing the future in...the future?
I've been a Reagan conservative incrementalist all my political life. But the near and ominous debt and statism future is radicalizing me quickly. We must do much more, much faster than this deal offers if we are to save our future. The establishment needs to start emotionally de-investing in a fast dying status quo and prepare to embrace real change.
America will lose its triple-A Treasury rating not because a rating agency says so (and despite a debt deal) but because the anticipated federal debt to gross domestic product ratio — and the $60 trillion of unfunded entitlements that is driving that ratio— can be seen by every bond buyer on the planet.
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As if that weren't enough, I saw a WSJ editorial today which explained that the purported Medicare cuts that will be paired with the $500B cuts of the US military in the event that the SuperCommittee does not come up with something passed by Congress and signed by Baraq will be in purported payments to PROVIDERS, NOT BENEFITS. i.e. the law of supply and demand will be repealed and the health care system will be commanded to offer the same level of service for less money. This is regularly done, AND UNDONE already. (Perhaps our docs here can help flesh this out?) Bottom line:
a) BO gets past the 2012 election
b) the Bush tax rates will expire (as best as I can tell) but this will not be called a tax increase
c) Medicare will not be cut
d) the Reps will have to allow additional tax increases or allow the military to be decimated
We are so fuct :cry: :x
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Change!
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[youtube]http://www.youtube.com/watch?v=MqoGORXAv2o&feature=player_embedded[/youtube]
http://www.powerlineblog.com/archives/2011/07/doorbell.php
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Mark Steyn
August 6, 2011 10:00 A.M.
Mad Debt
A threat to liberty.
On Thursday, in honor of Barack Obama’s 50th birthday, the Dow dropped ten points for every year he has walked among us. It was the ninth largest drop in history. We should be relieved he wasn’t turning eighty.
The markets are apparently concerned that the entire global economy may be “stalling.” You don’t say? Observant fellows, these market chappies.
And yet, in a certain sense, these are still the good times. At the end of the week, U.S. Treasury yields plunged to Eisenhower-era rates. America, explained Ethan Harris of Bank of America Merrill Lynch, “still gets the safe haven money.” That’s to say, as crazy as Washington is, Europe is perceived to be crazier. In confirmation of the point, over in Italy, which is (believe it or not) a G7 economy, police raided Moody’s and Standard & Poor’s over allegations that all the meanie things that the rating agencies have been saying about the Italian economy were having an impact on Italian stock prices. Apparently that’s a crime in Italy. They’re not yet shooting the messenger. But they are dragging him through the streets in chains pour encourager les autres. Good luck with that.
But I wonder if “the safe haven money” is quite as safe as its investors assume. Under the “historic” “resolution” of the debt crisis (and don’t those very words “debt crisis” already feel so last week?), America will be cutting federal spending by $900 billion over ten years. “Cutting federal spending by $900 billion over ten years” is Washington-speak for increasing federal spending by $7 trillion over ten years. And, as they’d originally planned to increase it by eight trillion, that counts as a cut. If they’d planned to increase it by $20 trillion and then settled for merely $15 trillion, they could have saved five trillion. See how easy this is?
As part of this historic “cut,” we’ve now raised the “debt ceiling” — or, more accurately, lowered the debt abyss. Do you ever discuss the debt with your neighbor? Do you think he has any serious intention to repay the 15 trillion racked up in his and your name? Does your congressman? Does your senator? Look into their eyes. You can see the answer. And, if none of these parties seem inclined to pay down the debt now, what are the chances they’ll feel like doing so by 2020 when, under these historic “cuts,” it’s up to 23-25 trillion?
Like America’s political class, I have also been thinking about America circa 2020. Indeed, I’ve written a book on the subject. My prognosis is not as rosy as the Boehner-Obama deal, as attentive readers might just be able to deduce from the subtle clues in the title: After America: Get Ready For Armageddon. Oh, don’t worry, I’m not one of these “declinists.” I’m way beyond that, and in the express lane to total societal collapse. The fecklessness of Washington is an existential threat not only to the solvency of the republic but to the entire global order. If Ireland goes under, it’s lights out on Galway Bay. When America goes under, it drags the rest of the developed world down with it. When I go around the country saying stuff like this, a lot of folks agree. Somewhere or other, they’ve a vague memory of having seen a newspaper story accompanied by a Congressional Budget Office graph with the line disappearing off the top of the page and running up the wall and into the rafters circa mid-century. So they usually say, “Well, fortunately I won’t live to see it.” And I always reply that, unless you’re a centenarian with priority boarding for the ObamaCare death panel, you will live to see it. Forget about mid-century. We’ve got until mid-decade to turn this thing around.
Otherwise, by 2020 just the interest payments on the debt will be larger than the U.S. military budget. That’s not paying down the debt, but merely staying current on the servicing — like when you get your MasterCard statement and you can’t afford to pay off any of what you borrowed but you can just about cover the monthly interest charge. Except in this case the interest charge for U.S. taxpayers will be greater than the military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel combined.
When interest payments consume about 20 percent of federal revenues, that means a fifth of your taxes are entirely wasted. Pious celebrities often simper that they’d be willing to pay more in taxes for better government services. But a fifth of what you pay won’t be going to government services at all, unless by “government services” you mean the People’s Liberation Army of China, which will be entirely funded by U.S. taxpayers by about 2015. When the Visigoths laid siege to Rome in 408, the imperial Senate hastily bought off the barbarian king Alaric with 5,000 pounds of gold and 30,000 pounds of silver. But they didn’t budget for Roman taxpayers picking up the tab for the entire Visigoth military as a permanent feature of life.
And even those numbers pre-suppose interest rates will remain at their present historic low. Last week, the firm of Macroeconomic Advisors, one of the Obama administration’s favorite economic analysts, predicted that interest rates on ten-year U.S. Treasury notes would be just shy of nine percent by 2021. If that number is right, there are two possibilities: The Chinese will be able to quintuple the size of their armed forces and stick us with the tab. Or we’ll be living in a Mad Max theme park. I’d bet on the latter myself.
Did you know there’s a U.S. Bureau of the Public Debt? Hey, why not? There’s a bureaucracy for everything else. I’m sure somewhere or other there’s a CBO graph showing that by 2050 all federal revenues will be going either to the Chinese Politburo or to the lavish pension plans of retired officials of the Bureau of the Public Debt. At any rate, the BPD is headquartered in Parkersburg, West Virginia, and it’s easy to find because it’s the only building in the state other than the Klan lodge not named after Robert C. Byrd. The Bureau uses as its motto the words of Alexander Hamilton: “The United States debt, foreign and domestic, was the price of liberty.”
But in the early 21st century foreign and domestic debt is a threat to liberty. As the Brokest Nation in History drowns in its profligacy, its commissars will grow ever more rapacious and desperate. If you think Obama’s dreary attempt to blame America’s woes on corporate-jet owners is unbecoming to the chief of state, wait till he’s reduced to complaining about two-car families. By the way, if you’re reading this out on the runway at O’Hare, what’s the difference between a corporate jet landing and Obama flying in? With Air Force One, even when they switch the engines off, all you can hear is the whining.
No author writes a dystopian apocalyptic doomsday book because he wants it to happen: Apart from anything else, the collapse of the banking system makes it hard to cash the royalty check. You write a doomsday book in hopes you can stop it happening. But time is running short. If you think we’ve got until 2050 or 2025, you’re part of the problem.
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The gift that just keeps on giving, Rep. Barney Frank, recent Chairman of the House Financial Services Committee during the collapse of the nations financial systems, says that S&P is incompetent. http://www.realclearpolitics.com/video/2011/08/06/barney_frank_trashes_sp_as_incompetent.html
Meanwhile, S&P says the USA is on the negative side of AA+ meaning (to me) another downgrade is coming down the pike if the status quo continues.
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"But with respect to future debt; would it not be wise and just for that nation to declare in the constitution they are forming that neither the legislature, nor the nation itself can validly contract more debt, than they may pay within their own age, or within the term of 19 years." --Thomas Jefferson, letter to James Madison, 1789
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I just can't imagine why , , ,
http://www.youtube.com/embed/VtVbUmcQSuk
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US Debt: Moody’s AAA / S&P AA+
Moody’s reaffirmed its AAA-rating on US government debt last week, while Standard & Poor’s lowered it a notch to AA+. The US now has a split rating from the largest agencies. The bond market, even though it is not open right now, was well aware that a downgrade was possible, but will still lend 10-year money to the US government under 2.6%. In fact, after the US was put on credit watch by S&P in mid-July, US yields fell, they did not rise.
Ten-year interest rates, on Friday, were lower in the US than in Canada, Australia, United Kingdom, France, New Zealand, or Norway – all AAA-rated countries. In other words, S&P is leading the markets here, not following, as it normally does. For example, it did not lower its AAA rating on low-income, low credit score, no-doc, no-down-payment loans to homebuyers until the market crashed and became absolutely illiquid.
This downgrade of the US was based, not on an ability to pay bond-holders, but in consideration of the political turmoil the US has just gone through (over the debt deal) and the potential for more political turmoil in the months and years ahead. None of this is new to the market and the US is still the world’s reserve currency, which means actual default is virtually impossible.
The Federal Reserve has said that the downgrade by S&P has absolutely no impact for risk-based capital ratios. The Fed will still apply a 0% risk-weighted capital requirement on Treasury debt. Some investors (funds, plans, or other investment vehicles) could be forced to alter their portfolios because of investment guidelines. However, most investment committees knew this downgrade could happen and also have the flexibility to change these guidelines relatively easily. In other words, forced selling (or buying) of Treasury, or other, types of debt will likely be benign. S&P left the short-term debt rating at A-1+, its highest, which means money market funds will not be affected. We do not look for any kind of major market disturbance.
The equity markets had a rough week and could still be jittery on Sunday night and Monday morning. Short-sellers will likely try to take advantage of this event. However, the S&P downgrade alters nothing about the economy or corporate profitability in the short, medium or even long- term. We still hold to our comments from last week that the markets are over-reacting to fears about the economy, the debt deal, or European financial issues. (Link)
In the end, while we agree with S&P’s sentiment about the direction of US spending patterns, we do not agree with the S&P downgrade. We believe that S&P is entirely too pessimistic about the ability of the US to pay its debts and solve its problems. History shows that this country has found a way to alter course before problems became a full-blown crisis. In fact, the US economy was in much worse shape during the late 1970s and early 1980s. Elections of the early 1980s changed the country’s course then, and a boom of unprecedented magnitude ensued.
If this move by S&P helps the US get more serious about cutting spending, then it will have been a very positive development. If it influences the political environment by pushing the US to a more conservative set of fiscal values it will be even more positive than that. There is a titanic battle of economic and political philosophy taking place in the US today. S&P wants to be a player in this battle, but in the end it will have a relatively minor role.
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I listened to Nat'l People's Radio this AM, where they attempted to spin the downgrade as those darn tea partiers fault. :roll:
[youtube]http://www.youtube.com/watch?v=XGlbRrF_Bas[/youtube]
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Whatever one thinks of the credit-rating agencies—and we aren't admirers—it serves no good purpose to shoot the fiscal messengers. Friday's downgrade by Standard & Poor's of U.S. long-term debt to AA+ from AAA will be the first of many such humiliations if Washington doesn't change its economic and fiscal policies.
Investors and markets—not any single company's rating—are the ultimate judge of a nation's creditworthiness. And after their performance in fanning the credit and mortgage-security mania of the last decade, S&P, Moody's and Fitch should hardly be seen as peerless oracles.
Their views are best understood as financial opinions, like newspaper editorials, and they're only considered more important because U.S. government agencies have required purchasers of securities to use their ratings. We've fought to break that protected oligopoly, even as liberals in the Senate led by Minnesota's Al Franken have tried to preserve it. Federal bank regulators have been on Mr. Franken's side in this fight, so they can blame themselves in part for S&P's continued prominence.
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Yet is there anything that S&P said on Friday that everyone else doesn't already know? S&P essentially declared that on present trend the U.S. debt burden is unsustainable, and that the American political system seems unable to reverse that trend.
View Full Image
Getty Images
.This is not news.
In that context, the Obama Administration's attempt to discredit S&P only makes the U.S. look worse—like the Europeans who also want to blame the raters for noticing the obvious. Treasury officials and chief White House economic adviser Gene Sperling denounced S&P for relying on a Congressional Budget Office scenario that overestimated the U.S. discretionary spending baseline by $300 billion through 2015 and $2 trillion through 2021.
But even adjusting for that $2 trillion would only reduce U.S. publicly held debt to 85% or so of GDP—still dangerously high. And that assumes that recently agreed upon spending caps are sustained over a decade, something which rarely happens.
We think the larger problem with S&P, Moody's and Fitch is that they make no distinction over how a nation balances its books—whether through tax increases or spending reductions. Like the International Monetary Fund, the raters care only about balance.
This takes too little account of the need for faster economic growth, which is the only real path out of a debt crisis. Britain's government has earned rater approval for its fiscal consolidation, but its increases in VAT and income tax rates are hurting its tepid recovery. Letting the credit raters dictate tax increases is the road to an austerity trap.
The real reason for White House fury at S&P is that it realizes how symbolically damaging this downgrade is to President Obama's economic record. Democrats can rail all they want about the tea party, but Republicans have controlled the House for a mere seven months. The entire GOP emphasis in those seven months—backed by the tea party—has been on reversing the historic spending damage of Mr. Obama's first two years.
The Bush Presidency and previous GOP Congresses contributed to the current problem by not insisting on domestic cuts to finance the cost of war, and by adding the prescription drug benefit without reforming Medicare. But as recently as 2008 spending was still only 20.7%, and debt held by the public was only 40.3%, of GDP.
In the name of saving the economy from panic, the White House and the Pelosi Congress then blew out the American government balance sheet. They compounded the problem of excessive private debt by adding unsustainable public debt.
They boosted federal spending to 25% of GDP in 2009, 23.8% in 2010 (as TARP repayments provided a temporary reduction in overall spending), and back nearly to 25% this fiscal year. Meanwhile, debt to GDP climbed to 53.5% in 2009, 62.2% in 2010, and is estimated to hit 72% this year—and to keep rising. These are all figures from Mr. Obama's own budget office.
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...Rather than change direction this year, Mr. Obama's main political focus has been to preserve those spending levels by raising taxes. His initial budget in February for fiscal 2012 proposed higher spending. He then resisted the modest spending cuts that the GOP proposed for the rest of fiscal 2011.
He responded to Paul Ryan's proposal to reform Medicare and Medicaid by calling it un-American and unworthy of debate. In the most recent budget talks, he would only consider small entitlement reforms (cuts in payments to providers) if Republicans agreed to raise taxes. He has refused even to discuss ObamaCare or serious reforms in Medicare and Social Security. Meanwhile, federal payments to individuals continue to grow as a share of all spending, as the nearby chart shows.
This is how you become the Downgrade President.
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Despite S&P's opinion, there is no chance that America will default on its debts. The real importance of the downgrade will depend on the political reaction it inspires.
If the response is denial and blaming the credit raters, then the U.S. will continue on its current road to more downgrades and eventually to Greece. What has already become a half-decade of lost growth will turn into a lost decade or more.
If the response is to escape the debt trap by the stealth route of inflation—a path now advocated by many of the same economists who promoted the failed spending stimulus of 2009—then the U.S. could spur a dollar crisis and jeopardize its reserve currency status.
The better answer—the only road back to fiscal sanity and AAA status—is to reverse the economic policies of the late Bush and Obama years. The financial crisis followed by the Keynesian and statist revival of the last four years have brought the U.S. to this downgrade and will lead to inevitable decline. The only solution is to return to the classical, pro-growth economic ideas that have revived America at other moments of crisis.
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College students getting food stamps?
How did we get to this point? I never dreamed of expecting tax payers to pay for students food before.
From Kayla Neff who was receiving food stamps to buy food for her and her father:
"Students should be focusing on their education, not whether or not they'll be able to eat dinner or whether they can manage to find a job and balance it on top of their studies," Neff said in a Friday email interview from Mount Pleasant."
So how did we get to her next logical conclusion that her food should be paid for by taxpayers? Who the heck is she and why should others pay for her Mcdonald's. What is this? How about a loan? Why is the treasury a free bank in the minds of these people. They should have this they should have that. There is no end to this.
****Last Updated: August 08. 2011 6:22PM
30,000 college students kicked out of food aid program in Michigan
State's new eligibility rules to save $75M; more students got aid than thought
Paul Egan/ Detroit News Lansing Bureau
Lansing — Michigan has removed about 30,000 college students from its food stamp program — close to double the initial estimate — saving about $75 million a year, says Human Services Director Maura Corrigan.
Federal rules don't allow most college students to collect food stamps, but Michigan had created its own rules that made nearly all students eligible, said Brian Rooney, Corrigan's deputy director. As a result, the number of Michigan college students on this form of welfare made the state a national leader. For example, Michigan had 10 times the number of students on food stamps as either Illinois or California, Rooney said.
Cutting off the students is part of what Corrigan says is an effort to change the culture of the state's welfare department and slash tens of millions of dollars of waste, fraud and abuse.
"Maybe (students) could go get a part-time job — that's what I did," said Corrigan, a former justice of the Michigan Supreme Court who attended Detroit's Marygrove College and University of Detroit Mercy School of Law.
"We want to encourage people to be self-sufficient, not to be dependent on the government," she said in an interview with The Detroit News.
But critics say state funding has shrunk and tuition has skyrocketed since Corrigan attended college in the late '60s and early '70s. They cite Michigan's still-battered economy and say the suffering the cuts will create won't be apparent until after cash-strapped students return to campuses this fall.
Corrigan, appointed by Republican Gov. Rick Snyder in January to head the $6.9 billion Department of Human Services, has also ordered administrators to start looking at applicants' assets, not just their income. That move follows an uproar after it was revealed Leroy Fick of Auburn remained eligible for food stamps and continued using them after he won $2 million in the state lottery TV show "Make Me Rich!" in June 2010.
If cutting millionaires off food stamps is a no-brainer, some say cutting off most students is less clear cut.
Kayla Neff, a 19-year-old Spanish and computer science student at Central Michigan University who qualified for food stamps in September, said it's tough to find a job in Michigan, particularly for students with little experience.
Neff said she and her father share about $150 a month in grocery money from the program, which "made all the difference in the world," but her eligibility is now under review.
"Students should be focusing on their education, not whether or not they'll be able to eat dinner or whether they can manage to find a job and balance it on top of their studies," Neff said in a Friday email interview from Mount Pleasant.
CMU was singled out by Corrigan as having publicized students' eligibility for food stamps on the university's website. University spokesman Steven Smith said Friday he wanted to research the issue, but "I am confident no official CMU site would promote this kind of activity."
The number of students taken off food stamps was close to double the estimate of 10,000 to 18,000 before the policy change was implemented in April.
Under the federally funded program, college students generally aren't eligible, Rooney said. But Michigan had created an exception for those participating in a valid employment and training program. Employment training was defined as attending college, he said.
Corrigan said one large Michigan school, which she did not identify, had 3,500 students on the program.
Many see using food stamps while attending school as a scam, and former Detroit Mayor Kwame Kilpatrick described it in much that way in his new autobiography.
Kilpatrick, who was recently released from state prison after serving time for violating probation and awaits trial on federal corruption charges, revealed he used food stamps when he attended Florida A&M University in the late 1980s and early 1990s. At the time, his mother was a state representative and his father was a top Wayne County official.
"The food stamp game is an old hook-up in neighborhoods from Detroit to Tallahassee," Kilpatrick said in the book. "If you could get them, especially as a struggling college student, then you did."
Though still commonly known as food stamps, the state's Food Assistance Program now uses debit cards called Bridge Cards to provide assistance to eligible recipients.
Even after the recent removal of 30,000 college students from the food stamp program, close to 2 million Michigan residents — one in five — are on the program, Rooney said.
Not all college students have been kicked off food stamps. For instance, single moms who go to school can still be eligible, as can certain students who work at least 20 hours a week.
Still, critics say Corrigan's changes are too sweeping and each student's case should be examined on its merits.
Nate Smith-Tyge, director of the Michigan State University Student Food Bank, said the stereotypical profile of the middle-class freshman getting dropped off at the new dorm room by Mom and Dad no longer applies.
"A more nuanced approach would have been more humane," Smith-Tyge said. "This sort of carte blanche decision is going to adversely affect people who really needed it. At what cost does it eliminate some abuse?"
Corrigan also detailed steps she is taking to make sure big lottery winners can no longer get food stamps.
As part of its arrangement for federal funding, Michigan in 2000 opted to determine eligibility based only on income and not consider assets, partly because the program is easier to administer that way, Rooney said.
Starting Oct. 1, assets will also be considered in determining eligibility for new applicants, he said. The assets of existing food stamp recipients will also be examined as their cases are re-evaluated every six months.
"We're going to take a look at everyone in the system," he said.****
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I like the pick of former head of the Club for Growth Sen. Pat Toomey (R-PA) to this committee. A focus on growth will be necessary to move forward out of the current stalemate. All 6 Republicans picked have signed no tax increase pledges. Rob Portman also seems particularly in tune with tax reform which is potentially the fastest way to add revenue into the mix.
On the D side, Max Baucus might be the most possible to persuade of the D's because the divided state of Montana is not exactly San Francisco or New York for politics. One lesson from in his last reelection could be that needing 91% of your campaign money to come from out of state is something that conceivably could backfire. Baucus voted for the 2001 tax cuts and in 2008 for repealing the estate tax.
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Thomas Sowell, I respect very much, says budget deal is a bad deal, boxes the GOP into a corner. (Pyrrhic is a 'victory' costly to the point of negating or outweighing expected benefits)
A Pyrrhic ‘Victory’
By Thomas Sowell
In Don Marquis' classic satirical book, "Archy and Mehitabel," Mehitabel the alley cat asks plaintively, "What have I done to deserve all these kittens?"
That seems to be the pained reaction of the Obama administration to the financial woes that led to the downgrading of America's credit rating, for the first time in history.
There are people who see no connection between what they have done and the consequences that follow. But Barack Obama is not likely to be one of them. He is a savvy politician who will undoubtedly be satisfied if enough voters fail to see a connection between what he has done and the consequences that followed.
To a remarkable extent, he has succeeded, with the help of his friends in the media and the Republicans' failure to articulate their case. Polls find more people blaming the Republicans for the financial crisis than are blaming the President.
Why was there a financial crisis in the first place? Because of runaway spending that sent the national debt up against the legal limit. But when all the big spending bills were being rushed through Congress, the Democrats had such an overwhelming majority in both houses of Congress that nothing the Republicans could do made the slightest difference.
Yet polls show that many people today are blaming the Republicans for the country's financial problems. But, by the time Republicans gained control of the House of Representatives, and thus became involved in negotiations over raising the national debt ceiling, the spending which caused that crisis in the first place had already been done — and done by Democrats.
Had the Republicans gone along with President Obama's original request for a "clean" bill — one simply raising the debt ceiling without any provisions about controlling federal spending — would that have spared the country the embarrassment of having its government bonds downgraded by Standard & Poor's credit-rating agency?
To believe that would be to believe that it was the debt ceiling, rather than the runaway spending, that made Standard & Poor's think that we were no longer as good a credit risk for buyers of U.S. government bonds. In other words, to believe that is to believe that a Congressional blank check for continued record spending would have made Standard & Poor's think that we were a better credit risk.
If that is true, then why is Standard & Poor's still warning that it might have to downgrade America's credit rating yet again? Is that because of the national debt ceiling or because of the likelihood of continued runaway spending?
The national debt ceiling is just one of the many false assurances that the government gives the voting public. The national debt ceiling has never actually stopped the spending that causes the national debt to rise to the point where it is getting near that ceiling. The ceiling simply gets raised when that happens.
Just a week before the budget deal was made at the eleventh hour, it looked like the new Republican majority in the House of Representatives had scored a victory by getting the President and the Congressional Democrats to give up the idea of raising the tax rates — and to cut spending instead. But now that the details are coming out, that "victory" looks very temporary, if not illusory.
The price of getting that deal has been having the Republicans agree to sitting on a special bipartisan Congressional committee that will either come to an agreement on spending cuts before Thanksgiving or have the budgets of both the Defense Department and Medicare cut drastically.
Since neither side can afford to be blamed for a disaster like that, this virtually guarantees that the Republicans will have to either go along with whatever new spending and taxing that the Democrats demand or risk losing the 2012 election by sharing the blame for another financial disaster.
In short, the Republicans have now been maneuvered into being held responsible for the spending orgy that Democrats alone had the votes to create. Republicans have been had — and so has the country. The recent, short-lived budget deal turns out to be not even a Pyrrhic victory for the Republicans. It has the earmarks of a Pyrrhic defeat.
http://www.jewishworldreview.com/cols/sowell081011.php3
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Yeah, but we are cutting $21B this year and $45B next year :roll: :roll: :roll: Sowell understates just how bad this deal was and just how incompetent the Reps have been in communicating with the American people.
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http://www.daybydaycartoon.com/2011/08/14/
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Just to expand slightly on maternity/ paternity leave from the humor on media issues. I have taken 17 years off of full time work to raise just one - everybody's situation is different. Mom bonding with baby is great. Maybe 2 years or 5 years should be the law - and mom's without babies can pay for it?? Dumping the kid at day care full time at 2 days or 91 days is unbelievable to me. No slam on Ms. Kelly, perhaps her husband or the kids grandparents watch and I doubt she is on the air 40 hours a week, who knows. Point is that you can make a federal law to fit her situation, even though she already has it in her contract, then it applies to all women in all states in all industries at all pay levels and all company sizes. Add gender fairness to that and it applies to men too. Then if the employer can't afford to pay people not working, the company closes. You can't pay out what you don't take in. Even if you write the law perfectly and it all makes sense, it is one more mandate on top of thousands of others and it causes less hiring. 3 months off, if that is the magic number, could be the expense of the employee, the choice to not get paid for not working - that is extreme! 18 years off could be paid for with accumulated savings and investments if that was still legal or by having the other spouse work, if half the pay didn't go to the government - for other people's children. A tangled web we weave - there is not a one size fits all solution available, I'm sorry.
General Motors before the bailout was paying healthcare for 10 times more people than actually worked there. 9 out of 10 were on some kind of leave until the cost of healthcare surpassed the cost of all materials in the car, not to mention labor. The what could possibly go wrong question already has. Only big business knows how to jump through all the hoops, take GE with no income tax, but big business is inefficient and losing out to leaner operations everywhere else.
Can't people negotiate for themselves in a free society? Or understand a connection between work and pay?
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Years ago in another life I was an employee benefit consultant at a very large consulting firm advising large (50,000+ employees) corporations.
In the real olden days, even basic maternity wasn't covered. Nor was it considered a "disability". Medical complications were covered however. The theory
being that "maternity" is "Voluntary" and just like nose jobs and breast jobs, if you want it, great, but don't expect insurance or your employer (most large plans are self funded) to pay for it. Simply save your money if you want kids. It should not be a "medical necessity" nor should it be "unexpected".
Times have changed in more ways than one...
How you are "entitled" to pay while out on maternity leave is beyond my understanding.
ps GM's healthcare plan covered so many people and was prohibitively expense because they had contractual retiree benefits to pay. Worse, they did not fund properly, but it's not rocket science. I just wanted it noted that these are not abled bodied employees on "some kind of leave".
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By JOHN STEELE GORDON
With the national debt certain to be a front-and-center issue in the 2012 campaign, it is important to understand the true measure of its size. That size seems to vary considerably in news reports. Some news organizations use the debt held by the public, others use total debt. Still others report total future liabilities of the federal government, without making clear what, exactly, that means.
So, a few definitions. The total national debt of the United States is the sum of all federal bills, notes and bonds that have been issued by the Treasury and not yet redeemed. The publicly held debt is the sum of the Treasury securities held by individuals, financial institutions and foreign governments. (That's not just the Chinese, by the way. Both Great Britain and Japan are also major holders of U.S. debt, as are many other countries in lesser amounts.)
The intra-governmental debt is the sum of Treasury bonds held by agencies of the federal government, principally the so-called Social Security Trust Fund. The liabilities equal the future pensions, health care, Social Security payments, etc., that are promised under current legislation.
But while the Treasury securities bear the full faith and credit of the United States and any failure to pay the interest or redeem the principal in a timely fashion would be a default, the liabilities are liabilities only so long as current law remains unchanged. If, for instance, Congress were to adjust the formula by which Social Security cost-of-living increases were calculated or change the age of eligibility, future federal liabilities would shrink by trillions of dollars instantly.
Should the intra-governmental debt be counted when discussing the national debt? I think the answer is yes. As the Social Security surplus disappears (it did, at least temporarily, in 2010) as the baby boomers increasingly retire, the Treasury will be asked to redeem more and more of these federal bonds.
Congress will then have three options: cut spending elsewhere, raise taxes, or borrow the money in the bond market, thus converting the intra-governmental debt into publicly held debt. The last of the three options is the only plausible one and so the intra-governmental debt should be counted as though it were publicly held debt, as that's exactly what it will be in the fullness of time.
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.In absolute numbers, the total public debt as of Aug. 11 was $9.924 trillion, and the intra-government debt was $4.666 trillion, for a total of $14.587 trillion. That's well over 300 million times the country's median household income. Stacked as dollar bills, it would reach 920,953 miles high, almost four times as far from Earth as the moon.
But while these numbers are fun to play with, they don't mean much. It's the debt's size relative to gross domestic product that matters, just as personal debts must be measured against a person's income before they can be properly evaluated. The GDP of the United States was $15.003 trillion at the end of the first quarter in 2011. That makes the public debt equal to 66.1% of GDP and the intra-governmental debt 31.1%. Total debt is now 97.2% of GDP and climbing rapidly.
And it's the climbing rapidly part that is worrisome, not the debt's current size relative to GDP. Indeed, the debt has been substantially higher by that measure in earlier times. In 1946, in the immediate aftermath of World War II, it was 129.98% of GDP. But while the debt had increased enormously during the war (it had been 50% of a much smaller GDP in 1940), it did not increase substantially over the next 15 years. It was $269 billion in 1946 and $286 billion in 1960. The American economy grew so much in those years that the debt, while slightly up in absolute terms, was down to only 58% of GDP by 1960.
The debt grew to $370 billion in the next decade, but again economic growth (and, towards the end of the 1960s, inflation) continued to reduce it relative to GDP. In 1970 it was a mere 39%, the lowest it had been since the depths of the Great Depression. And while the debt nearly tripled in the 1970s (to $909 billion), the raging inflation of that decade caused the debt to continue to decline to 34.5% of GDP.
When the Federal Reserve under Paul Volcker broke the back of the 1970s inflation, the debt relative to GDP began to soar. Why? Because Washington continued to increase spending faster than government revenues increased (and revenues increased a whopping 99.4% in the 1980s thanks to the great boom that began in 1983). The debt was 58.15% of GDP in 1990, a full 24 percentage points above its 1980 low. It continued to increase dramatically in the early 1990s, reaching 68.91% of GDP in 1994.
But then a Republican Congress was swept into power that year, the first time the GOP controlled both houses of Congress since 1954, and President Clinton tacked sharply to the center. In the next six years, while revenues increased 61%, federal outlays increased only 22%. The years 1998-2000 actually showed the first surpluses in the federal budget in 30 years. And the debt, relative to GDP, declined between 1994 and 2000 to 57.3% from 68.91%.
That decline ended in 2001 following the collapse of the dot-com bubble and rising unemployment in the resulting recession. By 2003 the debt-to-GDP ratio had risen to 61.7%. Many blame the Bush tax cuts for adversely impacting federal revenues, causing the debt to spiral upwards. But that is just not true. Federal revenues declined by almost 12% in the early years of the decade, but when the tax cuts fully kicked in in 2003, the economy began to grow strongly again and federal revenues increased 44% in the next four years, while unemployment fell to 4.2% from 6.2%. Federal outlays in those four years increased by only 26.4%, and while the debt-to-GDP ratio increased to 64.8% by 2007, that was still well below what it had been in 1994.
Only with the severe recession that officially began in mid-2007 did the debt-to-GDP ratio begin to soar once more. It reached 67.7% by Oct. 1, 2008, near the end of the Bush administration. A year later, under President Obama, it was at 84.4%, a year later still 93.8%. It is headed quickly towards 100% and beyond without fundamental change in how Washington handles the public fisc.
But a president and a Congress committed to reforming Washington's ways face no insuperable problem getting the debt under control. No one expects the United States to pay off its debt (as we did in the administration of Andrew Jackson, the only time a major country has ever paid off its national debt). Even in a best-case scenario, the absolute size of the debt will not get smaller. But if we can summon the necessary political will, we can dramatically affect the measure of the debt burden that matters: the debt-to-GDP ratio.
Just do what we did after World War II, a period that saw its share of recessions and wars, both hot and cold: stop adding to the debt and let the growth of the GDP bring down the ratio.
If the country can experience GDP growth equal to what we had in the 1990s, the debt-to-GDP ratio would drop, in just a decade, to 56.7%, about where it was in 2000.
But that can only happen if the American electorate sends an unequivocal message in November 2012. Voters did exactly that in November 2010. Will they do it again?
Mr. Gordon is the author of numerous books, including "Hamilton's Blessing: The Extraordinary Life and Times of Our National Debt" (Walker, revised edition, 2010).
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http://www.nytimes.com/2011/09/05/business/in-internet-age-postal-service-struggles-to-stay-solvent-and-relevant.html?_r=1&nl=todaysheadlines&emc=tha2
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http://www.npr.org/2011/08/06/139027615/a-national-debt-of-14-trillion-try-211-trillion
A National Debt Of $14 Trillion? Try $211 Trillion
by NPR Staff August 6, 2011 All Things Considered
When Standard & Poor's reduced the nation's credit rating from AAA to AA-plus, the United States suffered the first downgrade to its credit rating ever. S&P took this action despite the plan Congress passed this past week to raise the debt limit.
The downgrade, S&P said, "reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."
It's those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan's Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.
"We have all these unofficial debts that are massive compared to the official debt," Kotlikoff tells David Greene, guest host of weekends on All Things Considered. "We're focused just on the official debt, so we're trying to balance the wrong books."
Kotlikoff explains that America's "unofficial" payment obligations — like Social Security, Medicare and Medicaid benefits — jack up the debt figure substantially.
"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap," he says. "That's our true indebtedness."
We don't hear more about this enormous number, Kotlikoff says, because politicians have chosen their language carefully to keep most of the problem off the books.
"Why are these guys thinking about balancing the budget?" he says. "They should try and think about our long-term fiscal problems."
According to Kotlikoff, one of the biggest fiscal problems Congress should focus on is America's obligation to make Social Security payments to future generations of the elderly.
"We've got 78 million baby boomers who are poised to collect, in about 15 to 20 years, about $40,000 per person. Multiply 78 million by $40,000 — you're talking about more than $3 trillion a year just to give to a portion of the population," he says. "That's an enormous bill that's overhanging our heads, and Congress isn't focused on it."
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By JAMES BOVARD
Last Thursday, President Obama proposed new federal jobs and job-training programs for youth and the long-term unemployed. The federal government has experimented with these programs for almost a half century. The record is one of failure and scandal.
In 1962, Congress passed the Manpower Development and Training Act (MDTA) to provide training for workers who lost their jobs due to automation or other technological developments. Two years later, the General Accounting Office (GAO) discovered that any trainee in this program who held a job for a single day was counted as "permanently employed"—a statistical charade by the Department of Labor to camouflage its lack of results. A decade after MDTA's inception, GAO reported that it was failing to teach valuable job skills or place trainees in private jobs and was marred by an "overriding concern with filling available slots for a particular program," regardless of what trainees actually needed.
Congress responded in 1973 by enacting the Comprehensive Employment and Training Act (CETA). The preface to the new law noted that "it has been impossible to develop rational priorities" in job training. So instead of setting priorities, CETA spent vastly more money, especially on job creation. Notorious examples reported in the press in those years included paying to build an artificial rock for rock climbers, providing nude sculpture classes (where, as the Pharos-Tribune of Logansport, Ind., explained, "aspiring artists pawed each others bodies to recognize that they had 'both male and female characteristics'"), and conducting door-to-door food-stamp recruiting campaigns.
Between 1961 and 1980, the feds spent tens of billions on federal job-training and employment programs. To what effect? A 1979 Washington Post investigation concluded, "Incredibly, the government has kept no meaningful statistics on the effectiveness of these programs—making the past 15 years' effort almost worthless in terms of learning what works." CETA hirees were often assigned to do whatever benefited the government agency or nonprofit that put them on the payroll, with no concern for the trainees' development. An Urban Institute study of the mid-1980s concluded that participation in CETA programs resulted in "significant earnings losses for young men of all races and no significant effects for young women."
After CETA became a laughingstock, Congress replaced it in 1982 with the Job Training Partnership Act. JTPA spent lavishly—to expand an Indiana circus museum, teach Washington taxi drivers to smile, provide foreign junkets for state and local politicians, and bankroll business relocations. According to the Labor Department's inspector general, young trainees were twice as likely to rely on food stamps after JTPA involvement than before since the "training" often included instructions on applying for an array of government benefits.
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President Obama touts his jobs training proposals in Virginia, June 8.
.For years the Labor Department scorned the mandate in the 1982 legislation to speedily and thoroughly evaluate whether the programs actually benefitted trainees. Finally, in 1993, it released a study that showed participation in JTPA "actually reduced the earnings of male out-of-school youths." Young males enrolled in JTPA programs had 10% lower earnings than a control group that never participated.
The Workforce Investment Act (WIA) replaced JTPA in 1998. Congress required a thorough evaluation of the law's impact on trainees by 2005. At last report, the Labor Department is promising it will be completed by 2015.
In his speech to Congress, Mr. Obama called for funding hundreds of thousands of summer jobs for teens, which he labeled "investing in low-income youth and adults." Yet such programs have been blighting work ethics for decades.
The GAO warned in 1969 that many teens in federal summer jobs programs "regressed in their conception of what should reasonably be required in return for wages paid." A decade later, it reported that most urban teens "were exposed to a worksite where good work habits were not learned or reinforced." And in 1985, a National Academy of Science study found that government jobs and training programs isolated disadvantaged youth, thus making it harder for them to fit into the real job market.
More recently, Mr. Obama's 2009 stimulus package expanded federally funded summer jobs. And so young men and women used puppets to greet aquarium visitors in Boston. Teens in Washington, D.C.'s Green Summer Jobs Corps maintained "school-yard butterfly habitats." And summer workers in Florida, the Orlando Sentinel reported, "practiced firm handshakes to ensure that employers quickly understand their serious intent to work."
Did any of this "investing" work? There's no evidence it did.
Mr. Obama also wants a new federal initiative to be based on Georgia Work$, which the president describes as a program in which "people who collect unemployment insurance participate in temporary work as a way to build their skills while they look for a permanent job." But Georgia Work$ has produced far more headlines than jobs—fewer than 200 this year, according to a recent article in Politico.
Begun in 2003, Georgia Work$ gives people a chance to "train" at an employer for eight weeks. They receive no salary but continue collecting unemployment compensation and as well as a $240 weekly stipend from the state of Georgia. Last year, the stipend was increased to $600 a week and anyone who said they needed a job was allowed to participate. After costs exploded, Georgia Work$ was scaled back early this year.
Mark Butler, Georgia's current labor commissioner, stated that the program suffered from a "lack of oversight" before he took over in January. At last report, only 14% of trainees were hired by employers—a success rate akin to other unemployed Georgians who do not participate in the program.
Earlier this year, the Government Accountability Office reported that there were 47 different federal employment and training programs, costing taxpayers $18 billion a year. There is massive overlap and duplication, and few programs seriously evaluate their impact on trainees.
If federal job training efforts worked, Congress would not have thrown out the programs it has created every decade or so and enacted new ones. In reality, government training has always been driven by bureaucratic convenience, or politicians' re-election considerations. There is no reason to believe the latest round of proposals will be any different.
Mr. Bovard, the author of "Attention Deficit Democracy" (Palgrave, 2006), is working on a memoir.
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**And here we said it wouldn't work......
http://hotair.com/archives/2011/09/15/great-news-green-jobs-subsidies-created-1-job-for-every-5-44-million-spent/
Great news: Green-jobs subsidies created 1 job for every $5.44 million spent
posted at 10:45 am on September 15, 2011 by Ed Morrissey
Today’s Washington Post acknowledges what everyone already knows, and what Spain learned the hard way as well — green-jobs subsidies are sinkholes. When Barack Obama loaded his 2009 Porkulus with nearly $40 billion in subsidies to the green-tech industry, he promised that it would produce an explosion of jobs in a new, green US economy, starting with 65,000 directly created from his largesse. With half of the money gone, how many jobs has Obama’s investment created?
A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.
The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies. …
Obama’s efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.
That may be the understatement of the year. Even with Obama’s initial promise of 65,000 jobs created (or “saved,” which makes zero sense in this context), that would still come to $593,846 per job, which is hardly an efficient use of capital. If a private-sector business had that kind of capital, it could easily create five jobs from that amount with $100,000 in compensation each, with enough left over for a substantial profit margin.
But the actual results in this case are much worse. With $19.3 billion spent on these programs, the cost per actual job created comes to $5.44 million. That kind of capital could launch entire new businesses, let alone multiple jobs. Any company that ate through $5.44 million to create a job would shortly become a former company … kind of like Solyndra, where $535 million disappeared and took 1,000 jobs along with it.
Inefficiency isn’t the only problem with this model, either. Taxpayers will have to pay off the bonds created to give away this cash, which means the cost won’t just be the $5.44 million, but also the interest we have to pay on each $5.44 million over the next ten years or so. We also have to count the opportunity costs as well. Had we not borrowed this money to feed Obama’s green-jobs-explosion delusions, taxpayers in the future would have that capital to invest, expand and create businesses, and create jobs that make far more efficient use of the capital than $5.44 million per worker. We have not only failed in the present, we have set ourselves up for failure in the future as American capital has to get redirected into paying off the debt Obama hung on us for his green-jobs subsidy program.
That’s Obamanomics in a nutshell. Which is, by the way, exactly where it belongs.
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"No pecuniary consideration is more urgent, than the regular redemption and discharge of the public debt: on none can delay be more injurious, or an economy of time more valuable." --George Washington, Message to the House of Representatives, 1793
"There is not a more important and fundamental principle in legislation, than that the ways and means ought always to face the public engagements; that our appropriations should ever go hand in hand with our promises. To say that the United States should be answerable for twenty-five millions of dollars without knowing whether the ways and means can be provided, and without knowing whether those who are to succeed us will think with us on the subject, would be rash and unjustifiable." --James Madison, Speech in Congress, 1790
"The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale." --Thomas Jefferson, letter to John Taylor, 1816
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As important as the substance is to see from where this is coming, one of the Senate's most left leaning Republicans. I disagree with her on policy; it is not a one year break from governmental stupidity and excess that we need. How about a structural reform requiring that any regulation large enough in scope to cripple the economy of a state or the nation would have to go through the House and Senate in order to become federal law.
http://online.wsj.com/article/SB10001424053111904194604576583082888335542.html
The Economy Needs a Regulation Time-Out
Why send jobs overseas by creating more rules for American business?
By SUSAN COLLINS
Last year, the Food and Drug Administration issued a warning to a company that sells packaged walnuts. Believe it or not, the federal government claimed the walnuts were being marketed as a drug. So Washington ordered the company to stop telling consumers about the health benefits of walnuts.
Meanwhile, the Environmental Protection Agency proposed a new rule on fossil-fuel emissions from boilers that—by the EPA's own admission—would cost the private sector billions of dollars and thousands of jobs. The owner of a small business in Maine told me the proposed rule would require him to scrap a new, $300,000 wood waste boiler he recently installed.
No wonder America's employers dread what is coming next out of Washington. Our country cannot afford regulations run amok at a time when no net new jobs are created and unemployment remains above 9%. But at least we're safe from health claims about walnuts.
America's overregulation problem is only getting worse. Right now, federal agencies are at work on more than 4,200 rules, 845 of which affect small businesses, the engine of job creation in our country. More than 100 are major rules, with an economic impact of more than $100 million each.
No business owner I know questions the legitimate role of limited government in protecting our health and safety. Too often, however, our small businesses are buried under a mountain of paperwork that drives up costs, prevents the hiring of workers, and impedes economic growth.
Business owners are reluctant to create jobs today when they're going to need to pay more tomorrow to comply with onerous new regulations. That's what employers mean when they say that uncertainty generated by Washington is a big wet blanket on our economy.
I have asked employers in my state what it would take to help them add jobs. No matter their business or the size of their work force, they tell me that Washington must stop imposing crushing new regulations.
America needs a "time-out" from the regulations that discourage job creation and hurt our economy. I have introduced legislation to impose a one-year moratorium on any "significant" new rules that would have an adverse impact on jobs, the economy, or America's international competitiveness. A one-year moratorium on such regulations is a common-sense solution that would help create jobs.
Under my bill, certain rules would be exempt from the moratorium: those that are needed in emergencies, such as to respond to imminent threats to public health or safety, and those affecting crime, the military and foreign affairs. My bill also excludes rules that would reduce the regulatory burden on the private sector. Unfortunately, those rules that actually reduce regulatory burdens and promote jobs are few and far between.
That EPA rule on boilers is a good example of why we need a regulatory time-out. According to a recent study by the American Forest & Paper Association, if the rule went into effect as written it could, along with other pending regulations, cause 36 American pulp and paper mills to close. That would put more than 20,000 Americans out of work—18% of that industry's work force.
Once those mills close, the businesses that supply them also would be forced to lay off workers. Estimates are that nearly 90,000 Americans would lose their jobs, and wages would drop by $4 billion—just because of over-regulation.
But even that is not the end of the story. People and businesses would still need paper. Where do you think we would get it? We'd be strengthening the economies of other countries like China, India and Brazil, while weakening our own.
American businesses need pro-growth economic policies that will end the uncertainty and kick-start hiring and investment. American workers need policies that will get them off the sidelines and back on the job.
In sports, time-outs are called to give athletes a chance to catch their breaths and make better decisions about the next play. American workers and businesses are the athletes in a global competition that we must win. They need a time-out from excessive regulation so that America can get back to work.
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The Environmental Protection Agency claims that the critics of its campaign to remake U.S. electricity are partisans, but it turns out that they include other regulators and even some in the Obama Administration. In particular, a trove of documents uncovered by Congressional investigators reveals that these internal critics think the EPA is undermining the security and reliability of the U.S. electric power supply.
With its unprecedented wave of rules, the EPA is abusing traditional air-quality laws to force a large share of the coal-fired fleet to shut down. Amid these sacrifices on the anticarbon altar, Alaska Republican Lisa Murkowski and several House committees have been asking, well, what happens after as much as 8% of U.S. generating capacity is taken off the grid?
A special focus of their inquiry has been the Federal Energy Regulatory Commission, or FERC, which since 2005 has been charged with ensuring that the (compact florescent) lights stay on. That 8% figure comes from FERC itself in a confidential 2010 assessment of the EPA's regulatory bender—or about 81 gigawatts that FERC's Office of Electric Reliability estimated is "very likely" or "likely" to enter involuntary retirement over the next several years. FERC disclosed the estimate in August in response to Senator Murkowski's questions, along with a slew of memos and emails.
FERC Chairman Jon Wellinghoff, a Democrat, has since disavowed the study as nothing more than back-of-the-envelope scribblings that are now "irrelevant," as he told a recent House hearing. OK, but then could FERC come up with a relevant number? Since he made the study public, Mr. Wellinghoff has disowned responsibility for scrutinizing the EPA rules and now says that FERC will only protect electric reliability ex post facto once the rules are permanent, somehow.
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Sen. Lisa Murkowski
.This abdication is all the more striking because the documents show that EPA's blandishments about reliability can't be trusted. In its initial 2010 analysis—a rigorous document—FERC notes in a "next steps" section that the reliability office and industry must "assess the reliability and adequacy impacts of retirement of at risk units." In part, this was because the office believed the EPA analyses to be deficient. One undated memo specifies multiple weaknesses in EPA reliability modelling.
However much power is lost, whether 81 gigawatts or something else, the electric grid is highly local. Even subtracting a small plant could have much larger effects for regions, such as blackouts. The older and less efficient coal plants that are slated for closure are often the crucial nodes that connect the hubs and spokes of the grid. If these "sensitive" interconnections are taken out, as the memo puts it, the power system becomes less stable, harder to manage and may not be able to meet peak-load demand or withstand unexpected disturbances.
When large swaths of Arizona, New Mexico and parts of southern California including San Diego went dark this month, preliminary reports blamed it on a Homer Simpson who flipped the wrong switch. But the incident shows that even minor mistakes or degraded systems can ramify throughout the grid. The EPA scanted these technical, regional issues when writing the rules, even though another "summary of interagency working comments" within the Administration explicitly told the EPA that reliability needed "more discussion."
And according to the FERC minutes of a 2010 meeting between its reliability office and the EPA, EPA staffers waved off those concerns. "The EPA concluded the discussion by stating that it felt the Clean Air Transport Rule and Mercury MACT rule"—two of the most destructive new regulations—"were the highest priority given that these regulations were more finalized." In other words, the agency's green political goals are more important than the real-world outcomes, never mind the danger.
For our part, we've opposed this "highest priority" because the rules are written in a way that maximizes the economic costs, with terrible effects on growth, hiring, investment and consumer prices. And well, well: More than a few people in the Administration seem to agree.
The interagency memo explains that the EPA used its "discretion" to structure one rule so that it is more "stringent" than it needs to be. The agency could achieve the same environmental benefits with "substantial" cost-savings, which "would be far more preferable to the proposed approach," says the memo. It sensibly adds that, "The current economic climate dictates a balancing of economic and environmental interests."
Under pressure from Democrats and the EPA to disavow his own agency's analysis, Mr. Wellinghoff now says that FERC favors only a "safety valve" that would give it the authority to overrule the EPA on a case-by-case basis if its regulations might lead to blackouts. But even this is a tacit admission of EPA's overkill. You don't need a safety valve if there isn't a threat to safety.
The best option would be for the EPA to write less destructive rules that don't jeopardize reliability in the first place. Failing that, we should at least know the risks before it is too late. In a letter to Mr. Wellingoff last week, Mrs. Murkowski simply asks that FERC undertake some kind of study of the EPA's agenda in line with its statutory obligations and the warnings of its own experts. If FERC won't do it, someone else should.
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"Last week, the Federal Emergency Management Agency was telling everyone who would listen that they needed billions to replenish their disaster relief fund right now, or else they would run out of money today. ... Then, suddenly, FEMA told Senate Democrats that all of their previous warnings were overblown. The agency was able to recover $40 billion from ongoing long-term projects, and instead of being broke, they actually had $114 million in the bank, just enough to get them into the next fiscal year. Which is convenient, because that allows them access to all of next year's budgeted disaster relief spending. Since there is now no need for unbudgeted disaster relief spending this year, there is now no need for spending offsets. ... If anybody ever wants to know why conservatives never believed Secretary Tim Geithner when he said the government was going to run out of money this August, this $114 million FEMA find is a great example why." --Washington Examiner columnist Conn Carroll
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second post
"If European governments and the U.S. Congress ceased the practice of giving people what they have not earned, budgets would be more than balanced. For government to guarantee a person a right to goods and services he has not earned, it must diminish someone else's right to what he has earned, simply because governments have no resources of their very own. ... It turns out that if Congress taxed away our entire $14 trillion 2011 GDP and put it in the bank, it would just barely cover Social Security and Medicare liabilities. That observation suggests that we can't tax our way out of our fiscal mess. In order to avoid permanent stagnation or total economic collapse, governments must start the process of reducing welfare spending. I wouldn't recommend cold turkey for a heroin addict, neither would I recommend cold turkey for all those people who have been addicted and made dependent upon government handouts. We must find a compassionate way to wean people off government." --economist Walter E. Williams
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http://finance.townhall.com/columnists/mikeshedlock/2011/09/29/state_capital_of_pa_going_bankrupt_over_alternative_energy_project
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First, the Walter WIlliams quote above in the thread is right on the money.
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Refusing to use the term crony c*pitalism anymore for what is not at all capitalism, this topic could always go under corruption, but at its heart it is just another failed government program doing enormous damage to out economic foundations. At its core it violates the freedom of equal protection under the law when you all-knowing, all-powerful government picks your winners and losers for you.
http://www.powerlineblog.com/archives/2011/09/the-trouble-with-crony-capitalism.php
John Hinderacker at Powerline yesterday:
The Trouble With Crony Capitalism
Yesterday the Department of Energy approved $1 billion in new loan guarantees to “green energy” companies. Drudge is headlining the fact that, as reported by Mark Hemingway in the Weekly Standard, most of that amount–$737 million–is going to SolarReserve LLC for a solar-thermal project in Nevada. SolarReserve’s “investment partners”–I take it that means owners–include the Pacific Corporate Group’s Clean Energy and Technology Fund. One of Pacific Corporate Group’s principals is Nancy Pelosi’s brother-in-law, Ronald Pelosi. Another of SolarReserve’s owners is Argonaut Private Equity, whose managing director, Steve Mitchell, is on Solyndra’s board of directors.
My guess is that government underwriting of SolarReserve’s project is a horrible idea. But suppose it isn’t: who is going to believe that the Obama administration wasn’t influenced by Pelosi’s brother-in-law’s involvement in the project? Likewise, who will believe that Democratic donor George Kaiser’s involvement in Solyndra was irrelevant to the government’s misbegotten support for that company? Hemingway writes that “t’s increasingly hard to tell the government’s green jobs subsidies apart from the Democrats’ friends and family rewards program.” That’s true, and whether “green energy” corruption is real or only perceived, it breeds cynicism and erodes trust in government–which, not coincidentally, is at an all-time low.
But the problem goes deeper still. When the federal government gets into the business of picking winners and losers among private businesses, it is easy to identify the winners–they are companies like Solyndra and SolarReserve that get government money or loan guaranties. But what about the losers? A much larger number of companies who don’t get federal money are in that category, and how will we ever know who they are, let alone know whether they were losers because someone involved in them is a Republican donor?
There is no such thing as “good” crony capitalism. Once the government gets into the business of favoring some private businesses over others, the results can only be bad, and not only, or even primarily, because of the loans that wind up costing the taxpayers.
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The term "crony socialism" works for me :-D
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When critics warned about rising defaults on government-backed student loans two years ago, the question was how quickly taxpayers would feel the pain. The U.S. Department of Education provided part of the answer this month when it reported that the default rate for fiscal 2009 surged to 8.8%, up from 7% in 2008.
This rising default rate doesn't even tell the whole story. The government allows various "income contingent" and "income-based" repayment options, so the statistics don't count kids who were given permission to pay less than they owed. Taxpayers shouldn't expect relief any time soon. Thanks to policy changes in recent years and fraudulent government accounting, the pain could be excruciating.
Readers who followed the Congressional birth of ObamaCare in 2010 may recall that student lending was the other industry takeover that came along for the legislative ride. Private lenders used to originate federally guaranteed loans, but the new law required all such loans to come directly from the feds. Combined with earlier changes that discouraged private loans sold without a federal guarantee, the result is a market dominated by Washington.
The 2010 changes did not happen simply because President Obama and legislators like Rep. George Miller and Sen. Tom Harkin distrust profit-making enterprises. The student-loan takeover also advanced the mirage that ObamaCare would save money.
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.Thanks to only-in-Washington accounting, making the Department of Education the principal banker to America's college students created a "savings" of $68 billion over 11 years, certified by the Congressional Budget Office. Even CBO Director Douglas Elmendorf admitted that this estimate was bogus because CBO was forced to use federal rules that ignored the true cost of defaults. But Mr. Miller had earlier laid the groundwork for this fraud by killing amendments in the House that would have required honest accounting and an audit.
Armed in 2010 with their CBO-certified "savings," Democrats decided they could finance a portion of ObamaCare, as well as an expansion of Pell grants. But as Bernie Madoff could have told them, frauds break down when enough people show up asking for their money. That's happening already, judging by recent action in the Senate Appropriations Committee, where lawmakers apparently realize that the federal takeover isn't going to deliver the promised riches.
To preserve Team Obama's priority of maintaining a maximum Pell grant of $5,550 per year and doubling the total annual funding to $36 billion since President Obama took office, Democrats recently decided to make student-loan borrowers pay interest on their loans for their first six months out of college. Washington used to give the youngsters an interest-free grace period. Taxpayers might cheer this change if the money wasn't simply being transferred to another form of education subsidy. But it seems almost certain to raise default rates as it puts recent grads under increased financial pressure.
None of these programs has anything to do with making it easier to afford college. Universities have been efficient in pocketing the subsidies by increasing tuition after every expansion of federal support. That's why education is a rare industry where prices have risen even faster than health-care costs.
This is also the rare market where the recent trend of de-leveraging doesn't apply. An August report from the Federal Reserve Bank of New York found that Americans cut their household debt from a peak of $12.5 trillion in the third quarter of 2008 to a recent $11.4 trillion. Consumers have reduced their debt on houses, cars, credit cards and nearly everything except student loans, where debt has increased 25% in the three years.
Perhaps this is because most federal student loans are made without regard to income, assets or credit history. Much like the federal obsession to finance a home for every American regardless of ability to pay, the obsession to finance higher education for every high school student ignores inconvenient facts. These include the certainty that some of these kids will take jobs that don't require college degrees and may not support timely repayment.
For this school year, even the loans that pay on time aren't necessarily winners for the taxpayer. That's because of a 2007 law that Mr. Miller and Nancy Pelosi pushed through Congress—and George W. Bush signed—that cut interest rates on many federally backed student loans. Stafford loans, the most common type, have been available since July at a fixed rate of 3.4%, barely above the historically low rates at which the Treasury is currently borrowing for the long term. The student loan rates are scheduled to rise back to 6.8% next year. But if our spendthrift government ends up borrowing money above 7% and lending it to kids at 6.8%, taxpayers will suffer even before the youngsters go delinquent.
Efforts to clean up this debacle are stirring on Capitol Hill, with House Republicans moving to limit Pell grants to students who have a high school diploma or GED. Oklahoma Sen. Tom Coburn would go further and have government leave the business of subsidizing the education industry via student loans and let private lenders finance college. That may be too radical at the moment, but it won't be if taxpayers ever figure out how much subsidized loans will cost them.
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This piece drifts across other topics, especially energy, but is first and foremost IMO about our misguided government picking
winners(losers) and losers in any industry. Though he is pointing out truths that should be self evident, perhaps you should disregard because author Walter Russell Mead who teaches American foreign policy at Yale has a blog. Also he is biased, an admitted Democrat who voted for Obama.
My question is about the government program, why are we doing this? Forget that it will fail for certain, Why do they get billions taken from other people doing honest work including future generations? Why can they build plants on public land on the rest of us can't? These programs are morally and constitutionally wrong.
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http://blogs.the-american-interest.com/wrm/2011/10/01/green-energy-industry-staggers/
Walter Russell Mead's Blog
October 1, 2011
As the Energy Department hustled to get another $4.7 billion in loan guarantees for green tech companies out the door before time ran out and the program ended last week, yet another solar panel manufacturer was wilting in the sun, and the green jobs scam was looking more threadbare than ever. Says the WSJ:
Solar-power equipment manufacturer Stirling Energy Systems Inc. has filed for bankruptcy, adding to a wave of troubles in the solar industry amid soft demand, falling prices and difficulty raising money. [… ] Both [of the company’s plants] were sited on public land in California and obtained fast-track construction permits from the Obama administration.
The filing is the latest in a string of U.S. solar company bankruptcies, as soft global demand for solar power, falling prices and a glut of solar panels from Asia have hammered manufacturers.
Surprise, surprise: the American “green energy” industry faces much the same problems as everyone else in this economy. Solar firms still have to compete with Chinese labor (and massive Chinese government subsidies further enhanced by cheap Chinese currency).
But there’s another factor behind the failure of so many Obama administration initiatives in this field. Because alternative energy generation is expensive and inefficient, it requires some combination of subsidies, high energy prices and forced purchases to make these investments pay off.
The Solyndra guarantee and related programs were all developed back in the heady early days of the Obama administrations when delusional greens thought their global agenda was on the verge of being realized. Cap and trade and other aggressive energy policies would artificially jack up energy prices in the US to the point where demand for solar and other alternative energy would grow. The global carbon treaty would provide a permanent source of demand for green energy.
The political assumptions underlying the green investment boomlet turned out to be false. There will be no global carbon regime for the foreseeable future; there will be no cap and trade and no aggressive federal programs to raise energy prices during the deepest recession since World War Two.
Perhaps even worse from the green point of view, a cascade of discoveries and technological advances has dramatically increased the supplies of oil and gas in the western hemisphere — including huge new domestic energy supplies in places like Pennsylvania, Ohio and upstate New York. These discoveries are devastating to the politics of the environmental movement.
There will be the usual NIMBY-motivated opposition (some of it justified) to frakking and to oil and gas pipelines, but overall millions more Americans are going to be economically tied to domestic energy production and they will not want their congressional representatives voting against the industry on which their paychecks depend. Nor will they support presidential candidates who promise to eliminate their jobs. It will not just be the people who work in the extraction business who feel this way. Those who supply the industry, those who operate pipelines, those who sell goods and services to gas and oil workers: they will form a powerful phalanx of pro-oil and gas interests that will reach far beyond Texas.
At the same time, key environmental arguments will be seriously weakened. The western hemisphere looks set to become energy independent for the foreseeable future; the US is moving steadily away from the dependence on Middle Eastern oil that makes many national security experts think green. Importing from Canada just isn’t the same kind of problem as importing from Iraq.
The question of supply and peak oil will also recede; with new technologies and new discoveries coming so quickly, fewer people will feel the need to make large financial sacrifices now in order to prevent huge oil shortage and massive price hikes in the near term.
Increasingly, the climate change argument will be the only argument left to support subsidies for alternative energy generation. That argument has not been enough to make far reaching legal changes in the past when national security and peak oil worries supported it; there is not much to suggest that the climate change forces can win the political battle standing alone.
The collapse of the green political structure (cap and trade plus global carbon treaty) and the transformation of the American fossil fuel supply have dramatically weakened the case for alternative energy. Investors take heed.
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Crony
capitalism socialism.
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Crony capitalism socialism.
Even socialism implies a more equal outcome than having your government take from you to prop up your competitor.
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http://www.usnews.com/opinion/slideshows/10-wasteful-stimulus-projects/2
1, A Visitor's Center With No Visitors
$554,763 to the U.S. Forest Service to allow it to replace the windows in a visitors center at Mount St. Helens, Wash., that is currently closed and which the Forest Service has no plans to reopen.
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2. A Museum Off the Rails
$1.2 million to convert an abandoned train station in Glassboro, N.J., that has been boarded up and unused for 40 years, into “a museum, public meeting space and welcome center.”
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3. Analyzing Ants
$1.9 million to allow the California Academy of Sciences to send researchers to the Southwest Indian Ocean Islands and east Africa, to capture, photograph, and analyze thousands of exotic ants--with the photographs to be posted on AntWeb, a Web site devoted to organizing and displaying pictures and information on the world’s thousands of ant species.
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4. Monkey Business
$677,462 to researchers at Georgia State University to study why monkeys respond negatively to inequity and unfairness.
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5. Artificial Comedy
$712,883 to researchers at Northwestern University using stimulus money in an effort utilizing “artificial intelligence” that will mine jokes from the Internet and “use them to create hilarious presentations that mimic real-life comedians.”
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6. Divining Neptune
$456,663 to University of California, Berkeley to support their getting a better understanding of the global circulation in the atmosphere and altitude of clouds on the planet Neptune.
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7. Yoga vs. Hot Flashes
$294,958 so that researchers at Wake Forest University can study whether Integral Yoga “can be an effective method to reduce the frequency and/or severity of hot flashes” in menopausal women.
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8. Big Brother's Recycling Bins
$500,000 to pay for blue, 96-gallon, microchip-embedded recycling bins for the city of Dayton, Ohio. “The microchips, which use radio frequency identification technology, are installed in the bin handles, and will be used by the city to track citizen participation in the recycling program.” In addition to paying for at least 8,000 bins and equipping collection trucks to read the microchips, another “$500,000 will pay for a consultant to design a campaign promoting recycling.”
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9. Better Skiing Through Tax Dollars
$25 million to Mt. Snow in West Dover, Vt., “to replace the Summit Local and Sunbrook chairlifts, construct a 120-million-gallon storage pond for snowmaking, and install additional snowmaking fan guns” that take advantage of a provision in the stimulus that make funds available for “ski area capital improvements.”
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10. Meta-Stimulus
$193,956 to researchers at Houston’s Rice University and the University of Texas in Dallas, who are getting money through the National Science Foundation to “estimate the impact of stimulus funds on the perceptions of citizens and the choices of local community decision makers” or, in other words, to do a stimulus-funding study of how people feel about the stimulus.
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How's YOUR stimulus going? In spite of equal protection under the law being an essential part of our society enshrined in the highest law in the land, I did not receive any money or benefit from any of these.
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http://www.bailoutcost.com/
Current loss: 14, 421,881,925.36
How the loss is calculated:
The United States Treasury owns roughly 500 million shares of common stock in General Motors. (Source: U.S. Treasury) The Treasury would need to sell these shares at roughly $53 per share in order to "break even" on the investment. (Source: WSJ) Using Google Finance API, we multiply the current GM stock price by 500,065,254, and subtract that total from $26,503,458,462 (or, 500,065,254 x $53).
Our calculations estimate the loss taxpayers would suffer if UST sells its GM common stock shares at the current ticker price. We track the common stock price and update our calculations on an ongoing basis, providing an up-to-the-minute snapshot of the money the UST lost in Government Motors.
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Rob Peter, pay Paul. Someone tell me how coerced help from taxpayers to one enterprise is equal protection to all others... :-(
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Maybe it's a sign of the tumultuous times, but the federal government recently wrapped up its biggest spending year, and its second biggest annual budget deficit, and almost nobody noticed. Is it rude to mention this?
Corbis
.The Congressional Budget Office recently finished tallying the revenue and spending figures for fiscal 2011, which ended September 30, and no wonder no one in Washington is crowing. The political class might have its political pretense blown. This is said to be a new age of fiscal austerity, yet the government had its best year ever, spending a cool $3.6 trillion. That beat the $3.52 trillion posted in 2009, when the feds famously began their attempt to spend America back to prosperity.
What happened to all of those horrifying spending cuts? Good question. CBO says that overall outlays rose 4.2% from 2010 (1.8% adjusted for timing shifts), when spending fell slightly from 2009. Defense spending rose only 1.2% on a calendar-adjusted basis, and Medicaid only 0.9%, but Medicare spending rose 3.9% and interest payments by 16.7%.
The bigger point: Government austerity is a myth.
In somewhat better news, federal receipts grew by 6.5% in fiscal 2011, including a 21.6% gain in individual income tax revenues. The overall revenue gain would have been even larger without the cost of the temporary payroll tax cut, which contributed to a 5.3% decline in social insurance revenues but didn't reduce the jobless rate.
Enlarge Image
Close...The nearby table shows the budget trend over the last five years, and it underscores the dramatic negative turn since the Obama Presidency began. The budget deficit increased slightly in fiscal 2011 from a year earlier, to $1.298 trillion. That was down slightly as a share of GDP to 8.6%, but as CBO deadpans, this was still "greater than in any other year since 1945."
Mull over that one. The Obama years have racked up the three largest deficits, both in absolute amounts and as a share of GDP, since Hitler still terrorized Europe. Some increase in deficits was inevitable given the recession, but to have deficits of nearly $1.3 trillion two years into a purported economic recovery simply hasn't happened in modern U.S. history. Yet President Obama fiercely resisted even the token spending cuts for fiscal 2011 pressed by House Republicans earlier this year.
The table also shows how close the federal budget was to balance as recently as fiscal 2007, with a deficit as low as $161 billion, or 1.2% of GDP. Those are the numbers to point to the next time someone says that the Bush tax rates are the main cause of our current fiscal woes.
Under those same tax rates in 2007, the government raised $2.57 trillion in revenue but it spent only $2.73 trillion. Four years later, the government raised $265 billion less thanks to the tepid recovery, but it spent nearly $900 billion more thanks to the never-ending Washington stimulus.
The lesson for Congress's super committee contemplating fiscal reform is that faster economic growth and spending restraint are the keys to reducing deficits. Higher taxes will hurt growth and feed a Washington spending appetite that is as voracious as ever, despite the claims of political sacrifice.
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Former Obama adviser highly critical of current policy:
http://www.nytimes.com/2011/10/23/business/volckers-advice-for-more-financial-reform.html?_r=1
“This is an opportunity to get rid of institutions (Fannie Mae, Freddie Mac) that shouldn’t exist,”
“You ought to be either public or private; don’t mix up private profit-making opportunities with an institution that is going to be protected by the government but not controlled by it.”
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I took the liberty of reformatting so that each statement stands visually distinct from the other. Both are worthy of independent consideration.
The first is a sound political action point.
The second is pithily precise. To have one sentence that gets everything as exactly right in terms that everyone can understand as that one does is a gift.
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Thumbs up for accuracy and clarity. Hard to believe Volcker was ever an Obama supporter with these views. Everyone was quiet about the falling out, but at what point and over what issue in the Solydra Presidency did he resign or fade away? My understanding is that they just never sought his advice. They haven't really had any economic troubles - the unraveling of our economy into crises and government takeovers is going pretty much according to plan.
Volcker Oct 2011: “You ought to be either public or private; don’t mix up private profit-making opportunities with an institution that is going to be protected by the government but not controlled by it.”
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Crafty on Fed thread: "A big part of the problem is that we lie to ourselves with baseline budgeting. Until we stop using baseline budgeting for our thinking we continue down the road to destruction.
If we were simply to make some genuine cuts to entitlements (e.g. block grants to states for Medicaid and Medicare, set in place gradual increases in the age for social security) truly freeze overall spending from there and set off growth by putting in a genuine massive tax reform (e.g. 9-9-9) would could turn this around in short order."
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It is amazing that after all the end of the world hoopla around the debt ceiling panic that we find out we are still spending at a rate 5% higher than ever before in history (4 posts up in this thread). Both sides think we can't handle the truth and brag about cuts that aren't cuts. Putting an end to Baseline budgeting would be more exciting if we hadn't already campaigned on it, won, and passed it in Newt's Contract with America: http://en.wikipedia.org/wiki/Contract_with_America. Ask your congressman anyone, what percentage "cut" is it to spend exactly the same this year as last! Liberals decided years ago that to own the language is to control the direction, and elected Republicans keep going along with them.
Obama has opened the door to both entitlement reform and flat tax running with the assertion that Buffet pays a lower tax rate than his secretary. If we admit social security is a tax and a welfare system not an retirement insurance contribution, and there is no firewall or lockbox, then it can compete for tax dollars and spending dollars with every other program. As pointed out, 9-9-9 is one way of eliminating a direct tax for social security and spreading it all the way up and down the system. Liberals want to do this in an additive way rather than a replacement tax; they want to end the cap on income taxed and tax or means test benefits. Both of those moves also IMO also move it from sacred cow status to a general welfare program subject to budget restraints and scrutiny. Meanwhile, if we admit that the rich always find away around punitive taxation even if it means to stop producing, why not once and for all accept that a dollar earned is a dollar taxed and treat all people and all dollars the same.
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http://blogs.the-american-interest.com/wrm/2011/10/23/rhode-island-athens-of-america/
October 23, 2011
Rhode Island: Athens of America?
Walter Russell Mead
Rhode Island is looking more and more like Greece, and not in a good way. That is one message of this important piece by Mary Williams Walsh in the New York Times. Years of blue social policy have wrecked local and state government finance in the country’s smallest state, and now the bills are coming due. Services are being cut to the bone and elderly retirees are losing money they thought was secure.
In Rhode Island, it is Democrats, not nasty union-hating Republicans, who are doing the dirty work. Democratic mayors are telling their unions that there isn’t any money — not because they are vicious corporate stooges who hate working people and want to see them suffer, but because There. Isn’t. Any. Money.
Because Rhode Island listened to timeserving blue politicians too long, and union leaders and public sector workers lost their grip on any mathematical realities beyond the numbers at the ballot box, the pension system grew more and more out of control. State and local governments lurched into a crisis. Vote yourself a raise, vote yourself a pension: why not?
But there is financial math as well as political math and in any war with financial arithmetic, the money numbers win. If there isn’t any money, the checks won’t clear. Ultimately, you will have to fire existing workers, stop paying pensions or a mix of both. That is where Rhode Island is now: its economy can’t generate the revenue to support its existing governance system and to pay its pension obligations.
The Ostrich Party has long ruled Rhode Island; their heads planted firmly in the sand - if not in even darker and damper regions – Rhode Island politicians, government and union officials have done everything possible to conceal the true state of affairs from the voters, the bondholders, retirees and even themselves. Unrealistic assumptions about rates of return helped hide the ugly truth about the looming pension meltdown — and anybody who tried to raise the alarm about the coming crisis was hooted down as an enemy of the workers. Even now the true blue firing squads are assembling to shoot the messenger; Mary Williams Walsh can expect angry push back from a whole sector of American political life that thinks this whole problem will go away if we tax the rich, clap our hands and all say together, “I believe in government”.
But “objectively”, as our Marxist friends would say, the union leaders and their political chums were the worst enemies of the workers: they told state workers that their benefits were secure even as it became increasingly obvious that, as a matter of arithmetic, they were not.
Let’s be crystal clear about this. To tell a 50 year old pretty lies about the soundness of a pension plan is one of the most wicked and irresponsible things you can do without actually shedding blood; people who believe these phony promises will not make the extra savings, work the extra years or otherwise take steps to protect themselves until it is too late. Telling those pretty lies is exactly what Rhode Island’s establishment has been doing for some time; it is what Ostrich Party legislators, trade unionists, journalists and governors are still doing across much of the country.
Reasonable reforms could have made things much less painful, but the unions typically threaten to destroy the careers of any politician who tampers with the pension system until the truck actually starts falling over the cliff. Now the long fall has begun and Rhode Island and its retirees are caught in a cascade of bad news, lawsuits, and financial crisis. No Rhode Island retiree can rely on getting the benefits promised; nobody can predict how this will all work out.
That is not the kind of uncertainty that 70 year old retired teachers and firefighters should have to face. A decent society would not let that happen — but the blue social model in its decadent late shark-jumping years of fake promises is anything but decent. Political chicanery, fuzzy math, denial, rhetoric, ambition: this is how a union betrays its members, this is how politicians betray their constituents.
To give the devil his due, this monumental crack up was the result, in its early stages, of ignorance and complacency more than anything else. The union leadership and the statehouse pols took growth for granted. They had grown up in the post war boom; good times were what they expected. They believed that the American economy would continue to grow richer every year and that there was a never-failing cornucopia of “more” somewhere that would somehow make sure that there was always enough money in the kitty to redeem the promises made. You could always squeeze another quart out of the milk cow.
This was a natural mistake to make — in 1972. But state and local government ignored a generation of warnings that the wheels were coming off the car of the blue social model, and especially in rust belt states like Rhode Island. Factories closed, the economy changed, the state fiscal picture grew steadily worse, but these facts were not allowed to penetrate the closed shop in which the union leaders and their political allies made plans for the future. The state’s economy would continue to grow at a rate which would make it possible to pay new state workers higher and higher salaries even as a growing number of retirees could collect increasingly generous pensions — adjusted, of course, for inflation every year. You could tax the rich, defer maintenance, hit the bond markets — and when all else failed, you could assume that your underperforming pension reserves were invested in magic growth beans that would automatically gain 8.5 percent in value forever.
Providence City Hall (Wkimedia)
The union leadership in Rhode Island, as in the majority of US public and private workplaces, failed in the first task of the stakeholder: they failed to undertake and support changes that would ensure the health of the enterprise down the road. This is partly about wages, pensions and work rules: making unrealistic demands only stores up trouble down the road. But more profoundly it is about not thinking seriously about the future of the company or, in Rhode Island’s case, of the state.
What economic development options did Rhode Island have to build a sustainable new economy as the old one withered away? Locked into the assumptions of the blue social model, Rhode Island planners, like their counterparts across the country, fell for white elephant concepts like convention centers, those cliched “new urbanism” pedestrian malls and downtown redevelopments that never seem to work, Solyndra style industrial policy and all the other failed nostrums that strike upper middle class social engineers as cool but that rarely make anything as vulgar and utilitarian as money.
There was a lot of expensive churn, many consultants deposited checks, but the underlying economy never turned around. The serial failure of one plan after another to regenerate solid growth, turn around the population trend, put Medicare on a sustainable path, and reverse the decline of the cities never led to a questioning of basic assumptions — and it never led the Ostrich Party to think through the implications of economic stagnation and decline for the state’s pension system and its future budgeting.
More care and foresight could have spared Rhode Island’s workers and retirees some of the sacrifices that will now have to be made. But that would have forced the many members of the Ostrich Party to pull their heads out of the warm and comfortable dark in order to look around and act. Denial was psychologically more comfortable and politically safer. The more untenable the old system became, the more tightly they shut their eyes and closed their minds.
The lesson goes farther than Rhode Island. As Walsh points out in the Times, Rhode Island style pension meltdowns look increasingly possible in hard pressed cities and states across the country. Can public sector union leaders in other states begin to think proactively about how to build a post-blue economic future and put their muscle behind genuinely forward looking development ideas or will they wait, as in Rhode Island, for the truck to go over the cliff?
We can dream. Yes, we can.
After Rhode Island, What Next?
As the American political system attempts to grapple with the growing pension, debt and entitlement crisis, three types of responses seem to be emerging. There is the true blue ostrich approach of the unions themselves and their closest allies: denial and rage. There is the attitude of more centrist Democrats like Governor Cuomo and Mayor Emanuel: make prudent cuts, hold the line on spending, work to quietly make government more efficient without jumping into a full scale confrontation with the unions. And there is the Scott Walker, dragonslayer approach: take them on.
The rage and denial crowd in the Ostrich Party, rumps in the air, have nowhere to go. Both the Cuomo and the Walker approaches have their merits — though it seems to me that neither is exactly what we need. Cuomo style gradualism may soften the hard landing, but it doesn’t do enough to reverse the decline of the blue state economies. Upstate New York is in desperate shape, and it cannot prosper without a radical reduction of its cost structure. New York City is simply becoming more and more of an appendage to Wall Street, even as public opinion in the city turns against the one healthy industry it still has. Governor Cuomo’s policy mix holds out hope to slow the decline — but there is little to suggest that New York can go back to the innovation and leadership that once made it the country’s most dynamic growth engine and a wonder of the world.
The Cuomo/Emanuel Democrats want to fight the unions and the government lobby over specific issues, but they don’t want to pay the ideological and political costs of taking on the worldview behind the blue model machine. I think leadership today has to do more: political leaders need to talk to the public about what has changed and why, and talk also about where we can go from here. Intelligently managing the decline of the blue social model is better than nothing, but what is really needed is to prepare a transition to a new kind of growth.
But if the Mama Bear New Democrats serve their porridge too cool, the Papa Bear Republicans like Wisconsin’s Scott Walker and Ohio’s John Kasich risk serving it too hot.
Polarizing politics and demonizing state and local government workers is not a good idea. It is unfair for one thing; it is bad politics for another. Toxic blue model legacy costs are the problem: rigidly bureaucratic government structures, unrealistic costs, years of underfunded pension plans, regulations that choke growth and initiative, outdated progressive ideas about how change works — these are the roots of our problems, not the middle school teacher down the street or the retired post office worker living modestly on a pension that may be underfunded but is hardly a bonanza.
The fifty year old teacher, fireman or police officer may have been naive to believe his or her union leaders, the politicians and the journalists who all said there was nothing to worry about — but most of those workers cannot be called “greedy” or “selfish”. They are victims of a complex, multi-player Ponzi scheme and have been lied to by a lot of people for a long time. They also face some serious financial costs. Not only are their pensions likely to be less generous and solid than they were led to expect; they may well face layoffs and wage freezes as states struggle to cope with legacy costs.
The first church in Rhode Island, founded by Roger Williams (Wikimedia)
Reform cannot and should not be understood simply as an assault on state and local government workers — although these workers cannot be insulated from the general consequences of a major failure of our political system. The problem is not that teachers and firefighters earn “too much” money; the problem is that we have developed a dysfunctional social system which cannot pay its bills. The public economy needs to be rationalized and restructured, but the most important job is to revitalize and energize the private sector.
Ultimately the only solution is for the country to move on to a new post-blue economic model that can generate enough wealth to cover our existing debts. In the absence of a serious growth agenda, both the Cuomo and the Walker approaches can’t get the job done. And what the country needs is a competition between growth strategies, not a contest between strategies for cutbacks.
In the meantime, there is one thing that state and municipal workers and taxpayers can and should demand: honest and transparent accounting standards that make absolutely clear and explicit what the state of public pensions systems really are, what the assumptions are that underpin them, what the chances are that the systems may fall short, and what the fiscal consequences of any shortcomings are likely to be. Those reports ought to be annual, they ought to be impartial, they ought to be conducted in accordance with the strictest accounting principles, and the results ought to be public.
This is something that everybody should support: from the Tea Party to OWS and beyond; accurate public reporting on the state of worker pensions should be a no-brainer. If we can’t solve our problems overnight, let’s at least have a no-denial zone when it comes to public pensions.
Defend your country: kick an ostrich.
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http://www.cnbc.com/id/45019599
US States Are Facing Total Debt of Over $4 Trillion
The total of U.S. state debt, including pension liabilities, could surpass $4 trillion, with California owing the most and Vermont owing the least, a new analysis says.
The nonprofit State Budget Solutions combined states' major debt and future liabilities, primarily for pensions and employee healthcare, unemployment insurance loans, outstanding bonds and projected fiscal 2011 budget gaps. It found that in total, states are in debt for $4.2 trillion.
The group, which follows state fiscal conditions and advocates for limited spending and taxes, said the deficit calculations that states make "do not offer a full picture of the states' liabilities and can rely on budget gimmicks and accounting games to hide the extent of the deficit."
The housing bust, financial crisis and economic recession caused states' tax revenue to plunge, and huge holes have emerged in their budgets over the last few years. Because all states except Vermont must end their fiscal years with balanced budgets, states have scrambled to cut spending, hike taxes, borrow and turn to the federal government for help.
Taxpayers are worried the states' poor fiscal health will persist for a long time and some Republicans in Congress have questioned whether the situation is worse than the states say.
State Budget Solutions relied on financial reports and income tax rates provided by the Federation of Tax Administrators in determining its rankings.
The true debt totals may be lower, though, because the group also used the highest estimates of pension gaps. The conservative think tank American Enterprise Institute says public pensions are short $2.8 trillion.
Others, including the nonpartisan research group Pew Center on the States, put total unfunded pension liabilities at around $700 billion.
The wide range is based on different assumptions of the returns of pension fund investments, which provide the bulk of money for benefit payments. Conservative economists say the investments will have annual returns of around 4 percent, while many funds expect returns in line with the average of the last 20 years — closer to 8 percent.
Using the higher pension gap number, State Budget Solutions said California is in the biggest financial hole — with total debt of more than $612 billion. New York follows with $305 billion of debt, and then Texas, with total debt of $283 billion. Vermont has the lowest amount of total debt at just over $6 billion.
The group also looked at the financial shape of states using the Pew pension projections. It came up with a total debt of $2 trillion for all states.
California still owes the most under the alternative computation, but the state's total debt drops significantly, to $307 billion. With the Pew numbers, New Jersey follows with $183 billion of debt and Illinois is next at $150 billion.
According to the analysis, California has also borrowed the most from the federal government to pay for unemployment benefits, $8.6 billion. Michigan was next, taking out $3.1 billion, and then New York, borrowing $2.9 billion.
As unemployment shot up, some states could not pay for the surge in demand for jobless benefits. The federal government loosened its lending rules to keep states from having to cut other areas of their budgets. But last month the U.S. government again began charging interest on the outstanding loans and may levy extra taxes on businesses in states with outstanding loans.
Looking at just state annual financial statements, the group found Connecticut has the highest debt per capita, at $5,402, and nine states have debt of more than $3,000 per capita.
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http://usdebt.kleptocracy.us/
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Following up on GM's posts
The pension time bomb
State governments have promised public employees trillions in retirement benefits. Only problem: The money to pay them doesn’t exist
Why are pensions a problem?
For decades, local and state governments have guaranteed employees that they can retire on comfortable—and in some cases, lavish—pensions. Officials assumed that taxes, investments, and other revenues would rise over time, covering the cost. That assumption has turned out to be wrong. Taxpayers are now on the hook to provide pensions to 80 percent of the nation’s 27 million state and local government workers and retirees. The combined shortfall in funding those pensions could be as much as $3.4 trillion—more than double this year’s federal deficit. Even using a rosy projection that pension-investment portfolios will return 8 percent annually, seven states, including Illinois, Connecticut, and Louisiana, are on track to exhaust their pension funds within a decade. More than half of state pension funds will run dry by 2027. “This charade can’t last,” wrote former Los Angeles Mayor Richard Riordan and investment advisor Alexander Rubalcava in The New York Times. “In many cities, pension obligations will soon consume a quarter or more of the annual budget—money that will be unavailable for parks, libraries, street maintenance, and public safety.”
How did governments miscalculate so badly?
Pension funds subsist on three revenue streams: employee contributions, employer contributions, and investment earnings. During the 1990s, soaring stock prices swelled the value of pension funds, enabling states and municipalities to reduce their own contributions and those from employees. They also acceded to public union demands to increase benefits. “Everybody was raising benefits without thinking of the long term,” said Kil Huh, director of research for the Pew Center on the States. Governments began assuming they could count on rising markets and high investment returns indefinitely. But in the wake of the 2008 financial crisis, stock prices plummeted, eventually declining 56 percent from their 2007 peak; pension portfolios were devastated. The loss in equity was exacerbated by the plunge in tax revenues that also accompanied the Great Recession.
How generous are benefits?
They vary dramatically. The average annual benefit in 2008 was $22,780, according to the Center for Retirement Research at Boston College, a figure that includes part-time workers. But some public employees receive benefits far beyond average. More than 9,000 beneficiaries of CalPERS, California’s state retirement plan, which is the nation’s largest, receive six-figure annual pensions. In Yonkers, N.Y., taxpayers were outraged to learn that some police officers who had retired in their 40s were collecting six-figure pensions for life; former cop Hugo Tassone, for example, retired at 44 with a $101,333 pension. Edward A. Stolzenberg, a former public hospital administrator in New York’s Westchester County, receives $222,143 annually. “It may not be viable,” Stolzenberg acknowledged. “But that’s the way the state structured it.”
What about the cost of current workers?
It’s also part of the problem. While median family income actually declined over the past decade, salaries for public workers continued to rise. Blue-collar public workers with a high school education now earn, on average, more than their private-sector counterparts—$53,880 annually compared with $50,596. White-collar public-sector employees, however, fare less well. Those with professional degrees earn an average of $121,192 in the public sector, compared with $192,977 in the private sector. But with state budgets under duress and unemployment stuck at around 9.6 percent, public workers’ salaries and benefits are now coming under increased scrutiny. Taxpayer groups in California, which has a projected $19 billion budget deficit, want to cut salaries and take an ax to the most generous public pensions. But most state constitutions explicitly guarantee benefits that have accrued from work already completed. Even when municipalities have declared bankruptcy, their employee pension benefits have been paid.
Can benefits be scaled back?
Only for future employees. New Jersey Gov. Chris Christie recently signed legislation reducing pension benefits for new state employees. In California this month, voters in nine municipalities approved ballot measures to limit benefits for future public employees. And governments are starting to take a harder line in collective bargaining with public unions. “I’ve seen a sea change in the local collective bargaining process,” said Dwight Stenbakken, deputy executive director of the League of California Cities. Some analysts recommend following the lead of Georgia, which requires that prior to being enacted, any changes to retiree benefits be studied for long-term impacts. According to the Pew Center on the States, the policy has helped Georgia avoid “costly and irreversible” mistakes.
What if reform efforts fail?
Look out. If states run out of pension reserves, they’ll be forced to dip into operating budgets to pay benefits—siphoning money from schools, health care, and other vital services. Because most states are required to balance their budgets, tax increases or cuts to government services are the only options. In every region of the country, the high-rolling days are gone and the public-pension bill is coming due. “This is not a conservative-versus-liberal issue,” said Dan Liljenquist, a Utah state senator and pension-reform advocate, “this is a reality issue.”
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http://www.weeklystandard.com/articles/losing-economic-battle_598447.html?nopager=1
Losing the Economic Battle
The global debt apocalypse approaches.
Oct 31, 2011, Vol. 17, No. 07 • By DAVID M. SMICK
On the issue of public debt, Washington is experiencing what psychologists call “learned helplessness.” The financial news is so relentlessly terrible that people have become numb to it and assume nothing can be done to regain control over our fate.
Today the world’s public and private debt exceeds an incredible 300 percent of GDP. We are at risk of succumbing to an ugly, downward, global mark-to-market in asset prices. Yet the discussion in Washington fails to reflect the immensity of the threat.
Some money managers have a theory that this mark-to-market process has been under way for some time. Stage One was the 1990s Asian crisis. Global financial markets concluded that Asia’s debt was dangerously high and its banks’ balance sheets not reflective of reality. Global traders pounced. Interest rates soared, equity markets plummeted, banks failed, and currencies collapsed.
Stage Two is happening in Europe today.
Stage Three will eventually hit the United States. Washington policy-makers seem confident America’s public debt risk is years away. They believe that the U.S. economy, with the dollar the reserve currency, enjoys some immunity from these concerns. The central bank, moreover, can buy bonds to keep interest rates from rising in response to growing debt. Yet these are risky assumptions.
A year ago, senior European officials never dreamed they’d be in their current mess. Greece represents only 3 percent of the Eurozone economy. Bailout tricks and clever central bank interventions were supposed to calm nervous markets. That happened, but didn’t last. A powerful global financial market brought officials to their knees. Today, many European policymakers can’t believe America is risking a similar outcome. True, as a means of protection the Fed itself will try to manipulate credit markets by keeping long-term interest rates artificially low. But global financial markets will simply penalize bank stocks, a phenomenon that may result in a credit contraction and double dip recession.
The larger danger is that ballooning debt reaches a tipping point beyond which financial markets conclude the debt cannot be repaid without instigating political chaos. That is Europe’s predicament today. Markets realize that the austerity policies needed to bring the debt under control are making the task of debt reduction impossible, as tax revenues plummet.
Some analysts, including Criton Zoakos, argue that the global economy has reached a “point of no return.” Debt suffocates growth, which destroys equity values (particularly financial stocks), which diminishes lending, investment, and consumption. Falling tax receipts lead to even more debt. Optimists argue not to worry. The world since January 2008, they say, has been undergoing an important period of public and private deleveraging. Growth will resume once deleveraging is completed.
If only life were that simple! Global indebtedness, according to Zoakos, has actually increased by 17 percent since the beginning of 2008. Nations have enacted generous bailout and stimulus programs while growth has averaged an anemic 1.2 percent.
With the world having fallen into a giant liquidity trap, monetary policy has been ineffective. Because of the growing slack in the economy as the developing world joins in the global slowdown, the central bankers couldn’t inflate their way out of today’s debt problem through bond purchases even if they wanted to.
What the Greek situation has shown (debt 120 percent of GDP before the crisis and 170 percent today after reforms) is that austerity without a strategy for vigorous economic growth is a recipe for failure. But Washington’s political environment is so poisonous, bipartisan fiscal compromise seems impossible.
Washington is overflowing with tax reform policies, proposals to bend the cost curve of entitlements, and ideas for smart infrastructure spending. There even seems to be a beneath-the-surface bipartisan consensus to move forward on these items, which probably won’t happen short of a stock market crisis that forces Congress to act.
Yet these reforms may not be enough. Policymakers also need to reform today’s slow-to-lend, too-big-to-fail banks. Here’s an important question: Should governments and central banks continue to try to prop up the value of the assets on bank balance sheets even though those values are unsustainable? This losing battle has already contributed to global public debt-to-GDP ratios that boggle the mind. We may be saving our banks, but we’re losing our economy.
Like a giant bow wave building up on each side of the vessel, the growing debt is threatening to swamp the entire world economic ship. A feeling of helplessness has taken hold at the precise moment policymakers need to be audacious. The numbers behind presidential candidate Herman Cain’s 9-9-9 plan may not add up, but his gut instinct is on the mark. America needs radical reform on the issues of both growth and debt.
David M. Smick, chairman of the macroeconomic advisory firm Johnson Smick International, is the founder and editor of the International Economy magazine.
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Yet we have Brock running around the country screaming the Republicans are blocking us from investing in our futures in education. Over a trillion in student debt. So what is Brock saying we need forgive loans and spend more tax dollars?
From the Economist:
****IN LATE 1965, President Lyndon Johnson stood in the modest gymnasium of what had once been the tiny teaching college he attended in Texas and announced a programme to promote education. It was an initiative that exemplified the “Great Society” agenda of his administration: social advancement financed by a little hard cash, lots of leverage and potentially vast implicit government commitments. Those commitments are now coming due.
“Economists tell us that improvement of education has been responsible for one-fourth to one-half of the growth in our nation’s economy over the past half-century,” Johnson said. “We must be sure that there will be no gap between the number of jobs available and the ability of our people to perform those jobs.”
»Nope, just debt
To fill this gap Johnson pledged an amount that now seems trivial, $1.9m, sent from the federal government to states which could then leverage it ten-to-one to back student loans of up to $1,000 for 25,000 people. “This act”, he promised, “will help young people enter business, trade, and technical schools—institutions which play a vital role in providing the skills our citizens must have to compete and contribute in our society.”
Almost a half-century later these modest steps have metastasised into a huge, federally guaranteed student-loan industry. On October 25th the Obama administration added indebted students to the list of banks, car companies, homeowners, solar manufacturers and others that have benefited from a federal handout.
Johnson’s lending programme was altered almost straight away. The intention of providing students with an education through “business, trade and technical schools” was expanded to include the full, imaginative panoply of American education, regardless of economic utility. Interest rates and terms have all been adjusted numerous times.
The result is a shifting, difficult landscape only barely understood even by insiders. For students, the task is that much larger. They must choose between an array of products, including subsidised and unsubsidised “Stafford” loans (named after a Republican senator) via the William D. Ford loan programme (named for a Michigan congressman), loans directly from the government, “Plus” loans (for parents of dependent children) and “Perkins” loans (named after a congressman from Kentucky), plus an array of private options.
On top of all this, there are choices about how to consolidate, restructure and pay the debts. Many students are understandably overwhelmed. Deanne Loonin of the National Consumer Law Centre has one client with $300,000 in debt from a failed effort to become an airline pilot. That liability could have been reduced by a better understanding of products.
Two things, however, are clear. The size of student debt is vast (see chart), and lots of borrowers are struggling. More than 10m students took out loans for the latest academic year, according to a report issued on October 26th by the College Board, a consortium of academic institutions. Almost a third of students graduating from college, and 69% of the ones dropping out, hold debt tied to their education.
The total amount of debt is staggering. The New York Federal Reserve Bank puts it at $550 billion, but includes a footnote in the “technical notes” section suggesting this may be an underestimate. Sallie Mae, the school-loan equivalent of the housing industry’s Fannie Mae and Freddie Mac, reckons there are $757 billion-worth of outstanding loans. A bank heavily involved in the area says there is at least another $111 billion in purely private loans, and with new lending estimated in excess of $112 billion for this year alone, the total amount outstanding will surpass $1 trillion in the not-so-distant future.
Critics allege a viciously wasteful circle: the size of the loan pool expands to enable students to pay ever higher fees to schools whose costs expand because money is coming their way. That was just about sustainable in the good times, a lot harder when there are fewer jobs to be had.
Signs of strain are everywhere. In September the Department of Education reported that in 2009 the default rate, which is defined as non-payment for 270 days, had reached 8.8%. By some estimates delinquency rates, an earlier indicator of stress, for student loans exceed 10%, ten times that for credit cards and car loans. Ms Loonin’s average client has a low-paying job, $30,000 of debt and is in arrears.
This is despite punitive laws to enforce repayment. In response to clever students burying their obligations in court during the 1970s, anti-default provisions were imposed to make it almost impossible to shed student loans in bankruptcy. In 1991 the statute of limitations for non-repayment was eliminated.
Many troubled borrowers could avoid default if they used government options to consolidate their loans and make minimum payments, says Ms Loonin, but they are unaware of the possibility. Their primary contact with the industry after being granted a loan is through collection agents who are compensated based on how much they collect, and who therefore have little incentive to explain alternatives.
There are increasingly loud calls for reform of the system, with demands that range from a full-fledged bail-out of borrowers to a phased curtailment of government lending. For now the bail-out is the bigger priority for politicians. For many years government-backed loans were distributed through banks which earned a fee and occasionally had to assume a little bit of risk, but in 2009 the business was entirely absorbed by the federal government.
The changes announced this week are designed to ease the pressure on struggling graduates. Borrowers who qualify will get payment relief, not debt relief. Their payments will be capped at 10% of income rather than 15%, but interest will continue to be applied to their underlying debt and may expand rather than contract over time. There will also be forgiveness after 20 years, rather than 25. The administration says these changes will have no cost to taxpayers. If there is one lesson of the past 46 years, it is to be dubious of that claim.*****
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"As parents, we can have no joy, knowing that this government is not sufficiently lasting to ensure any thing which we may bequeath to posterity: And by a plain method of argument, as we are running the next generation into debt, we ought to do the work of it, otherwise we use them meanly and pitifully. In order to discover the line of our duty rightly, we should take our children in our hand, and fix our station a few years farther into life; that eminence will present a prospect, which a few present fears and prejudices conceal from our sight." --Thomas Paine, Common Sense, 1776
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"The president of the New York Public Library was busted for drunken driving after careening in reverse down an East Harlem street Sunday in a bid to maneuver around the marathon -- but ended up slamming his luxury car into a sanitation truck. An inebriated Dr. Anthony Marx, 52, just missed one truck before plowing his 2009 Audi A4 sedan -- which is registered to the New York Public Library
http://www.nypost.com/p/news/local/manhattan/read_him_his_rights_OpcKXZyUhfz9dpSyvjXYcM
Who knew the public library owned a drunk driven 2009 Audi. I have a potential explanation. He only gets a new one every 3 years and the new one must be on its way...
There is your 1%! Over here in the real world I buy used cars out of after-tax income. This of course must have been for official business. The story doesn't tell what kind of official public library business entails driving drunk backwards, .19 at 3pm. You'd think the taxpayer purchased all wheel drive would have helped him avoid the sanitation truck.
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That's because you evil capitalists don't pay enough taxes to provide a driver for this hard working civil servant. Shame!
"The president of the New York Public Library was busted for drunken driving after careening in reverse down an East Harlem street Sunday in a bid to maneuver around the marathon -- but ended up slamming his luxury car into a sanitation truck. An inebriated Dr. Anthony Marx, 52, just missed one truck before plowing his 2009 Audi A4 sedan -- which is registered to the New York Public Library
http://www.nypost.com/p/news/local/manhattan/read_him_his_rights_OpcKXZyUhfz9dpSyvjXYcM
Who knew the public library owned a drunk driven 2009 Audi. I have a potential explanation. He only gets a new one every 3 years and the new one must be on its way...
There is your 1%! Over here in the real world I buy used cars out of after-tax income. This of course must have been for official business. The story doesn't tell what kind of official public library business entails driving drunk backwards, .19 at 3pm. You'd think the taxpayer purchased all wheel drive would have helped him avoid the sanitation truck.
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"That's because you evil capitalists don't pay enough taxes to provide a driver for this hard working civil servant. Shame!"
All I ask in my equal protection zealotry is that if one American gets a free new Audi from the taxpayer to drive drunk backwards, then we all get one. That is a bad joke here because the public cost of light rail was higher than the cost to lease each car-less rider a new Lexus.
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"That's because you evil capitalists don't pay enough taxes to provide a driver for this hard working civil servant. Shame!"
All I ask in my equal protection zealotry is that if one American gets a free new Audi from the taxpayer to drive drunk backwards, then we all get one. That is a bad joke here because the public cost of light rail was higher than the cost to lease each car-less rider a new Lexus.
Give everyone a Chevy Dolt! Give every gov't employee a driver! Unemployment solved, GM (the company) is solvent!
Wow, it's easy to solve problem when you think like a democrat. Where does the money come from? The rich!
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"Deficit spending is an unconscionable form of fiscal child abuse." - Stephen Moore, 1996
Contract with America
On the first day of their majority in the House, the Republicans promised to pass eight major reforms:
"8. guarantee an honest accounting of the Federal Budget by implementing zero base-line budgeting."
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I assume that Newt kept his promise on that first day, held that vote and passed that item. Then it died in the Senate?? No followup? Focus and staying power were weaknesses of that leadership. We needed that one reform and successfully posed and passed the question with the American people for it to become law and stay law. A Google search of when it was repealed yields nothing! It was swept under the carpet, allowed to quietly die even while we achieved a TEMPORARY balance of the budget.
Here is Stephen Moore in 1996, then of Cato, calling for the exact same reforms, zero baseline budgeting, dynamic scoring of tax reforms etc 2 years AFTER the Contract with America! Imagine that, they thought spending growth was out of control in 1996 at 1.5 trillion, now we approach $4 trillion. They were right!
http://www.cato.org/pubs/policy_report/v18n4-1.html
Cato Policy Report, July/August 1996
Seven Reforms to Balance the Budget
by Stephen Moore
Stephen Moore is director of fiscal policy studies at the Cato Institute and author Government: America's #1 Growth Industry (1995). This article is based on testimony he delivered before the House Committee on Government Reform and Oversight on March 27, 1996.
Over the past 50 years Congress has lost all control over federal spending. As Table 1 shows, even after adjusting for inflation, the federal government spends almost four times more today than it did 40 years ago. Entitlement spending has seen the largest growth. My overall conclusion from the data is that government today is America's number-one growth industry.
A top priority for this Congress should be passage of a new budget act. The 1974 Budget Reform and Impoundment Control Act has been a monumental failure. One of the purposes of that act was to eliminate deficit spending, but this is the actual legacy of that legislation: in the 20 years before the act, the federal deficit averaged just 1 percent of gross domestic product, or $30 billion 1994 dollars. In the 20 years since the 1974 act, the average budget deficit has been $170 billion per year, or 3.5 percent of GDP. We have accumulated more than $4 trillion in debt since 1976. By any objective standard, the budget process has not worked better under the 1974 act--it has worked much worse.
Figure 1 (go to the link) shows how the budget deficit has grown since Harry S. Truman was president. Despite recent progress in reducing the deficit, the long-term prognosis remains grim. In fact, the Congressional Budget Office predicts that if we stick with the Clinton budget plan, the deficit will begin rising after 1996 and reach a record high of $350 billion within 10 years.
The 1974 Budget Act cannot be fixed. Tinkering won't do the trick. Congress ought to repeal the act before it does more damage to our national economy.
The centerpiece of any budget reform quite clearly should be an amendment to the Constitution outlawing deficit spending. Most members of this committee are keenly aware of the need for a balanced-budget requirement, so I will not dwell on it.
Deficit spending is an unconscionable form of fiscal child abuse. There are hundreds of groups in Washington that pretend to speak for the interests of children. But who in Washington, among the thousands of powerful special-interest lobbyists and self-proclaimed do-gooders, speaks for the children who are going to have to pay off our irresponsible debts? The single most pro-child policy that any of us can pursue in Washington today is to reduce the crushing burden of debt our government is now preparing to place on the next generation's backs.
I sincerely wish that we did not need a constitutional amendment to cure Washington's addiction to red ink. Unfortunately, the destruction of our nation's once firmly held moral rule against deficit spending--what James Buchanan called "the collapse of the constitutional consensus"--requires us to amend our Constitution and command Congress to do what it used to feel honor bound to do--balance the budget.
Tax-and-spend opponents of a balanced-budget amendment argue that a constitutional requirement is just "a gimmick." No one really believes that. If the amendment were a gimmick, Congress would have approved it long ago. Defense contractors, corporate lobbyists, federal workers, teachers' unions, the welfare industry, and other powerful special-interest groups ferociously attack the amendment, not because they think it won't work, but because they shudder at the thought that it will. What frightens the predator economy in Washington is that gift-bearing politicians may have the federal credit card taken away from them.
The U.S. House of Representatives last year wisely approved a balanced-budget amendment, but it was defeated in the Senate. The matter is now out of your hands. The real issue is, What can be done in the meantime to make the budget process work better and to end deficit spending?
Last year the House passed a courageous budget, crafted by Budget Committee chairman John Kasich, that promised a balanced budget by 2002. But one thing is a virtual certainty: no matter how sincere your intentions of balancing the budget, the deficit will not be eliminated by 2002 unless new budget enforcement rules are implemented to ensure that this admirable, though minimal, goal is honored.
I would urge that a new budget act contain the following seven provisions, which are discussed in order of priority.
1.) An Enforceable Legislative Balanced-Budget Requirement
Don't wait for a balanced-budget amendment. Act now. The most urgent reform for this Congress to undertake is passage of a balanced-budget law that enforces the deficit targets established in the House budget resolution.
What I have in mind is a new Gramm-Rudman-Hollings formula that establishes iron-clad enforceable deficit targets. One of the great myths in Washington is that Gramm-Rudman was repealed because it wasn't working. Gramm-Rudman was repealed by the pro-spending constituencies in Congress precisely because it was working too well.
Gramm-Rudman was enacted in 1985, when Congress was under intense public pressure to immediately reform the budget and reduce the $200 billion budget deficit. The controversial law required Congress to balance the budget by 1991 by meeting a series of annual deficit reduction targets. If Congress missed those targets, the law would trigger automatic spending cuts--a process called "sequestration"--to reduce the deficit to the mandated level.
Critics charge that the act was a dismal failure because Congress continually veered off the balanced-budget track. It is true that Congress routinely missed the deficit targets. Actual deficits under Gramm-Rudman were, on average, about $30 billion per year above maximum deficit targets.
Still, Gramm-Rudman had a positive effect on the federal budget. The best way to measure its impact is to compare the actual deficits recorded during the five years the act was in effect with what the deficit was projected to be by the Congressional Budget Office without Gramm-Rudman. The 1989 deficit was about $100 billion lower than had been expected in 1985 without Gramm-Rudman. The deficit fell from 6 to 3 percent of GDP under Gramm-Rudman.
The most dramatic effect of Gramm-Rudman was to curb government expenditures. Government spending in the five years before the act grew at a rate of 8.7 percent, but it slowed to only 3.2 percent in the five years Gramm-Rudman was in effect. Even entitlement spending was curtailed under Gramm-Rudman to a 5 percent growth rate, because Congress realized that if it allowed programs like Medicare and Medicaid to rise uncontrollably, that would eat up the rest of the budget and cause painful automatic cuts in discretionary spending.
Sen. Phil Gramm (R-Tex.) and House Majority Leader Dick Armey have introduced legislation to restore many of the features of Gramm-Rudman. The most vital reform is a series of deficit reduction targets that, if missed, would trigger automatic across-the-board spending cuts--a sequester. I would urge that any new sequester process include all federal outlays except interest payments and Social Security benefits. That would impose a much-needed dose of discipline on the budget process.
2.) A Supermajority Requirement to Raise Taxes
Americans have been hit with 12 tax hikes in the past 20 years; each one has succeeded in further expanding the size of government rather than reducing the debt. Requiring a three-fifths or two-thirds majority in both the House and the Senate to pass a tax increase would allow Congress to pass tax hikes in cases of national emergency but would make it very difficult for Uncle Sam to continue the annual ritual of peacetime tax hikes. Several states, including Arizona, California, and Oklahoma, have enacted such measures; they have stopped tax increases dead in their tracks. As one Arizona taxpayer advocate of the supermajority requirement recently told me, "Now the legislature doesn't even bother to propose new taxes."
Congress passed the part of the "Contract with America" that promised new rules requiring a 60 percent vote to raise income taxes. That was a good start. But now that hurdle should be made to apply to all revenue-raising bills.
3.) National Referendum on All Tax Increases
Another populist budget reform that is sweeping the states is the requirement that any tax increase be ratified by a popular vote of the people in the next election. That gives the taxpayers veto power over the state legislature's efforts to raise taxes. Congress, too, should be forced to take its case to the people when it wants to take more dollars out of our paychecks. It is a virtual certainty that George Bush and Bill Clinton's wildly unpopular record tax increases would have been blocked if such a rule had been in effect.
Minority Leader Dick Gephardt deserves hearty congratulations for suggesting this reform as part of his 10 percent tax plan. Perhaps a bipartisan consensus could emerge on the issue.
4.) Dynamic Scoring of Tax Law Changes
The 1986 capital gains tax rate increase has raised roughly $100 billion less revenue than the Joint Tax Committee estimated when the law was passed. Capital gains realizations are less than half the level expected, as shown in Figure 2. Why such gigantic forecasting errors? Congress still uses static analysis to score tax rate changes--that is, it assumes little change in behavior in response to tax changes and thus almost no overall economic impact of new tax laws. The assumptions have been shown time and again to be wrong. We know the procedures are wrong, but we still use them.
The capital gains tax cut promised in the "Contract with America" will almost certainly raise revenues for the government--and it might raise substantial new revenues. The rich will actually pay more taxes with the rate cut. But the Joint Tax Committee refuses to score those dynamic effects. Scholars at the Cato Institute have long endorsed a zero capital gains tax. But the static revenue estimators say that will reduce revenues by $150 billion over five years. Dynamic estimates indicate that a zero capital gains tax would so energize our economy that total tax revenues might actually increase. But as long as we are slaves to static scoring, pro-growth tax initiatives will be torpedoed by faulty computer models.
Dynamic scoring will yield more accurate tax revenue estimates and thus encourage better policy.
5.) An End to Baseline Budgeting
A 4.5 percent increase in spending on the School Lunch Program is a budget increase, not a budget "cut." Baseline budgeting is a fraud. Lee Iacocca once stated that if business used baseline budgeting the way Congress does, "they'd throw us in jail."
It's time to end the false and misleading advertising in the budget. Congress should be required to use this year's actual spending total as the baseline for the next year's budget. If Congress spends more next year than it did in the current year, it is increasing the budget; if it spends less, it is cutting it.
6.) A Statute of Limitation on All Spending Programs
It has been said that the closest thing to immortality on this earth is a government program. Congress doesn't know how to end programs--even years and years after their missions have been accomplished. A five-year sunset provision should apply to every spending program in the budget--both entitlements and discretionary programs. That would require the true "reinvention" of programs by forcing the reexamination of every program, including entitlements, every five years.
7.) Debt Buy-Down Provision
This is Rep. Bob Walker's idea that would allow taxpayers to dedicate up to 10 percent of their income tax payments to retirement of the national debt. Politicians earmark spending all the time. Taxpayers should have the same right.
Rules Matter
Those budget process reforms are vitally important to the balanced-budget exercise because the rules of the game matter. The rules dictate outcomes. For more than 20 years, forces that favor spending have consistently prevailed over forces that favor fiscal restraint. That pro-spending bias in Washington threatens to cripple our nation's economic future.
Let me conclude by retelling a story about the late great Washington Redskins football coach George Allen. Allen lived by the motto "the future is now." He traded all the Redskins draft picks for over-the-hill veterans. He spent millions of dollars of owner Jack Kent Cooke's money to purchase expensive free agents. After several years of that, Cooke finally fired Allen. When asked why, Cooke responded, "When George Allen came to Washington I gave him an unlimited budget. But George managed to exceed it." That's the way taxpayers now feel about our politicians in Washington.
This article originally appeared in the July/August 1996 edition of Cato Policy Report.
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Pessimism is growing about the Congressional super committee on deficit reduction, so we were eager to listen yesterday when Pat Toomey called with the latest lowdown. Most notably, the Pennsylvania Senator explained why he and his five fellow Republicans have decided to put new tax revenues on the table.
Steve Moore on the prospects of real reform from the Congressional supercommittee.
.The rap from Democrats has been that Republicans refuse to touch revenues, preferring only to cut spending. But Mr. Toomey explained that this week the GOP Six offered to raise revenues by $500 billion over 10 years as part of a tax reform that would lock in lower tax rates in return for giving up deductions. Democrats have rejected it, which is puzzling since it would achieve so many of their stated goals.
The GOP offer would raise about $250 billion over 10 years by using some variation of economist Martin Feldstein's proposal that no combination of deductions could exceed, say, 2% of a taxpayer's adjusted gross income. (See Mr. Feldstein's Journal op-ed, "The Tax Reform Evidence From 1986," Oct. 24.) That's a big revenue hit, especially for earners in the top tax brackets who benefit more from tax breaks. Grover Norquist of tax-pledge fame would probably not be pleased.
In return for these cuts in deductions, Mr. Toomey says the top individual tax rate would fall to 28% from 35%, with the other tax-rate brackets falling by similar proportions. The current top rates for capital gains and dividends (15%) and the estate tax (35%) would remain unchanged. The GOP negotiators agreed to the Democrat request that these tax changes be statically scored—which assumes no revenue gains from economic growth—yet they would still yield $250 billion in additional revenue over a decade even with the lower tax rates.
"It's a bitter pill to accept new statically scored revenue," says Mr. Toomey, "but I think it's justified to prevent the tax increase that's coming" in 2013. Given the history of revenue gains after marginal-rate tax cuts, the tax windfall for the Treasury would likely far exceed $250 billion over a decade.
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.Another $40 billion or so in new revenue would come from changing the formula for adjusting tax brackets for inflation. And $200 billion more would come from a variety of asset and spectrum sales, user fees, tax compliance and other things—all scored on a static basis by the Joint Tax Committee. Mr. Toomey says the Members have also made progress on a corporate tax reform that would cut the rate to 25% in return for eliminating deductions, though any agreement would probably have to be done in two stages to work out the details.
As for spending cuts, Democrats would only have to agree to $750 billion over 10 years. About $180 billion of that would come from changing the inflation calculation for benefits, so the other reductions would hardly be extreme. Keep in mind that any changes in ObamaCare (with its 3.8-percentage point payroll tax increase) and major reform of Medicare and Medicaid were long ago ruled out by Democrats.
Despite the modest spending cuts, the deal Mr. Toomey describes would be a big political win for all concerned. It would give the economy a major lift by taking the tax increase now scheduled for 2013 off the table, and it would show that Congress can at least make some progress toward controlling federal spending. With a ratio of $1.50 in spending cuts to $1 in tax increases, the offer is far better for Democrats than the $3 to $1 ratio that President Obama's own Simpson-Bowles deficit commission recommended.
Mr. Toomey says Democrats nonetheless rejected this offer on Tuesday night, a fact that leaves him "enormously frustrated." He says Democrats are insisting on at least $1 trillion in new revenues while refusing to allow any reduction in tax rates or to stop the tax increase that will hit in 2013. The freshman Republican now fears the talks will end with a whimper of small revenue and spending measures that will do little to help the economy or the federal fisc.
We report all this because it's news and because it illustrates the real political obstacles to more sensible economic policy in Washington. In media mythology, the only barrier to a budget deal is conservative opposition to raising taxes. But even when Republicans put $500 billion in statically scored new revenues on the table, at the risk of upsetting their political base, Democrats declare that tax reform without higher tax rates is impossible. So who are the real "ideologues" here?
Democrats must believe they can blame Republicans if the super committee fails, riding their campaign against "millionaires and billionaires" back to complete power in Washington. It's a reckless bet, but the American public may have to call it.
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November 12, 2011 12:00 A.M.
Deficit-Reduction Fever
President Obama launches the war on tchotchkes.
Have you been following this so-called Supercommittee? They’re the new superhero group of Superfriends from the Supercongress who are going to save America from plummeting over the cliff and into the multi-trillion-dollar abyss. There’s Spender Woman (Patty Murray), Incumbent Boy (Max Baucus), Kept Man (John Kerry), and many other warriors for truth, justice, and the American way of debt. The Supercommittee is supposed to report back by the day before Thanksgiving on how to carve out $1.2 trillion dollars of deficit reduction and thereby save the republic.
I had cynically assumed that the Superfriends would address America’s imminent debt catastrophe with some radical reform — such as, say, slowing the increase in spending by raising the age for lowering the age of Medicare eligibility from 47 to 49 by the year 2137, after which triumph we could all go back to sleep until total societal collapse.
But I underestimated the genius of the Superfriends’ Supercommittee. It turns out that a committee created to reduce the deficit is instead going to increase it. As The Hill reported:
Democrats on the supercommittee have proposed that the savings from the end of the wars in Iraq and Afghanistan be used to pay for a new stimulus package, according to a summary of the $2.3 trillion plan obtained by The Hill.
Do you follow that? Let the Congressional Budget Office explain it to you:
The budget savings from ending the wars are estimated to total around $1 trillion over a decade, according to an estimate in July from the Congressional Budget Office.
Let us note in passing that, according to the official CBO estimates, a whole decade’s worth of war in both Iraq and Afghanistan adds up to little more than Obama’s 2009 stimulus bill. But, aside from that, in what sense are these “savings”? The Iraq War is ended — or, at any rate, “ended,” at least as far as U.S. participation in it is concerned. How then can congressional accountants claim to be able to measure “savings” in 2021 from a war that ended a decade earlier? And why stop there? Why not estimate around $2 trillion in savings by 2031? After all, that would free up even more money for a bigger stimulus package, wouldn’t it? And it wouldn’t cost us anything because it would all be “savings.”
Come to think of it, didn’t the Second World War end in 1945? Could we have the CBO score the estimated two-thirds of a century of “budget savings” we’ve saved since ending that war? We could use the money to fund free master’s degrees in Complacency and Self-Esteem Studies for everyone, and that would totally stimulate the economy. The Spanish–American War ended 103 years ago, so imagine how much cash has already piled up! Like they say at Publishers Clearing House, you may already have won!
Meanwhile, back at the Oval Office, the president is asking for your votes for the 2011 SAVE Award. To demonstrate his commitment to fiscal discipline, he set up a competition whereby federal employees can propose ways to cut government waste. A panel of experts (John Kerry, Paula Abdul, etc.) then weigh the merits, and the four finalists go up on the White House website to be voted on by members of the public: It’s like Dancing with the Czars. Last year, Marjorie Cook of Michigan, a food inspector with the Department of Agriculture, noted that every year USDA inspectors ship 125,000 food samples to its analysis labs by “next day” express delivery, and that a day or two later the labs ship the empty containers back to the inspectors using the very same “next day” service. Marjorie suggested that, as the containers are empty, they can’t be all that urgent, and should be mailed back at regular old ground delivery rates.
But this reform was way too radical, so it didn’t win. And happily, even as we speak, mail couriers are rushing empty containers back and forth across the USDA-inspected fruited plain at your expense. This year’s SAVE Award nominees include Faith Stanfield of Toledo, a “General Technical Expert” with the Social Security Administration. As someone who’s technically expert in a very general sense, she sees the big picture. It’s on the front of the SSA’s glossy magazine. Did you know Social Security has its own glossy magazine? It’s called Oasis and it’s sent out to 88,000 SSA employees plus about a thousand government retirees. It’s like Vogue or Vanity Fair, but without the perfume and fashion ads, because who needs Givenchy and Yves St. Laurent to fund your mag when you’ve got the U.S. taxpayer? It’s the magazine that says you’re cool, you’re now, you’re living the SSA-bureaucrat lifestyle. But Faith thinks they should scrap the glossy pages and only publish it online.
Ooh, I dunno. Sounds a bit extreme to me. Could result in hundreds of Social Security lifestyle editors being laid off and reduced to living on Social Security.
Anyway, the winner of the SAVE Award gets to meet with the president to discuss his or her proposal. The proposal then gets submitted to a committee for further discussion on whether to set up a committee to discuss discussing it further. But, unlike the Superfriends’ Supercommittee, the lunch expenses are cheaper.
What with the proposal to use the nearly two centuries of budget savings from the end of the War of 1812 to fund the construction of high-speed monorails and the plan to turn the Social Security Administration’s in-house glossy into an in-house virtual-glossy, it’s no surprise that the president himself has got the deficit-reduction fever. On Wednesday, he signed an executive order “Promoting Efficient Spending” — and ending government waste. Just like that! According to Section Seven:
Agencies should limit the purchase of promotional items (e.g., plaques, clothing, and commemorative items), in particular where they are not cost-effective.
Sounds like someone’s seen one amusing Janet Napolitano bobblehead too many at the DHS holiday party. About to stick in one of those giant commemorative plaques on the side of the road saying “These next three miles of single-lane scarified pavement brought to you by the American Recovery & Reinvestment Act”? Don’t even think about it.
Fresh from launching the war on tchotchkes, the administration then proposed a 15-cent tax on Christmas trees in order to fund a federal promotional campaign to promote the sale of Christmas trees. Possibly Commerce Department research showed that there’s a dramatic fall-off in the sale of “holiday trees” round about December 26 every year, and Obama figured a little stimulus surely couldn’t hurt. He was forced to rescind the proposal, presumably after an ACLU chum pointed out that settling the Bureau of Christmas Tree Promotion lawsuit would wipe out all the budget savings from the French and Indian Wars.
Meanwhile, as these ruthless austerity measures start to bite, the government of the United States continues to spend one-fifth of a billion dollars it doesn’t have every hour, every day, every week, including Thanksgiving, Christmas, and Ramadan.
And remember, folks, Rick Perry is the dummy because he wants to abolish so many government departments, he can’t keep track of them all. Keep it simple, Rick. Just stick to a campaign pledge to set up a supercommittee to report back on the possibility of using savings from mailing back empty specimen beakers by three-day ground service to fund Medicare. Then people will take you seriously.
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http://www2.macleans.ca/2011/11/11/acropolis-now/
Acropolis now: Greece may be just the start
Other Eurozone countries are faltering, with far more worrying consequences
by Michael Petrou with Stavroula Logothettis on Friday, November 11, 2011 11:00am - 7 Comments
Orestis Panagiotou/Keystone Press
“We are finished as a nation,” says Marko Gjini, a 39-year-old unemployed construction worker in Athens. “The country has been sold off. We have no say in anything anymore. Greece is owned by the Germans.”
Like many Greeks these days, Gjini is bitter and despondent because of his country’s financial mess, and the austerity measures that have been imposed in an effort to contain it. His wife, Aleka, a public hospital nurse, has seen her income drop from 1,200 euros a month to 800 euros. Now, facing more taxes and cuts to public expenditures, the family expects to have a net monthly income of less than 500 euros. Marko and Aleka are investing whatever money they can toward English lessons for their twin eight-year-old boys in the hope that they might have a better future somewhere else. “Let the government fall,” says Gjini, “[German Chancellor Angela] Merkel is the boss now anyway.”
Greece’s financial troubles have been accelerating since 2008, and have now reached a crisis point. Unable to pay debts accumulated through years of wild spending and financial mismanagement, covered up by blatant cooking of the books, last May the country accepted a $150-billion bailout loan from the International Monetary Fund and other members of the eurozone—those European Union countries that use the common euro currency—in return for imposing harsh austerity measures. These weren’t popular among ordinary Greeks; strikes and street protests followed. Three bank officials died in May when rioters set fire to their bank branch in downtown Athens.
The Greek government, meanwhile, missed its financial targets. Rescue loans were delayed. And the recession got worse. Facing the very real possibility of defaulting on its enormous national debt, Greece last month negotiated another bailout package involving cash and a 50 per cent “haircut” off all its privately held debt, if Greece would agree to further cuts to public spending and increased taxes.
Greek Prime Minister George Papandreou then shocked the rest of the continent when he announced he would take the proposed package to the Greek people in a national referendum. But French President Nicolas Sarkozy and Merkel—leaders of the two largest economies in the eurozone—summoned Papandreou to a meeting of the G20 in Cannes, France, and told him all bailout money would be suspended until after a referendum vote was held. What’s more, they said, a referendum on the bailout deal would, in effect, be a vote on whether Greece wished to remain in the eurozone. Papandreou backed off and dropped the referendum.
For Vaso Gildizi, a Greek freelance writer, events in Cannes were “a national humiliation for the country.” The Greek prime minister was scolded like a schoolboy and sent home. The incident didn’t sit well with many Greeks who were already sour on the bailout deal and the euro itself.
“We’re bankrupt,” says 44-year-old Vasilia Paneli, owner of Bliss, a trendy café a short walk from Syntagma Square and the parliament in Athens. “We know it. The EU knows it. And yet we continue this Greek tragedy. A referendum would at least give us a voice, a chance to speak up for our future.” Paneli was unmoved by French and German threats that a referendum on the bailout deal would have meant a vote on whether to remain in the eurozone. She’d rather Greece leave it. “It’s self-serving,” she says. “I say let’s go back to the drachma.”
This option of leaving the eurozone and reverting back to Greece’s previous currency has some traction in Greece. “Under the euro we’ve become a nation of bailout slaves,” says Stavro Tsoykalas, an unemployed truck driver who claims people were never as poor during the drachma days as they are now. He too would like to drop the euro.
William Antholis, a senior fellow at the Brookings Institution think tank, likens flirting with a return to the drachma to “threatening suicide to avoid a lynching.” Greece is in for a painful few years whatever happens, he said in an interview with Maclean’s. The austerity measures are going to bite. But leaving the euro, he says, would be disastrous. The costs could include a run on Greek banks, as people sought to withdraw euros before they were changed to drachmas. Some banks would probably collapse. Greece would likely default on its debts, and would be unable to pay pensions and salaries. Some sectors of the economy built on export might benefit from a new, devalued currency, but at the expense of much heavier blows elsewhere.
“Greece would be basically shot back into developing country status,” says Henning Meyer, a senior visiting fellow at the London School of Economics. “The economy would almost certainly collapse. It would be a very severe economic shock to the country.” But Meyer is also critical of the bailout package. Forced spending cuts will shrink Greece’s GDP, he predicts, crippling its ability to pay down its debts. What’s needed, he says, is a “European growth strategy” of targeted cuts but also investment. This isn’t on the table. Greece will accept the bailout package, he says, “because they’ve basically got a gun to their head. There are no good options left.”
Indeed, this week the Greek socialist government and opposition conservatives agreed to form a coalition government until a new election is held next year, possibly in February. Papandreou will remain as prime minister until his interim replacement is chosen. In the meantime, the coalition government will approve the bailout package, triggering the release of the now frozen rescue funds.
This won’t solve all of Greece’s problems, though. The economy will take years to recover, if it does at all. This will make Greece difficult to govern in the years ahead, as future governments will have to convince voters that austerity measures are still necessary, even as their standard of living stagnates or declines.
“If one of us were indebted to that degree and told you have to give up all the comforts that you’ve been accustomed to, and on top of that pay more out of your pocket, and maybe in 15 years you’ll see some incremental growth, there isn’t much incentive for people to work toward that goal,” says Phil Triadafilopoulos, an assistant professor of political science at the University of Toronto. “There isn’t much hope in that message. And that’s basically the message of austerity at its best.”
It’s not certain Greeks will buy in to such a deal, and solve some of the problems that have bedevilled the Greek economy and made reform so difficult: widespread tax evasion and a pervasive black market. Kostas Agas, a banker in Piraeus, a port city on the outskirts of Athens, says that even though Greeks understand the severity of the problems facing their country, many “continue to perpetuate the black money economy and the no-receipt mentality, but now it’s done in defiance of the austerity measures.”
Beyond Greece’s economic future are dilemmas about its political one—and indeed about the political future of Europe as a whole. “This is a much bigger than a question of currency. It’s a question of identity and who we are moving forward,” says Triadafilopoulos.
A generation or two ago, Greeks talked about “going to Europe,” as if the place were somewhere else. This has changed, as Greeks, especially young Greeks, embrace being part of a larger European community. But cynicism is growing among some, such as Gjini, the construction worker who believes his country is owned by Germans and run by Angela Merkel.
“The nature of the European Union is that you give up a piece of your sovereignty in return for prosperity and democracy,” says Jeffrey Kopstein, a political science professor at the University of Toronto. “That’s the bargain. If the prosperity is not there, the bargain appears to be less juicy.”
But Spyros Economides, a senior lecturer in international relations at the London School of Economics, dismisses the notion that Greece is selling its sovereignty to foreign countries in exchange for bailout funds. “This is a false dichotomy. We are a European Union partner. We are eurozone partners. We’ve also benefited from being part of this joint enterprise. And when we were on the receiving end of money and benefits, and structural funds and cohesion funds and regional funds, I didn’t hear much of an outcry then in terms of what this meant for sovereign rights and whether we were being dictated to from abroad.”
What’s most worrying about Greece’s financial crisis is that it is not an isolated one. Other countries in the eurozone are faltering, and the repercussions in economies bigger than Greece will be stronger. “Greece is a minor, minor spoke on a much bigger wheel,” says Economides.
Portugal and Ireland have both needed bailouts because of their debt problems. Now there are fears for Italy’s economy—the third largest in the eurozone—because of the country’s large debt and soaring borrowing costs for the government. This week, its prime minister, Silvio Berlusconi, finally heeded calls from political allies and opponents and agreed to step down. Along with Papandreou of Greece, he’s the second European leader to fall victim to the financial crisis in a week.
“The European project has a big question hanging over it,” says Economides. “I don’t think the European Union is in danger of collapsing right now. But you can see if the eurozone starts dismantling and falling into subgroups, and two tiers, then of course it has direct implications as to what this project actually is, and who it’s for, and what it’s going to achieve in the future.”
Already, some voters in the richer EU countries question why they should continue to bail out poorer member states. In Britain, 81 Conservative MPs defied Prime Minister David Cameron’s orders to vote against a call for a referendum on Britain’s continued membership in the European Union. And according to an October ICM poll, more Britons would vote to leave the European Union than would choose to stay in it.
“A whole dream has come into question,” says Triadafilopoulos. “Something that people were really proud of and saw as part of their identity, this European project, has been challenged at its very core. The belief in Europe as a basically positive thing and a way of moving forward into the future has been put into question at its basest level.
“Europe was established initially as a way of making sure that France and Germany didn’t tear each other to pieces a third time. The logic changed somewhat to be more economically driven. But at its core, it’s an idea that Europe is a community of European states that are united, despite their differences, according to a common allegiance to certain core principles—key of which is a commitment to liberal democratic principles and human rights. “If that project fails, then what we understand of Europe today is thrown into question. And Europe’s pre-unification history is not one that makes me optimistic. It was the centrepiece of two world wars, and prior to that innumerable conflicts, vicious conflicts that pitted European against European.”
Triadafilopoulos doesn’t expect a return to war in Europe. But he says a shared sense of what it means to be European will be lost. Until now, the trend in an integrating Europe has been toward liberal democracy. “If that trend is thrown into reverse, I don’t know what the consequences are, but I’m pretty sure they’re not good.”
But Triadafilopoulos says the crisis might have collateral benefits if it provokes debate among Europeans about what they want their future to be. Europe’s politicians, he says, will have to make a renewed case for the union. “Those who believe in Europe, they’re going to have to marshal arguments that resonate with everyday people in their respective countries, that give them a sense of the consequences if Europe is allowed to wither, because they are significant,” he says. “This may be a way of connecting Europe to Europeans.”
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http://www.thedailybeast.com/articles/2011/11/12/europe-s-financial-crisis-is-headed-to-america.html
Europe’s Disaster Is Headed Our Way
Nov 13, 2011 12:00 AM EST
Can America withstand the death spiral of debt?
As an author who has just published a book on the crisis of Western civilization, I couldn’t really have asked for more: simultaneous crises in Athens and Rome, the cradles of the West’s law, languages, politics, and philosophy.
Yet most Americans are baffled by the ongoing economic pandemonium in the European Union. For them, places like Greece and Italy are primarily tourist destinations they’ll visit at most once. The finer points of Mediterranean politics leave them cold, except insofar as they’re funny. After all, who could resist the opera-buffa character of Silvio “Bunga-Bunga” Berlusconi?
But only a few weirdos really feel their pulses quicken when they hear news like: the new Greek prime minister is a former central banker called Papademos! Ever tried to explain to a New Yorker the finer points of Slovakian coalition politics? I have. He almost needed an adrenaline shot to come out of the coma.
So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China.
Until March, it seemed as if exports to Europe were on an upward trajectory. But the eurozone crisis has stopped that. Governments that ran up excessive debts have seen their borrowing costs explode. Unable to devalue their currencies, they’ve been forced to adopt austerity measures—cutting spending or hiking taxes—in a vain effort to reduce their deficits. The result has been Depression economics: shrinking economies and unemployment rates approaching 20 percent.
As a result, according to the new president of the European Central Bank, Mario Draghi, a “double dip” recession in Europe is now all but inevitable. And that’s lousy news for U.S. exporters targeting the EU market.
But there’s more. Europe’s problem is not just that governments are overborrowed. There are an unknown number of European banks that are effectively insolvent if their holdings of government bonds are “marked to market”—in other words, valued at their current rock-bottom market prices. In our interconnected financial world, it would be very odd indeed if no U.S. institutions were affected by this. Just as European institutions once loaded up on assets backed with subprime U.S. mortgages, so most big U.S. banks have at least some exposure to eurozone bonds or banks. One institution—MF Global, run by former Goldman Sachs CEO Jon Corzine—just blew up because of its highly levered euro bets. Others are biting their fingernails because it is suddenly far from clear that the credit default swaps they have bought as insurance against, say, a Greek default are worth the paper they are written on.
But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.
Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.
Athens, Rome, Washington ... The shortest route from imperial capital to tourist destination is precisely this death spiral of debt.
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Niall Ferguson is a professor of history at Harvard University and a professor of business administration at Harvard Business School. He is also a senior research fellow at Jesus College, Oxford University, and a senior fellow at the Hoover Institution, Stanford University. His Latest book, Civilization: The West and the Rest, will be published in November.
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Your point (emphasized) about debt is valid. We need to get our house in order.
An important subpoint however is that Europe DOES matter.
"So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China."
The implication is that we should not sit by and merely watch Europe fail. Whether you care about Europe or not, it's failure will a disaster for us.
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You assume there is something we can do to save europe. Europe has to fix Europe. We have to unfcuk ourselves.
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I'm not sure why "working for the State is different"......
http://www.latimes.com/news/local/la-me-discipline-reversed-20111114,0,7958658.story
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I'm not sure why "working for the State is different"......
http://www.latimes.com/news/local/la-me-discipline-reversed-20111114,0,7958658.story
Well, it's a matter of due process regarding civil service employees. Pretty repulsive examples cited, and I don't think civil service would protect some of those in other states.
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Seems to me that the larger point about it being insanely difficult to fire state employees for cause has considerable merit.
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I can tell you that it's not the case elsewhere.
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I understand the BBA voted on that received a majority but failed to get the 2/3rd threshold did not include the cap on spending, did not include the super majority requirement to raise taxes and among the opponenets was Rep. Paul Ryan.
Ryan said: “I’m concerned that this version will lead to a much bigger government fueled by more taxes,” Ryan said in a statement following the vote. “Spending is the problem, yet this version of the BBA makes it more likely taxes will be raised, government will grow, and economic freedom will be diminished. Without a limit on government spending, I cannot support this Amendment.”
I agree with Paul Ryan. What a strange 'solution' that we can spend all we want if it is combined with a tax increase on someone else.
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Agreed.
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First I must admit I am fascinated with things like off the grid power systems and with electric vehicles. I have 2 electric vehicles right now (an electric bike and a trolling motor powered kayak) but still rely heavily on the combustion engine to get real work done, a load carried or a real distance traveled. A natural gas and electric hybrid I predict will be in my future, but who knows. I just don't see how any of it depends on a government program. That doesn't it make it more cost effective, it just hides the costs.
The real intention of these government programs, subsidies and mandates, is to rush the product to market before it is ready. Isn't government's role in every other product, FDA etc. life saving drugs and procedures, to slow the product to market so that proper testing and public safety is assured?
http://www.signonsandiego.com/news/2011/nov/25/2nd-electric-car-battery-fire-involving-chevy-volt/?ap
2nd electric car battery fire involving Chevy Volt
WASHINGTON (AP) — Federal officials say they are investigating the safety of lithium-ion battery in General Motors Co.'s Chevrolet Volt after a second battery fire following crash-testing of the electric car.
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In the last round, were the real cuts $1 billion or $7 billion?
Mark Steyn: "The correct answer is: Who cares? The government of the United States currently spends $188 million it doesn’t have every hour of every day. So, if it’s $1 billion in “real, enforceable cuts,” in the time it takes to roast a 20 lb. stuffed turkey for your Thanksgiving dinner, the government’s already borrowed back all those painstakingly negotiated savings. If it’s $7 billion in “real, enforceable cuts,” in the time it takes you to defrost the bird, the cuts have all been borrowed back."
By the time the relevant bill passed the Senate earlier this month, the 2012 austerity budget with its brutal, savage cuts to government services actually increased spending by $10 billion.
http://www.nationalreview.com/articles/284111/more-more-more-mark-steyn
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Posted elsewhere that leftists think govt spending is too low. :?
Voters sent a message to Washington a year ago. We had fights over "CUTS" that would cripple public services last summer. Still spending is up anther 5%. Why? Because of, as Crafty has argued, the services baseline budget calculations still in place, so a cut isn't a cut, it is any number lower than what some elitists in the bowels of DC determine is enough to keep excesses constant.
A larger look at what they are stealing from the economy below. A smarter parasite would not seek to kill off the host.
(https://www.nationalreview.com/sites/default/files/nfs/uploaded/u814/2011/11/Government%20Spending%20Chart.jpg)
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Going Off the Rails Against the REINS Act
Jonathan H. Adler • December 7, 2011 8:52 am
Today the House of Representatives is expected to vote on the REINS Act, a bill to enhance political accountability over regulatory decisions. The bill has two essential features. First, it bars new “major” regulations (those anticipated to cost more than $100 million annually) from taking effect unless approved by both houses of Congress. Second, it creates an expedited review process that forces each house to vote on each major rule. So while requiring Congressional approval, REINS prevents members of Congress from ducking their responsibility to vote yay or nay.
REINS is a controversial bill, in part because it effectively limits the delegation of broad regulatory authority to federal agencies, but to read some critics, REINS would usher in an anti-regulatory armageddon. While I support the legislation, for reasons detailed in these posts (and summarized in this NRO piece), I recognize that there are reasonable arguments to be made on the other side. What’s so interesting watching this debate, however, is how many opponents refuse to make them, relying instead on inaccurate and fanciful characterizations of the bill. It’s telling when opponents of legislation are unable or unwilling to describe it accurately when making their case.
To take one example, US PIRG’s Ed Mierzwinski argues that the REINS Act would lead to unsafe toys on the market and emasculate the CPSC.
One bill, the REINS Act, would not only allow but require congressional meddling in the implementation of all public health and safety rules. A single member of Congress, at the behest of some powerful special interest or campaign contributor, could block the public database, block science-based lead standards for children’s products, block crib safety rules or any number of protections that provide a safer consumer marketplace.
The idea that REINS would allow a single member of Congress to block new regulations is a common claim. The Center for American Progress makes it here. It’s also false. The bill expressly limits debate, waives procedural objections, and requires a vote on the merits. Under REINS, if some members of Congress wish to block needed safety rules at the behest of a special interest, they will have to do it out in the open, and will only succeed if they can win a majority vote. How could this undermine legislative accountability? It’s true REINS requires that legislative approval occur within a set period of time, but it also ensures the vote occurs before the deadline expires.
The NYT worries REINS will “undermine the executive branch.” Really. Why? Because it will be too easy for a majority in either House to prevent a President from rewriting regulatory requirements. The NYT also argues REINS is “deeply undemocratic.” Got that? Requiring legislative votes on major regulations — that two or three of the most consequential regulatory decisions made by federal agencies — is “undemocratic,” whereas allowing agencies to rely upon decades-old statutes to remake industries and reconfigure whole sectors of the economy is not.
The REINS Act would dramatically alter how major rules are made, but it would do so by making sure the people’s representatives have a greater say on — and greater accountability for — the major regulatory actions our federal government takes. If the public wants greater regulation of environmental or other problems, REINS won’t stand in the way. Only if the public is skeptical of such regulations, or unconcerned by legislative vetoes of proposed rules, will REINS slow down the adoption of new rules. And perhaps that’s what the REINS Act’s opponents are truly afraid of: A regulatory process that more accurately reflects what the public wants.
UPDATE: For unhinged commentary on the REINS Act, it’s hard to do better than this piece which, among other things, claims the Act would “essentially return environmental regulation to 1890s standards – when corporations polluted with impunity.” That’s an astounding charge given that REINS a) does not have any effect whatsoever to regulations already on the books and b) would apply equally to deregulatory initiatives, such as any effort by a future President to repeal existing regulations.
http://volokh.com/2011/12/07/going-off-the-rails-against-the-reins-act/
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Just a quick yip to note the utter tactical incoherence of the Boener in the current go round with Baraq. The intellectual co-author of the "super committee" fiasco has now managed to enable Baraq positioning himself as the tax cutter! Unfgbelievable. :x
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Just a quick yip to note the utter tactical incoherence of the Boener in the current go round with Baraq. The intellectual co-author of the "super committee" fiasco has now managed to enable Baraq positioning himself as the tax cutter! Unfgbelievable. :x
Yes, the roles got flipped here, but it was Boehner who got the pipeline into the bill and the senate approved that. Doesn't even the two month extension get the pipeline going? Unless I am missing something, they should have taken the deal.
OTOH, it is odd that Dems are so eager to defund social security making it less sacred.
Removal of the separate payroll tax should have been combined with comprehensive reform. Real reform is not possible with the current divisions of power. The positioning and posturing coming into the election is crucial and there is a leadership vacuum on both sides.
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According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year.
Chevy Volt Costing Taxpayers Up to $250K Per Vehicle
http://www.michigancapitolconfidential.com/16192
Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.
Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.
The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.
It’s unlikely that all the companies involved in Volt production will ever receive all the $3 billion in incentives, Hohman said, because many of them are linked to meeting various employment and other milestones. But the analysis looks at the total value that has been offered to the Volt in different aspects of production – from the assembly line to the dealerships to the battery manufacturers. Some tax credits and subsidies are offered for periods up to 20 years, though most have a much shorter time frame.
GM has estimated they’ve sold 6,000 Volts so far. That would mean each of the 6,000 Volts sold would be subsidized between $50,000 and $250,000, depending on how many government subsidy milestones are realized.
If those manufacturers awarded incentives to produce batteries the Volt may use are included in the analysis, the potential government subsidy per Volt increases to $256,824. For example, A123 Systems has received extensive state and federal support, and bid to be a supplier to the Volt, but the deal instead went to Compact Power. The $256,824 figure includes adding up the subsidies to both companies.
The $3 billion total subsidy figure includes $690.4 million offered by the state of Michigan and $2.3 billion in federal money. That’s enough to purchase 75,222 Volts with a sticker price of $39,828.
Additional state and local support provided to Volt suppliers was not included in the analysis, Hohman said, and could increase the level of government aid. For instance, the Volt is being assembled at the Poletown plant in Detroit/Hamtramck, which was built on land acquired by General Motors through eminent domain.
“It just goes to show there are certain folks that will spend anything to get their vision of what people should do,” said State Representative Tom McMillin, R-Rochester Hills. “It’s a glaring example of the failure of central planning trying to force citizens to purchase something they may not want. … They should let the free market make those decisions.”
“This might be the most government-supported car since the Trabant,” said Hohman, referring to the car produced by the former Communist state of East Germany.
According to GM CEO Dan Akerson, the average Volt owner makes $170,000 per year.
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Question:
The super committee failed to come to terms, so presumably the "automatic cuts" are , , , automatically happening? If so, WHEN are they happening?
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Amid this month's payroll tax fracas, few noticed that Congress passed a 1,200-page, $1 trillion omnibus spending bill for fiscal 2012. Maybe no one in Washington boasted because it's a victory for spending as usual. Republicans—in the House and Senate—need a better strategy.
The news is that after accounting for last-minute unemployment insurance extensions, "emergency" spending and higher Medicare physician payments, total federal outlays are estimated to be $3.65 trillion in fiscal 2012, up slightly from $3.6 trillion in 2011. The last year has seen no major reforms in any of the big entitlement programs—Medicare, Medicaid or Social Security. Spending on food stamps alone is scheduled to reach $80 billion in 2012, more than double the amount as recently as 2007.
Republicans had promised to roll back discretionary spending to 2008 levels, to save $100 billion. But the August debt deal lowered the savings to $7 billion—or a 2012 target for appropriations of $1.043 trillion. Even that target was missed because appropriators tacked on roughly $10 billion in disaster relief—hurricanes this summer—and so the new total is $1.054 trillion. That's $4 billion more than the 2011 baseline of $1.050 trillion, although savings from troop withdrawals in Iraq may reduce that.
What about killing programs? Well, only 28 programs out of the thousands of line-items contained in the omnibus budget were terminated. The list includes mostly minor programs such as $12.5 million spent on something called "adolescent family life," $1.2 million for civic education, and $1.4 million for economics education (not for members of Congress).
The one major domestic program of more than $100 million that got the axe was the Energy Department loan guarantee program for the likes of Solyndra. The total domestic savings from program terminations come to less than $0.5 billion.
Enlarge Image
Close...Meanwhile, scores of programs that have long been GOP targets survived: Amtrak, the Legal Services Corp., National Public Radio, the United Nations population program, mass transit grants, and even funding for the U.N. Climate Panel. Spending increased for many programs, such as the National Institutes of Health, the Consumer Product Safety Commission, Indian Health Service and Bureau of Land Management.
Many readers will look at all this and blame House Republicans, and there's no doubt they failed to meet expectations. Yet believe it or not, a flat overall budget is a vast improvement over the years 2007 to 2011, when overall spending increased 32%, or $868 billion. (See the nearby table.) Voters elected a GOP House to pull the Democratic credit card, and Republicans at least stopped the blowout of the Pelosi-Obama years.
The real failure of GOP leaders is that Senate Democrats and the White House foiled Republican attempts to cut spending further. The GOP fiscal high point was the passage of Paul Ryan's budget in the spring, with $4.5 trillion of savings over a decade, numerous program cancellations, the most ambitious entitlement reform since the GOP budget of 1995 (vetoed by Bill Clinton), and an outline for pro-growth tax reform.
From that moment on, Democrats went into a prevent defense. Senate Majority Leader Harry Reid refused to pass a comparable budget outline, a Democratic abdication that has now reached more than 900 days. Democrats offered no spending cuts or budget reforms in public. None. Instead, they attacked Mr. Ryan for daring to reform the structure of Medicare to introduce more competition, which takes some nerve after Democrats cut Medicare by $500 billion over a decade to fund ObamaCare.
As for the White House, Mr. Obama joined the assault on Mr. Ryan, but he also claimed to favor some fiscal discipline and he invited GOP leaders to work out a compromise behind closed doors. This let him posture as a spending cutter without having to make a decision on any specific budget cuts or reforms. He gulled Speaker John Boehner in particular with promises of sincerity, only to demand $1 trillion in tax increases that House Republicans could never pass without violating their own campaign promises.
This was the big GOP mistake. Mr. Boehner and Majority Leader Mitch McConnell both fell for Mr. Obama's backroom political trap. Mr. Boehner privately insisted that Mr. Obama really wanted a deal, while Mr. McConnell, who never liked the House budget, was looking for political cover on Medicare. But whatever their motives, their strategy failed by letting Mr. Obama set the terms of debate. They failed to make Senate Democrats and the White House declare themselves in public where voters would notice.
***
There has to be a better way. Tea party expectations of major reforms were always unrealistic with Democrats controlling the Senate and White House. But that's no reason that Republicans in Congress can't use their power to fight for their priorities.
They need to draw contrasts with Democrats on taxes, spending, regulation and reform that at least educate the public about what's at stake. Pick some programs and make them budget-cutting showcases. Use the savings to finance tax cuts that promote growth. Or simply vote for tax reform whether or not it is "revenue neutral" under Congress's silly budget rules. Follow votes in the House by bringing pro-growth bills to the Senate and forcing Democrats to vote up or down, as they did with the Keystone XL pipeline.
GOP Congressional leaders will be tempted to play it safe and wait for their Presidential nominee. And inevitably the Presidential race will dominate public debate as 2012 unfolds. But before it does, Republicans need to do far more to show their own supporters and independent voters that they are the party of reform and change in Washington. If voters want spending as usual, they'll elect Democrats.
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"Public debt has increased by 67 percent over the past three years, and too many Americans refuse even to see it as a problem. For most of us, '$16.4 trillion' has no real meaning, any more than '$17.9 trillion' or '$28.3 trillion' or '$147.8 bazillion.' It doesn't even have much meaning for the guys spending the dough: Look into the eyes of Barack Obama or Harry Reid or Barney Frank, and you realize that, even as they're borrowing all this money, they have no serious intention of paying any of it back. That's to say, there is no politically plausible scenario under which the 16.4 trillion is reduced to 13.7 trillion, and then 7.9 trillion and, eventually, 173 dollars and 48 cents. At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done." --columnist Mark Steyn
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In a country of 307,000,000, roughly 1500 people bought the US taxpayer subsidized Chevy Volt flammable electric golf cart. You do the math. A good number of those subsidized rich people already own at least one subsidized Prius.
The average Volt buyer makes $170,000 per year, roughly the same as a US Senator or a judge on the US Court of Appeals.
So much for the war on poverty.
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I'm thinking Romney or Santorum would have a hard time answering this in debate-- how about each of us?
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WSJ
By AUSTAN GOOLSBEE
The Iowa caucuses presented the full range of views of the Republican hopefuls. When it came to fiscal strategy, however, there was almost no daylight among them. Each candidate decried the rise of government spending and wants to cut taxes.
Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years.
To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form.
Yet the long-run fiscal problem facing the country—which is real—has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened.
The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office. The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision.
Most of the increase in the deficit during a downturn doesn't come from new policies in Washington. The deficit rises because both spending and taxes automatically adjust when the economy struggles. Unemployment insurance payments rise and more people qualify for Medicaid and food stamps. Incomes fall so people pay less taxes.
It's completely normal that spending rises during big downturns. The government's share of the economy jumped significantly during the big recessions in the 1970s and '80s. As the economy grows back to health, the government share of the economy will fall (and many analysts forecast just that for the coming year).
The same dynamic applies to tax revenues. You would think that—using the same logic they apply to the rise of government spending—the GOP candidates would be trumpeting the last three years as one of the greatest tax cutting periods of the century.
The nonpartisan Tax Policy Center's data predict that in 2011 taxes will have fallen more as a share of national income than during almost any other comparable period in U.S. history (including under Ronald Reagan) and may hit their lowest level since World War II: 14.4% of GDP, compared with the more than 18% average of the last 30 years. Individual income taxes may hit their lowest level as a share of income since 1950 and corporate income taxes the lowest since 1936.
The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels.
The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%.
To hear the Republican candidates, you would think our problems were about discretionary spending running wild. Yet, if you take out the aging of the population and health-care cost increases, government spending is going to shrink over the next decade. A cap on government spending at past levels and a balanced-budget constitutional amendment would force huge cuts to Social Security and Medicare.
So let's talk about the trade-off between new revenues versus cuts to entitlements. We have known about that issue for decades. We also know it would be much easier to address if the economy were growing again.
The election should lay out each candidate's fiscal grand bargain and growth strategy. Let us compare them. They matter. This could make up the heart of a historically important presidential contest. Instead, Iowa showed us a series of candidates trying to outdo one another with condemnation for the short-term rise in spending while simultaneously proposing tax policies that would add trillions to the long-term deficit.
Mr. Goolsbee, a professor of economics at the University of Chicago's Booth School of Business, was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.
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Crafty wrote: Alright gents, answer this... I'm thinking Romney or Santorum would have a hard time answering this in debate-- how about each of us?
Hey, that was some 40 posts back, where are those answers?! Put it another way, either know and be able to articulate a rebuttal to Obamanomics or settle for you, your children and your grandchildren living their lifetimes in the transformed country that Pres. Obama and his Czars and central planners are building for you. I will go through this drivel point by point, but would rather see the deceptions answered in a coherent and persuasive 60-90 second debate narrative, as Crafty indicated. The piece contains the central thesis of the reelection, at least the best they can manufacture.
==================
WSJ
By AUSTAN GOOLSBEE
- FWIW, this is the editorial page publishing an opposing view and these are the slanted underpinnings for a partisan stump speech written by an insider and co-conspirator. He is highly credentialed but this is not a serious academic economic analysis.
"The Iowa caucuses presented the full range of views of the Republican hopefuls. When it came to fiscal strategy, however, there was almost no daylight among them."
- FALSE. A view that they are all the same can only come from an opposing partisan setting up a series of straw arguments. Reminds me of a white guy saying all blacks or Asians look alike. If the author isn't interested or can't see the differences, then why comment.
"Each candidate decried the rise of government spending and wants to cut taxes."
- FALSE and its a theme here. It's the tax RATES that they want to cut, not cut revenues. A professor of economics at the Univ. of Chicago knows the difference. Shame on him.
"Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years." ( - TRUE!)
"To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form."
- FALSE, Everyone of them knows that the under-performance of the private economy is the central problem. Resources taken from the private economy for the public sector are just one of the causes of that under-performance. Taxes and especially overly burdensome regulations comprise most of the rest.
"Yet the long-run fiscal problem facing the country—which is real—has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened."
- FALSE! What Republican is pretending the recession never happened? Prof. Goolsbee, OTOH, pretends that the economic stagnation is like weather; this recession is like a rain certain to be followed by sunshine just by waiting or doing more of the same. This recession/stagnation was and is a GOVERNMENT CAUSED DOWNTURN and as a top adviser, former chief economic adviser, he was right there at the table where they failed to identify either the correct cause or solution to the mess.
"The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office."
- DECEPTIVE to say the least. Yes the pundits and voters will look at the calendar days of the Obama Occupy the White House movement but everyone who was alive and paying attention knows that domestic power in Washington DC changed hands in the Nov 2006 election. The CBO forecast he sites is from the Pelosi-Reid-Obama-Hillary-Biden 'non-partisan' CBO scoring the budget passed by the Pelosi-Reid-Obama-Hillary-Biden congress signed by Bush 'before the Obama administration even came into office'. The downturn was under THEIR watch as well, including SEN. Obama always supporting or voting with the majority, and the emergency measures coming into the 2008 election and during the transition period were made in 100% consultation and agreement with the incoming Obama administration. Spin that some other way if you would like, but the investors and employers in the economy were wide awake heading into the tax rate increases and the host of new programs and regulations impending beyond their worst nightmare of imagination when the asset selloff began and when the collapse of housing and employment ensued.
"The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision."
- This is 4 years later! "ONLY" a quarter trillion/yr. is a TRILLION in 4 years and it wasn't a stimulus if it didn't stimulate and it doesn't count the QEx, nationalization of autos and host of other excesses. If you didn't know that then, surely you know that now as the chief outgoing economic adviser. And not all tax cuts are created equal. Some stimulate economic activity and others give up revenues without improving incentives whatsoever. Some are targeted to constituent voting groups and some apply to all, especially those inclined to hire and produce. Guess which types the Obama administration working the first 2 years with a 100% Dem congress chose??
"Most of the increase in the deficit during a downturn doesn't come from new policies in Washington. The deficit rises because both spending and taxes automatically adjust when the economy struggles. Unemployment insurance payments rise and more people qualify for Medicaid and food stamps. Incomes fall so people pay less taxes."
- A theoretically truth, but FALSE in this case. Spending sold as "emergency" and "temporary" in fact became the new benchmark used by same author and the administration and its allies to assail any reduction from emergency levels an act of war against the 99% and the weakest among us in particular. Proof: After all the budget hysterics and pretend "cuts" of the past year under bitterly divided government, spending was up another 5% for the year. What part of that spending was emergency? None of it. It was the why-waste-a-crisis crowd intentionally transforming American dependency on government. BTW, we aren't in a recession (and the downturn did come from new government policies). We are in the new American economy operating exactly as it should be under the disincentives scheme designed by Prof. Goolsbee et al and legislated and signed by the side he is defending.
"It's completely normal that spending rises during big downturns. The government's share of the economy jumped significantly during the big recessions in the 1970s and '80s. As the economy grows back to health, the government share of the economy will fall (and many analysts forecast just that for the coming year)."
- WHY should the economy grow back to health. Doing more and more of the same and expecting a different result is WHAT?? (definition of insanity?)
"The same dynamic applies to tax revenues. You would think that—using the same logic they apply to the rise of government spending—the GOP candidates would be trumpeting the last three years as one of the greatest tax cutting periods of the century."
- BLATANTLY FALSE!! If anyone would believe this drivel then I would put it with falsely shouting fire in a crowded theater - perhaps not protected speech. Do they need that level of LIE to run on their record? Once again, a fully educated economist intentionally confuses tax rates with tax revenues for political deception purposes. The frontrunners are NOT trying to lower government revenues. Maybe Ron Paul would lower revenues AND balance the budget, but that blows the Professor's first premise that he (blindly) can't see any daylight between any of them.
"The nonpartisan Tax Policy Center's data predict that in 2011 taxes will have fallen more as a share of national income than during almost any other comparable period in U.S. history (including under Ronald Reagan) and may hit their lowest level since World War II: 14.4% of GDP, compared with the more than 18% average of the last 30 years. Individual income taxes may hit their lowest level as a share of income since 1950 and corporate income taxes the lowest since 1936.
The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels."
- Again, he implies a bad economy was happenstance rather than admit it was a government policies caused event. We avoided large downturns for almost a quarter century by keeping mostly in place the Reagan pro-growth agenda, even with reform in the late 80s, smaller increases under HW Bush and the early Clinton years. But this economy IS the new normal. What changed? He doesn't say here but if pressed I'm sure he would say Bush's fault.
"The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%."
- FALSE. The true challenge is get off the slow growth or no-growth trajectory of the current policies and to minimize the amount of debt we accumulate during this wasted 4-8 years of 'transformation' BEFORE the worsening demographics fully set in.
"To hear the Republican candidates, you would think our problems were about discretionary spending running wild."
- FALSE. Does anyone remember the sensation of 9-9-9? That was all about unleashing economic growth running wild. Or Pawlenty's plan highly acclaimed by Prof Taylor of Stanford, or Rick Perry's plan endorsed by Steve Forbes, or Gingrich's plan - all about regenerating economic growth and innovation, or Huntsman's or even Romney's Plan. The centerpiece of NONE of them is slashing spending or starving seniors, our single most prosperous demographic group.
... Iowa showed us a series of candidates trying to outdo one another with condemnation for the short-term rise in spending while simultaneously proposing tax policies that would add trillions to the long-term deficit.
- FALSE and when will we truly be rid of the proven false doctrine of static scoring?!?! Growth at this point in the Reagan recovery was close to 8% and revenues in the 1980s DOUBLED! Good riddance to you and your team.
Mr. Goolsbee, a professor of economics at the University of Chicago's Booth School of Business, was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.
- Can you imagine investing your family's life savings in sending your kid to one of the top schools in the country and finding out this is the level of analysis being taught? Did the professor writing about FISCAL challenges really not know that REGULATIONS are a tax on the economy or simply run out of space? Did he not know or just wish to not say that under his watch 77,000 pages of new regulations were issued? Did he not know that Obamacare impending is a tax on our economic growth and perhaps the final nail in the coffin of new hiring? Did he forget to notice the differences between these candidates and his policies prohibited energy development and blocked pipelines that are taxes on our growth? Did he not know that the perpetual cloud of expiring Bush-Obama tax rate cuts is a huge tax on our economy that yields all the destruction and no new revenues and same for the Harry Reid surcharge proposal on millionaires, the 24 new taxes in Obamacare: http://www.atr.org/comprehensive-list-tax-hikes-obamacare-a5758. Republican are proposing plenty of remedies starting with canceling his new programs and reversing most of their new regulations, the question is whether anyone is listening and whether people would really prefer just more of the same policies, but expecting a different result.
My two cents.
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WSJ
By AUSTAN GOOLSBEE
- FWIW, this is the editorial page publishing an opposing view and these are the slanted underpinnings for a partisan stump speech written by an insider and co-conspirator. He is highly credentialed but this is not a serious academic economic analysis.
MARC: Exactly so.
"Each candidate decried the rise of government spending and wants to cut taxes."
- FALSE and its a theme here. It's the tax RATES that they want to cut, not cut revenues. A professor of economics at the Univ. of Chicago knows the difference. Shame on him.
MARC: I agree with the point, but this meme runs deep. As the rather good Wesbury piece I posted yesterday points out, the payroll tax holiday will not produce much economic effect because it is MARGINAL tax rates that matter. Under Boener’s leadership in the House, the Reps have already folded on this subject so if we are keeping score, the Reps are poorly positioned at the moment to make Doug’s point.
"Again and again they noted that spending under President Obama rose to 25% of the economy in 2009, the highest in decades and well over the 20%-21% norm of the last 30 years." ( - TRUE!)
"To hear the GOP candidates tell it, this fact explains the deficit, explains America's long-run fiscal problem, and explains why new taxes cannot be tolerated. Congressional Republicans have the same outlook. The deficit is up thanks to government spending, so we must cut spending right now in every form."
- FALSE, Everyone of them knows that the under-performance of the private economy is the central problem. Resources taken from the private economy for the public sector are just one of the causes of that under-performance. Taxes and especially overly burdensome regulations comprise most of the rest.
"Yet the long-run fiscal problem facing the country—which is real—has almost nothing to do with the reasons that the deficit is currently large or that spending is abnormally high. They are high for the same reason taxes are abnormally low: because of the economic downturn. We should debate the real issues, not try to pretend the recession never happened."
- FALSE! What Republican is pretending the recession never happened? Prof. Goolsbee, OTOH, pretends that the economic stagnation is like weather; this recession is like a rain certain to be followed by sunshine just by waiting or doing more of the same. This recession/stagnation was and is a GOVERNMENT CAUSED DOWNTURN and as a top adviser, former chief economic adviser, he was right there at the table where they failed to identify either the correct cause or solution to the mess.
MARC: I suspect that if the Dems were to point out that tax revenues as a % of GDP are several percentage points below usual, even for during a recession, and that much of the deficit is due to this factor and but for this the deficit numbers would be well within normal ranges, the Reps would be sore pressed to give a snappy coherent answer. With the exception of Ron Paul the Reps have conceded Keynesian logic that some deficit spending is necessary during a recession.
"The Congressional Budget Office forecast a $1.2 trillion deficit before the Obama administration even came into office."
- DECEPTIVE to say the least. Yes the pundits and voters will look at the calendar days of the Obama Occupy the White House movement but everyone who was alive and paying attention knows that domestic power in Washington DC changed hands in the Nov 2006 election. The CBO forecast he sites is from the Pelosi-Reid-Obama-Hillary-Biden 'non-partisan' CBO scoring the budget passed by the Pelosi-Reid-Obama-Hillary-Biden congress signed by Bush 'before the Obama administration even came into office'. The downturn was under THEIR watch as well, including SEN. Obama always supporting or voting with the majority, and the emergency measures coming into the 2008 election and during the transition period were made in 100% consultation and agreement with the incoming Obama administration.
MARC: I’m not sure that this answers the point as perceived by most voters— many/most of them tend to say “Obama inherited a really bad situation.”
“Spin that some other way if you would like, but the investors and employers in the economy were wide awake heading into the tax rate increases and the host of new programs and regulations impending beyond their worst nightmare of imagination when the asset selloff began and when the collapse of housing and employment ensued.
MARC: THIS is a VITAL point and it is a HUGE failing of the Reps that it is not part of the narrative.
"The stimulus added only around $250 billion a year, and more than one-third of that came from tax cuts, especially the tax credit in the stimulus bill's "Making Work Pay" provision."
- This is 4 years later! "ONLY" a quarter trillion/yr. is a TRILLION in 4 years and it wasn't a stimulus if it didn't stimulate and it doesn't count the QEx, nationalization of autos and host of other excesses. If you didn't know that then, surely you know that now as the chief outgoing economic adviser. And not all tax cuts are created equal. Some stimulate economic activity and others give up revenues without improving incentives whatsoever. Some are targeted to constituent voting groups and some apply to all, especially those inclined to hire and produce. Guess which types the Obama administration working the first 2 years with a 100% Dem congress chose??
MARC: Again we see the weakness of participating in non-marginal rate tax cuts and the weakness of Bush and the Reps failing to make his cuts permanent in the name of “fiscal responsibility” thereby conceding the Dem meme that rate cuts equal revenue cuts. Also, have the Reps effectively put out their number of what Baraq has spent? NO!!! Quickly now, can anyone here (and we are all well above average—“No brag, just fact”) give me the total of Baraq’s stimulus spending?
"Most of the increase in the deficit during a downturn doesn't come from new policies in Washington. The deficit rises because both spending and taxes automatically adjust when the economy struggles. Unemployment insurance payments rise and more people qualify for Medicaid and food stamps. Incomes fall so people pay less taxes."
- A theoretically truth, but FALSE in this case. Spending sold as "emergency" and "temporary" in fact became the new benchmark used by same author and the administration and its allies to assail any reduction from emergency levels an act of war against the 99% and the weakest among us in particular. Proof: After all the budget hysterics and pretend "cuts" of the past year under bitterly divided government, spending was up another 5% for the year. What part of that spending was emergency? None of it. It was the why-waste-a-crisis crowd intentionally transforming American dependency on government. BTW, we aren't in a recession (and the downturn did come from new government policies). We are in the new American economy operating exactly as it should be under the disincentives scheme designed by Prof. Goolsbee et al and legislated and signed by the side he is defending.
MARC: Again we see the evil Orwellian effects of baseline budgeting in clouding clear thinking!!! Until the Reps (and the Tea Party too!!!) find a way to get this point across, I fear we are doomed. That said, the challenge of crisply answering Goolsbee’s Keynesian logic here remains.
"It's completely normal that spending rises during big downturns. The government's share of the economy jumped significantly during the big recessions in the 1970s and '80s. As the economy grows back to health, the government share of the economy will fall (and many analysts forecast just that for the coming year)."
- WHY should the economy grow back to health. Doing more and more of the same and expecting a different result is WHAT?? (definition of insanity?)
MARC: The argument Baraq will make is that things were really bad so they’re taking longer than usual to turn around but now we are, as Doug notes, out of recession and things are headed in the right direction, albeit slower than we would like. How do we crisply answer this in a fifty words or less sound bite?
"The same dynamic applies to tax revenues. You would think that—using the same logic they apply to the rise of government spending—the GOP candidates would be trumpeting the last three years as one of the greatest tax cutting periods of the century."
- BLATANTLY FALSE!! If anyone would believe this drivel then I would put it with falsely shouting fire in a crowded theater - perhaps not protected speech. Do they need that level of LIE to run on their record? Once again, a fully educated economist intentionally confuses tax rates with tax revenues for political deception purposes. The frontrunners are NOT trying to lower government revenues. Maybe Ron Paul would lower revenues AND balance the budget, but that blows the Professor's first premise that he (blindly) can't see any daylight between any of them.
"The nonpartisan Tax Policy Center's data predict that in 2011 taxes will have fallen more as a share of national income than during almost any other comparable period in U.S. history (including under Ronald Reagan) and may hit their lowest level since World War II: 14.4% of GDP, compared with the more than 18% average of the last 30 years. Individual income taxes may hit their lowest level as a share of income since 1950 and corporate income taxes the lowest since 1936.
The deficit shot up in basically equal measure from taxes falling and spending rising. Spending rose to 25% of GDP from 20.5% in the recession and soon it will fall back down. Taxes fell to 14.5% of GDP from 18.5% and will also return to more normal levels."
- Again, he implies a bad economy was happenstance rather than admit it was a government policies caused event. We avoided large downturns for almost a quarter century by keeping mostly in place the Reagan pro-growth agenda, even with reform in the late 80s, smaller increases under HW Bush and the early Clinton years. But this economy IS the new normal. What changed? He doesn't say here but if pressed I'm sure he would say Bush's fault.
MARC: Here Goolsbee makes the assertion that concerns me the most. Revenues as a % of GDP in fact ARE down a lot, far more than usual in a recession if I am not mistaken. Superficially it will sound plausible for Obama to say in a debate? What is our sound bit answer to this???
"The true fiscal challenge is 10, 20 and 30 years down the road. An aging population and rising health-care costs mean that spending will rise again and imply a larger size of government than we have ever had but with all the growth coming from entitlements—while projected federal revenues as a percentage of GDP after the rate cuts of the 2000s will likely remain below even historic levels of 18%."
- FALSE. The true challenge is get off the slow growth or no-growth trajectory of the current policies and to minimize the amount of debt we accumulate during this wasted 4-8 years of 'transformation' BEFORE the worsening demographics fully set in.
MARC: With the exception of the final clause this is quite TRUE. Entitlements and Rising Health Care costs ARE the true challenge-- and the fact of it is that the Reps have avoided talking about how to bring down entitlement spending. Quick, someone name me Rep proposals other than that by Paul Ryan or the joint plan by Ryan and Dem ____ (about which I have posted here). Why are none of the candidates, including my man Newt, using the Ryan plan as a talking point?
"To hear the Republican candidates, you would think our problems were about discretionary spending running wild."
- FALSE. Does anyone remember the sensation of 9-9-9? That was all about unleashing economic growth running wild. Or Pawlenty's plan highly acclaimed by Prof Taylor of Stanford, or Rick Perry's plan endorsed by Steve Forbes, or Gingrich's plan - all about regenerating economic growth and innovation, or Huntsman's or even Romney's Plan. The centerpiece of NONE of them is slashing spending or starving seniors, our single most prosperous demographic group.
... Iowa showed us a series of candidates trying to outdo one another with condemnation for the short-term rise in spending while simultaneously proposing tax policies that would add trillions to the long-term deficit.
- FALSE and when will we truly be rid of the proven false doctrine of static scoring?!?! Growth at this point in the Reagan recovery was close to 8% and revenues in the 1980s DOUBLED! Good riddance to you and your team.
MARC: The key word in Goolsbee’s assertion here is “discretionary” and he is right, the Reps are, as I asserted a moment ago, talking as if discretionary spending is the issue—with Ron Paul being the exception. Only he is talking about eliminating entire departments. Perry can’t even remember his three, and Romney and Newt want to keep the Dept. of Education and others of that ilk.
Mr. Goolsbee, a professor of economics at the University of Chicago's Booth School of Business, was chairman of President Obama's Council of Economic Advisers from 2010 to 2011.
- Can you imagine investing your family's life savings in sending your kid to one of the top schools in the country and finding out this is the level of analysis being taught? Did the professor writing about FISCAL challenges really not know that REGULATIONS are a tax on the economy or simply run out of space? Did he not know or just wish to not say that under his watch 77,000 pages of new regulations were issued? Did he not know that Obamacare impending is a tax on our economic growth and perhaps the final nail in the coffin of new hiring? Did he forget to notice the differences between these candidates and his policies prohibited energy development and blocked pipelines that are taxes on our growth? Did he not know that the perpetual cloud of expiring Bush-Obama tax rate cuts is a huge tax on our economy that yields all the destruction and no new revenues and same for the Harry Reid surcharge proposal on millionaires, the 24 new taxes in Obamacare: http://www.atr.org/comprehensive-list-tax-hikes-obamacare-a5758. Republican are proposing plenty of remedies starting with canceling his new programs and reversing most of their new regulations, the question is whether anyone is listening and whether people would really prefer just more of the same policies, but expecting a different result.
MARC: Are we happy with how the Rep candidates are communicating this message?
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Crafty thanks for great additions to that. Going back a step, if Republicans let Obama and the Goolsbee types frame the debate, Republicans lose. We need real answers to their straw arguments but this will be decided by something much simpler: the right direction/wrong direction question. Is the progress expected by Nov 2012 (unemployment 7.9%?) good enough to reelect on? And what do swing voters think of the Republican alternative?
Starting at the end, "Are we happy with how the Rep candidates are communicating this message?"
- Obviously not. But this is unfortunately a time of candidates bickering amongst themselves. This part could be over very quickly, hopefully followed by many months of a more singular and coherent argument against the direction of the current administration.
Taking one key passage leading to where Crafty wrote "THIS is a VITAL point and it is a HUGE failing of the Reps that it is not part of the narrative":
[I contended this mess goes back to Nov 2006 and Pelosi-Reid-Obama taking over congress]
MARC: I’m not sure that this answers the point as perceived by most voters— many/most of them tend to say “Obama inherited a really bad situation.”
(Doug)“...investors and employers in the economy were wide awake heading into the tax rate increases and the host of new programs and regulations impending beyond their worst nightmare of imagination when the asset selloff began and when the collapse of housing and employment ensued.
MARC: THIS is a VITAL point and it is a HUGE failing of the Reps that it is not part of the narrative.
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Yes. Republicans need to attack on what caused our current mess, even where that means taking responsibility, because it is tied to what solves it.
I have called it '6 years since 2006'. Not just the Presidency but those Senate seats are up. Obama entered the majority Jan. 2007, was a rock star by that time, and voted yes on everything he showed up for in the agenda tied to the collapse. If he gets a free pass for his role in the 2 years preceding the Oval Office, then no one has learned anything about what went wrong so why would we expect to win their vote now. One person who should know about the change of power in Nov. 2006 is former Sen. Rick Santorum who lost very badly that year in a key swing state. He should take responsibility for his part in what led to the Republican defeat and power shift, then he should be all over what happened to this country aftger his opponents won and took power. Not that all that is wrong started then, but what they didn't reform before the collapse they still haven't reformed now - this many years later - and won't fix in the next 4 years either. Out they go!
None of the Obama/Goolsbee wild goose chase straw distractions justify the Democrats obsession with raising taxes on job creators (from 36% to 39.6% plus the Buffet-Reid surcharge, plus a 15.3% payroll tax removing the ceiling, the estate tax against wealth, and the 24 new taxes in Obamacare) when we are only collecting 14.4% taxes on income in the current setup. The marginal rate of disincentive to produce, hire and grow doesn't need to surpass 50% when the goal is only to get back to collecting 18% of GDP in federal revenues. We ought to be able to do that with a top rate in the mid-20s and end the counter productive class envy and class warfare mindset. It's been 6 years of attacking ourselves and it didn't work.
Instead:
1) Open up the energy production by widely approving projects that use state of the art, clean processes only - not dirtier air and dirtier water.
2) Close down the excesses in regulations especially in hiring and employment regulations. This does not mean return to the dark ages or slave labor.
3) Phase out federal spending on failed programs and things the federal government has no business doing in the first place. Get entitlements in line with our ability to pay.
4) Get tax RATES on individuals, business owners and corporations down to what is efficient and competitive in a 21st century global marketplace. Cut out the crap. Lower the rates. Even Goolsbee admits it, revenues only come back with economic growth and the deficit will never close with spending cuts alone.
It isn't rocket science.
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These columns have defended the independence of the Federal Reserve from attacks on the right and left, but after last week the central bank is on its own. It's impossible to defend the Fed's rank electioneering as it lobbies for more political and taxpayer intervention in the housing market—just in time for the election campaign.
This extraordinary political intrusion came in the form of a 26-page paper that the Fed sent to Capitol Hill last Wednesday, without invitation, graciously offering what Chairman Ben Bernanke called a "framework" for "thinking about certain issues and tradeoffs." He was underselling his document. The paper is a clear attempt to provide intellectual cover for politicians to spend more taxpayer money to support housing prices.
In case there was any doubt on this point, New York Fed President William Dudley put them to rest Friday when he called specifically for bridge loans for jobless borrowers, more government-assisted refinancings, a new program for principal reductions for underwater borrowers, and floated the possibility of getting Fannie Mae and Freddie Mac into the rental housing business. Your average HUD secretary wouldn't dare go this far.
As America's central bank, the Fed is responsible for monetary policy and bank regulation. During and since the financial panic, and in the name of preventing a meltdown, the Fed has bought mortgage-backed securities to provide liquidity for housing and keep down mortgage rates. This is a form of credit allocation and should be winding down, though it is at least arguably within the emergency purview of monetary policy.
It is a far different matter to tell Congress and the executive branch that they ought to rescue homeowners who borrowed more than they can afford to repay, or strong-arm banks to loosen credit standards for borrowers, or further entrench government-sponsored enterprises (Fan and Fred) that have already cost taxpayers $142 billion in losses. These are core political questions that belong to elected officials.
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Federal Reserve Chairman Ben Bernanke and New York Fed President William Dudley.
.The intrusion is especially ill-timed because it looks like an attempt to further isolate Edward DeMarco, Fannie and Freddie's politically beleaguered regulator. House Republicans have closed off another housing bailout from Congress, so Administration officials and Capitol Hill Democrats are desperate to unleash Fannie and Freddie to spend even more to rescue underwater homeowners.
Their main obstacle is Mr. DeMarco, who has bent a little to accommodate the Treasury's expanded refinancing program but rightly says he has a legal mandate to protect taxpayers. The Fed white paper acknowledges that committing more taxpayer money to its housing brainstorms could stick Fan and Fred with more losses, but it suggests this is worth promoting a faster housing recovery. How about we put that gamble to a taxpayer vote? In any event, it's disgraceful for the Fed to contribute to the mau-mauing of a fellow regulator.
The advice to let Fan and Fred rent out foreclosed properties they own until prices rise also goes against the lesson of previous housing recoveries. Prices recover faster—recall the Resolution Trust Corp. after the savings and loan bust—when the government sells property as quickly as possible, so prices can find a bottom. The last thing housing markets need is an extended Fannie and Freddie inventory overhang.
The Fed also suggests having Fan and Fred weaken their standards for loan modifications and expand an existing refinancing program to include private-insurance-backed mortgages participate. But weak lending standards is part of what created the subprime mortgage mess. No wonder the mortgage bankers, the homebuilders and the rest of the housing lobby greeted the Fed's white paper with enthusiasm. They'd love to see Fannie and Freddie more politically and economically entrenched so reformers can't slowly reduce their market dominance.
The Fed will no doubt justify all of this by claiming that the larger economy can't recover until housing does. Yet this confuses cause and effect. Housing recoveries don't lead economic recoveries; they occur as part of the larger recovery as incomes begin to rise and consumer confidence grows. It's precisely this "housing must save the day" mentality that caused the Fed to keep interest rates too low for too long after the dot-com bust and 9/11. This promoted the housing bubble and led to the mania and crash. By force-feeding a housing recovery, the Fed is misallocating resources that will make the expansion less durable.
The Fed's economic timing is especially curious given Friday's encouraging jobs report for December. Manufacturing is expanding and the economy is showing signs that the modest expansion may be self-sustaining. Aside from a European meltdown and a 2013 tax increase, the main threat to this growth is if Washington maintains its habit of willy-nilly intervention in housing, health care, energy and everything else.
We recently attempted to add up the number of housing-support programs that the federal government has implemented since prices began to fall five years ago. We counted 16. Maybe Washington should do nothing for a change, let foreclosures take their natural course, allow the surplus supply of houses to clear, and see if that works. It can't do any worse.
Beyond the policy errors, the larger issue is the political independence of the Fed itself. Its Board of Governors is now dominated by Obama appointees who share the interventionist designs of their colleagues in the White House. Mr. Dudley is a White House and Treasury man. Mr. Bernanke may feel surrounded, but we'd have thought he'd have more respect for the integrity of his institution.
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I notice we the tax payers paid for this abuse of power by the obama administration through the outdated and past its time equal employment opportunity commission.
So I just happen to look up the website and I see this mafia like government organization basically extorting money out of Pepsi - why because they do background checks on job applicants and a disproportionate number of Blacks come up with positive criminal records. So they are fined 13 million. Where is the outrage from the MSM? So now an employer cannot do background criminal checks and act upon their findings at their discretion? I guess so if your the bama/holder mob:
http://www.eeoc.gov/eeoc/newsroom/release/1-11-12a.cfm
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The Orwellian fascism of it all boggles the mind :cry: :cry: :x
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US share of IMF is 1/6.
* Global stocks this morning are mixed with the Euro Stoxx 50 down -0.06% and Mar
S&Ps up +2.40 points. The dollar and Treasuries are lower and most commodities rose
after the IMF proposed a $500 billion expansion of its lending resources to insulate
the global economy against any worsening of Europe's debt crisis. The IMF is
pushing China, Brazil, Russia, India, Japan and oil exporting nations to be the top
contributors to the bailout fund that may be initiated at the Feb 25-26 meeting of
G-20 finance ministers and central bankers in Mexico City. The IMF currently has
$385 billion available for lending and wants to boost that amount to $885 billion.
A positive for European bank stocks was the decline in the 3-month cross-currency
basis swap, the rate banks pay to convert euro interest payments into dollars, to 78
bp below the euro interbank offered rate, a 5-1/4 month low. Limiting gains in
stocks and the euro was the action by Germany's Economy Ministry to cut its 2012
German GDP forecast to +0.7%, down from an Oct forecast of +1.0% as the debt crisis
dampens the outlook for sustaining exports. The World Bank also cut its growth
estimates as they reduced their 2012 global growth forecast to +2.5% from a June
estimate of +3.6%, saying a recession in the Euro-Zone threatens to exacerbate a
slowdown in emerging markets.
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The political strategy behind Obamanomics was always simple: Call for "stimulus" to rescue the economy, run up the debt with the biggest spending blitz in 60 years, and then when the deficit explodes call for higher taxes. The Congressional Budget Office annual review released yesterday shows this is all on track.
CBO reports that annual spending over the Obama era has climbed to a projected $3.6 trillion this fiscal year from $2.98 trillion in fiscal 2008, or more than 20%. The government spending burden has averaged 24% of GDP, up from an average of about 20%. This doesn't include the $2 trillion tab for ObamaCare.
All of this has increased the federal debt by about $5 trillion in a mere four years. Thanks to higher revenues, the federal deficit will decline to $1.08 trillion in 2012, or 7% of GDP. But that is still the highest deficit since 1946—except for the previous three years. In other words, the four years of the Obama's Presidency will mark the four highest years in spending and deficits as a share of the economy since Harry Truman sat in the Oval Office.
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.And don't forget the national debt held by the public—the kind we have to pay back. On President Obama's watch, CBO says public debt will climb this year to 72.5% of the economy from 40.3% in 2008. This isn't as high as Italy or Greece, but it's rising fast toward the 90% level that begins to debilitate an economy.
We pause from this gloom for some good news: Despite the abuse they've taken, House Republicans have made some fiscal progress. CBO estimates that overall federal spending in 2012 will grow by only $3 billion, or less than 1%, which compares with double digit increases during the Obama-Pelosi years. Republicans have also tried to reform entitlements, but Democrats wanted a $1 trillion tax hike ransom for even modest cuts, which was wisely rejected.
The other part of the fiscal story is that revenues have been in the tank for five years. In 2012 revenues will hit $2.52 trillion down from $2.57 trillion in 2007. Revenues are still only 16.3% of GDP, about two percentage points below the norm.
The drought has two main causes. First, the anemic recovery in jobs and investment isn't spinning off enough new output (1.7% growth last year) to boost tax receipts anywhere near their historic level.
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Close...Second, a series of non-stimulative tax cuts—tax rebates in 2008 and 2009, and payroll tax holidays in 2011 and this year—have depleted the Treasury with little economic benefit. These tax cuts don't change the incentive at the margin to work or invest, and they thus have little feedback effect in revenues from faster growth.
The most amusing part of the CBO's report is its projection that the deficit will fall to $269 billion by 2015, or a mere 1.5% of GDP, if current law holds. But this is a fiscal fantasy because current law never holds.
CBO predicts, for example, that all the Bush tax cuts will go away next year. The Alternative Minimum Tax will supposedly be allowed to hit 30 million tax filers (up from four million now) with an income as low as $75,000 a year. Under those assumptions total federal revenues rise by $1 trillion over the next three years, $1.5 trillion over five years, and $3.6 trillion over 10 years. You can't get anywhere near that level of revenues without a much bigger tax increase on the rich and the middle class, or an extended boom in the range of 5% to 6% annual growth.
Even the Keynesians who run CBO concede that the 2013 tax hike—on capital gains, dividends, estates and small business—would knock economic growth down to 1% next year and raise unemployment to 9.1% (from 8.5%). That means about 750,000 more jobless Americans. You can't have such a lousy economy and cut the deficit in half.
CBO also indulges in the fantasy that discretionary spending will fall by nearly $2 trillion over the next decade—with almost all the cuts after 2015. About $1.25 trillion of those cuts come from the automatic across-the-board reductions that Congress and Mr. Obama agreed to last year. But wait. More than half of those cuts will come from the military budget and even Defense Secretary Leon Panetta has said these reductions could be "devastating" to national security.
To sum it all up, CBO's facts plainly show that Mr. Obama has the worst fiscal record of any President in modern times. No one else is even close.
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http://www.newsmax.com/Newsfront/rasmussen-deficit-higher-estimates/2012/02/01/id/426275
Rasmussen: Deficit Closer to $4 Trillion for 2012
Wednesday, 01 Feb 2012 11:33 AM
Pollster and political analyst Scott Rasmussen says the U.S. is in the middle of a worsening fiscal crisis and the federal office charged with estimating the country's debt has missed the mark by trillions.
Rasmussen, of Rasmussen Reports, released this statemen today following yesterday's Congressional Budget Office report on the nation's debt:
The Congressional Budget Office (CBO) yesterday reported that the federal budget deficit is projected to reach $1.1 trillion in 2012. That number is troubling enough but the reality is much worse. The United States will actually go about $4 trillion further in debt during the year.
The difference comes from the fact that government accounting procedures simply ignores the cost of benefits being promised for future Social Security and Medicare recipients. While precise estimates vary as to how much these promises cost, they are in the range of $3 trillion annually. It is important to note that the CBO is not to blame for this accounting gimmick. That agency typically does a sound job of operating within the ground rules established by Congress. Unfortunately, the rules often make little sense.
As former CBO Director Douglas Holtz-Eakin explained to Scott Rasmussen, “The debt from the past is a problem, but the future potential debt is a crisis.”
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(Unless you are Buffett Gates Soros and a couple of celebs----)
Let's see 17 K per person 70K per family of four. Yet if we remove the roughly 50% who pay no income tax or those who are retired on SS what is the real cost to today's workers (some pay a payroll tax I guess) and their working children. Though since a large number of those under 20 - 25 yo are unemployed - bottom line - the toll on those carrying this load is FAR worse:
****President Obama’s fourth budget has now been released, which allows for a relatively full accounting of deficit spending during his four years in office. The picture isn’t pretty, but it is revealing.
According to the White House’s own figures (see table S-1 here for 2011 to 2013, and table S-1 here for 2010), the actual or projected deficit tallies for the four years in which Obama has submitted budgets are as follows: $1.293 trillion in 2010, $1.300 trillion in 2011, $1.327 trillion in 2012, and $901 billion in 2013. In addition, Obama is responsible for the estimated $200 billion (the Congressional Budget Office’s figure) that his economic “stimulus” added to the deficit in 2009. Moreover, he shouldn’t get credit for the $149 billion in TARP (Troubled Asset Relief Program) repayments made in 2010 and 2011 to cover most of the $154 billion in bank loans that remained unpaid at the end of the 2009 fiscal year — loans that count against President Bush’s 2009 deficit tally.
Adding all of this up, deficit spending during Obama’s four years in the White House (based on his own figures) will be an estimated $5.170 trillion — or $5,170,000,000,000.00.
To help put that colossal sum of money into perspective, if you take our deficit spending under Obama and divide it evenly among the roughly 300 million American citizens, that works out to just over $17,000 per person — or about $70,000 for a family of four.***
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:-o :-o :-o
I wonder what that works out to per taxpayer? IIRC the labor force is currently aound 60-M, which is about 1/5 th population, so if my numbers are correct, we are looking at about $350,000 per taxpayer? :-o :cry: :cry: :x :x :x :x :x :x
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"we are looking at about $350,000 per taxpayer?"
Brock is not helping the middle class - he is killing us.
Yet hear him speak he is saving us.
Will/can the word get out?
Yet for the other 240 million what do they care? Vote for the Brock!! They say. Soak the "rich". :-P :roll: :cry: :-( :x
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Limited time here but some numbers to help calculate
Workforce (BLS defined): 130,000,000 Non-farm, farm employment is pretty small.
(Participation rate: 63.7%)
Unemployment rate 8.3%
http://www.bls.gov/news.release/empsit.nr0.htm
Number of votes 2008: 130,000,000
US population 310,000,000
info at the link. I will come back to this.
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Oops, I confused the 60% labor force participation rate for 60-M employed :oops: So, if I have it right , , , this time :oops:
then if I have my zeros right then $5.17-T/130-M=approximately $40k per job in increased indebtedness during the Obama regime.
Anyone have the data on what the average job pays in America?
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The Foundation
"Would it not be better to simplify the system of taxation rather than to spread it over such a variety of subjects and pass through so many new hands." --Thomas Jefferson
Government & Politics
Tinkering With the Payroll Tax
Tinkering with, but not fixing, tax policy
Congress finally reached an agreement Thursday to extend the payroll tax "holiday" for the rest of 2012 and will likely vote on it today. The tax cut, due to expire at the end of February, was a gimmick conceived in late 2010 and sold as an economic stimulus. Yet the extra $80 a month for someone earning $50,000 a year hasn't helped the economy much. In fact, economic growth slowed in 2011 compared to 2010. At least neither party can be accused of raising taxes on the middle class in an election year.
Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, congratulated Congress on a job well done, saying that maintaing the two percentage-point reduction in the payroll tax for the rest of the year is "good for the country. It's very good for the country." Actually, not really. As already mentioned, it had no significantly positive affect on the economy. Perhaps more important, it will take $100 billion out of the so-called "trust fund" for Social Security this year, thereby adding to the national debt.
That's not to say Social Security's "trust fund" wasn't already an accounting farce. The money taken from today's workers finances today's retirees because politicians have been raiding the "trust fund" for years -- all that's left are Treasury IOUs. Social Security ran a deficit of approximately $45 billion last year, and even the IOUs will run out within the next generation.
As for the deal, it includes once again extending the "doc fix" for Medicare -- preventing 27 percent cuts to reimbursement rates -- as well as unemployment benefits. Republicans saw the Democrats' election-year trap and caved on their insistence that the $100 billion the government would otherwise have collected in payroll taxes be offset by other budget cuts. They could do little more than retreat, lest they face disingenuous accusations that they don't care about the poor and middle class.
The argument they should have made is two-fold: First, a couple of questions: Will January 2013 be a good time to raise taxes on workers after a two-year holiday? Given the stagnant Obama economy, and the massive tax hikes scheduled in his outrageous budget, we doubt it. And do Republicans think Democrats won't blame them no matter when it happens? Adam Jentleson, a spokesman for Senate Majority Leader Harry Reid (D-NV), certainly gave the game away during negotiations: "Democrats will continue working to extend this middle class tax cut, and Republicans will rightfully get blamed if Americans see their taxes go up on March 1." Insert "January 1, 2013" and you have a future talking point.
Second, practically since its creation, Democrats have accused Republicans of trying to destroy Social Security. Rather than point out the farce, Republicans have adopted Democrat talking points. They should highlight the Democrats' plan to make Social Security into an ever-growing entitlement, regardless of what one pays -- or doesn't pay -- into it. Republicans should argue for Social Security reform to go along with this cut, along the lines that Rep. Paul Ryan (R-WI) proposed. So forgive us if we've found a tax cut that doesn't excite.
What do you think of the payroll tax holiday?
Quote of the Week
"Our party firmly believes in the safety net. We reject the idea of the safety net becoming a hammock. ... What Republicans have long understood is that poor communities are best served when they're empowered to care for themselves. The more they come to rely on government checks, the less they learn to rely on their own ability and ingenuity. For this reason, the Republican value of minimizing government dependence is particularly beneficial to the poorest among us. Conversely, the Democratic appetite for ever-increasing redistributionary handouts is in fact the most insidious form of slavery remaining in the world today, and it does not promote economic freedom." --Rep. Allen West (R-FL)
The 'Alpha Jackass' Budget Plan
Barack Obama may be proud of his socialist "Winning the Future" budget, but in Senate testimony this week, Treasury Secretary Timothy Geithner said his boss's budget is unsustainable: "Even if Congress were to enact this budget, we would still be left with -- in the outer decades as millions of Americans retire -- what are still unsustainable commitments in Medicare and Medicaid." In 2011, Geithner had similar observations: "With the president's plan, even if Congress were to enact it, and even if Congress were to hold to it, we would still be left with a very large interest burden and unsustainable obligations over time." Apparently, somebody in the Obama administration understands that Obama's debt bomb will collapse the economy.
Asked about Obama's broken pledge to "cut the deficit in half," his spokesman Jay Carney insisted, "It was a promise based on what we knew about the economy at the time. The economy turns out to have been far worse and in far greater distress ... than we knew at the time. The catastrophe was far worse than we knew."
For leftists, history never includes what they said yesterday. For the rest of us, we know better. In 2008, Obama claimed, "I think everybody knows now that we are in the worst financial crisis since the Great Depression." After three years of his presidency, he's right. Maybe Carney just meant it was even worse than that.
Obama claims his budget includes $4 trillion in deficit reduction over 10 years. The problem is, the cuts are either completely phony -- such as not spending money in Iraq or Afghanistan -- or nothing more than reductions in growth, and nearly half of the "saved" $4 trillion comes in the form of tax hikes.
Indeed, Obama views tax cuts as government spending. Of the Bush tax rates that have been in effect for 10 years now, he said, "Right now, we're scheduled to spend more than $1 trillion more on what was intended to be a temporary tax cut for the wealthiest two percent of Americans. We've already spent about that much. Now we're expected to spend another $1 trillion."
As you may recall, on July 3, 2008 -- the day before Independence Day -- Obama lectured the nation on "patriotic responsibility," saying, "The problem is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt ... so that we now have over $9 trillion dollars of debt that we are going to have to pay back. [That's] $30,000 for every man, woman and child. That's irresponsible. It's unpatriotic."
In three years under Obama, make that $15 trillion in debt. That's more than $50,000 for every man, woman and child. "That's irresponsible. It's unpatriotic."
The BIG Lie
The day before Obama released his budget blather, White House Chief of Staff Jack Lew was challenged twice on the Sunday morning political roundtables about the fact that Senate Democrats haven't passed a budget in almost three years. He responded, twice, "You can't pass a budget in the Senate of the United States without 60 votes and you can't get 60 votes without bipartisan support," implying that Republican partisanship is to blame.
Memo to Jack: Senate rules require a simple majority of 51 votes to pass a budget, and for the last three years, Democrats have held a Senate majority.
Memo to Sunday morning interlocutors of Obama administration mouthpieces: Do your homework, and call these guys out on their lies.
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The Economist has a lot to say about US government *over*regulation in this week's issue. I saw this article on Cass Sunstein who is decried from the right as a big liberal. Sunstein is marketed by the WH as being this big government 'spending/cut' Czar. A lot of smoke and mirrors as one would expect from the Obama WH. That said not all of Sunstein's opinions are that liberal though his stance on taxes certainly is one of a big liberal government cheerleader (see the Wikipedia piece on him below; I read with some skepticism for the objectivity of what shows up in Wikipedia).
Certainly in making its analyses the OIRA appears to exaggerates the benefits, and minimize the costs of any government program the WH wants to promote or conversely cut:
****..Deleting regulations
Of Sunstein and sunsets
Many barriers impede regulatory reform. The poor quality of the laws Congress produces is among the biggest
Feb 18th 2012 | NEW YORK | from the print edition
The busy nudgemeister .
CHEERS greeted Barack Obama’s hiring of Cass Sunstein away from the University of Chicago. Mr Sunstein, a lawyer, now head of the Office of Information and Regulatory Affairs, is in charge of lifting the heavy hand of regulation from America’s economy. Known for his clever economics, Mr Sunstein favours a “libertarian paternalism”; policies that nudge, but do not force, people to do the right things. For example, making people opt out instead of opting in to pension plans makes many more sign up, to their benefit. And Mr Sunstein has been involved in redesigning dietary recommendations and fuel-efficiency stickers for cars, making formerly confusing information more useful.
Mr Sunstein is now in charge of overseeing a year-old executive order from Mr Obama telling every agency to slim its rule book. Mr Sunstein says every one has complied, with 580 proposals received from the departments under his purview. (Independent agencies like the Securities and Exchange Commission are not among them.) And he says real savings are on the way. Lifting a requirement for states to require pollution vapour-recovery systems will save $400m in five years. Making it easier for doctors and hospitals to participate in the Medicare programme for the elderly will save $5 billion. He adds that agencies have responded not grudgingly (the old stereotype of bureaucrats loth to surrender cash or power), but eagerly.
But the Obama administration has added to the rule book at the same time as it is trimming. And many of the rules are big: 194 of them, each with an economic impact (not necessarily a net cost) of $100m or more, have been published in the Federal Register. In George Bush’s first three years, 141 hit the books. Even if most have more benefits than costs, as the agencies’ economists calculate, the scope of regulation is not shrinking. The overall cost of regulation is unknown, and measurement controversial. One study for the Small Business Administration found that regulation cost $1.75 trillion a year in 2008, though many object to the analysis. It relies on a methodology, invented at the World Bank, which one of the bank’s researchers says was misused, and Mr Sunstein dismisses it as “an urban myth”.
Meanwhile, the executive agencies are accused of minimising costs by counting only hours spent on paperwork or money spent on kit to comply with regulation. The real costs may be found in the hard-to-calculate perversion of behaviour that over-regulation causes. At the same time, the benefits tallied up by regulators may be overvalued (see article). The agencies calculate their own numbers, using their own methodologies. But what no one doubts is that compliance with the ever-expanding rule book is wearisome and hard.
Furthermore, the politics of removing regulations is harrowing. Each removal must go through the same cumbersome process it took to put the regulation in place: comment periods, internal reviews and constant behind-the-scenes lobbying. Ironically, regulated industries may actually not want regulations removed. They have sunk costs into compliance, and do not want those costs taken away to the benefit of upstart competitors.
Many proposals are floated to deal with this last problem. One, supported by the Republican candidate Mitt Romney, is to remove one regulation for each new one that is proposed. A second idea is to create a truly independent scorer for regulatory costs and benefits, modelled on the widely respected Congressional Budget Office. A third is to create a board of outside grandees to help break political deadlocks, like the Base Realignment and Closure commission, which was able to prod Congress to shut down military bases. And yet another is creating a full-time advocate for regulatory rollback: one state, Kansas, has created an “Office of the Repealer”, which aggregates complaints and suggests repeals to the governor and legislature. Lastly, automatic “sunsets” of laws have their fans, though Congress could mindlessly reauthorise laws gathered up in omnibus bills (and a bitterly divided Congress might allow good laws to lapse).
Finally, one bad idea is the REINS bill. Passed by the House, it would involve Congress more heavily in rule-making. If there is a body worse than the executive agencies at this kind of thing, it is Congress. A 1999 study by the OECD found that poorly written laws, not subsequent rule-writing, were at the heart of America’s regulatory woes. (No one has been foolish enough to suggest that Congress has become wiser since then.) Jim Cooper, a Democratic House member from Tennessee, says of his colleagues: “People vote on things they have not read, do not have the time to read, and cannot read.” He further despairs of the power of special interests to bend Congress’s will: “There is a pimento lobby,” he says of those who fight for the interests of those who grow the small red peppers served inside olives. “You do not want to cross the pimento people.” In such an environment, getting things undone is at least as hard as getting them done, and perhaps harder still.****
More on Cass - he is a dog person :-D:
http://en.wikipedia.org/wiki/Cass_Sunstein
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Glenn Beck loathes Cass Sunstein, and IIRC regards him as "the second most dangerous man in America" or something like that. Though the details don't spring to mind at the moment, GB supports his position with considerable specificity. The tenor of this piece is at considerable variance from GB.
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"The tenor of this piece is at considerable variance from GB."
Exactly my thoughts. That is why I question the veracity or intellectual honesty of the author of the Wikipedia piece. Based on that piece I question why GB and others (Hannity) hold Sunstein out as a looney liberal. OTOH are GB and others the ones who are exaggerating? I doubt they are. Far more likely the Wikipedia piece is tempered to camouflage the truth.
Just like Obama conceals who he really is. All the same with liberals. They cannot tell us what they really think and aspire to.
Not if they want to stay in office unless they are from Barney Frank's (now ANOTHER freakin Kennedy's) or Pelosi's districts.
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7 minutes of Judge Judy (no commercials) allegedly pulled by CBS off of Youtube:
http://revolutionarypolitics.tv/video/viewVideo.php?video_id=15915
Judge Judy: "That is what we are creating." "Him." "I'm sending this tape to congress."
Besides taxpayers paying his rent, he is getting $88,000 to learn to play guitar?
More than half of US households receive government check.
Watch until the end; the plot turns quickly.
Welcome to my world.
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Brock also with corporate tax plan. At least the idea of fixing taxes has traction if the biggest White House liberal is running scared enough to try to beat the Repubs to the punch with his won tax plan before his election.
Let's see him running for cover -
Suddenly he is a big fan of natural gas.
Suddenly whispers from the WH that military force in Iran may be needed.
Suddenly the Bamster is for corporate tax streamlining.
Doesn't fit with his usual narative does it.
Of course we have also lerned not to trust what he says but watch what he and his minions (like Eric Holder) do.
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Doug: That link is not working for me.
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http://revolutionarypolitics.tv/video/viewVideo.php?video_id=15915
2nd try. If this works I will fix the original.
Also found it on Youtube at lower resolution:
http://www.youtube.com/watch?v=ndtDZKNBz0g
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Trillion plus still in deficit and the budget thread slipped to page two in political topics. Not very sexy, not even urgent?
Another chart with credits to Scott Grannis. Policy-caused recessions and slowdowns cause budget gaps on their own confounded by additional policy choices/mistakes, so there are at least 4 levels of collective stupidity on display here. Note that when the economy is running reasonably well the gap tends to close in spite of our horrific appetite for wasteful largess.
Look at the more recent uptick in revenues, but also look at it in context with wherever you judge the long term trtend line should be.
Please complete the following sentence. This course we are on is sustainable because .......................................................... .
(http://2.bp.blogspot.com/-WS-LkB9_urg/T14660haXhI/AAAAAAAAG0s/-NwQ_wt1-jI/s400/Receipts+and+Outlays.jpg)
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Alright, for the intellectual exercise, I'll take a stab at it :-D
because , , , ummm , , , well , , , nevermind.
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"Please complete the following sentence. This course we are on is sustainable because .......................................................... ." [Accompanied with the picture of our eternal deficit trend.]
Crafty: "because , , , ummm , , , well , , , nevermind."
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The gallant effort is duly noted though I think that is also what Geithner (Treas. Sec.) said when asked what year the outgoing administration's budget balances.
One of three things is going to happen.
1) We can slash current spending by a net trillion a year to balance the budget - or can we? This is pretty much the Ron Paul proposal but he hasn't even won a far right caucus state yet. The trillion would have to be net savings, not just cutting government jobs where the people end up getting federal dollars anyway. Politically speaking, this option is not even on the table for discussion. For all the root canal negotiations for cuts last year following the landslide, power changing, off-year elections, domestic spending was up another 5%.
2) Win a mandate and implement supply-side, pro-growth policies that include tax system reform, regulatory reform and spending growth restraint, and keep all the reforms in place over an extended period of time while we grow our way out of this.
3) Stay on the present course and find out exactly when GM's prediction of our demise will come true - where the only investments surviving are canned foods and dry gun powder.
I would like to choose door number two.
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Doug,
don't worry be happy
we will 'grow' our way of this
let me see if I can find the article on that guy who says the US is elegantly or beautifully deleveraging ourselves out of our mess while Europe is not doing it is artfully or in a more ugly fashion.
What a joke.
It really is remarkable that probably few hundreds of people truly control the world economy
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Ray Dalio
Man and machine
The economic ideas of the world’s most successful hedge-fund boss
Mar 10th 2012 | WESTPORT, CONNECTICUT | from the print edition
..
And my returns look like this
“THE most beautiful deleveraging yet seen” is how Ray Dalio describes what is now going on in America’s economy. As America has gone through the necessary process of reducing its debt-to-income ratio since the financial crash of 2008, he reckons its policymakers have done well in mixing painful stuff like debt restructuring with injections of cash to keep demand growing. Europe’s deleveraging, by contrast, is “ugly”.
Mr Dalio’s views are taken seriously. He made a fortune betting before the crash that the world had taken on too much debt and would need to slash it. Last year alone, his Bridgewater Pure Alpha fund earned its investors $13.8 billion, taking its total gains since it opened in 1975 to $35.8 billion, more than any other hedge fund ever, including the previous record-holder, George Soros’s Quantum Endowment Fund.
In this section
The new grease?
»Man and machine
Pausing for breath
Fixing LIBOR
Year of the tortoise
Better Than Goldman?
Natural stock selection
Arise and fall
Bond shelter
Reprints
--------------------------------------------------------------------------------
Related topics
United States
George Soros
Business
Economics
Economic crisis
Mr Dalio, an intense 62-year-old, is following in the footsteps of Mr Soros in other ways, too. Mr Soros has published several books on his theories, and is funding an institute to get mainstream economists to take alternative ideas seriously. Mr Dalio, too, is now trying to improve the public understanding of how the economy works. His economic model “is not very orthodox but gives him a pretty good sense of where the economy is,” says Paul Volcker, a former chairman of America’s Federal Reserve and one of Mr Dalio’s growing number of influential fans.
Whereas Mr Soros credits the influence of Karl Popper, a philosopher who taught him as a student, Mr Dalio says his ideas are entirely the product of his own reflections on his life as a trader and his study of economic history. He has read little academic economics (though his work has echoes of Hyman Minsky, an American economist, and of best-selling recent work on downturns by Carmen Reinhart and Kenneth Rogoff) but has conducted in-depth analysis of past periods of economic upheaval, such as the Depression in America, post-war Britain and the hyperinflation of the Weimar Republic. He has even simulated being an investor in markets in those periods by reading daily papers from these eras, receiving data and “trading” as if in real time.
In the early 1980s Mr Dalio started writing down rules that would guide his investing. He would later amend these rules depending on how well they predicted what actually happened. The process is now computerised, so that combinations of scores of decision-rules are applied to the 100 or so liquid-asset classes in which Bridgewater invests. These rules led him to hold both government bonds and gold last year, for example, because the deleveraging process was at a point where, unusually, those two assets would rise at the same time. He was right.
What Mr Dalio calls the “timeless and universal” core of his economic ideas is set out in a 20-page “Template for Understanding” that he wrote shortly after the collapse of Lehman Brothers in 2008 and recently updated. The document begins: “The economy is like a machine.” This machine may look complex but is, he insists, relatively simple even if it is “not well understood”. Mr Dalio models the macroeconomy from the bottom up, by focusing on the individual transactions that are the machine’s moving parts. Conventional economics does not pay enough attention to the individual components of supply and, above all, demand, he says. To understand demand properly, you must know whether it is funded by the buyers’ own money or by credit from others.
A huge amount of Bridgewater’s efforts goes into gathering data on credit and equity, and understanding how that affects demand from individual market participants, such as a bank, or from a group of participants (such as subprime-mortgage borrowers). Bridgewater predicted the euro-zone debt crisis by totting up how much debt would need to be refinanced and when; and by examining all the potential buyers of that debt and their ability to buy it. Mr Volcker describes the degree of detail in Mr Dalio’s work as “mind-blowing” and admits to feeling sometimes that “he has a bigger staff, and produces more relevant statistics and analyses, than the Federal Reserve.”
Two sorts of credit cycle are at the heart of Mr Dalio’s economic model: the business cycle, which typically lasts five to eight years, and a long-term (“long wave”) debt cycle, which can last 50-70 years. A business cycle usually ends in a recession, because the central bank raises the interest rate, reducing borrowing and demand. The debt cycle ends in deleveraging because there is a “shortage of capable providers of capital and/or a shortage of capable recipients of capital (borrowers and sellers of equity) that cannot be rectified by the central bank changing the cost of money.” Business cycles happen often, they are well understood and policymakers are fairly adept at managing them. A debt cycle tends to come along in a country once in a lifetime, tends to be poorly understood and is often mishandled by policymakers.
An ordinary recession can be ended by the central bank lowering the interest rate again. A deleveraging is much harder to end. According to Mr Dalio, it usually requires some combination of debt restructurings and write-offs, austerity, wealth transfers from rich to poor and money-printing. A “beautiful deleveraging” is one in which all these elements combine to keep the economy growing at a nominal rate that is higher than the nominal interest rate. (Beauty is in the eye of the beholder: Mr Dalio expects America’s GDP growth to average only 2% over a 15-year period.)
Print too little money and the result is an ugly, deflationary deleveraging (see Greece); print too much and the deleveraging may become inflationary, as in Weimar Germany. Although Mr Dalio says he fears being misunderstood as saying “print a lot of money and everything will be OK, which I don’t believe, all deleveragings have ended with the printing of significant amounts of money. But it has to be in balance with other policies.”
Mr Dalio admits to being wrong roughly a third of the time; indeed, he attributes a big part of his success to managing the risk of bad calls. And the years ahead are likely to provide a serious test of whether the economic machine is as simple as he says. For now, he is in a more optimistic mood thanks to the European Central Bank’s recent moves, in effect, to print money. Although he still expects debt restructuring in Spain, Portugal, Italy and Ireland, on top of that in Greece, he says that the “risk of chaos has been reduced and we are now calming ourselves down.” Here’s hoping he is right again.
See also: An interview with Ray Dalio
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Would you please post that in the Economics thread and/or the Political Economics thread as well? TIA
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http://online.wsj.com/article/SB10001424052702304636404577291830334896896.html?mod=WSJ_hp_LEFTTopStories
By NAFTALI BENDAVID
House Republicans, searching for an election-year message amid a muddled political and economic landscape, will introduce a 2013 budget Tuesday that cuts tax rates and provides for just two individual brackets of 10% and 25%.
The budget would end the Alternative Minimum Tax, which originally was aimed at the wealthy but ensnares a growing number of middle-class taxpayers each year. The plan would nearly eliminate U.S. taxes on American corporations' earnings from overseas operations.
The proposal, to be offered by Rep. Paul Ryan (R., Wis.), who has become the Republicans' leading figure on budget issues, has little chance of becoming law soon. It is likely to be welcomed by House and Senate Republicans, and rejected by the Democratic-controlled Senate.
But with Republicans struggling to agree on a presidential nominee and a campaign theme, party leaders hope the easy-to-understand tax-cut proposal will give Republican candidates a clear and popular message.
"We don't expect to make law this year, but we expect to give the country an alternative choice for the future," Mr. Ryan, who chairs the House Budget Committee, said in an interview. "We're going into this election with a specific plan and showing how we could realize it and get it done."
The document was drafted with input from Rep. David Camp (R., Mich.), who heads the tax-writing Ways and Means Committee and has long pushed for tax overhaul.
More
Individuals
• Current: There are six tax rates of 10%, 15%, 25%, 28%, 33% and 35%
• Proposal: Reduce that to two rates of 10% and 25%
Alternative Minimum Tax
• Current: There are two rates, 28% and 26%. The Alternative Minimum Tax is affecting growing numbers of middle-class households
• Proposal: Eliminate the Alternative
Minimum Tax Corporations
• Current: The top rate of 35% is among the developed world's highest
• Proposal: Lower the top rate to 25%
Multinational Earnings
• Current: The U.S. seeks to tax multinationals' overseas earnings. However, companies can defer the tax until the money is brought home
• Proposal: Nearly eliminate U.S. taxes on American corporations' earnings from overseas operations
Source: WSJ Research
"We think it's very important to have a clear message on jobs and the economy," Mr. Camp said. "The code is too costly, too burdensome, and it's hurting job creation, so we think we should take action."
Democrats see the tax proposal as an attempt to deflect attention from the more controversial parts of Mr. Ryan's budget, such as a Medicare overhaul and a decision to set lower 2013 spending levels than those agreed to in the debt-limit deal in August.
"Republicans are on a maddening push once again to end Medicare and raise health-care costs for seniors, while giving more special tax breaks to big oil companies and millionaires," said Rep. Steve Israel (D., N.Y.), who coordinates the House Democrats' campaigns.
Mr. Ryan caused a furor among Democrats last year by proposing to change Medicare from a program in which the government pays directly for health care into a "premium support" program for those currently 55 or younger. Medicare would subsidize beneficiaries' premiums as they bought private insurance.
Last year, Democrats hammered the GOP for seeking to unravel a long-standing program that ensures the elderly get health care. Since then, Mr. Ryan has teamed up with Sen. Ron Wyden (D., Ore.) to propose an alternative that would let beneficiaries use their premiums to buy into traditional Medicare as well as private insurance and that is expected to be in the new plan.
continued
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WSJ:
By PAUL RYAN
Less than a year ago, the House of Representatives passed a budget that took on our generation's greatest domestic challenge: reforming and modernizing government to prevent an explosion of debt from crippling our nation and robbing our children of their future.
Absent reform, government programs designed in the middle of the 20th century cannot fulfill their promises in the 21st century. It is a mathematical and demographic impossibility. And we said so.
We assumed there would be some who would distort for political gain our efforts to preserve programs like Medicare. Having been featured in an attack ad literally throwing an elderly woman off a cliff, I can confirm that those assumptions were on the mark, but one year later, we can say with some confidence that the attacks have failed. Courageous Democrats have joined our efforts. And bipartisan opposition to the path of broken promises is growing.
And so Tuesday, House Republicans are introducing a new Path to Prosperity budget that builds on what we've achieved.
Like last year, our budget delivers real spending discipline. It does this not through indiscriminate cuts that endanger our military, but by ending the epidemic of crony politics and government overreach that has weakened confidence in the nation's institutions and its economy. And it strengthens the safety net by returning power to the states, which are in the best position to tailor assistance to their specific populations.
More important, it tackles the drivers of our debt and averts the fiscal crisis ahead. This year, our nation's publicly held debt is projected to reach 73% of the economy—a dangerously high level that, according to leading economists, puts the nation at risk of a panicked run on its finances.
As shown in the nearby chart, our budget tackles this crisis head-on by cutting debt as a share of the economy by roughly 15% over the next decade, putting the nation's finances on a path to balance, and paying off the debt. By contrast, the president's budget pushes debt as a share of the economy even higher. In his budget's own words, it allows the government's fiscal position to "gradually deteriorate" after 2022.
On the critical issues of health security and tax reform, our budget draws a clear distinction between serious reformers and those who stand in the way of the growing bipartisan consensus for principled solutions.
Our budget's Medicare reforms make no changes for those in or near retirement. For those who will retire a decade from now, our plan provides guaranteed coverage options financed by a premium-support payment. And this year, our budget adds even more choices for seniors, including a traditional fee-for-service Medicare option.
We also introduce a competitive-bidding process to determine the growth of government's financial contribution to Medicare. Forcing health plans to compete against each other is the best way to achieve high-quality coverage at the lowest cost, and implementing these reforms in Medicare can have the effect of lowering health-care costs for everyone. This is the key to increasing access and affordability while preventing government debt from threatening the health security of seniors and the economic security of all Americans.
Our budget also spurs economic growth with bold tax reform—eliminating complexity for individuals and families and boosting competitiveness for American job creators. Led by House Ways and Means Committee Chairman Dave Camp, our budget consolidates the current six individual income tax brackets into just two brackets of 10% and 25%.
We propose to reduce the corporate tax rate of 35%, which will soon be the highest rate in the developed world, to a much more competitive 25%. Our budget also shifts to a "territorial" tax system to end the practice of hitting businesses with extra taxes when they invest profits earned abroad in jobs and factories here at home.
We reject calls to raise taxes, but revenue nevertheless remains steady under our budget because we close special-interest loopholes. More important, our reforms will grow the economy—and the faster the economy grows, the more revenue the government will have to meet its priorities and start paying down the debt.
These patient-centered Medicare reforms and pro-growth tax reforms have a long history of bipartisan support. Medicare reforms based on choice and competition have their roots in the Clinton administration's bipartisan Commission on the Future of Medicare. And in recent years, I've worked with Democrats to advance these reforms.
Tax reforms based on lowering tax rates and closing loopholes go back to the Reagan administration, when Democrats served as the congressional co-sponsors of the landmark 1986 tax reform law. More recently, the chairmen of President Obama's bipartisan fiscal commission put forward a plan for lower rates and a broader base.
It makes sense that these ideas have attracted leaders in both parties. The premium support model offers the only guarantee that Medicare can keep its promise to seniors for generations to come. And pro-growth tax reform, by lowering rates for all Americans while closing loopholes that primarily benefit the well off, can eliminate unfairness in the tax code and ensure a level playing field for all.
While these ideas have enjoyed growing bipartisan support, President Obama has doubled down on policies that have drawn growing bipartisan opposition.
With regard to Medicare, his latest budget calls for giving "additional tools" to the Independent Payment Advisory Board, an unaccountable board of 15 unelected bureaucrats empowered by the new health-care law to cut Medicare in ways that will lead to denied care for seniors. Just this month, Democrats and Republicans alike voted for a measure to repeal this board.
And with regard to tax reform, the president's latest budget calls for taking more from American families and businesses by raising rates and adding complexity to the tax code—precisely at odds with the bipartisan consensus for tax reform.
It is rare in American politics to arrive at a moment in which the debate revolves around the fundamental nature of American democracy and the social contract. But that is where we are. And no two documents illustrate this choice of two futures better than the president's budget and the one put forward by House Republicans.
The president's budget gives more power to unelected bureaucrats, takes more from hard-working taxpayers to fuel the expansion of government, and commits our nation to a future of debt and decline.
The contrast with our budget couldn't be clearer: We put our trust in citizens, not government. Our budget returns power to individuals, families and communities. It draws inspiration from the Founders' belief that all people are born with an unalienable right to the pursuit of happiness. Protecting this right means trusting citizens, not nameless government officials, to decide what is in their best interests and make the right choice about our nation's future.
Mr. Ryan, a congressman from Wisconsin, serves as chairman of the House Budget Committee.
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Sure this could be the usual pork project but someone who has time and the wherewithal should look into whether Mr. Reid owns any land or is joint owner of any land anywhere near this project. This has bribe written all over it and the Reidster was noted for this kind of thing before:
****Lead StoryHarry Reid’s Pet Bullet Train Project on Verge of Securing $4.9 Billion Government Loan
By Doug Powers • March 26, 2012 03:32 PM **Written by Doug Powers
“Woo! Woo! Next stop, bankruptcy!”
Early last year Joe Biden and Transportation Secretary Ray LaHood announced the administration’s intention to sink $53 billion into high speed rail systems in the coming years. That news must have invigorated Harry Reid more than a cowboy poetry reading under his pomegranate trees, because now taxpayers might end up on the hook for an amount of money that could make Solyndra look insignificant:
On a dusty, rock-strewn expanse at the edge of the Mojave Desert, a company linked to Senate Majority Leader Harry Reid wants to build a bullet train that would rocket tourists from the middle of nowhere to the gambling palaces of Las Vegas.
Privately held DesertXpress is on the verge of landing a $4.9 billion loan from the Obama administration to build the 150 mph train, which could be a lifeline for a region devastated by the housing crash or a crap shoot for taxpayers weary of Washington spending.
The vast park-and-ride project hinges on the untested idea that car-loving Californians will drive about 100 miles from the Los Angeles area, pull off busy Interstate 15 and board a train for the final leg to the famous Strip.
[...]
Transportation Secretary Ray LaHood has publicly blessed the train — it means jobs, he says — and it’s cleared several regulatory hurdles in Washington.
Yet even as the Federal Railroad Administration considers awarding what would be, by far, the largest loan of its type, its own research warns it’s difficult to predict how many people will ride the train, a critical measure of financial survival, an Associated Press review found.
Let me get this straight… the Obama administration might put taxpayers on the hook for billions to pay for a train so people can travel to the city that a couple of years ago Obama told them not to waste money in? “All aboard the Mixed Message Express!”
Then there’s the inevitable “well, we were gonna do this ourselves, but since you offered…”****
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http://www.washingtonpost.com/wp-dyn/content/article/2006/10/11/AR2006101101640.html
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Sol-rail-dryna.
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January 30, 2007
Dems Should Dump Ethically Challenged Harry Reid
By Dennis Byrne
Instead of talking in sweeping platitudes about "ethics reform," Senate Democrats might want to prove they mean it by dumping their ethically challenged majority leader, Harry Reid.
The Nevada lawmaker has been implicated in yet another land scheme that this time could net him a tidy $50,000 to $290,000. Los Angeles Times investigative reporters Chuck Neubauer and Tom Hamburger, this week revealed that Reid paid $166 an acre for valuable northern Arizona land whose market value, according to the county assessor, four years ago was worth $2,144 an acre.
Who would be a big enough fool to sell Reid the land at such a ludicrously low price? A long-time pal who would financially benefit from some obscure legislation that the senator has often sponsored.
It worked like this, according to the Times:
In 2002, Reid (D-Nev.) paid $10,000 to a pension fund controlled by Clair Haycock, a Las Vegas lubricants distributor and his friend of 50 years. The payment gave the senator full control of a 160-acre parcel in Bullhead City that Reid and the pension fund had jointly owned. Reid's price for the equivalent of 60 acres of undeveloped desert was less than one-tenth of the value the assessor placed on it at the time.
Six months after the deal closed, Reid introduced legislation [which failed to pass] to address the plight of lubricants dealers who had their supplies disrupted by the decisions of big oil companies. It was an issue the Haycock family had brought to Reid's attention in 1994, according to a source familiar with the events.
If Reid were to sell the property for any of the various estimates of its value, his gain on the $10,000 investment could range from $50,000 to $290,000.
It is a potential violation of congressional ethics standards for a member to accept anything of value -- including a real estate discount -- from a person with interests before Congress.
Reed apparently prefers to put his gains into dry desert land instead of into cold cash, as did Rep. William Jefferson (D-La.), whom the FBI said was harboring $90,000 in marked bills in his home freezer.
Last year the Associated Press disclosed that Reid "collected a $1.1 windfall on a Las Vegas land sale, even though he hadn't personally owned the property for three years." The deal was "engineered by Jay Brown, a longtime friend and former casino lawyer whose name surfaced in a major political bribery trial [last year] and in other organized crime investigations."
Reid and his office have denied any improprieties in these matters. Reid's spokesman noted that the transaction was "a sale, not a gift." The wording of the denial is interesting because Reid is co-sponsoring legislation that would ban "gifts" from lobbyists - or their clients - to lawmakers or their staffs. Reid himself touted that legislation in a Jan. 9 press release, "Reid: The Senate is committed to tough new ethics reform."
In a press release a day earlier ("Senate Democrats highlight commitment to tough new ethics reform"), Reid proclaimed: "The American people demanded change, and Democrats are ready to deliver. The new Democratic Senate is committed to giving American (sic) a government as good--and as honest--as the people it serves. The Senate will start with legislation that is good, and working together, we'll improve it to make it even better. In the end, the Senate will pass the most sweeping reforms since Watergate."
This is exactly the kind of hypocrisy, from both parties, that turns off so many Americans. It a word, it makes Americans vomit.
Let it not go by unnoticed that claiming and getting full credit for this brand of Democratic "ethics reform" is the luminous Democratic presidential contender Barack Obama of Illinois. "Now that the dust has settled and the new Congress is underway," he intoned, "we need to get down to business and show Americans that we are responding to their call for change. We now have the opportunity to give the American people what they deserve and demanded in November--real ethics and lobbying reform that holds their elected officials to the highest ethical standards."
This is from a senator who tromped around Africa, trailed by an adoring throng of media panderers, who condemned corruption there, but had nothing to say about the graft pervading his hometown and state. Quite the contrary, Obama last week endorsed Chicago Mayor Richard M. Daley for re-election this spring, even though the suspected, indicted and convicted percolate through his administration like water through a coffee-maker.
You've got to hand it to Reid. With a record like his, to claim that he is the champion of a new day of congressional ethics takes a lot of brass. He could prove it by resigning. Or Democrats could prove it by giving him the heave-ho as majority leader.
Dennis Byrne is a Chicago Tribune op-ed columnist. dennis@dennisbyrne.net.
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http://www.realclearpolitics.com/articles/2007/01/dems_should_dump_ethically_cha.html
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IMHO this deserves careful consideration.
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By LAWRENCE GOODMAN
The conventional wisdom that nearly infinite demand exists for U.S. Treasury debt is flawed and especially dangerous at a time of record U.S. sovereign debt issuance.
The recently released Federal Reserve Flow of Funds report for all of 2011 reveals that Federal Reserve purchases of Treasury debt mask reduced demand for U.S. sovereign obligations. Last year the Fed purchased a stunning 61% of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis. This not only creates the false appearance of limitless demand for U.S. debt but also blunts any sense of urgency to reduce supersized budget deficits.
Still, the outdated notion of never-ending buyers for U.S. debt is perpetuated by many. For instance, in recent testimony before the Senate Budget Committee, former Federal Reserve Board Vice Chairman Alan Blinder said, "If you look at the markets, they're practically falling over themselves to lend money to the federal government." Sadly, that's no longer accurate.
Enlarge Image
Close...It is true that the U.S. government has never been more dependent on financial markets to pay its bills. The net issuance of Treasury securities is now a whopping 8.6% of gross domestic product (GDP) on average per annum—more than double its pre-crisis historical peak. The net issuance of Treasury securities to cover budget deficits has typically been a mere 0.6% to 3.9% of GDP on average for each decade dating back to the 1950s.
But in recent years foreigners and the U.S. private sector have grown less willing to fund the U.S. government. As the nearby chart shows, foreign purchases of U.S. Treasury debt plunged to 1.9% of GDP in 2011 from nearly 6% of GDP in 2009. Similarly, the U.S. private sector—namely banks, mutual funds, corporations and individuals—have reduced their purchases of U.S. government debt to a scant 0.9% of GDP in 2011 from a peak of more than 6% in 2009.
The Fed is in effect subsidizing U.S. government spending and borrowing via expansion of its balance sheet and massive purchases of Treasury bonds. This keeps Treasury interest rates abnormally low, camouflaging the true size of the budget deficit. Similarly, the Fed is providing preferential credit to the U.S. government and covering a rapidly widening gap between Treasury's need to borrow and a more limited willingness among market participants to supply Treasury with credit.
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CloseGetty Images
.The failure by officials to normalize conditions in the U.S. Treasury market and curtail ballooning deficits puts the U.S. economy and markets at risk for a sharp correction. Lessons from the recent European sovereign-debt crisis and past emerging-market financial crises illustrate how it is often the asynchronous adjustment between budget borrowing requirements and the market's appetite to fund deficits that triggers a shock or crisis. In other words, budget deficits often take years to build or reduce, while financial markets react rapidly and often unexpectedly to deficit spending and debt.
Decisive steps must be implemented to restore the economy and markets to a sustainable path. First, the Fed must stabilize and purposefully reduce the size of its balance sheet, weaning Treasury from subsidized spending and borrowing. Second, the government should be prepared to lure natural buyers of Treasury debt back into the market with realistic interest rates.
If this happens, the resulting higher deficit may at last force the government to make deficit and entitlement reduction a priority. First and foremost, however, we must abandon the conventional wisdom that market demand for U.S. Treasury debt is limitless.
Mr. Goodman is president of the Center for Financial Stability and previously served at the U.S. Treasury.
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This is exactly the thing that worries me.
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Growth Grade: Paul Ryan’s Path to Prosperity
March 29, 2012
By Brian Wesbury Paul Ryan’s new budget (The Path To Prosperity) is a very positive step toward boosting economic growth. It reduces tax rates on individuals and corporations, cuts spending as a share of GDP, and reduces the burden of entitlements on future generations of taxpayers. There is a very good chance that this budget would begin a virtuous cycle for the economy similar to that of the 1980s, generating faster growth in GDP, more revenue to the federal government and less demand for government spending. The results will most likely be much better than the Ryan scoring assumes.
Clearly, White House spokesman Jay Carney makes the opposite case. He said supporters of the plan “have to be aggressively and deliberately ignorant of the world economy not to understand that clean energy technologies are going to play a huge role in the 21st century.” He added that these supporters “have severely diminished capacity to understand what drives economic growth in industrialized countries in this century if [they] do not understand that education is the key that unlocks the door to prosperity.”
Presumably, he is saying that Congressman Ryan’s proposed cuts in federal spending on clean energy and education will reduce the economy to rubble. But, nothing could be further from the truth. In fact, the growth grade for Carney’s economic statements is an “F.” Between the fourth quarter of 1982 and the fourth quarter of 1999, real GDP in the US expanded at a 3.8% average annual rate. During the past 10 quarters (beginning in March 2009) the economy has grown just 2.5% at an annual rate. In other words, the evidence, so far, suggests Carney is wrong. No one knows the future. Using government power to push the economy in one direction or another is an economic mistake that harms growth. See our growth grade on the Keystone pipeline.
But back to the Ryan plan. The growth grade is based on the macro-picture. What we know from history and cross-country analysis is that the bigger government is as a share of GDP, the weaker overall economic growth and job creation become. As an example, with its bigger government, Europe has had much higher unemployment rates and slower growth rates in the past 30 years than has the U.S.
The Ryan budget gets spending down to slightly less than 20% of GDP by 2015 and keeps it there. This will boost real growth by somewhere between 0.4% and 0.8% per year from what it would have been if spending would have remained at 23% of GDP. The top individual and corporate tax rates would be cut to 25% under the Ryan plan. This would boost growth, but with so few details of the tax cut provided, it is hard to give it credit for more than a slight boost to GDP. In the end, it is reduced spending that convinces markets that future tax rates can remain low.
Under the Ryan plan, total federal spending would be cut for two years and then begin to grow again. This would initially shrink the government sharply as a share of GDP (from 23.4% to 19.4%). But then, spending would accelerate again to a 5.0% annual growth rate between 2017 and 2022, and spending would rise back to 19.8% of GDP. This is a concern. The federal budget has never been in balance with spending above 19.5% of GDP — no matter what tax rates were in place.
But Congressman Ryan used static scoring models in his proposal for political purposes. These models do not give credit for positive economic feedback loops. Reduced spending will lead to higher economic growth. Higher economic growth will boost revenues and reduce the demands on governments at all levels, which will reduce the share of GDP devoted to government, which then starts the process all over again. This happened in the 1990s and the result was a boom in the economy and surpluses in budgets.
As a result, we anticipate that the plan will create even more economic growth than Ryan’s current scoring anticipates.
On this basis it would seem that the Budget deserves an A, or even an A+. However, while the budget would lift growth significantly, it is not a “perfect” budget from the growth perspective. Some on the right have attacked the plan because it makes little effort to immediately cut spending back to levels that would have existed if the huge spending spree of 2008/2009 had not happened. Some on the right also want to take this opportunity to “fix” entitlement programs for good.
The Ryan plan pushes off Social Security fixes to a future bi-partisan commission. This attempt to make the budget palatable to a bi-partisan majority means that the budget falls short of perfect. If growth were the only measuring stick, not political expediency or social expectations, the “perfect” budget would end entitlements and redistribution as we know them, and move the US toward free-market based solutions, like Chile’s defined-contribution social security system.
As a result, the Ryan plan gets a B+ because it still leaves issues unresolved. The growth grade is not made on a curve; it does not make adjustments for the current political environment.
Nonetheless, the Ryan plan will lift growth and create more prosperity. Sometimes prosperity makes government more willing to spend — think about the 1960s in the US, when prosperity created an environment conducive to creating the Great Society. But, sometimes it creates momentum for more positive change … as in the 1990s, when welfare reform was signed into law. In the end, the growth grader must support proposals that lift growth, even if they are not “perfect.”
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From a post by GM on the Poli-Econ thread:
"Just how bad things have become was illustrated by the floor defeat of Obama’s budget 414-0. It received not a single vote. “Republicans wrote an amendment that contained Mr. Obama’s budget and offered it on the floor, daring Democrats to back the plan, which calls for major tax increases and yet still adds trillions of dollars to the deficit over the next decade. … But no Democrats accepted the challenge.”"
:-o :-o :-o :lol: :lol: :lol:
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I don't recall if Greta or Shawn played this last night. But head of GSA explaining that officials got bonuses because they were "entitled". This kind of corruption starts right at the top. We have the first guy in the WH whose modus operondi (sp?) is that total government control and power is good. He leads by example. Obama has a revolving door of money. "Punish your enemies" and "reward your friends". My God can any corrupt official be more explicit than this. HE is out of control and no suprise we are seeing more at lower levels.
http://www.realclearpolitics.com/video/2012/04/16/gsa_admin_officials_were_entitled_to_bonuses_during_obamas_pay_freeze.html
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If Moochelle gets endless luxury vacations on the public dime, why not the rest of the federal power structure?
I don't recall if Greta or Shawn played this last night. But head of GSA explaining that officials got bonuses because they were "entitled". This kind of corruption starts right at the top. We have the first guy in the WH whose modus operondi (sp?) is that total government control and power is good. He leads by example. Obama has a revolving door of money. "Punish your enemies" and "reward your friends". My God can any corrupt official be more explicit than this. HE is out of control and no suprise we are seeing more at lower levels.
http://www.realclearpolitics.com/video/2012/04/16/gsa_admin_officials_were_entitled_to_bonuses_during_obamas_pay_freeze.html
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In the category of famous people reading the forum I offer you The Economist cover story Feb 18 2012 that I spotted yesterday:
http://www.economist.com/node/21547789
Over-regulated America
The home of laissez-faire is being suffocated by excessive and badly written regulation
AMERICANS love to laugh at ridiculous regulations. A Florida law requires vending-machine labels to urge the public to file a report if the label is not there. The Federal Railroad Administration insists that all trains must be painted with an “F” at the front, so you can tell which end is which. Bureaucratic busybodies in Bethesda, Maryland, have shut down children’s lemonade stands because the enterprising young moppets did not have trading licences. The list goes hilariously on.
But red tape in America is no laughing matter. The problem is not the rules that are self-evidently absurd. It is the ones that sound reasonable on their own but impose a huge burden collectively. America is meant to be the home of laissez-faire. Unlike Europeans, whose lives have long been circumscribed by meddling governments and diktats from Brussels, Americans are supposed to be free to choose, for better or for worse. Yet for some time America has been straying from this ideal.
Consider the Dodd-Frank law of 2010. Its aim was noble: to prevent another financial crisis. Its strategy was sensible, too: improve transparency, stop banks from taking excessive risks, prevent abusive financial practices and end “too big to fail” by authorising regulators to seize any big, tottering financial firm and wind it down. This newspaper supported these goals at the time, and we still do. But Dodd-Frank is far too complex, and becoming more so. At 848 pages, it is 23 times longer than Glass-Steagall, the reform that followed the Wall Street crash of 1929. Worse, every other page demands that regulators fill in further detail. Some of these clarifications are hundreds of pages long. Just one bit, the “Volcker rule”, which aims to curb risky proprietary trading by banks, includes 383 questions that break down into 1,420 subquestions.
Hardly anyone has actually read Dodd-Frank, besides the Chinese government and our correspondent in New York (see article). Those who have struggle to make sense of it, not least because so much detail has yet to be filled in: of the 400 rules it mandates, only 93 have been finalised. So financial firms in America must prepare to comply with a law that is partly unintelligible and partly unknowable.
Flaming water-skis
Dodd-Frank is part of a wider trend. Governments of both parties keep adding stacks of rules, few of which are ever rescinded. Republicans write rules to thwart terrorists, which make flying in America an ordeal and prompt legions of brainy migrants to move to Canada instead. Democrats write rules to expand the welfare state. Barack Obama’s health-care reform of 2010 had many virtues, especially its attempt to make health insurance universal. But it does little to reduce the system’s staggering and increasing complexity. Every hour spent treating a patient in America creates at least 30 minutes of paperwork, and often a whole hour. Next year the number of federally mandated categories of illness and injury for which hospitals may claim reimbursement will rise from 18,000 to 140,000. There are nine codes relating to injuries caused by parrots, and three relating to burns from flaming water-skis.
Two forces make American laws too complex. One is hubris. Many lawmakers seem to believe that they can lay down rules to govern every eventuality. Examples range from the merely annoying (eg, a proposed code for nurseries in Colorado that specifies how many crayons each box must contain) to the delusional (eg, the conceit of Dodd-Frank that you can anticipate and ban every nasty trick financiers will dream up in the future). Far from preventing abuses, complexity creates loopholes that the shrewd can abuse with impunity.
The other force that makes American laws complex is lobbying. The government’s drive to micromanage so many activities creates a huge incentive for interest groups to push for special favours. When a bill is hundreds of pages long, it is not hard for congressmen to slip in clauses that benefit their chums and campaign donors. The health-care bill included tons of favours for the pushy. Congress’s last, failed attempt to regulate greenhouse gases was even worse.
Complexity costs money. Sarbanes-Oxley, a law aimed at preventing Enron-style frauds, has made it so difficult to list shares on an American stockmarket that firms increasingly look elsewhere or stay private. America’s share of initial public offerings fell from 67% in 2002 (when Sarbox passed) to 16% last year, despite some benign tweaks to the law. A study for the Small Business Administration, a government body, found that regulations in general add $10,585 in costs per employee. It’s a wonder the jobless rate isn’t even higher than it is.
A plea for simplicity
Democrats pay lip service to the need to slim the rulebook—Mr Obama’s regulations tsar is supposed to ensure that new rules are cost-effective. But the administration has a bias towards overstating benefits and underestimating costs (see article). Republicans bluster that they will repeal Obamacare and Dodd-Frank and abolish whole government agencies, but give only a sketchy idea of what should replace them.
America needs a smarter approach to regulation. First, all important rules should be subjected to cost-benefit analysis by an independent watchdog. The results should be made public before the rule is enacted. All big regulations should also come with sunset clauses, so that they expire after, say, ten years unless Congress explicitly re-authorises them.
More important, rules need to be much simpler. When regulators try to write an all-purpose instruction manual, the truly important dos and don’ts are lost in an ocean of verbiage. Far better to lay down broad goals and prescribe only what is strictly necessary to achieve them. Legislators should pass simple rules, and leave regulators to enforce them.
Would this hand too much power to unelected bureaucrats? Not if they are made more accountable. Unreasonable judgments should be subject to swift appeal. Regulators who make bad decisions should be easily sackable. None of this will resolve the inevitable difficulties of regulating a complex modern society. But it would mitigate a real danger: that regulation may crush the life out of America’s economy.
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$200 million from the taxpayer to build cars. No cars. No jobs here or even where they manufacture - in Finland! Taxpayer is blamed for not putting up more money. The only innovation that came out of it was to shift the entire innovation sector over to lobbying government for their dollars - while we mock and despise venture capitalists. Go figure.
http://www.theblaze.com/stories/govt-subsidized-company-goes-through-another-round-of-layoffs-plant-is-absolutely-empty/
Gov’t-Subsidized Company Goes Through Another Round of Layoffs: Plant Is ‘Absolutely Empty’
Govt Subsidized Company Goes Through Another Round of Layoffs: Plant Is Absolutely EmptyAn electric car manufacturer that was awarded more than half a billion dollars in loan guarantees from the Department of Energy has gone through a second round of layoffs.
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Analysts blame the lousy state of Fisker’s finances on the fact that the DOE has denied the company the second round of its loan.
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Fisker Automotive is given $193 million of a $529 million DOE loan to produce two lines of plug-in hybrid cars and, presumably, create jobs.
The company is unable to find a contract manufacturer in the United States, so it outsources manufacturing jobs to Finland (the company vehemently denies charges that it has used any part of the federal loan to fund manufacturing operations in Finland).
The automaker falls behind its production schedule and experiences “delays” in its sales (i.e. poor sales), depleting its capital.
But to qualify for the rest of the $529 million loan guarantee, the company has to maintain a certain amount of capital.
Therefore, in order to meet this DOE benchmark, Fisker Automotive decides it will save money by laying off an “undisclosed number” of employees.
Or as Axelrod will call it, another example of failure in the private sector.
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I'm no fan of government funded research but doesn't it make sense that the product of that research belongs to the taxpayer and the public?
http://www.economist.com/node/21552574
When research is funded by the taxpayer or by charities, the results should be available to all without charge
"...a year of the Journal of Mathematical Sciences will set you back $20,100. In 2011 Elsevier, the biggest academic-journal publisher, made a profit of ($1.2 billion)... Such margins (37%) are possible because the journals’ content is largely provided free by researchers, and the academics who peer-review their papers are usually unpaid volunteers. The journals are then sold to the very universities that provide the free content and labour. For publicly funded research, the result is that the academics and taxpayers who were responsible for its creation have to pay to read it. This is not merely absurd and unjust; it also hampers education and research."
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Finallly some numbers to prove what I have been saying all along. Jobless claims would be worse if not for all these people taking the quick way out. I believe probably half of all disability and workers comp is fraud or exagerated:
http://news.investors.com/article/608418/201204200802/ssdi-disability-rolls-skyrocket-under-obama.htm
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Finallly some numbers to prove what I have been saying all along. Jobless claims would be worse if not for all these people taking the quick way out. I believe probably half of all disability and workers comp is fraud or exagerated:
http://news.investors.com/article/608418/201204200802/ssdi-disability-rolls-skyrocket-under-obama.htm
Next to dead people and illegal aliens, the "disabled" are Buraq's new voting bloc.
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A few SS posts on the health care thread because Obamacare advocates argue the similarity. Question was posed, Why is it NOT optional?
JDN's answer is pretty good: the government doesn't want people to be on the dole any more than they are because they opted out of Social Security, but didn't save their money, and/or lost it in the stock market and therefore at age 65 have absolutely zero.
More simply, it would not exist if it was optional.
What we call Social Security has two different meanings. What the voters were sold or think of it as is a long term contract with the government where we pay in as we work and take payments back when we retire. They hold it in that lockbox for safekeeping and compounding on our behalf. Of course none of that is true and if it were true it would NOT be constitutional. The congress of 1935 like the congress of 2013 has no power to bind future congresses - in my reading of consent of the governed.
More accurately, social security is a single time-frame, tax and spend program with the formulas changed at will by congress. If you earn income you pay into the federal government according to the formula of the current tax, like an income tax - okay it IS an income tax. If you are eligible/ 'entitled' you receive a check in the amount according to the program formula, like a spending program - okay, it IS a government spending program completely separate from the tax. No lockbox, no compounding, no balancing.
There is nothing constitutionally controversial about the taxing income, it was specifically authorized in an amendment. And there is nothing controversial about spending money, we do $4trillion of that a year. And there is no long term contract.
If you make the program optional, the recipients opt in and the payers opt out.
If you make the program optional, it is commerce - a private, consensual, financial contract. We have entire industries already doing that.
If the contract was consensual you would not need the confiscatory, prosecutorial or threat of incarceration powers of the federal government to administer it.
As a people, we prefer it forced on us.
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"Social Security" is an epic Ponzi scheme that would be totally illegal if anyone but the gov't were doing it.
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Actually, if politicians on both sides of the aisle would have kept their grubby little hands off the money, there would be no problem. It would have been properly funded.
It's too late. Now, they must make a choice or a combination thereof, raise the payroll tax or cut benefits.
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Actually, if politicians on both sides of the aisle would have kept their grubby little hands off the money, there would be no problem. It would have been properly funded.
It's too late. Now, they must make a choice or a combination thereof, raise the payroll tax or cut benefits.
That's part of it. If your're willing to steal from Peter to pay Paul, you can count on Paul's vote, and you can villify Peter to boot!
When Social Security was first brought into existance, very few people lived to collect it, now with the longer lifespans and the demographic baby boom collecting it, it's going to crash.
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Mortality changes? That could have been actuarially adjusted; no big deal. But stealing from Peter to pay Paul, that's a big deal.
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http://www.forbes.com/sites/deanzarras/2011/03/11/why-social-security-is-a-ponzi-scheme/print/
3/11/2011 @ 5:09PM |9,207 views
Why Social Security is a Ponzi Scheme
Want a recipe for ruckus? Merely suggest that Social Security might be a “Ponzi scheme”. You might even end up on Drudge Report. Yet the facts bear out the thesis, as we shall see…
For starters, let’s be clear on what a Ponzi scheme is.
Charles Ponzi -- Image via Wikipedia
Say you’re in a scheming kind of mood and looking to get rich off it. Say you’re Bernie Madoff! You start by convincing a small group of people, say five of them, to each give you some money, say $1,000, with the promise that each month thereafter, you’re going to give them $50 back. That works out to $600 over the year, or a 60% rate of return. Not too shabby! These people are a little skeptical at first, but the promised 60% rate of return seems worth the risk. So you collect $5,000, but pay out $600 to each of these five people, $3,000 in total, leaving you ahead by $2000 at year end. So far so good — stick with me…
Here’s how you’ll fund the $3,000 you’re going to pay to those five people.
Not long after the first five, you find ten other people to also give you $1000, with the promise that they, too, will get $50 back each month thereafter. You take in $10,000, and over the course of the year, you pay back the $3,000 to the first group of five people, leaving you with $7,000 from the group of ten, plus the full $5,000 from the group of five, for a total of $12,000. But you still owe the group of ten $6,000. That’s OK, because after you pay them, you’re still ahead by $6,000.
You can repeat the same funding mechanism to pay back that group of ten. Find another ten people, or ideally, more than ten, promise each of them $50 a month, and pay them by using the incoming cash from yet another group of people. Keep this going for a while and all the people earning 60% a year on their money might even turn you on to their friends. It almost seems like a virtuous circle.
All the math for this will work out great provided you play by some simple rules. You absolutely must keep finding more people to pay in. You might need to start promising a lower return to new “investors”, just to help the math. Oh, and you’ll want to keep everyone in the dark about what’s really going on.
But eventually there just aren’t enough people in the world to solicit. And eventually some smart cookies begin to suspect too much of a good thing, and start asking pesky questions.
Now let’s examine Social Security.
Image via Wikipedia
When Social Security was started in 1935, workers paid 2% of their first $3,000 earned, or a maximum of $60. Of course, only those aged 65 and older could collect anything, and many of those collectors conveniently died not long thereafter. So even without full participation by every wage earner, the number of people paying in dwarfed those being paid out, and money began to pile up in what became known as the “Social Security Trust Fund”.
As trends (and thankfully, lifespans) have changed, the payer/payee relationship has not stayed constant. Michael Tanner of the Cato Institute documents some of the demographics as follows:
“In 1950, there were 16 workers paying taxes into the system for every retiree who was taking benefits out of it. Today, there are a little more than three. By the time the baby boomers retire, there will be just two workers who will have to pay all the taxes to support every one retiree.
- “Social Security: Follow the Math”, Michael Tanner, 1/14/2005
Think Cato’s some radical right-wing organization? Ok then, let’s see what the official Social Security Online website has to say in their 2010 summary:
“Social Security expenditures are expected to exceed tax receipts this year for the first time since 1983. The projected deficit of $41 billion this year (excluding interest income) is attributable to the recession and to an expected $25 billion downward adjustment to 2010 income that corrects for excess payroll tax revenue credited to the trust funds in earlier years. This deficit is expected to shrink substantially for 2011 and to return to small surpluses for years 2012-2014 due to the improving economy. After 2014 deficits are expected to grow rapidly as the baby boom generation’s retirement causes the number of beneficiaries to grow substantially more rapidly than the number of covered workers. The annual deficits will be made up by redeeming trust fund assets in amounts less than interest earnings through 2024, and then by redeeming trust fund assets until reserves are exhausted in 2037, at which point tax income would be sufficient to pay about 75 percent of scheduled benefits through 2084.
So there’s your admission that this scheme has run its course, and even an admission that without legislative changes, people will be getting less than they thought.
Some people say, “There’s no problem here – just raise taxes further until we get the money that we need.” But what started at 2% has now become 12.4% when both the employee’s and the employer’s portions are considered. And keep in mind that the half paid by the employer represents monies that by definition can’t be paid to the employees or investors in the form of additional wages and/or returns. As the saying goes, corporations don’t pay taxes. People pay taxes.
Furthermore, the idea that we can just raise taxes and hit some projected revenue increase is fatally flawed by static analysis — the idea that people don’t respond to incentives and penalties. Tax increases routinely fail to yield the originally projected revenue. Lastly, you have to be willing to legislatively seize a lot of property that just doesn’t belong to you (regardless of what Michael Moore might say).
It’s not as if Franklin D. Roosevelt set out to create a Ponzi scheme. To this day, the nature of the system is fully disclosed, although now things are so scary that most people don’t want to look. Even when a few people are asked to look, like the recent commission headed by Alan Simpson and Erskine Bowles, the very President doing the asking looks away. In the meantime, people who do know that the scheme is mathematically unsustainable are drafting battle plans against those who might, horrors!, try to give some control over the situation back to individuals.
Like so many government programs, Social Security started off with great intentions, but morphed into something else. Some people refute the Ponzi scheme comparison largely on the grounds that unlike a traditional Ponzi scheme, Social Security is completely disclosed, was never sold to as a way to make anyone rich, and that it has good intentions rooted in compassion for the poor.
Hold on to your wallets. Just because a fraud is being perpetuated in full view doesn’t mean it’s not a fraud. It simply means people are either not paying attention, or don’t understand what they’re looking at. Regarding not trying to make anyone rich, that’s precisely correct, if only ironically. The creation of Social Security probably did incalculable damage by disincentivizing saving and investing. It ratcheted up moral hazard big time, and nudged untold millions of people into looking towards government for solutions, rather than to themselves and the private sector. And as for good intentions, isn’t that what a certain road to a certain nasty place is paved with? Or at the minimum, The Road to Serfdom?
What’s that saying about walking and talking like a duck?
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Yes, I agree with both of you. The FDR starting tax rate of 1% each on the employer and the employee on the first $3,000 of earnings, never to surpass a $90 total contribution per employee per year was enough to pay out small amounts to people who retire and live beyond life expectancy.
I don't know why anyone tampered with it.
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"What we call Social Security has two different meanings. What the voters were sold or think of it as is a long term contract with the government where we pay in as we work and take payments back when we retire. They hold it in that lockbox for safekeeping and compounding on our behalf. Of course none of that is true"
Yes. Correct me if I am wrong. We recently heard SS is solvent till 2035 at which point it will run out of money!
And we should be glad because *that* estimated date is the same as the estimate last year. Yet I haven't heard any MSM discussing how such a calculation HAS to be absurd. Like Doug points out there is no money sitting anywhere for safekeeping.
It is all a moving target. All based on assumptions about what is coming in keeping some sort of pace with what is going to be paid out.
As JDN points out only the government (and apparantly not every government - Europe which is tied to the Euro cannot print money) can make money out of thin air and claim it has value
Bottom line I don't beleive the year 2035 has much meaning. It is all smoke and mirriors. Where is the outrage in MSM? It will emerge only if Romney wins.
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CCP, I don't know the numbers but one problem with solvency is that we already took 2 points off the pay in amount - temporarily. The other problem is that the funds are all co-mingled with the way out of balance other funds.
Dems propose ending the income cap, taxing it all the up, and tax the payout or cap or end the payout to 'wealthy' recipients, ending the insurance 'I' in FICA and converting it into just one more tax and spend welfare program.
Taxing it all the way up opens it up to lowering the rates. Means testing the payouts ends the sacred but phony that is my money mentality that protected the program all these decades. It becomes just another run of the mill general welfare program subject up to normal budget negotiations like everything else.
For how long were people going to believe there was a lockbox?
Social security on its current path is not the third rail of politics that it was 10 or 20 years ago IMHO. The reformers keep saying no one over 55 will be affected. Everyone else is currently on the pay in side of the ledger.
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Fox News caught reading the forum. A day late but the covered all the main points already covered here.
http://www.foxnews.com/opinion/2012/04/26/social-security-iisi-ponzi-scheme/
Social Security IS a Ponzi scheme
When Texas Gov. Rick Perry, then in the early stages of his short-lived quest for the Republican presidential nomination, referred to Social Security as "a Ponzi scheme," he was excoriated by the press, left and right, and by his fellow Republicans, as well. Earlier this week, government actuaries revealed that Perry was correct.
That revelation, which was greeted with a ho-hum by the media, basically announced that by 2033, 21 years from now, the so-called "Social Security trust fund" will be empty.
The only reason this was even announced is because we are approaching a presidential election campaign, and in response to Perry's much-derided claim, the government's actuaries, who originally told the Obama administration and the public that the fund would be solvent until 2036, re-examined their numbers and concluded that it will be in the red three years earlier than they thought.
This revelation should come as no surprise to those who monitor the government and its deceptive ways. When he first introduced Social Security, President Franklin D. Roosevelt argued that under Social Security the federal government would be holding your money for you. He deceptively fostered the idea that Social Security would be a savings account, into which employees and employers would make contributions and out of which guaranteed monies would be paid to those who reached the age of 65. Essentially, he claimed that you'd get your money back.
Eventually, the government would acknowledge that what it first called a savings account and then called old-age insurance and then said would be fortified by a trust fund did not even establish a contractual obligation to those who have paid the Social Security tax -- which would be all of us.
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The politicians believed him, but the actuaries and the judiciary understood that the government would never hold anyone's money for him — as if it were the custodian of a bank account. In the first of several challenges to the constitutionality of Social Security, the Supreme Court found that the Social Security fund did not consist of your money. It was merely tax revenue.
Did you know that?
It also held that since Congress' law-making authority is limited to the 16 discrete delegated powers granted to it in the Constitution (a truism few in Congress accept as binding) but its spending authority is open-ended (a conclusion that must torment James Madison's ghost), Congress could collect funds, claim it was holding the funds in a savings account and then spend those funds as it saw fit — for those in need after age 65 or for any other purpose.
Did you know that?
And, in a curious yet revealing one-liner in the Supreme Court opinion upholding the constitutionality of Social Security, even the court recognized that there would be no trust fund in the traditional sense when it found that the tax dollars collected and supposedly designated for Social Security were "not earmarked in any way."
Did you know that?
Eventually, the government would acknowledge that what it first called a savings account and then called old-age insurance and then said would be fortified by a trust fund did not even establish a contractual obligation to those who have paid the Social Security tax — which would be all of us.
Thus, the Feds have conceded and the courts have agreed that the money you have involuntarily contributed to the so-called trust fund is not yours and can be spent by the government as it pleases, just like any other revenue that the Feds collect.
Did you know that?
The trust fund is not money that the government "holds" for you, as FDR promised.
It is not money to which you have a lawful claim, as he claimed.
It is not a guarantee for you, as he led the public to believe.
The so-called "trust fund" is merely the difference between what is collected and what is paid out. And the Feds just acknowledged that in 21 years, they are likely to pay out more than they will collect.
Perry did not succeed this time in his quest for the Republican presidential nomination. But he did succeed in articulating a hard truth: The same federal government that prosecutes people like Bernie Madoff for paying out more than they collect does the very same thing under the color of law.
Is a Ponzi scheme — which is basically theft by deception — lawful just because the government runs it? The Supreme Court has said yes. Perry has said no.
Governor Perry is correct.
Andrew P. Napolitano, FoxNews.com Opinion
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There is a fear on the left that the GOP will shamelessly exploit the current scandals for political gain. Unfair because government was big and out of control under all administrations (and we only hold Republican administrations accountable)? FYI to the CinC, the political executive branch is above the bureaucracy in federal power just like the civilian leadership is above the joint chiefs in war. The party in Las Vegas happened under your watch. They got caught and you got caught not paying attention while setting the same example. Worse yet that was the President told private businesses not to waste money in Vegas! http://www.lasvegassun.com/news/2009/feb/10/las-vegas-mayor-says-obama-owes-city-an-apology/
GSA for those outside of government is a monstrosity of an agency that, believe it or not, operates to make all the other agencies conform to a set of rules relating to efficiency and good government practices in areas like purchasing and contracting. They are the experts on spending taxpayer money. They don't defend our shores, they don't clean the environment, they don't enforce securities and exchange law, regulate interstate commerce, feed the poor or deliver meds to the elderly. They do NONE of it.
The GSA operates under the assumption that ordinary government agencies are too small to create and enforce their own safeguards on the wise use of taxpayer funds. Surely you jest. We created a super agency to ride herd on the other agencies and this is what we got. http://www.politico.com/news/stories/0412/75181.html http://articles.latimes.com/2012/apr/23/nation/la-na-gsa-corruption-20120423
The GSA now needs 200 million additional square feet of rented office space FY2013 to further "save the taxpayer money". Seriously: http://www.gsa.gov/portal/content/132827
GSA helps protect the environment? http://www.gsa.gov/HP_13_SpecialTopics_gogreen - No it doesn't.
GSA helps small business? http://www.gsa.gov/HP_13_SpecialTopics_smallbusiness - No it doesn't.
GSA is low hanging fruit for anyone looking for an entire agency to close down completely. -Doug
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This thread would be more precisely targeted for discussions of the GSA:
http://dogbrothers.com/phpBB2/index.php?topic=2228.0
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http://www.cnbc.com/id/41491193/
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Tom Frost: The Big Danger With Big Banks
Taxpayer safety nets such as the FDIC should be available only to banks that are in the loan business, not those in the investment business..
By TOM C. FROST
In the early 1950s, when I was a young college graduate and a new employee of the Frost Bank, my great-Uncle Joe Frost, then CEO, told me that the very first goal we had was to return the deposits we received from customers. Our obligation was to take care of the community's liquid assets and manage them safely so others could use them (via loans) to grow.
Frost Bank was not big enough to be saved by the government, Uncle Joe told me at the time, so we would always need to maintain strong liquidity, safe assets and adequate capital. I was impressed that making money was not high on his list of priorities, but he implied that profits would come if we observed sound banking principles.
When we look at banking in the United States today, Uncle Joe's values seem so long ago and far away. The industry is now dominated by a few large banks.
In 1970, according to data from the Federal Reserve Bank of Dallas, the five largest U.S. institutions owned 17% of banking industry assets; in 2010 that share was 52%. Their business has expanded well beyond the role as steward of the community's assets into riskier endeavors that chase supersized returns.
As the financial crisis of 2008 showed, the very diversification, structure and size of most of our largest banks put the community's assets at tremendous risk. They had become "too big to fail," and the government—really the American taxpayers—had no choice but to keep their colossal mistakes from bringing down the economy.
But as Harvey Rosenblum, the Dallas Federal Reserve Bank's executive vice president and director of research, wrote last year, "These rescues have penalized equity holders while protecting bondholders and, to a lesser extent, bank managers." In other words, by protecting people from the consequences of their errors, the bailouts raised the risk that the same errors will be made in the future.
There are many good proposals for minimizing, if not entirely eliminating, the likelihood of another "too big to fail" crisis of the sort we faced in 2008. Perhaps most prominent among them is the recommendation that we require banks to hold additional capital to protect themselves (and the rest of us) from loans and investments gone sour.
But even these recommendations would allow the big banks to keep their traditional FDIC-insured deposits, alongside their investment enterprises within the parent company. I suggest that we divide the two functions into separately owned, managed and regulated entities. That's the only way we can ensure that their riskier businesses don't undermine the insured deposits that are the foundation of a stable and healthy economy.
Taxpayer safety-net programs, such as the Federal Deposit Insurance Corporation (FDIC), should be available only to banks in business to provide insured deposits. Financial institutions that provide primarily investment, hedging and speculative services don't deserve protection either by the FDIC's explicit guarantees or by an implicit understanding that taxpayers will bail them out because there is no other alternative. Indeed, this kind of protection is a perversion of capitalism and can distort its good outcomes.
Uncle Joe was not a fan of the FDIC—he said it took his money to subsidize his inefficient competitors. I support the FDIC as a protection for the depositor, but, with a nod to my uncle's wisdom, I believe this safety net should apply only to banks that are allowed to receive FDIC-insured deposits.
There are actually two business cultures in the banking business, and they should be separated. The first focuses on establishing long-term customer relationships, building the communities in which the bank does business, and preserving depositors' liquid assets. Most of America's smaller banks do business this way, and this banking culture needs to be sustained for the sake of local, regional and national economic well being.
The second culture allows, and even encourages, risk taking that threatens the first culture if the two are bound within one institution. Please don't misunderstand: Financial institutions should be free to engage in services that insured-deposit banks can't. But they shouldn't expect taxpayers to bail them out when their risky activities fail.
We need a real and impregnable firewall that keeps one part of the banking system—and the economy—from being consumed when the other goes into flames.
The combination of both banking cultures in a single institution—which had been separated for decades by the Glass-Steagall Act of 1933 until the 1990s—brought us to the doorstep of global financial-system collapse a few years ago. If the nation stays on its current path, we could see another crisis.
We are approaching a state of affairs in which an oligopoly of a few major institutions dominates our entire banking system. There's little evidence those institutions will share the concerns and dedication of my Uncle Joe—and many like-minded bankers in his time and since. If we truly separate the cultures of commercial and investment banking, the clients of both will prosper.
Mr. Frost is chairman emeritus of San Antonio, Texas-based Frost Bank.
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In related budget news, Obama's budget proposal suffered its third straight defeat in a year after Republicans forced a vote on it in the Senate this week. What's startling is not that Obama has lost three votes in a row in the last year; it's that he hasn't garnered a single vote of support from either Republicans or Democrats. The Senate defeated his 2011 budget 97-0, while in March the House defeated his latest proposal 414-0. This time, the Senate vote was 99-0. The White House claims it has a balanced approach of tax increases to offset higher spending, while adding $6.4 trillion to the deficit in the next 10 years. GOP budget proposals produce deficits of less than half that over the same time frame. Meanwhile, it's been more than three years since Senate Democrats have even submitted a budget.
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By WARREN KOZAK
Beware of little expenses.
A small leak will sink a great ship.
—Benjamin Franklin
There is a large chain grocery store in my neighborhood that I rarely frequent because the prices are too high. Instead, I will travel an extra 30 blocks to another store where the costs per item are 20%-30% lower.
I arrange my travel around this activity. It takes a little extra effort, but within a year the savings are substantial. As it turns out, I am not alone. The average income of Costco discount shoppers, it was reported recently, is $96,000—so perhaps they're not the millionaires and billionaires the president talks about, yet not the folks one might immediately expect to be watching their pennies either.
But every so often I will need one item late at night—a quart of milk, a missing part of a school lunch—and I run over to the high-price store nearby. There, I've noticed something happening with increased regularity: The person ahead of me in line or at the next checkout counter is using a benefits card. Since we are now in the third year of our national recession and unemployment remains depressingly high, I understand this.
Recently I had to run into that store and, sizing up the three lines, chose to stand behind a woman with one item in her cart. It was one of those large ice-cream cakes. When the checkout person said "Forty-one dollars," I wasn't the only one who blanched. The shopper's son, around 12, repeated it as a question: "Forty-one dollars?"
I quickly calculated that the woman's cake was eight times more expensive than the kind I make at home to celebrate birthdays. The mother ignored her son's question.
She took out her benefits card, swiped it through the machine, and they were off. My turn.
I stood there, wondering what lesson the young boy takes away from this transaction. Does he grow up with the faintest understanding of delayed gratification—that you have to earn your money before you can buy candy—or, in this case, an ice-cream treat? I wondered how we arrived at this point as a nation. I also felt like a chump.
Enlarge Image
CloseAssociated Press
Items purchased using food stamps at a Philadelphia grocery store.
.The vast majority of Americans—Democrat, Republican or independent—will readily help someone who cannot make ends meet in a bad economy. Americans want a hungry child to be fed. I know this because in no other country do people donate more to charities. Americans will go far beyond what our taxes already pay for to help the less fortunate. We have been blessed with overabundance in this land, and we are a very generous people.
But over the last four decades, our government has quietly done away with almost all of the restrictions once placed on food assistance. SNAP cards (Supplemental Nutrition Assistance Program) can be used to purchase practically anything with the exception of liquor and cigarettes. These cards are also openly and illegally sold for cash, which allows the recipient to buy anything they want, including cigarettes and liquor.
Food assistance is helping many families keep their heads above water when they would otherwise not get by, and many of these families watch every dime. But the system also allows people to flagrantly disregard the program's original purpose.
Of course there are instances of fraud in every corner of the government, from Congress to defense spending. Why single out food stamps? Because, with over 48 million Americans now using some form of food assistance and few restrictions, the possibilities of waste are unlimited.
My grandmother did not serve on the president's Council of Economic Advisers. She did not have an M.B.A. from Harvard. She never went to high school because she had to go to work to support her family. But she gave me an astute piece of financial advice when I was about to enter the world. "Never," she told me, "spend more than you earn" and "always try and save a little something."
When we wonder how this great nation traveled from our grandparents' common sense to where we are today, it might be easier to understand with this question: How did the country that created the strongest middle class in history, the country that offered everyone the chance to succeed, the country that built and paid for the transcontinental railroad and the Hoover Dam, won World War II and put Neil Armstrong on the moon—how did that country rack up trillions in debt?
One $41 cake at a time.
Mr. Kozak is the author of "LeMay: The Life and Wars of General Curtis LeMay" (Regnery, 2009).
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Jumping around threads a little, really not necessary because regulations are a tax...
JDN: "On another subject, bureaucracy, Doug, you are in the real estate investment business. I don't know about MN, but in CA there are so many hoops you must jump through, not to mention jump at the right time, have everything in line and I mean everything, or simply your permit is denied. Now I'm all for safety in construction, but sometimes government is simply ridiculous. No common sense."
Yes regulations in my business are my worst nightmare. They either think it has no cost, that the cost can't be passed on or they don't care. Mostly it makes me inefficient. I have to work on what is on their radar screen because every order comes with the threat of closing my business, instead of working on what I know is most urgent or the most productive use ofmy time and resources.
Regulations at the locals can be the worst. I noticed a headline in a small community this past week, something like, Council Might Act on Grocery Store Proposal. Who knew that selling groceries was illegal, that only some really well connected people can do it.
When I worked in the export business there was quite a good rule in place for the feds to act on an export license application. We did not want to be selling weapons technologies to our enemies, but we also wanted to be the world leader in technology sales around the globe. On certain applications for export license, if one of the federal agencies did not respond within a short, reasonable time (72 hours IIRC) and block the shipment, you were authorized to ship. In local grocery sales, why is that different. Inform the proper agencies that we will be selling food. If the USDA wants to come in and see the health standards of the operation, then do that. If we are unsafe or unhealthy, shut us down. If the state revenue dept wants to see our payroll withholding system, then do that. If the locals want to be certain that we are not creating parking problems and traffic jams, then come check us out. Instead you cannot even contemplate a business opening without all their blessings, and they know that and load up the rules with all kinds of unrelated crap. In third world countries that process can take years and require bribes and maybe never happen. In America - same thing.
A friend building an indoor tennis facility and teaching center needed approvals from 6 levels of government in order to build with charitable donations a place for introducing inner city children to a life sport that builds character and can open all kinds of doors of opportunity for them in the future. They got it approved and built, but the regulatory hoops were far tougher than raising money or laying bricks and mortar. http://www.innercitytennis.org/
In another example the city of Minneapolis shut down a church clothing shelf operation days before Christmas that was giving donated winter coats to poor people in below zero weather - due to parking and ordinance restrictions. And they call themselves the 'regulatory services' department.
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http://dogbrothers.com/phpBB2/index.php?topic=2228.0
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Belatedly getting back to BigDog from the Pres. thread (http://dogbrothers.com/phpBB2/index.php?topic=2112.msg62909#msg62909):
"You don't understand the link between nutrition and health, Doug?!?"
My point was to doubt a link between receiving food stamps and improving health. If there is such a link, please advise. My link showed that obesity, not starvation, is positively correlated. My take on the radio ad is that they were advertising for more enrollees. Your point that they were saying to use the program to improve health is true as well.
Your personal story sounds to me like the program worked exactly as it was designed. And it isn't me paying for you; I'm sure you've paid more than your own way. Just as true (IMO) are the examples I see where the program is not working as intended.
I don't know the answer to it, I suggested three better possibilities. I am mostly doubting that a doubling of food stamp usage is a positive sign that things are working.
(BD) "Is helping people eat bad? Do you want children to starve?"
I posted in specific dollars three different and perhaps better ways of funding it:
(Doug) "Food for the hungry might be the best social spending program possible, but why is it federal? Why is it government? Would not closer to home be a better place to know the people, the needs, the costs? My county has a budget of $1649528239/yr. (There are over 6000 counties in the US) My state has a budget of $33793000000 /biennium. (There are 50 states closer to the point ofneed than the federal government) What do they do that is more important than helping to feed people in the community who have no other source of food? Charitable giving in the US is $290890000000. What do they have that is more pressing than feeding the hungry. If food for needy wasn't already paid at the federal level, charities would receive even more IMO. If further away is better for funding, why not do the whole world via the UN instead of advertising for recipients who don't even know they need help."
If charitable giving in the US is $290890000000, why must food assistance be a federal government program? Starving the children is not the only alternative to doing things the way we are.
(BD)"These were not job creation attempts in any way I can recognize. You know that whole "Buy American" push? You know the car companies that were bailed out? You don't recognize the connection to building cars in the US and US jobs?"
I value the system, structure and principles of freedom and enterprise that enabled to the US becoming the industrial giant and technological leader in the world. I value the level playing field over manipulating the rules to get desired results for preferred operations. The car bailouts were certainly a manipulation of the free flow of resources to their most productive use, a historic case of changing the rules to suit interests of those in power over other less connected.
The two largest beneficiaries of the cash for clunkers were Honda and Toyota, an odd form of Buy American. The general motors deal moved unsecured creditors ahead of secured ones. It forced closure Republican owned dealerships and moved up the position of contributing unions. Am I proud of emulating the economic system of a third world country to prop up centrally chosen core industries at the expense of all others? No.
I don't know how we look at the Obama Administration BLS Labor Force Participation chart and call these jobs created or saved. The jobs below the line are being created or saved - in declining numbers.
(http://data.bls.gov/generated_files/graphics/latest_numbers_LNS11300000_2002_2012_all_period_M04_data.gif)
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http://www.usatoday.com/news/washington/story/2012-05-18/federal-deficit-accounting/55179748/1
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Deficits and debt hurt everyone going forward, especially the youth.
"the government ran red ink last year equal to $42,054 per household — nearly four times the official number reported under unique rules set by Congress."
In 2008 candidate Obama won the youth vote (18-29) by 68% to 30% for McCain. http://www.msnbc.msn.com/id/27525497/ns/politics-decision_08/t/youth-vote-may-have-been-key-obamas-win/#.T8PmZVKIhdg The youth vote in particular needs to look very critically at the accumulating debts, what led to them and what the choices are going forward.
In rough numbers, half of America is not in the workforce and half of the workforce does not pay a significant part of the burden. Therefore those who significantly pay in are on the hook for far more than even what is reported here.
My daughter will vote this year. She is stubbornly non-political now and was only 13 years old at this point 4 years ago during Obama's historic rise to the Presidency. We will see with this one voter, but all young voters are faced with a starkly different set of facts coming into 2012 than in 2008. Hope and change has a scorecard. The are-you-better-off-now-than-you-were-$6trillion-ago question may pack a bigger punch with the younger crowd than is currently projected. The productive part of their generation just took on another home mortgage - and didn't get a home for it.
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Contrast this to Paul Krugman who seems to believe we can spend forever:
http://finance.yahoo.com/blogs/breakout/schiff-america-already-bankrupt-115722723.html?l=1
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By TODD G. BUCHHOLZ
America has long been the land of the game show. And at some point just about all of us have screamed at a contestant: "Don't be stupid—take the money!"
That's what American citizens should be screaming at the United States Treasury today. The government has racked up $5 trillion of debt since President Obama moved into the White House. We don't know how we're going to pay it back. Yet the world is willing to lend us 10-year money at rates substantially below 2%.
So why not give our kids a break by issuing 50- or 100-year bonds, locking in today's puny rates? Corporations do it. In 1993, Disney issued $300 million in "Sleeping Beauty" bonds, and the market scooped them up. Last year, Norfolk Southern sold $400 million in 100-year bonds despite the obvious uncertainty: Will railroads be spaceships in 100 years?
Other governments are issuing long-term bonds, too. In 2011, buyers grabbed Mexico's 100-year bonds, despite that country's pockmarked history of devaluations and defaults. The average maturity of U.K. debt is three times longer than ours.
Instead of following these examples, the U.S. Treasury recklessly borrows short-term funds that must be rolled over. The Obama administration claims that it has taken advantage of low yields and extended the average duration of debt. But it's a flimsy boast. Yes, duration has moved up to 63.9 months but that is still short of the 2001 record of 70 months. And let's put the 2001 comparison in perspective. In 2001, 10-year Treasurys yielded 5.16%. Today, the 10-year rate is 1.62%. A more prudent administration would smash the 2001 record, not gaze up at it.
So why has the administration chosen to play the role of the feebleminded game-show contestant? The short answer is: out of shrewd political self-interest. Because short-term debt yields are typically the lowest on the yield curve, borrowing short gives the illusion of a lower budget deficit, flattering President Obama's fiscal profile—if anything can flatter a deficit-to-GDP ratio approaching 9%.
With a generous Federal Reserve squeezing short rates down to zero, the interest cost of existing debt looks pretty meager at 1.4% of GDP. But this is a terrible trade-off that makes President Obama look better while almost guaranteeing that our children are worse off. Issuing 100-year bonds, or at least 50-year bonds, would require a higher interest rate, perhaps 3%. Sure, that would put more pressure on near-term deficit reports. But leaders should be willing to let their personal image take a dent if it clearly helps the American people. Locking in 100 years of borrowing at a 3% rate would be the best deal since Pope Julius paid a pittance to have Michelangelo paint his ceiling.
Recently President Obama has been invoking President Reagan's name. Reagan's deficits looked lousy in his first term, peaking at 6% of GDP. Pundits threw rotten tomatoes at him for explosive Pentagon spending and for gradually raising the Social Security retirement age to 67. In retrospect, both were prudent measures. The former pushed the Soviet Union to bankruptcy while the latter wiped trillions of dollars in future liabilities off our national balance sheet. Together, they created a double-barreled dividend and helped launch a boom that created 40 million new jobs over two decades.
The lesson in all this: Smart finance requires tough, long-range investments—not quick calculations to make deficit snapshots look rosier.
President Obama should admit that our relatively short-term debt imperils us. Former Federal Reserve Governor Lawrence Lindsey calculated on these pages in June 2011 that if yields jumped back to normal levels, deficit estimates would soar by $4.9 trillion over the next 10 years. One of these days when the government tries to roll over America's paper, rates will have catapulted much higher, and the world's financial system will look at the U.S. taxpayer and announce: "Game over. You lose."
Mr. Buchholz, a former White House economic adviser and managing director of the Tiger hedge fund, is the author of "Rush: Why We Thrive in the Rat Race" (Penguin, 2011).
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Editorial: Food stamps expansion driven by politics
The United States is one of the richest countries in the world. And its economy is recovering from recession faster than those in most other industrialized nations. So why do the numbers of people on the Supplemental Nutrition Assistance Program (formerly known as Food Stamps) keep surging?
The numbers are stark. In 1992, about 25 million Americans took part in the program. By 2000, thanks to an unusually strong economy and overly rigid restrictions on qualifying, the number had fallen to 17 million. But since then, they have been going straight up. As of April, 46 million Americans, more than one in seven, were receiving assistance. Its annual cost meanwhile has risen from $17 billion in 2000 to $78 billion as of last year.
The value of the program is not in doubt. People in need obviously should not be left without food. But numbers like these erode people's faith in the fairness of government anti-poverty programs. These numbers are not driven by a rise in hunger. Indeed they have come about at a time when Americans — particularly those on the lower-income rungs — are struggling with obesity.
Rather the growth in SNAP, as the program providing food assistance is called, is being driven by politics as usual. Rural and urban lawmakers form an odd alliance to scratch each other's back. The rural representatives support expanding SNAP in return for getting the latter's support on farm subsidies. And vice versa.
More at the link:
http://www.usatoday.com/news/opinion/editorials/story/2012-07-04/SNAP-farm-bill-food-stamps/56020262/1
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Expanding the program was easy. Paying for it is forever. Cutting it back is impossible. As Bigdog wrote to me recently, "...Do you want children to starve?"
"Needless to say, there are destitute people who need help. But the goal should be to reduce dependence on food stamps to historic levels after the recession, and restore the asset test, re-establish a work requirement and implement a better system for income verification."
The Rise of Food-Stamp Nation
By Rich Lowry - July 10, 2012
Tom Vilsack is one of the most important welfare administrators in the nation. Oh, yeah — he’s also secretary of agriculture.
Two-thirds of the Agriculture Department’s budget is devoted to welfare programs. The biggest is food stamps, which is now the nation’s second-largest welfare program after Medicaid. Its inexorable growth during the past decade, through good times and bad, is a testament to government’s self-generating expansion.
Asked what labor wanted, the great 20th-century union leader Samuel Gompers answered, “More.” The modern welfare state lives by the same credo. About 17 million people received food stamps back in 2000. Some 30 million received them in 2008. Roughly 46 million people receive them today. From 1 in 50 Americans on food stamps at the program’s national inception in the 1970s, 1 in 7 Americans are on them now.
The grinding recession accounts for much of the increase the past few years, but not for its entirety. Spending on food stamps doubled between 2001 and 2006, even though unemployment was low in those years. Even when the economy is projected to improve in the future, usage of food stamps will remain elevated above historic norms. Food Stamp Nation is here to stay.
One of its pillars is so-called categorical eligibility, which means that if someone is eligible for another welfare program, he is presumptively eligible for food stamps. In 2000, the Clinton administration issued regulations saying that merely getting a non-cash welfare benefit could make someone eligible. Getting a welfare brochure or referred to an 800 number for services is enough to qualify in almost all the states.
Categorical eligibility effectively wiped out the program’s old asset test (i.e., you couldn’t have $30,000 in the bank and get food stamps), although income limits still apply. In the Obama stimulus, the work requirement was suspended, too, and hasn’t been restored. The requirement had discouraged young, able-bodied nonparents from utilizing the program; there are millions of them on food stamps. The bottom line is that government at all levels actively wants people on the program.
Newt Gingrich famously calls Barack Obama “the food-stamp president.” But the first president worthy of the moniker was George W. Bush. His administration brought a Madison Avenue element to the otherwise unreconstructed Great Society program. Not everyone who is eligible for food stamps knows it or wants to sign up. Bush began a recruitment campaign. In the same vein, the Obama administration is running radio ads hailing food stamps as a way to lose weight. At the local level, county governments spread the word and work to overcome residual cultural resistance to taking government benefits. The federal government pays $50 million in bonuses to states for signing people up.
That the food-stamps program is part of the farm bill (now up for debate in Congress) is itself a scam, an exercise in rural-urban logrolling that gives everyone an interest in seeing the bill pass.
As every level of government works to grow the program, attempts to scale it back are predictably savaged. When Jeff Sessions, a Republican senator from Alabama, advocated reforms to save $20 billion out of a $770 billion budget for food stamps during the next decade, he was portrayed as a Dickensian villain. The New York Democrat Kirsten Gillibrand accused him of not caring about kids and insisted that food stamps are an engine of economic growth, since every $1 spent on the program allegedly generates $1.71 in economic activity. There’s nothing, apparently, that food stamps can’t do.
Needless to say, there are destitute people who need help. But the goal should be to reduce dependence on food stamps to historic levels after the recession, and restore the asset test, re-establish a work requirement and implement a better system for income verification. When almost 15 percent of Americans are on food stamps, the government should reacquaint itself with two words: “too much.”
Rich Lowry is the editor of National Review.
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The Welfare Work Requirement: Obama Obliterates Clinton’s Best Achievement
By Herman Cain
President Obama likes to blame everything on George W. Bush, but apparently he does not discriminate. This week, Obama obliterated one of the best things Bill Clinton ever did.
Conservatives don’t look back fondly at the Clinton years, and for good reason, although he looks decent compared to what we have today. But you have to give credit where it’s due: Clinton did some good things, and one of the best – at the prodding of Newt Gingrich and the Republican Congress to be sure – was the signing of the 1996 welfare reform act.
The bill “ended warfare as we know it” as Clinton liked to say, and introduced stringent requirements that able-bodied welfare recipients either work or spend time preparing for work. It was a good idea and it reversed the expansion of the welfare rolls for the first time in decades. The key was that states were not allowed to waive the work requirements. Congress wrote this section of the law very carefully because they knew that some state bureaucrats would try to do just that.
Now the work requirement is gone, not because new legislation was passed to remove it, but because Obama once again decided the law does not apply to him.
On Thursday, the Obama Administration issued a directive allowing states to waive the work requirement – and only the work requirement. The directive explains: “The Secretary (Kathleen Sebelius) is interested in using her authority to approve waiver demonstrations to challenge states to engage in a new round of innovation that seeks to find more effective mechanisms for helping families succeed in employment.”
In fact, Sebelius has no authority to grant such waivers. The bill makes that very clear by limiting the allowance of waivers to one section only, and it very explicitly excludes the work requirement from that section. This was not an accident. The power of the bill, and of the whole idea, was that it would only succeed if the work requirement was mandatory for all states and for all recipients.
And there’s no need for the Obama Administration to “find more effective mechanisms.” Welfare reform has been a roaring success.
Of course, that depends how you define success. It only took four years after the bill had eliminated the old Aid for Families with Dependent Children program, and replaced it with the new Temporary Assistance to Needy Families program, for poverty to plummet while welfare caseloads were cut in half, according to a report from the Heritage Foundation.
So why would Obama get rid of the work requirements? I can think of two reasons – one ideological and the other political.
The ideological reason is that liberals hated welfare reform from day one. They predicted it would push millions more children into poverty. When it did exactly the opposite, their hatred was not abated in the slightest. They are convinced that the only way for people to get by is the reliability of a check from the government, and to them, the notion that you would replace this security blanket with this strange thing called a job is simply absurd.
The political reason is cynical but simple. People who depend on the government to be their primary benefactor vote Democratic, and if their dependence is permanent, then they vote Democratic for life. Even if these folks don’t vote, expanding the welfare rolls will allow for the expansion of the programs all across the country – and the newly hired welfare bureaucrats will vote Democratic, because their subsistence is dependent on the government as well.
Ronald Reagan liked to say that he defined compassion not by how many people we help, but by how many people no longer need our help. Obviously, and not surprisingly, Barack Obama’s view is exactly the opposite. The more people who depend on government largesse, and the easier it is for them to get it and keep getting it, the more job security he creates – for himself.
And he’s even willing to grant waivers that the law expressly forbids in order to make it happen.
I wonder what Bill Clinton thinks about what Obama did to one of his most positive achievements. After all, Clinton (who was re-elected the same year he signed welfare reform) worked with a Republican Congress to pass this bill, to cut the capital gains tax and to balance the budget for several years running.
Now the first Democratic president to follow him is undoing all of the above, or trying to. It’s almost enough to make you wonder, when Clinton walks into that voting booth in November and closes the curtain behind him . . . what he will really do.
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"BO illegally kills Welfare Work Requirement" :? :? :?
Hardly, even Herman Cain who wrote the partisan piece didn't call it "illegal".
"illegally"; a bit of hyperbole or worse don't you think?
Besides, I thought most here on this forum supported states rights? :evil:
All it is is a test if you will, for each state to do as it sees fit on how to handle the situation of welfare to work programs. Sounds reasonable to me.
"States will not be able to escape the work requirements of the landmark 1996 federal welfare reform law, the administration said, but they may get federal approval to try to accomplish the same goals by using different methods than those spelled out in the legislation."
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"Now the work requirement is gone, not because new legislation was passed to remove it, but because Obama once again decided the law does not apply to him.
"On Thursday, the Obama Administration issued a directive allowing states to waive the work requirement – and only the work requirement. The directive explains: “The Secretary (Kathleen Sebelius) is interested in using her authority to approve waiver demonstrations to challenge states to engage in a new round of innovation that seeks to find more effective mechanisms for helping families succeed in employment.”
"In fact, Sebelius has no authority to grant such waivers. The bill makes that very clear by limiting the allowance of waivers to one section only, and it very explicitly excludes the work requirement from that section. This was not an accident. The power of the bill, and of the whole idea, was that it would only succeed if the work requirement was mandatory for all states and for all recipients."
Sounds illegal to me , , ,
Here's some more in a similar vein:
============
Brief • July 16, 2012
The Foundation
"Wherever the real power in a Government lies, there is the danger of oppression." --James Madison
Government
"The imperial Presidency has overturned Congress and the law again. Not content to stop at rewriting immigration policy, education policy and energy policy, Thursday, President Obama's Department of Health and Human Services (HHS) released an official policy directive rewriting the welfare reform law of 1996. The new policy guts the federal work requirements that were the foundation of the Clinton-era reform. ... Welfare reform replaced the old Aid to Families with Dependent Children with a new program, Temporary Assistance for Needy Families (TANF). ... The whole point was that able-bodied adults should be required to work or prepare for work as a condition of receiving welfare aid. This reform was very successful. TANF became the only welfare program (out of more than 70) that promoted greater self-reliance. It moved 2.8 million families off the welfare rolls and into jobs so that they were providing for themselves. Child poverty fell, and single-parent employment rose. Recipients were required to perform at least 20-30 hours per week of work or job preparation activities in exchange for the cash benefit. Now, Obama's HHS is claiming that it can waive those work requirements that are at the heart of the law, and without Congress's consent. When it established TANF, Congress deliberately exempted or shielded nearly all of the TANF program from waiver authority. ... The TANF reform was one small step in the direction of reducing Americans' dependence on government programs and getting them back on their feet. Cutting its work component is likely to unnecessarily swell the ranks of welfare recipients and with no way to pay for it." --Heritage Foundation's Amy Payne
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"even Herman Cain who wrote the partisan piece..."
Democrat Obama is dismantling previous Dem Pres. Clinton's signature achievement - that Newt wrote and Bill with his zipper down took the credit. Pointing that out is partisan? Good grief. Transfer payments are MOST of the federal budget. We believe in states' rights and therefor are not entitled to comment on programs and requirements - that we are paying for?? Huh? We lost that war FYI and we WILL comment! Helpful might be if YOU put in YOUR post what YOU think about whether there should or should not be a federal work requirement in these pay to not work multi-trillion dollar federal programs that are destroying our country and our culture - instead of ad hominem on the others.
"All it is is a test if you will, for each state to do as it sees fit on how to handle the situation of welfare to work programs. Sounds reasonable to me."
I agree these all should be state programs, but IS it a state program or is it a federal program? Let's give states choices on other federal programs too, like whether or not to collect the federal income taxes, estate taxes or to allow abortions in their state as well. Sound reasonable? Maybe we could structure it all so that the central government had just limited powers in the first place, lol.
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I'll put this under government programs, but really the category is information I would like disclosed more relevant than another year of tax returns from Mitt Romney.
Energy Dept. 'Unable to Locate' $500,000 in Equipment Bought With Stimulus Money
By Penny Starr
July 16, 2012
Department of Energy
(CNSNews.com) – An audit conducted by the Energy Department’s Office of Inspector General was "unable to locate" $500,000 worth of equipment purchased with stimulus money by a recipient of funds distributed through the deparment's “Advanced Batteries and Hybrid Components Program,” according to an audit report published by the OIG.
The DOE said it would not be "appropriate" to release the name of stimulus-money recipient where the $500,000 worth of equipment could not be located.
The program was given nearly $2 billion in stimulus funds "to support the construction of U.S. based battery and electric drive component
manufacturing plants... More at the links:
http://cnsnews.com/news/article/energy-dept-unable-locate-500000-equipment-bought-stimulus-money
http://energy.gov/sites/prod/files/OAS-RA-L-12-05.pdf
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http://www.dickmorris.com/obama-repeals-welfare-reform-dick-morris-tv-lunch-alert/?utm_source=dmreports&utm_medium=dmreports&utm_campaign=dmreports
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Obama implies we should get the rich to pay their fair share and build some infrastructure. But with just the stimulus money spent so far we could have built the equivalent of 1567 Golden Gate Bridges in today's dollars. Instead it was squandered. With just the existing spending in our federal budget 2011 we could build 6788 Golden Gate Bridges. Instead we got what?
Steyn says: "Instead of roads and bridges, Obama-sized government funds stasis and sclerosis: The Hoover Dam of regulatory obstruction, the Golden Gateway to dependency."
...
"In Obama's "visions," he builds roads and bridges. In reality, the President of Dependistan has put nothing but roadblocks in the path to opportunity and growth."
http://www.ocregister.com/opinion/obama-364707-build-golden.html
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Morning Bell: Obama Denies Gutting Welfare Reform
Amy Payne August 8, 2012
The Obama Administration came out swinging against its critics on welfare reform yesterday, with Press Secretary Jay Carney saying the charge that the Administration gutted the successful 1996 reform’s work requirements is “categorically false” and “blatantly dishonest.” Even former President Bill Clinton, who signed the reform into law, came out parroting the Obama team’s talking points and saying the charge was “not true.”
The Heritage Foundation’s Robert Rector and Kiki Bradley first broke the story on July 12 that Obama’s Health and Human Services Department (HHS) had rewritten the Clinton-era reform to undo the work requirements, in a move that legal experts Todd Gaziano and Robert Alt determined was patently illegal.
The Administration’s new argument has two parts: denying the Obama Administration’s actions and claiming that Republican governors, including Mitt Romney, tried to do the same thing. In essence, “We did not do what you’re saying, but even if we did, some Republicans did it, too.” Both parts of this argument are easily debunked.
Obama Administration Claim #1: We Didn’t Gut Work Requirements
Ever since the 1996 law passed, Democratic leaders have attempted (unsuccessfully) to repeal welfare’s work standards, blocking reauthorization of the Temporary Assistance for Needy Families program (TANF) and attempting to weaken the requirements. Unable to eliminate “workfare” legislatively, the Obama HHS claimed authority to grant waivers that allow states to get around the work requirements.
Humorously, HHS Secretary Kathleen Sebelius now asserts that the Administration abolished the TANF work requirements to increase work.
HHS now claims that states receiving a waiver must “commit that their proposals will move at least 20 percent more people from welfare to work compared to the state’s prior performance.” But given the normal turnover rate in welfare programs, the easiest way to increase the number of people moving from “welfare to work” is to increase the number entering welfare in the first place.
Bogus statistical ploys like these were the norm before the 1996 reform. The law curtailed use of sham measures of success and established meaningful standards: Participating in work activities meant actual work activities, not “bed rest” or “reading” or doing one hour of job search per month; reducing welfare dependence meant reducing caseloads. Now those standards are gone.
Obama’s HHS claims authority to overhaul every aspect of the TANF work provisions (contained in section 407), including “definitions of work activities and engagement, specified limitations, verification procedures and the calculation of participation rates.” In other words, the whole work program. Sebelius’s HHS bureaucracy declared the existing TANF law a blank slate on which it can design any policy it chooses.
Obama Administration Claim #2: Even If We Did, the Republicans Tried It, Too
Though the Obama Administration is claiming it is not trying to get around the work requirements, it is also claiming that a group of Republican governors tried to do the same thing in 2005. Clinton also said in his statement yesterday that “the recently announced waiver policy was originally requested” by Republican governors.
Heritage welfare expert Robert Rector addressed this claim back on July 19. As Rector explains:
But [the governors'] letter makes no mention at all of waiving work requirements under the Temporary Assistance for Needy Families (TANF) program. In fact, the legislation promoted in the letter—the Personal Responsibility and Individual Development for Everyone (PRIDE) Act—actually would have toughened the federal work standards. It proposed raising the mandatory participation rates imposed on states from 50 percent to 70 percent of the adult TANF caseload and increasing the hours of required work activity.
The governors’ letter actually contradicts the Administration’s main argument: If the law has always permitted HHS to waive the work requirements, then why didn’t the governors just request waivers from then-President George W. Bush? Why would legislation be needed?
Two reasons: First, it has been clear for 15 years that the TANF law did not permit HHS to waive the work requirements. Second, the Republican governors were not seeking to waive the work requirements in the first place.
Obama’s Evolution from Welfare to Work and Back
President Obama had a convenient change of heart regarding welfare reform when it was time to run for President. In 1998, when he was an Illinois state senator, Obama said:
I was not a huge supporter of the federal plan that was signed in 1996. Having said that, I do think that there is a potential political opportunity that arose out of welfare reform. And that is to desegregate the welfare population—meaning the undeserving poor, black folks in cities, from the working poor—deserving, white, rural as well as suburban.
The same year, he reiterated that “the 1996 legislation I did not entirely agree with and probably would have voted against at the federal level.”
But in 2008, when he was running for President, Obama said he had changed his mind about welfare reform: “I was much more concerned 10 years ago when President Clinton initially signed the bill that this could have disastrous results….It had—it worked better than, I think, a lot of people anticipated. And, you know, one of the things that I am absolutely convinced of is that we have to work as a centerpiece of any social policy.”
One of his 2008 campaign ads touted “the Obama record: moved people from welfare to work” and promised that as President, he would “never forget the dignity that comes from work.”
This evolution is unsurprising, considering the vast majority of Americans favor requiring welfare recipients to work.
President Obama has finally accomplished what Democrats have been trying to do for years. He has even gotten President Clinton to turn his back on one of the signature achievements of his Administration to give him political cover—which Clinton was quick to do. In 1996, Clinton had to compromise and allow the tough work requirements to get the legislation passed.
Both Presidents have now revealed their true feelings about welfare—and there’s no denying it.
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Lengthen the Debt
Monday Morning Outlook
Lengthen the Debt To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Senior Economist
Date: 8/20/2012
The U.S. national debt has exploded, doubling over the past seven years. Everyone
agrees that this is unsustainable.
Meanwhile, interest rates have touched historic lows: the yield on the 10-year
Treasury Note dropped as low as 1.4% back in July; the yield on the 30-year Bond as
low as 2.5%.
Under these circumstances, one would think the US Treasury Department would be
turning lemons into lemonade, using this period of persistent, ferocious, and what
we believe is irrational risk aversion to reduce the exposure of US taxpayers to
potential future funding problems with the national debt.
Instead, the US Treasury is doing future US taxpayers a great disservice. It is
failing to seize the moment. And by doing so is compounding a potential risk. This
is about how we finance the debt, not the size of our deficits, how much we spend,
or how much we tax.
It’s really very simple. Imagine a country that funds its whole national debt
week to week. If interest rates ever spike upward dramatically, the government would
have to borrow even more to pay interest, or immediately raise tax revenue or cut
spending to meet its obligations.
By contrast, if the same country financed its debt with very long-term bonds
(30-year, or perhaps even 100-year bonds), a sudden spike in interest rates would
have very little meaning to taxpayers, because only a very small fraction of the
national debt would be issued at higher interest rates each year.
None of this is rocket science. So, why in the world has the US Treasury Department
not lengthened the maturity of the US debt? More importantly, why has the US
Treasury Department allowed the average maturity of the debt to decline?
In July 2011, 10.4% of the US debt was in 10-year Notes or longer. As of March, the
latest data available, that was down to 9.4%. Back in mid-2001, 20% of the debt had
a maturity of 10 years or more. We should be heading back in that direction, and
quickly.
All of these figures are for what is called the “private debt,” which is
the national debt held outside of government trust funds (think Social Security and
Medicare) and the Federal Reserve. Obviously, with the Fed buying longer maturities
as part of Operation Twist, that leaves more shorter-term securities for everyone
else, hence the recent decline in the maturity of the debt since July 2011.
But interest rates are now lower than Operation Twist was supposed to push them and
the Treasury Department is squandering a great opportunity. Yes, long-term debt
carries a higher interest rate than short-term debt,…the yield curve is
sloping upward. At current interest rates, for every $100 billion in debt issued as
a 30-year Bond, it would cost taxpayers about $2.75 billion extra in interest for
the next year compared to financing the same $100 billion with one year securities.
That’s not chump change, but it’s only one year’s worth of saving,
which is small compared to the safety gained by knowing the annual cost of that debt
will stay the same for the next 30 years. We can only hope that the government is
not ignoring this opportunity so that it can add more spending into the budget today
and therefore threaten the future even more.
There’s an old saying that the time to fix the roof is when the sun is
shining. Right now, the sun is shining on Treasury securities. But instead of making
sure future taxpayers are protected from a deluge that might eventually come,
Treasury officials are just smiling at the hole in the roof.
This information contains forward-looking statements about various economic
trends and strategies. You are cautioned that such forward-looking statements
are subject to significant business, economic and competitive uncertainties
and actual results could be materially different. There are no guarantees
associated with any forecast and the opinions stated here are subject to
change at any time and are the opinion of the individual strategist. Data
comes from the following sources: Census Bureau, Bureau of Labor Statistics,
Bureau of Economic Analysis, the Federal Reserve Board, and Haver Analytics.
Data is taken from sources generally believed to be reliable but no guarantee
is given to its accuracy.
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Crazy that there are ads every hour on every station that these are the lower rates ever and anyone sane must lock in now for 30 years, but for the world's biggest borrower this is a novel idea.
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AMEN!!!
"Constitutionally and by precedent, the House of Representatives has the exclusive prerogative to originate bills to appropriate money, as well as to raise revenues. ... No matter how Obama's presidency is viewed, if we buy into the notion that it's he whose spending binge is crippling our nation through massive debt and deficits, we will naturally focus our attention on the White House. The fact of the matter is that Washington has been on a spending binge no matter who has occupied the White House. In 1970, federal spending was $926 billion. Today it's $3.8 trillion. In inflation-adjusted dollars that's about a 300 percent increase. Believing that presidents have taxing and spending powers leaves Congress less politically accountable for our deepening economic quagmire. Of course, if you're a congressman, not being held accountable is what you want. ... Most members of our Republican-controlled House of Representatives say they're against Obamacare. If they really were, they surely would attach a legislative rider or some other legislative device to the Department of Health and Human Services' appropriation bill to ban spending any money on Obamacare; they have the power to. But they don't have the political courage to do so, and their lives are made easier by the pretense that it's the president controlling the spending. And we fall for it." --economist Walter E. Williams
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This great post from Fed/Monetary thread yesterday deserves post into the spending/deficit thread. (Also the political economics and regulations thread.) People know we are on the wrong track yet seem to keep voting for the status quo, a direction heading into a train wreck. Stop accepting this poor excuse for governance. - Doug
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By George P. Shultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor (senior fellows at Stanford University's Hoover Institution. They have served in various federal government policy positions in the Treasury Department, the Office of Management and Budget and the Council of Economic Advisers.)
[Excerpt with some of the Fed points already posted left out here.]
Did you know that annual spending by the federal government now exceeds the 2007 level by about $1 trillion? With a slow economy, revenues are little changed. The result is an unprecedented string of federal budget deficits, $1.4 trillion in 2009, $1.3 trillion in 2010, $1.3 trillion in 2011, and another $1.2 trillion on the way this year. The four-year increase in borrowing amounts to $55,000 per U.S. household.
The amount of debt is one thing. The burden of interest payments is another. The Treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance this debt which, when added to the current deficit, means Treasury must raise $4 trillion this year alone. So the debt burden will explode when interest rates go up.
The government has to get the money to finance its spending by taxing or borrowing. While it might be tempting to conclude that we can just tax upper-income people, did you know that the U.S. income tax system is already very progressive? The top 1% pay 37% of all income taxes and 50% pay none.
Did you know that, during the last fiscal year, around three-quarters of the deficit was financed by the Federal Reserve? Foreign governments accounted for most of the rest, as American citizens' and institutions' purchases and sales netted to about zero. The Fed now owns one in six dollars of the national debt, the largest percentage of GDP in history, larger than even at the end of World War II.
The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself. It determines the interest rate by declaring what it will pay on reserve balances at the Fed without regard for the supply and demand of money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended economic consequences.
...
The issue is not merely how much we spend, but how wisely, how effectively. Did you know that the federal government had 46 separate job-training programs? Yet a 47th for green jobs was added, and the success rate was so poor that the Department of Labor inspector general said it should be shut down. We need to get much better results from current programs, serving a more carefully targeted set of people with more effective programs that increase their opportunities.
Did you know that funding for federal regulatory agencies and their employment levels are at all-time highs? In 2010, the number of Federal Register pages devoted to proposed new rules broke its previous all-time record for the second consecutive year. It's up by 25% compared to 2008. These regulations alone will impose large costs and create heightened uncertainty for business and especially small business.
This is all bad enough, but where we are headed is even worse.
President Obama's budget will raise the federal debt-to-GDP ratio to 80.4% in two years, about double its level at the end of 2008, and a larger percentage point increase than Greece from the end of 2008 to the beginning of this year.
Under the president's budget, for example, the debt expands rapidly to $18.8 trillion from $10.8 trillion in 10 years. The interest costs alone will reach $743 billion a year, more than we are currently spending on Social Security, Medicare or national defense, even under the benign assumption of no inflationary increase or adverse bond-market reaction. For every one percentage point increase in interest rates above this projection, interest costs rise by more than $100 billion, more than current spending on veterans' health and the National Institutes of Health combined.
Worse, the unfunded long-run liabilities of Social Security, Medicare and Medicaid add tens of trillions of dollars to the debt, mostly due to rising real benefits per beneficiary. Before long, all the government will be able to do is finance the debt and pay pension and medical benefits. This spending will crowd out all other necessary government functions.
What does this spending and debt mean in the long run if it is not controlled? One result will be ever-higher income and payroll taxes on all taxpayers that will reach over 80% at the top and 70% for many middle-income working couples.
Did you know that the federal government used the bankruptcy of two auto companies to transfer money that belonged to debt holders such as pension funds and paid it to friendly labor unions? This greatly increased uncertainty about creditor rights under bankruptcy law.
...
When businesses and households confront large-scale uncertainty, they tend to wait for more clarity to emerge before making major commitments to spend, invest and hire. Right now, they confront a mountain of regulatory uncertainty and a fiscal cliff that, if unattended, means a sharp increase in taxes and a sharp decline in spending bound to have adverse effect on the economy. Are you surprised that so much cash is waiting on the sidelines?
What's at stake?
We cannot count on problems elsewhere in the world to make Treasury securities a safe haven forever. We risk eventually losing the privilege and great benefit of lower interest rates from the dollar's role as the global reserve currency. In short, we risk passing an economic, fiscal and financial point of no return.
Suppose you were offered the job of Treasury secretary a few months from now. ...Today, government officials are issuing debt to finance pet projects and payoffs to interest groups, not some vital, let alone existential, national purpose.
The problems are close to being unmanageable now. If we stay on the current path, they will wind up being completely unmanageable, culminating in an unwelcome explosion and crisis.
The fixes are blindingly obvious. Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform. The need is clear. Why wait for disaster? The future is now.
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Welfare Reform as We Knew It
Inside the Obama work waiver: It's worse than Romney says. .
It's hard to remember now, but this summer Mitt Romney opened a useful debate about "dependency"—concerning President Obama's regulation to rewrite the 1996 welfare reform. Democrats deny any such intent, but as early as this week the House plans to hold a vote to override the new rule.
So it's a good moment to dissect what the Administration is really trying to do, because in this case Mr. Romney is right: The Administration has made welfare's work requirements far weaker, and for ideological reasons that the press corps has failed to report.
***
The 1996 welfare landmark is among the few serious bipartisan reforms of government since the Great Society. State innovators like Tommy Thompson's Wisconsin gave Contract-with-America Republicans a model, while Bill Clinton promised to "end welfare as we know it." Their insight was that both welfare recipients and the bureaucracies built around them needed better incentives to end dependency, such as time limits on cash benefits and asking the able-bodied to work or train to prepare for work.
Unreconstructed liberals—then about half of Democrats in Congress—predicted a return to Bleak House. Some Clinton officials resigned when he signed the bill. They were wrong in every way. Caseloads plunged by half, to 5.9 million in 2000 from 12.6 million in 1996. Health and Human Service Department studies show that most found work and saw their incomes rise.
The anti-reformers have nonetheless looked for an opening to resurrect the old system. They have now found a way via an HHS regulatory "information memorandum" in July that said the agency would waive workfare requirements if states asked.
HHS is selling this under the guise of "flexibility" and says the point is to get more people working, not fewer. But recall that the joint state-federal welfare program has always had "work" requirements. Prior to 1996, they included such demands as journaling, bed rest and massage therapy.
For this reason, the statute specifically enumerated a 12-point definition of "work." People who can but don't meet the work terms eventually lose benefits. States have enormous flexibility to help recipients back into the job market. But they forfeit a portion of their federal money unless a certain percentage of their caseload complies—generally between 30% and 40%.
HHS has unilaterally upended these incentives. States can now get a waiver if they want "to test approaches and methods other than those set forth in section 407," the work requirement provision, including new "definitions of work activities and engagement."
But states are already allowed to experiment now, as long as beneficiaries meet the work quotas defined by current law. The crucial change is that HHS is saying they can experiment instead of complying with the law.
HHS suggests, for example, that states adopt "a comprehensive universal engagement system in lieu of certain participation rate requirements." Universal engagement means that everybody is doing something constructive with their time "for at least one hour per week," even if that's as simple as "researching child care options" or "a job readiness workshop," as a 2008 HHS document put it. So everybody can spend an hour looking into day care instead of—"in lieu of"—the work that 30% to 40% are supposed to be doing.
This new standard didn't appear out of thin air, but is part of a liberal critique of welfare reform that has made its way into the Administration. In 2005, Mark Greenberg of the Center for Law and Social Policy told Congress that welfare needs to be retargeted to families that are "not in work and not receiving welfare" and states ought to "work with, rather than drive away, families with serious employment barriers."
In a 2006 article for the journal Policy & Practice, Mr. Greenberg worried that "the challenge is to ensure that compliance and penalty avoidance do not become the central goals of welfare reform." He added that the work rate "was never a good measure of state efforts to help families get and keep jobs" and called for "more balanced approaches," including "promoting sustainable employment" and "supporting labor market progress."
Where's Mr. Greenberg now? Well, he's an HHS deputy assistant secretary for policy and the architect of the workfare waiver.
The problem with the waiver is also its illegality. Congress went to great lengths to ensure that work requirements aren't subject to waivers to prevent backsliding. Yet with no more than a paragraph of legal analysis, HHS simply ruled it could suspend enforcement of laws that Mr. Obama does not like. This is unconstitutional, as the Washington lawyers David Rivkin and Lee Casey noted in these pages.
When its welfare rewrite became a political issue, HHS then invented a new standard that appears nowhere in its original memorandum and says that 20% more people need to move to work from welfare than before to get a waiver. The Heritage Foundation's Robert Rector points out that this metric is bogus. The easiest way to achieve it statistically is to put 20% or more people on the rolls and then get credit when some naturally leave.
HHS's last line of political defense is that the Republican Governors of Nevada and Utah asked for this change. They did, though they claim they weren't trying to weaken the work requirements. In any case, in 2005, 29 GOP Governors including Mr. Romney asked for waivers on "allowable" work activities.
Yet the principle—those that can work must—isn't partisan. The drafters of reform knew that Governors of either party might try to take the path of political least resistance. Many Republican Governors are as bad as Democrats on Medicaid spending, for instance. That's why reformers created a structure that would resist gaming.
***
This is the reform that the Administration has, in fact, gutted. There's flexibility to innovate and there's "flexibility." In the first case, HHS has denied Governors the running room to redesign Medicaid to be more cost effective. But now it tells states that they don't have to comply with the most basic obligation of welfare reform. It's as if HHS told states they can have the "flexibility" not to cover health care for poor people.
Americans support a safety net for those who fall on hard times, but they don't want welfare to become a way of life. Mr. Obama seems to disagree, even if he denies it for the purposes of getting past Election Day. The House resolution to override the HHS waiver is an important reform moment, and if the Romney campaign were competent it would let every American know about it.
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I know some of us razz Wesbury, but I'm thinking all of us will find this one congenial.
http://www.ftportfolios.com/Commentary/EconomicResearch/2012/10/9/its-the-spending-stupid
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By STEPHEN MOORE
Some conservatives weren't entirely pleased with Mitt Romney's response to the question in Tuesday's debate about how the governor's policies would differ from those of President George W. Bush.
Typical of the chatter from conservatives was a complaint from Jameson Campaigne, a longtime political activist in Illinois. "There was no need to blame 43 for the expanding deficits," wrote Mr. Campaigne. "These came from the Pelosi-Reid spending of fiscal 2008-2013 . . .. Under Bush and the GOP Congresses of 2000-2006, deficits were reduced every year."
While it is hard to defend the Bush record on spending—prescription drug benefits for Medicare, the biggest increase in education spending in 20 years, the biggest transportation bill ever, and so on—it is true the deficit was falling rapidly until Sen. Harry Reid and Rep. Nancy Pelosi took control of Congress after the 2006 midterm elections. The deficit had fallen to $161 billion in fiscal year 2007. As a share of GDP, the deficit had fallen to 1.2 percent.
But the deficit shot up when Ms. Pelosi became House speaker. In 2008 the deficit soared to $459 billion and then to $1.4 trillion in 2009. Yes, Mr. Bush deserves some of the blame, but the Democratic Congress under Mr. Reid and Ms. Pelosi has been catastrophic to the nation's finances. The deficit in the past four years has averaged 7 percent of GDP and $1 trillion a year. It would have been nice if Mr Romney had told that to the nationwide audience on Tuesday night.
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"A new study by Stanford economist Michael Boskin estimates that the debt, if left unchecked, will have "severe negative consequences" for family incomes over time. The debt will reduce the average family income by 10 percent in 2030, by 17 percent in 2040 and by 30 percent by 2050."
http://online.wsj.com/article/SB10001424052970203707604578090942650610694.html?mod=WSJ_Opinion_LEFTSecond
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"Forecast in three parts: The sound and fury will be over big fights on taxes and spending. They will look like replays of the last four years and not end up accomplishing much. The big changes to our economy will be the metastatic expansion of regulation, led by ACA, Dodd-Frank, and EPA. There will be no change on our long run problems: entitlements, deficits or fundamental reform of our chaotic tax system. 4 more years, $4 trillion more debt." - John Cochrane, Professor, University of Chicago School of Business.
Much more detail at the link: http://johnhcochrane.blogspot.com/2012/11/predictions.html
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"Forecast in three parts: The sound and fury will be over big fights on taxes and spending. They will look like replays of the last four years and not end up accomplishing much. The big changes to our economy will be the metastatic expansion of regulation, led by ACA, Dodd-Frank, and EPA. There will be no change on our long run problems: entitlements, deficits or fundamental reform of our chaotic tax system. 4 more years, $4 trillion more debt." - John Cochrane, Professor, University of Chicago School of Business.
Much more detail at the link: http://johnhcochrane.blogspot.com/2012/11/predictions.html
Just 4 trillion? Very optimistic....
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At current interest rates IIRC we are paying about $250B a year on interest on the debt. Do the math. :cry:
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"At current interest rates IIRC we are paying about $250B a year on interest on the debt. Do the math. cry"
rough math:
250 billion interest expense
16 trillion debt
equals effective interest rate: 1.5%
This is nonsensical, except that Crafty's number is right:
http://www.treasurydirect.gov/govt/reports/pd/feddebt/feddebt_ann2011.pdf
Now do the math on interest rates returning to spiraling inflation normal levels, 6, 8, 10, 12+% after 4, 6, 8 trillion more debt. Interest costs potentially greater than all current spending, not 50 years out, but within the 6 year term of my newly reelected Dem Senator.
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Start with the chart:
(http://si.wsj.net/public/resources/images/ED-AQ049_3fisca_D_20121111174803.jpg)
http://online.wsj.com/article/SB10001424127887323894704578113033115035920.html?mod=WSJ_Opinion_LEADTop
The Hard Fiscal Facts
Individual tax payments are up 26% in the last two years.
While the rest of America was holding an election last week, the gnomes at the Congressional Budget Office released the final budget totals for fiscal 2012. They're worth reporting because they illuminate the real fiscal choices that confront the country, as opposed to the posturing you'll be hearing over the next few weeks.
The nearby table lays out the ugly details. The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history. As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.
Tax revenue kept climbing, up 6.4% for the year overall, and at $2.45 trillion it is now close to the historic high it reached in fiscal 2007 before the recession hit. Mr. Obama won't want you to know this, but this revenue increase is occurring under the Bush tax rates that he so desperately wants to raise in the name of getting what he says is merely "a little more in taxes." Individual income tax payments are now up $233 billion over the last two years, or 26%.
This healthy revenue increase comes despite measly economic growth of between 1% and 2%. Imagine the gusher of revenue the feds could get if government got out of the way and let the economy grow faster.
Now let's look at outlays, which declined a bit in 2012. That small miracle was achieved thanks to a 4% fall in defense spending, a 24% fall in jobless benefits, and an 8.9% decline in Medicaid spending.
Note, however, that federal spending remains at a new plateau of about $3.54 trillion, or some $800 billion more than the last pre-recession year of 2007. One way to think about this is that most of the $830 billion stimulus of 2009 has now become part of the federal budget baseline. The "emergency" spending of the stimulus has now become permanent, as we predicted it would.
When Beltway politicians claim they want a "balanced" approach to reducing the deficit, what they really mean is raising taxes to finance this new higher spending level. And the still-higher level that is coming with ObamaCare.
The reality is that the fastest way to raise revenue is with faster economic growth. To the extent that raising tax rates will reduce the rate of growth, it will slow the flow of tax revenue and increase the deficit.
Even if Mr. Obama were to bludgeon Republicans into giving him all of the tax-rate increases he wants, the Joint Tax Committee estimates this would yield only $82 billion a year in extra revenue. But if growth is slower as a result of the higher tax rates, then the revenue will be lower too. So after Mr. Obama has humiliated House Republicans and punished the affluent for the sheer joy of it, he would still have a deficit of $1 trillion.
Most of our readers know all this, but we thought you'd like some new evidence to rebut the kids who voted for your taxes to go up when they return from college for Thanksgiving. Maybe they'll figure it out when they have a job, if they can find one.
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Taken from GMs decline/fall post, Washington Post - home of some of the most widely read 'fact checkers' wrote:
"Nearly 47 million Americans rely on federal food assistance benefits, a 12-year high attributed to the weak U.S. economy and high rates of unemployment over the last five years."
A '12-year high'?!? No. It's an ALL TIME HIGH. 12 Years ago 17.2 million people were on foods stamps. It has almost tripled in 12 years.
The program has been growing every year, weak economy or not. 51 consecutive months of job growth and it grew the whole time. Source: Washington Post. Who knew? It grew and not because of a weak economy or expanding unemployment.
http://www.washingtonpost.com/blogs/think-tanked/post/food-stamp-growth-started-before-obama-took-office/2012/09/06/36f49b00-f844-11e1-8398-0327ab83ab91_blog.html
The number of recipients grows because we are talking about FREE FOOD! (http://wac.0873.edgecastcdn.net/800873/blog/wp-content/uploads/201206_blog_edwards141.jpg)
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One of the benchmark portions of the stimulus was the $25 billion devoted to
creating green jobs. Professor Obama imagined a world of greener buildings and green
jobs miraculously sprouting all across the fruited plains. So, he dumped $25 billion
into painting shingles white and whatever else it is they do to 'green' buildings.
The result? Zero jobs. Just another government 'success' story. READ
http://hotair.com/archives/2009/11/09/25-billion-stimulus-program-produces-0-jobs/
Krugman says that the stimulus didn't work because it wasn't big enough. I guess we'll find out.
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Why the U.S. Job Market Remains Terribly Bleak
By John C. Goodman | Posted: Fri. November 16, 2012, 4:24pm PT
Also published in Forbes on Thu. November 15, 2012
Full time work is about to get scarcer. The reason? By hiring part-time workers who put in less than 30 hours per week, employers can avoid a mandate dictated by the new health reform law: either provide expensive health insurance or pay a fine equal to $2,000 per worker. Avoiding the mandate becomes even more attractive for low-wage employees, since they can get highly subsidized insurance in the newly created health insurance exchanges. According to the Wall Street Journal:
Darden Restaurants [parent of Red Lobster and Olive Garden] was among the first companies to say it was changing hiring in response to the health-care law.
Pillar Hotels & Resorts this summer began to focus more on hiring part-time workers among its 5,500 employees, after the Supreme Court upheld the health-care overhaul.
CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s burger chains, began two months ago to hire part-time workers to replace full-time employees who left.
Home retailer Anna’s Linens Inc. is considering cutting hours for some full-time employees to avoid the insurance mandate if the healthcare law isn’t repealed.
In a July survey, 32% of retail and hospitality company respondents told [Mercer] that they were likely to reduce the number of employees working 30 hours a week or more.
Clearly the Affordable Care Act (ObamaCare) is a major factor holding back economic recovery. But it’s not alone. Other public policies enacted during the Obama administration’s first four years have been affecting the supply side of the market.
A new book by University of Chicago economist Casey Mulligan explains that through a major expansion of the welfare state we are paying people not to work:
n the matter of a few quarters of 2008 and 2009, new federal and state laws greatly enhanced the help given to the poor and unemployed—from expansion of food-stamp eligibility to enlargement of food-stamp benefits to payment of unemployment bonuses—sharply eroding (and, in some cases, fully eliminating) the incentives for workers to seek and retain jobs, and for employers to create jobs or avoid layoffs.
Mulligan gives the example of a two earner couple—each earning $600 a week. After the wife gets laid off she obtains a new job offer, paying $500 a week. But after deducting taxes and work related expenses her take home pay would be $257. Since untaxed unemployment benefits total $289, clearly she is better off not working.
All in all, Mulligan estimates that about half the precipitous 2007-2011 decline in the labor-force-participation rate and in hours worked can be blamed on easier eligibility rules for unemployment insurance, food stamps and housing aid.
As Steve Moore writes in a review of Mulligan’s book:
The annual value in average benefits for not working rose to $14,000 per recipient in 2011—the high was $16,000 in 2009—up from $10,000 in 2007. Such increases were inversely related to changes in average hours worked. On average, Americans worked a stunning 120 fewer hours in 2009 than in 2007—the largest contraction in work effort of any recession since the Depression. Since 2009, work hours and labor-force participation have remained at record lows even though the recession officially ended in June 2009.
Mulligan notes that it was the collapse of the housing market that set off the financial crisis that led to the Great Recession. But our problems are not confined to housing. They are systemwide. For every one job lost in construction, five others were lost is other sectors. One thing that affects all sectors, however, is overly generous incentives not to work.
Another frequently heard explanation for the slow recovery is the Keynesian idea that there has been a lack of consumer spending—which caused businesses to cut production and lay off workers. Yet:
Mulligan shows that, during the worst of the 2008-09 troubles, most sectors “outside of hard-hit construction and manufacturing…increased their use of production inputs other than labor hours.”…“Businesses perceive labor to be more expensive than it was before the recession began,” Mulligan writes. The reason for the added cost was that easier requirements for benefits—even as the government was pumping “stimulus” money into the economy— unwittingly reduced the supply of workers.
Meanwhile, health reform will require family coverage that is expected to average more than $15,000 a year. For $15 an hour employees, that sum equals more than half their annual wage. Unless they move to part-time employment or pay a hefty fine, employers of low-skilled workers are about to get hit with mandated benefit that will increase their labor costs by 50% or more.
To make matters worse, employers don’t really know what insurance they will have to provide or what it will cost. The $15,000 number I refer to is an estimate by the Congressional Budget Office. And even though employers will have the option of paying a $2,000 fine, does anybody think the fine is likely to stay that low?
The uncertainty created by all this is possibly worse than the actual monetary burden.
John C. Goodman
John C. Goodman is a Research Fellow at the Independent Institute and President and Kellye Wright Fellow in Health Care at the National Center for Policy Analysis. The Wall Street Journal and the National Journal, among other media, have called him the “Father of Health Savings Accounts.”
http://www.independent.org/newsroom/article.asp?id=3497
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Add cap and trade, and the higher taxes coming our way.
If people are grumbling now just wait. There is only so much money they can confiscated, printed out of this air, loaned borrowed....
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OK Gents, lets use this thread for "Fiscal Cliff" matters.
I'd like to kick things off by saying the very fact of the Sequester is a truly stupendous error on the part of Speaker Boener. Don't start fights you aren't willing to finish!!!---which is what the Reps did when they sought to play chicken with the debt ceiling.
While I certainly can understand the political logic of avoiding naming specific targets for "cuts" during a presidential election, the mathematical truth is that spending is increasing year over year because the "cuts" are but from "the baseline" (not bothering to restate the meaning here-- at this point I think most of our readers get it-- for those who don't please use the search function here and find previous discussions and references).
UNTIL WE BREAK FREE OF THE LIE OF "BASELINE BUDGETING" WE WILL ALWAYS LOSE ON SPENDING ISSUES for. WHAT OCCURS TO ME THAT THE WAY TO DO THIS IS TO STATE OUR POLICY AS ONE OF FREEZING SPENDING AT CURRENT LEVELS UNTIL GROWTH BALANCES THE BUDGET.
THINK ON THIS.
STATED THUS, IT IS STATED IN A WAY THE LOGIC OF WHICH IS READILY GRASPED AND REPEATED IN CONVERSATION, THIS MEME IS VERY POWERFUL. Instead of being meanies snatching mercy from the mouths of widows and orphans to defend tax cuts for the 1%, we merely call for a spending level freeze. How reasonable!!! Who can be against that?!?
Assuming I have my numbers right (and I think I do, but will check with Scott Grannis) this is a far lower level of spending than what anyone except for true Tea Partiers in Washington currently is proposing, a profoundly penetrating question is presented to the other side.
If they let the meme take root as something reasonable, then they have lost everything and we have won everything. If they challenge it, then they must explain why it is so radical. Thus, out of their own mouths, consciousness of the accounting fraud called baseline budgeting will be established and the seeds planted for its poltical destruction.
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Looters and Moochers will loot and mooch. You think they'll be reasoned out of that ?
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Apart from calling unemployment "just under 8%" when it is really just under 11% I think this article and its chart offer some good specifics, including addressing something that we here usually do not-- federal revenues as a percentage of GDP.
http://www.youngresearch.com/researchandanalysis/economy-researchandanalysis/its-the-spending-stupid-2/?awt_l=PWy8k&awt_m=3f2ocZEplezlu1V
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'Clinton balanced the budget. Turned deficits into a surplus. Paid down the debt. Left George Bush with a surplus' How many times have I heard that?
Actual figures from: http://www.treasurydirect.gov/NP/BPDLogin?application=np
Fiscal Yr. Year Ending National Debt Deficit
FY1993 09/30/1993 $4.411488 trillion
FY1994 09/30/1994 $4.692749 trillion $281.26 billion
FY1995 09/29/1995 $4.973982 trillion $281.23 billion
FY1996 09/30/1996 $5.224810 trillion $250.83 billion
FY1997 09/30/1997 $5.413146 trillion $188.34 billion
FY1998 09/30/1998 $5.526193 trillion $113.05 billion
FY1999 09/30/1999 $5.656270 trillion $130.08 billion
FY2000 09/29/2000 $5.674178 trillion $17.91 billion
FY2001 09/28/2001 $5.807463 trillion $133.29 billion
In no year did the national debt go down, nor did Clinton leave President Bush with a surplus that Bush subsequently turned into a deficit. Yes, the deficit was almost eliminated in FY2000 (ending in September 2000 with a deficit of "only" $17.9 billion), but it never reached zero--let alone a positive surplus number. And Clinton's last budget proposal for FY2001, which ended in September 2001, generated a $133.29 billion deficit. The growing deficits started in the year of the last Clinton budget, not in the first year of the Bush administration.
The difference between surpluses alleged and total debt is what is called Intragovernmental Holdings. As an example, only if we repealed Social Security could those holdings be released to reduce the total public debt.
http://www.craigsteiner.us/articles/16
$16 trillion, the debt figure that we know today, includes intragovernmental holdings:
Today Debt Held by the Public Intragovernmental Holdings Total Public Debt Outstanding
11/26/2012 11,474,648,831,627.28 4,835,089,224,735.16 16,309,738,056,362.44
http://www.treasurydirect.gov/NP/BPDLogin?application=np
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An interesting point, but one that changes constant measuring standard that we use to discuss this number.
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An interesting point, but one that changes constant measuring standard that we use to discuss this number.
I would be inclined to agree with you, but the crucial measuring standard for deficits and surpluses as they accumulate or take from debt owing is the debt ceiling law, which uses the total debt figure. It is the debt using this measuring standard in federal law that, if not for raising the ceiling, would shut down all deficit spending.
Treasury Direct displays both measures, at 11.4 (debt held by public excluding intragovernmental holdings) and at 16.3 trillion (total debt): http://www.treasurydirect.gov/NP/BPDLogin?application=np
US Debt clock shows the debt subject to the debt limit and it is approximately same as the total debt, 16+trillion figure: http://www.usdebtclock.org/
http://blog.heritage.org/2012/01/27/debt-limit-increases-to-nearly-16-4-trillion/ "This last increase, from $15.194 trillion to $16.394 trillion, was essentially granted in the Budget Control Act (BCA) of 2011, passed August 2 at the culmination of the debt limit debate."
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Aside from choosing between two ways to measure, are we better off now than we were 2.1 trillion dollars of unfunded spending ago since the last debt ceiling crisis ended on August 2, 2011?
A few hundred people can say yes, the President and Vice president, the Senate Democrats and the House Republicans all got re-elected. For the rest of us... no.
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All the tax pledge and tax hike talk puts a historic choice in front of House Republicans with the expiration of the Bush/Obama rates, the fiscal cliff, the debt ceiling, Obamacare implementation, and the second term of Pres. Barack Obama all coming.
What should they do?
Posted before, but the size and scope of government is limited to what the lowest of what the three parties, House, Senate and Executive, will support. The burden is on House Republicans alone to set the limits.
If there is no action on the tax rate extensions, tax rates go up automatically for all. Republicans oppose that. What leverage do they have? For one thing, Democrats oppose that too.
If there is no action on the so-called fiscal cliff it means automatic tax hikes and automatic defense cuts and other automatic spending cuts. Republicans oppose that, but how worse is that to signing on to the agenda of the Democrats? We don't need as much military spending right now if we are going to pull back for 4 years. Call that bluff?
Next comes the perpetually scheduled debt ceiling hike. Republicans have leverage there only if they are able to say no. What if they did say no? What kind of organization has no survival plan for the possibility that their bank will not raise their credit limit when it is maxed out for the umpteenth time? Federal spending including interest on the debt would instantly be limited to federal revenues. Say it isn't so! Isn't that what a balanced budget amendment would require anyway? We aren't in an economic crisis. This economy, this stagnation and this unemployment is the new normal for the poicies we are choosing.
Maybe House Republicans can steal away the initiative with bold proposals. They could require full scale tax reform as part of any revenue increase, agree to maintain current progressivity but insist on dynamic scoring and an end to baseline budgeting. They could insist on repeal of Humphrey Hawkins, the legislation that mandated the 'dual role' of the Fed. If the endpoint of budget negotiations is a responsible fiscal policy, then we don't need a 4th year of artificial monetary stimulus. They could insist on a pushback of Obamacare implementation. They could insist on passage of a 4 year moratorium on new fracking rules or to release new federal lands to energy leases. They could trade their needed votes on the current budget matters for Democrat votes on a balanced budget amendment that includes a cap on federal spending as a percent of GDP. The cap in the current bill was written at 18%, a little bit optimistic in current political context. Move it to 20%, then hold firm for passage in the House and Senate to send to the states.
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Vote present and give the dems everything they want. We're already through the looking glass.
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By RAND PAUL
Americans are told that they face a "fiscal cliff" if automatic federal spending cuts and tax increases occur at the end of the year. I'm not in favor of jumping off a cliff, but the logic of the supposed threat needs to be questioned.
The fiscal-cliff narrative assumes that spending cuts are bad for the economy. It follows, then, that more spending (and therefore more government debt) are good for the economy.
Didn't we try that with President Obama's trillion-dollar deficit-spending spree? You remember the stimulus—the one that created or "saved" American jobs at a cost of $400,000 per job. The one that left the unemployment rate over 8% for 43 consecutive months, the longest span since the Great Depression.
So is it good for the federal government to borrow more and spend more, or is it good for the economy to spend less and borrow less? These questions might need to be addressed before we wring our hands in despair at the possible fiscal cliff.
Now let's consider the assumption that raising taxes could lead to "taxmaggedon." The implication here is that raising taxes—that is, extracting and confiscating more income from workers and businesses—is harmful to the economy. I am easily persuaded of this truism. As Milton Friedman said, nobody spends someone else's money as frugally or as wisely as they spend their own.
But if raising taxes would lead us toward trouble, why would raising taxes only on some people ("the rich") not have some of the same harmful effect? Since the top 1% of income-earners pay about 40% of the income tax, raising taxes only on the 1% still significantly increases the tax burden on the private sector.
Any notion that it matters whom you tax is simply a parlor game played by the class-warfare crowd. There are only two repositories of money—the private sector (which efficiently distributes goods) and the public sector (which doesn't distribute anything well). No central planner possesses the omniscience to assign fairness. The only guide to fairness of distribution that I can imagine is the minute-by-minute vote of the most exacting and direct democracy ever known: the marketplace.
None of this is to say that we don't need government or that government doesn't strive to do good things. It is to say that government doesn't do anything very well, and that government should be limited—confined to those duties that absolutely can't or won't be done by the private sector.
When evaluating any government expenditure, legislators should be forced to acknowledge the "Bridge to Nowhere," the roughly 10,000 FEMA trailers bought but never delivered to Katrina victims, and the thousands of pounds of ice that never made it to New Orleans and required a new contract to have someone come melt it and dispose of it.
Apologists for big government say that we must raise taxes, that there simply isn't enough spending to cut. Maybe these legislators ought to look at the $100,000 that the State Department spent this year to send comedians to spread American culture in India (part of a $600 million program). Or the $2.6 million spent by the National Institutes of Health to teach Chinese prostitutes to drink responsibly. Or the $947,000 spent by NASA studying what type of food we should serve on Mars. Or the $100 billion ($115 billion last year) that is improperly spent across the federal government each year, according to the White House Office of Federal Financial Management.
Many Republicans are beginning to cave on the tax front. Some say to hell with the Taxpayer Protection Pledge they made to voters (drafted by Americans for Tax Reform) not to raise taxes. Some say they'll eliminate some undeserved loopholes. But the truth remains: If taking more money from the private sector is harmful, it doesn't matter whom you tax or what form the revenue increase takes. Taking more money out of the private sector is injurious to economic growth.
Where are the Republican calls for reducing revenue to government? Where are the calls for lowering taxes? If you want to stimulate the economy, leave more money in the economy. When Republicans give in on this argument, we doom not only the economy but our party as well.
Some Republicans are saying that if the tax rates expire, taxes will go up $2 trillion, so any increase in revenue less than $2 trillion is really a tax cut. I don't think that fuzzy Washington math will mollify the conservative grass roots.
Even for believers in wealth redistribution and big government, the facts militate against higher tax rates. As Stephen Moore recently pointed out on this page, in the 1920s, 1960s and again in the 1980s, lower tax rates increased the percentage of taxes paid by the wealthy. And the economy grew.
Any legislator considering capitulating on the Taxpayer Protection Pledge should remember that revenue is down now because of the recession and slow economic growth, not because of the lower tax rates that have been in place for almost a decade. Raising revenue by increasing rates or ending deductions won't spur the economy. It may even depress the meager economic growth we have and raise less tax revenue.
While there is no bigger believer than I am in a balanced-budget amendment, I don't want to balance a $5 trillion budget (which the Congressional Budget Office estimates we will have by 2020). I want to balance a budget that is limited in scope by the Constitution and limited in scope by the understanding that the private sector is more efficient than the public sector.
The Taxpayer Protection Pledge simply codifies what is incontrovertibly true. The economy and all individuals in it thrive when we are allowed to keep more of what we earn. If Republicans give up on that principle, we may as well disband the party.
Mr. Paul is a Republican senator from Kentucky.
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Second post
The White House this week finally explained just how serious it is about averting a fiscal cliff that could throw the country back into a recession. The answer: not serious at all.
The markets and the media in recent days have been operating on an optimistic belief that the administration simply will not let the country fall off the fiscal cliff. They'd best rethink. On Thursday, the president dispatched Treasury Secretary Tim Geithner and White House Director of Legislative Affairs Rob Nabors to Congress to finally outline the White House's offer to avert the coming tax hikes and sequester.
It was something out of Wonderland and Oz combined.
According to sources on Capitol Hill, the White House wants Republicans to pony up $960 billion in immediate tax increases, which will come from hiking the top marginal rates and increasing capital gains and dividends taxes. That is just for starters. The administration also wants the GOP to surrender an additional $600 billion in revenue via later tax reforms.
Related Video
Columnist Bill McGurn on whether Democrats will sabotage the fiscal cliff negotiations. Photo: Associated Press
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The president's team specified no amounts or details on spending cuts. Rather, the White House wants more spending: at least $50 billion in new stimulus, an extension of unemployment insurance, a one-year deferral of the sequester, new money to refinance underwater mortgages, a Medicare-doctor fix . . . and a partridge in a pear tree.
Oh, the White House also wants Congress to give Mr. Obama the authority to increase the debt limit, whenever he wants, as much as he wants.
What do Republicans get in return? Next year, the White House will agree to talk to the GOP about cutting as much as $400 billion from entitlement programs. Maybe. If Democrats get around to it. Which they won't—because they'll have everything they've wanted.
How to put this tax-and-more-spending offer in perspective? It is far in excess of what the Democrats asked for in last year's debt-limit standoff—when the political configuration in Washington was exactly the same. It is far more than the president's own Democratic Senate has ever been able to pass, even with a filibuster-proof majority. It is far more than the president himself campaigned on this year.
But the president's offer is very much in keeping with his history of insisting that every negotiation consist of the other side giving him everything he wants. That approach has given him the reputation as the modern president least able to forge a consensus.
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John Boehner, Barack Obama and Harry Reid at the White House, Nov. 16.
.Don't forget: The man now engaged with Congress to work out a grand deal is the same one who could not pull over to his side a single Republican vote for his stimulus legislation, who had to ram through ObamaCare with procedural tricks, and whose inept handling of last year's debt-ceiling talks ultimately led his fellow Democrat, Senate Majority Leader Harry Reid, to isolate him from the final negotiations. This is not a history to inspire confidence.
Mr. Obama's tendency to campaign rather than lead, to speechify rather than negotiate, has already defined this lame-duck session. The president has wasted weeks during which a framework for a deal has been in place.
Within two days of the election, Mr. Boehner had offered an enormous compromise, committing the GOP to provide new tax revenue, through limits on deductions for the wealthy. Mr. Obama campaigned on making "the rich" pay more—and that is exactly what Mr. Boehner agreed to give him.
All that was left for the president to do was accept this peace offering, pair it with necessary spending cuts, and take credit for averting a crisis. Mr. Obama has instead spent the past weeks campaigning for tax-rate hikes. He wants the revenue, but collected only the way he chooses. And on the basis of that ideological insistence alone, the nation is much closer to a crisis.
Talks that had been at a standstill may now crumble, thanks to the Geithner-Nabors proposal. The president is boxing in the Republicans—offering them a deal they cannot accept, a deal they can't even be seen to be treating seriously. Mr. Boehner is legitimately interested in a bargain that will set the country on sounder footing. Yet the most immediate outcome of such an open slap from the White House will be to make even those Republicans who were willing to cut a deal harden their positions. Someone get the White House a copy of "Negotiating Tactics for Dummies."
Then again, the most frightening aspect of the White House proposal is that it wasn't an error. Perhaps the proposal was thoroughly calculated. This suggests a president who doesn't care about the outcome of the cliff negotiations—who thinks that he wins politically no matter what. He's betting that either the GOP will be far more responsible than he is and do anything to avert a crisis, or that the cliff gives him the tax hikes his partisans are demanding. Win-win, save for the enormous pain to average families across the country.
The Republicans will have to contemplate how to deal with such an unserious offer. But in presenting his demands, the president has now made very clear that there is only one side that is working in good faith.
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Buraq wants us to go over the cliff. Massive tax increases and brutal military cuts and the MSM will propagandaize the dummies to blame the republicans for it.
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"But if raising taxes would lead us toward trouble, why would raising taxes only on some people ("the rich") not have some of the same harmful effect?"
Rand Paul has this right.
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Elections have consequences. Obama held the White House, but he failed to win crucial coattails even with his miraculous turnout operation. House Republicans hold the important trump cards. They can pass their own balanced measure that meets all the criteria and ought to be acceptable to Democrats and then hold firm. If and when Democrats fail to join and everyone's taxes skyrocket, Republicans can make it clear that full tax reform - for everyone, retroactive to the first - is always on the table for Democrats to join and enact. Same goes for either comprehensive or piecemeal spending and entitlement reforms.
"All bills for raising Revenue shall originate in the House of Representatives..." This isn't a Republican stand; it's a clause in the constitution.
"Buraq wants us to go over the cliff."
The President chickened out the last time (last two times?) he stood at the precipice. For better or for worse, this economy is the Obama economy. They didn't call the 90s the Gingrich economy. President Obama owns it. The Republican House was a direct result of his governance in general and Democrat overreach on health care in particular. People chose this President but importantly they also chose his opposition for majority in the House as a check and balance against his ability to enact the policies of his choosing. He can succeed or fail as a uniter and as a leader. There are plenty of revenue enhancers on the table from the Republicans and there are at this late date still no real domestic program or transfer payment cuts on the table from the President or Democrats.
At the end the President can say that he upset both Republicans and Democrats to make a deal. Voters love that and popularity equals ability to govern going forward. Just ask George Bush.
Mr. President, make a deal, take a deal or bring us all to failure. This is all on your watch.
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Some excellent points made by George Will including this one similar to one I believe Crafty already articulated on the forum: " restoration of the Clinton-era top rate of 39.6 percent would occur in the very different Obama era of regulatory excesses and Obamacare taxes"
A cliff of their own choosing
By George F. Will, Published: November 28
http://www.washingtonpost.com/opinions/george-will-a-cliff-of-democrats-choosing/2012/11/28/0320513c-38ce-11e2-8a97-363b0f9a0ab3_story.html
With a chip on his shoulder larger than his margin of victory, Barack Obama is approaching his second term by replicating the mistake of his first. Then his overreaching involved health care — expanding the entitlement state at the expense of economic growth. Now he seeks another surge of statism, enlarging the portion of gross domestic product grasped by government and dispensed by politics. The occasion is the misnamed “fiscal cliff,” the proper name for which is: the Democratic Party’s agenda.
For 40 years the party’s principal sources of energy and money — liberal activists, government-employees unions — have advocated expanding government’s domestic reach by raising taxes and contracting its foreign reach by cutting defense. Obama’s four years as one of the most liberal senators and his four presidential years indicate that he agrees. Like other occasionally numerate but prudently reticent liberals, he surely understands that the entitlement state he favors requires raising taxes on the cohort that has most of the nation’s money — the middle class.
Mitt Romney as candidate and others before and since have suggested increasing revenue by capping income tax deductions. This would increase that tax’s progressivity, without raising rates that would dampen incentives. Obama’s compromise may be: Let’s do both. Remember the story of when the British Admiralty sought six new battleships, the Treasury proposed four, so they compromised on eight.
Those proposing higher taxes on the wealthy note that when the income tax began in 1913, the top rate was 7 percent. But in 1917, war brought a 67 percent rate. Between 1925 and 1931, the rate was 24 percent or 25 percent, but in only five of the subsequent 80 years — 1988-92 — was the top rate lower than it is today.
Republicans, however, respond that because lower rates reduce incentives to distort economic decisions, they promote growth by enhancing efficiency. Hence restoration of the higher rates would be a giant step away from, and might effectively doom, pro-growth tax reform. Furthermore, restoration of the Clinton-era top rate of 39.6 percent would occur in the very different Obama era of regulatory excesses and Obamacare taxes. Hence Republicans rightly resist higher rates.
Given liberals’ fixation with the affluent paying their “fair share,” it might seem peculiar that they are so vehemently against Paul Ryan’s “premium support” proposal for Medicare. Their recoil is, however, essential to the liberal project.
Ryan’s supposedly radical idea is that people should shop for health insurance, with government subsidizing purchases by the less affluent. This would introduce what soon will be inevitable — means testing, a.k.a. progressivity. But liberals reject it with a word, the incantation of which suffices, they think, as an argument — “voucher.”
This is peculiar because perhaps the most successful federal program of the 20th century was essentially a voucher program. The purpose of the 1944 Servicemen’s Readjustment Act — a.k.a. the G.I. Bill of Rights — was to facilitate demobilization by helping men and women acquire educations and buy houses — and hence form families. The government did not build universities or houses. It, in effect, gave individuals conditional cash — vouchers — by helping to pay for home loans and college tuition.
Liberals’ strenuous objection to vouchers is that vouchers, as the functional equivalent of cash, empower individuals to make choices. It is the business of the liberals’ administrative state, staffed by experts, to make choices for inexpert individuals. This is why, while Democrats in Washington are working to reduce the portion of Americans’ private income that is disposed of by private choices, two tentacles of the Democratic Party — the Indiana and Louisiana teachers unions — are in their states’ courts waging futile fights against school choice programs, lest thousands of low- and moderate-income parents be as empowered as millions of demobilized servicemen were.
Washington’s contentiousness about the “cliff” is producing a blizzard of numbers. The argument, however, is not about this or that tax rate but about the nature of the American regime. When the Republican House majority acts as though it has a mind — and a mandate — of its own, this is not Washington being “dysfunctional,” it is the separation of powers functioning as the Founders intended. Their system requires concurrent congressional majorities — one in the Senate, with its unique constituencies and electoral rhythms, another in the House, with its constituencies and rhythms. And at least 219 of the 234 House Republicans won in November by margins larger than Obama’s national margin.
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For the record, Alan Simpson was a moderate Republican as a Senator, Erskine Bowles was Clinton's Chief of Staff; the commission was appointed by (first term) Pres. Barack Obama and the results were totally ignored.
One simple excerpt on spending:
RECOMMENDATION 1.1: CAP DISCRETIONARY SPENDING THROUGH 2020. Hold spending in 2012 equal to or lower than spending in 2011, and return spending to pre-crisis 2008 levels in real terms in 2013. Limit future spending growth to half the projected inflation rate through 2020.
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This is not rocket science, people. Put SOME limit on spending.
http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
http://www.powerlineblog.com/archives/2012/12/simpson-bowles.php
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AMEN!!!
The Rep incompetence (hard to think of worse front men for the Rep message than Boener and McConnell) in these negotiations is mind-boggling. It takes a special kind of stupidity to let Baraq pitch $1.6T in taxes AND INCREASES in spending and be losing on the issue. They are even letting him trap them into making specific proposals for him to demogogue instead of defining the ratio of "cuts" to revenue increases. If I have it right even the sequester has a 1:1 ratio of cuts to revenues!
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More famous people/publications caught reading the forum:
IBD Editorials
http://news.investors.com/ibd-editorials/120312-635563-clinton-era-spending-levels-not-tax-rates.htm
Obama Should Return To Clinton-Era Spending Levels
Fiscal Policy: Talk of Clinton-era tax rates ignores the fact that the former president, working with a GOP Congress, cut spending as a share of GDP and produced four balanced budgets by focusing on growth, not spending.
Even as he pushes $150 billion in new "stimulus" spending, President Obama argues that to avoid the fiscal cliff we must return to Clinton-era tax rates for wealthy households, with a top marginal rate of 39.6% vs. the Bush-era 35%. Clinton's was an age of balanced budgets and economic growth.
But it was also an era of budgetary restraint in which both parties, not just the GOP, still produced budgets.
It was one, too, in which a Republican Congress led by House Speaker Newt Gingrich produced welfare reform, killed the precursor to cap and trade — Bill Clinton's BTU tax — and stopped ObamaCare's predecessor, HillaryCare, dead in its tracks.
As the Cato Institute's Steve H. Hanke points out, when President Clinton took office in 1993, government expenditures were 22.1% of GDP. When he departed in 2000, the federal government's share of the economy had been squeezed to a low of 18.2%, a decline of 3.9 percentage points. No other modern president has even come close (see table).
(http://www.investors.com/image/ISSexpend_121204_345.png.cms)
Under Clinton, federal spending averaged 19.8% of GDP. In contrast, spending under Obama over the past four years has averaged 24.4% of GDP.
Revenues from Clinton-era tax rates were actually used to pay down the national debt and produce four successive budget surpluses. Obama's tax increases will simply fund new spending.
The spending restraint of the Clinton/Gingrich era was so successful and disciplined that it led President Clinton in his January 1996 State of the Union address to proclaim that "the era of big government is over." In contrast, President Obama has argued that "the danger of too much government is matched by the perils of too little."
Not only has he increased total welfare spending by $193 billion since taking office, he has also ballooned the number of food stamp recipients to more than 47 million and actively worked to dismantle the 1996 welfare reform act by neutering its work requirement through executive order.
Obama's first stimulus bill included funding to help states pay for additional welfare recipients and eliminated many of the incentives that encouraged states to reduce their welfare rolls. More recently, the Obama administration announced plans to waive many of welfare reform's work requirements.
Now ObamaCare threatens to increase health care costs while increasing Medicaid's burden on the states.
Of course, President Clinton benefited from President Ronald Reagan's tax cuts, which unleashed the dot-com boom and a period of unparalleled technological creativity and development.
During this boom, the economy grew by one-third and tax receipts doubled as we added the equivalent of the West German economy to our own.
Clearly tax cuts combined with spending cuts work, as does encouraging and rewarding entrepreneurship and not punishing and demonizing success. When government sucks all the economic oxygen out of the room, it becomes hard for real job creators to breathe.
Obama has been very selective in his admiration of the Clinton era. Adopt the spending levels and restraint,Mr. President, not the tax rates.
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VERY good! This gives a sound bite answer to the sound bite question "What's wrong with returning to Clinton era tax rates?"
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Where have we heard this before? (http://dogbrothers.com/phpBB2/index.php?topic=1847.msg67631#msg67631)
WSJ excerpt below, subscription info at the link
http://online.wsj.com/article/SB10001424127887323401904578157233680080150.html?mod=WSJ_Opinion_LEADTop
The Budget Baseline Con December 4, 2012
How Washington fools the public about spending 'cuts.'
...President Obama and John Boehner are playing by the dysfunctional Beltway rules. The rules work if you like bigger government, but Republicans need a new strategy, which starts by exposing the rigged game of "baseline budgeting."
Both the White House and House Republicans are pretending that their goal is "reducing the deficit," which they suggest means making real spending choices. They are talking about a "$4 trillion plan," or something, regardless of how that number is reached.
Here's the reality: Those numbers have no real meaning because they are conjured in the wilderness of mirrors that is the federal budget process. Since 1974, Capitol Hill's "baseline" has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms.
The most absurd current example is Mr. Obama's claim that his "$4 trillion" plan reduces the deficit by about $800 billion over 10 years by ending the wars in Iraq and Afghanistan. But those "savings," as he calls them, are measured against a White House budget office spending baseline that is fictional. Those wars are already being unwound and everyone knows the money will never be spent. But they are called "savings" to gull the public and make the deficit reduction add up to a large-sounding $4 trillion.
The baseline scam also exists in many states, and no less a Democrat than New York Governor Andrew Cuomo denounced it in 2011 as a "sham" and "deceptive." He wrote in the New York Post that state spending was "dictated by hundreds of rates and formulas that are marbleized throughout New York State laws that govern different programs—formulas that have been built into the law over decades, without regard to fiscal realities, performance or accountability." Then he proceeded to continue baseline budgeting.
In Washington, Democrats designed this system to make it easier to defend annual spending increases and to portray any reduction in the baseline as a spending "cut." Chris Wallace called Timothy Geithner on this "gimmick" on "Fox News Sunday" this week, only to have the Treasury Secretary insist it's real.
Republicans used to object to this game, but in recent years they seem to have given up. In an October 2010 speech at the American Enterprise Institute, House Speaker Boehner proposed that "we ought to start at square one" and rewrite the 1974 budget act. But he then dropped the idea, and in the current debate the GOP is putting itself at a major disadvantage by negotiating off the phony baseline. In a press release Tuesday, his own office advertised the need for "spending cuts" that aren't even cuts.
If Republicans really want to slow the growth in spending, they need to stop playing by Beltway rules and start explaining to America why Mr. Obama keeps saying he's cutting spending even as spending and deficits keep going up and up and up.
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All:
Today the WSJ turns to a subject near and dear to my heart. I would go so far as to say that until we get a spotlight on this issue we will continue to lose our free market and with it our freedom.
Marc
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The Budget Baseline Con
How Washington fools the public about spending 'cuts.'.
If the fiscal cliff talks make Lindsay Lohan look like a productive member of society, perhaps it's because President Obama and John Boehner are playing by the dysfunctional Beltway rules. The rules work if you like bigger government, but Republicans need a new strategy, which starts by exposing the rigged game of "baseline budgeting."
Both the White House and House Republicans are pretending that their goal is "reducing the deficit," which they suggest means making real spending choices. They are talking about a "$4 trillion plan," or something, regardless of how that number is reached.
Editorial board member Steve Moore on Republican options in the fiscal cliff negotiations. Photo credit: Associated Press.
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Here's the reality: Those numbers have no real meaning because they are conjured in the wilderness of mirrors that is the federal budget process. Since 1974, Capitol Hill's "baseline" has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms.
The most absurd current example is Mr. Obama's claim that his "$4 trillion" plan reduces the deficit by about $800 billion over 10 years by ending the wars in Iraq and Afghanistan. But those "savings," as he calls them, are measured against a White House budget office spending baseline that is fictional. Those wars are already being unwound and everyone knows the money will never be spent. But they are called "savings" to gull the public and make the deficit reduction add up to a large-sounding $4 trillion.
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Getty Images
President Barack Obama
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The baseline scam also exists in many states, and no less a Democrat than New York Governor Andrew Cuomo denounced it in 2011 as a "sham" and "deceptive." He wrote in the New York Post that state spending was "dictated by hundreds of rates and formulas that are marbleized throughout New York State laws that govern different programs—formulas that have been built into the law over decades, without regard to fiscal realities, performance or accountability." Then he proceeded to continue baseline budgeting.
In Washington, Democrats designed this system to make it easier to defend annual spending increases and to portray any reduction in the baseline as a spending "cut." Chris Wallace called Timothy Geithner on this "gimmick" on "Fox News Sunday" this week, only to have the Treasury Secretary insist it's real.
Republicans used to object to this game, but in recent years they seem to have given up. In an October 2010 speech at the American Enterprise Institute, House Speaker Boehner proposed that "we ought to start at square one" and rewrite the 1974 budget act. But he then dropped the idea, and in the current debate the GOP is putting itself at a major disadvantage by negotiating off the phony baseline. In a press release Tuesday, his own office advertised the need for "spending cuts" that aren't even cuts.
If Republicans really want to slow the growth in spending, they need to stop playing by Beltway rules and start explaining to America why Mr. Obama keeps saying he's cutting spending even as spending and deficits keep going up and up and up.
Printed in The Wall Street Journal, page 11
A version of this article appeared December 4, 2012, on page A
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A friend I hold in high regard comments on the article:
Agreed. And this is truly a bipartisan con.
A budget cut is not a reduction in spending. It is a reduction in the amount of the planned spending increase.
And the revenue projections are more of the same hocus-pocus. Obama demands $1.6 trillion of revenue increases over 10 years. The Republicans counter with $800 billion. These are all projections. And they must be divided by 10 to gauge their effect upon the annual budget deficits that will average $1.2 trillion over the same time period. Of course, you can jigger the projected deficit number by changing the assumption of personal income and GDP growth.
Added to the mess is the fact that the IRS reports income statistics as Adjusted Gross Income; i.e., income before deductions and exemptions; but it calculates income tax based upon taxable income; i.e., income after deductions and exemptions. And deductions and exemptions currently phase out for adjusted gross incomes that are substantially lower than Obama’s $250K threshold.
On top of all of this confusion is the fact that FICA taxes are reverting to 7.65% under both plans. Unless Obama now wants to make that tax progressive even though the benefits are now taxable via a means test called provisional income. And Medicare Part B premiums are means tested based upon provisional income.
In truth, the so-called fiscal cliff is not even a speed bump. If higher rates on taxable income are not so bad for some, then why is it bad for all? And why is taking $20 more per paycheck from the average worker OK when it comes from the FICA tax, but it is not OK to take it from the income tax? But it is OK to take another $20,000 from the business owner that takes a total of $150,000 in wages for himself and his wife plus realizes a $250,000 net profit from his subchapter S business after 10-20 years of doing without? Or increase the tax rate on the inheritance of small family businesses and farms from 35% to 45%?
All of these tax rates would come with no reform in entitlement spending or baseline budgeting.
The refusal of either party to talk about real numbers is extremely disheartening. Regardless of what happens on January 1st, the publicly held debt of the federal government will exceed 90% of nominal GDP at sometime in second half of 2016 unless real GDP growth increases to 4% annualized. And even then, the 90% threshold is delayed until 2019 or 2020 unless the deficits are reduced substantially and the need to borrow money drops dramatically. Real GDP is growing at a little over $300 billion per year. Federal borrowings are growing at over $1 trillion per year. The day of reckoning is fast approaching and the political leaders are focused upon whether or not the fairest share of income taxes for the highest 2% of incomes is 37% or 41% of all taxes paid. There is absolutely no sense of priorities by most everyone in DC – or for most of the voters either.
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Exactly!!
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I'm working on getting this esteemed friend to come play with us , , ,
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Chronicle • December 5, 2012
The Foundation
"It is error alone which needs the support of government. Truth can stand by itself." --Thomas Jefferson
Editorial Exegesis
Demo deficit reduction plan
"Both the White House and House Republicans are pretending that their goal is 'reducing the deficit,' which they suggest means making real spending choices. ... Since 1974, Capitol Hill's 'baseline' has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms. The most absurd current example is Mr. Obama's claim that his '$4 trillion' plan reduces the deficit by about $800 billion over 10 years by ending the wars in Iraq and Afghanistan. But those 'savings,' as he calls them, are measured against a White House budget office spending baseline that is fictional. Those wars are already being unwound and everyone knows the money will never be spent. But they are called 'savings' to gull the public and make the deficit reduction add up to a large-sounding $4 trillion. ... In Washington, Democrats designed this system to make it easier to defend annual spending increases and to portray any reduction in the baseline as a spending 'cut.' Chris Wallace called Timothy Geithner on this 'gimmick' on 'Fox News Sunday' this week, only to have the Treasury Secretary insist it's real. Republicans used to object to this game, but in recent years they seem to have given up. In an October 2010 speech at the American Enterprise Institute, House Speaker Boehner proposed that 'we ought to start at square one' and rewrite the 1974 budget act. But he then dropped the idea, and in the current debate the GOP is putting itself at a major disadvantage by negotiating off the phony baseline. In a press release Tuesday, his own office advertised the need for 'spending cuts' that aren't even cuts. If Republicans really want to slow the growth in spending, they need to stop playing by Beltway rules and start explaining to America why Mr. Obama keeps saying he's cutting spending even as spending and deficits keep going up and up and up." --The Wall Street Journal
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http://www.washingtontimes.com/news/2012/dec/4/gop-should-fear-voters-not-the-fiscal-cliff/
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The fiscal cliff conversation here is divided between this thread as a matter of budget, and the Tax Policy thread because of the central role of taxes in the FC.
Obj. posted Sen. Rand Paul's thoughts on the TP thread to effect of the "Let the Dems own it." This makes sense to me, especially with incompetents like Boo Boo Boener and McConnell at the helm for the Reps.
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Unemployment and the Fiscal Bluff
"For my part, whatever anguish of spirit it might cost, I am willing to know the whole truth; to know the worst, and to provide for it." --Patrick Henry
Gaming the numbers
November's jobs numbers are out and, though they're "better than expected," they're far short of a real recovery. The U.S. economy added 146,000 jobs in November, and headline unemployment dropped to 7.7 percent, the lowest rate since December 2008. But that number is deceptive.
The rate dropped because some 542,000 people left the workforce. If labor participation remained the same as it was in January 2009, headline unemployment would be 10.7 percent. The U-6 rate, which includes the underemployed and those who have given up looking for work, is 14.4 percent. Notably, the unemployment for blacks, who gave Barack Obama 96 percent of the vote, is 13.2 percent. Additionally, September and October numbers were revised down by a total of 49,000 jobs -- awfully convenient now that the election is over!
At least one person thinks that unemployment is a huge boon for the economy. House Minority Leader Nancy Pelosi (D-CA) says that unemployment insurance benefits -- which by the way cost $520 billion over the last five years -- "probably are one of the most important stimuli for the economy." So if more people become unemployed, the economy will grow even faster. Problem solved.
The Bureau of Labor Statistics did note one bright spot: "- ur analysis suggests that Hurricane Sandy did not substantively impact the national employment and unemployment estimates for November." That's good news, but Hurricane Barack and the fiscal bluff certainly are depressing the recovery, such as it is. Some 23 million Americans remain unemployed or underemployed, and millions more who are working haven't received pay increases in years to keep up with inflation. The economy is in a holding pattern while politicos in Washington preen and pontificate about the cliff.
The Congressional Budget Office (CBO) estimates that under "current law," i.e., if (when) we go over the cliff, the federal budget will still increase by 55 percent over the next 10 years, while tax collection will soar to an all-time high of 21.4 percent of GDP. CBO estimates, however, assume no economic change from higher taxes, which is unrealistic. In other words, higher rates won't necessarily bring in the projected revenue because businesses and consumers will change their behavior to avoid taxes. Government spending is also a tax in the sense that every dollar spent by the government must first be taken out of the economy.
A final fiscal cliff note: Barack Obama is demanding a return of the top tax rates to those in effect during the supposed nirvana of the Clinton years, and he's likely to get all the rates of Clinton's era. In fact, that's what former DNC chief Howard Dean said is necessary. "[T]he truth is everybody needs to pay more taxes, not just the rich," Dean admitted. "[W]e're not going to get out of this deficit problem unless we raise taxes across the board, to go back to what Bill Clinton had and his taxes." They're coming for the middle class, too, and some of them aren't afraid to say so.
To get spending to Clinton levels, however, the federal budget would have to be cut by an astounding 37 percent. According to Breitbart, "Adjusted for inflation, Clinton spent $2.24 trillion in 1993; that level stayed relatively stagnant, rising to $2.41 trillion in 2001." Obama is now spending nearly twice that. So instead of the $1.2 trillion in baseline "cuts" over 10 years outlined in the sequester, Congress would need to make real cuts of that much this year alone.
As we all know, there's a greater chance that pigs will fly
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The roll over and play dead strategy helps us how? Then people will like us? We consent to putting the country down the tubes and blame the Democrats? We did that and it didn't work.
It's easy for Rand Paul to say let it pass if he can't stop it in the Senate. But each House Republican ran on a promise to vote against this sort of thing, and won.
It is the Obama Presidency that has the standoff. House Republicans have a duty to pass what they believe are responsible solutions. If there was a party to negotiate with, they should negotiate, not cave.
The idea that a Republican House should pass exactly what a Democrat House would have passed is repulsive to me - and not the will of the voters.
If tax rates go up for everyone with the expiration of the Bush tax cuts, then they weren't what they were called - tax cuts for the wealthy. A return to Clinton era tax rates is a big hike - across the board. Unfortunately, we are no longer competing in a Clinton era world, with Clinton era spending or Clinton era regulations.
If people don't like Clinton tax rates applying to themselves they can sign on with tax reform retroactive any day that they want. House Republicans can be out front with multiple proposals.
If the Executive Branch can control outcomes in the House on revenue and appropriation bills, will the House of Representatives then choose the next Supreme Court appointee?
What part of constitutionally divided government powers am I missing?
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"CBO estimates, however, assume no economic change from higher taxes, which is unrealistic."
Really? Not unrealistic from any widely reported story that I have seen...
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http://www.washingtontimes.com/news/2012/dec/7/government-borrows-46-cents-every-dollar-it-spends/
The federal government borrowed 46 cents of every dollar it has spent so far in fiscal year 2013, which began Oct. 1, according to the latest data the Congressional Budget Office released Friday.
The government notched a $172 billion deficit in November, and is already nearly $300 billion in the hole through the first two months of fiscal year 2013, underscoring just how deep the government’s budget problems are as lawmakers try to negotiate a year-end deal to avoid a budgetary “fiscal cliff.”
Higher spending on mandatory items such as Social Security, Medicare and interest on the debt led the way in boosting spending compared with the previous year, which also highlights the trouble spots Congress and President Obama are struggling to grapple with.
All sides agreed to discretionary spending cuts and automatic spending cuts last year, but have been unable to agree on ways to control entitlement costs, which are the long-term drivers of deficits and debt.
Fiscal year 2013 began on Oct. 1 and so far the government has spent $638 billion and taken in just $346 billion in revenue.
That tax revenue is up by $30 billion compared with last year, or about 10 percent.
But spending is up even more — a staggering $87 billion, or 14 percent. The CBO said much of that higher spending total is due to timing of payments month-to-month. Without those shifts, spending would be up $22 billion, or 4 percent.
Overall, CBO analysts said that, accounting for shifts in both revenue and spending, the deficit would be $8 billion lower this year than it was last year at this time.
The agency, Congress’s nonpartisan budget scorekeeper, releases preliminary estimates of the government’s fiscal position each month. Final figures will come later this month from the Treasury Department.
The government is poised to post another $1 trillion deficit in fiscal year 2013, which would mark the fifth straight year. Before that, the record was $438 billion, which came in 2008, President George W. Bush’s last full year in office.
Congress and the White House are trying to hash out a long-term fiscal framework that could lead to higher taxes and limits on future spending.
Read more: http://www.washingtontimes.com/news/2012/dec/7/government-borrows-46-cents-every-dollar-it-spends/#ixzz2EZliAkBX
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By JOHN D. MCKINNON
Republican leaders are pushing what looks like a relatively painless method of slowing federal spending, one that alters how the government calculates annual cost-of-living increases for an array of programs.
Senate Minority Leader Mitch McConnell (R., Ky.) recently highlighted the idea, which is known as "chained CPI," as an example of the kind of changes needed to avert spending cuts and tax increases set to begin in January. House Speaker John Boehner (R., Ohio) included it in his recent deficit-reduction proposal.
President Barack Obama has in the past signaled openness to switching inflation measures to shore up Social Security. And several centrist Democrats have endorsed the idea, too.
But as with much of the "fiscal cliff" negotiations, nothing is as simple it appears. Even this seemingly technical change has become caught in the ideological gaps between the two sides.
Under the Republicans' proposal, the government would stop pegging benefits to versions of the consumer price index that measure the change in prices for a hypothetical fixed basket of goods, the standard measure of inflation. Instead, the government would use the chain-weighted CPI, which tends to rise slower because it recognizes that consumers will buy less of goods whose prices are rising rapidly. For example, if the price of chicken rises more than the price of beef, families might buy less chicken and more beef.
Falling Over the Fiscal Cliff
See some scenarios for how different groups of people may be affected by the tax changes that will take place if the fiscal cliff isn't resolved by the Jan. 1., 2013, deadline.
Messrs. McConnell and Boehner tend to talk about how the move would shrink spending. They also acknowledge it would boost tax collections because many features of the tax code are also pegged to inflation. This could make it harder to swallow for some Republicans, who already worry the tax system's inflation measure is biased toward higher rates.
"There's a lot of objection on our side of the aisle to revenue increases," said Sen. Bob Corker (R., Tenn.), who has pushed the idea in legislation. "But for anything to occur, people realize there's going to have to be some of both" tax increases and spending reductions.
Democrats are divided too. Liberals and seniors' groups are scrambling to block the concept, saying it could hurt lower-income households and weaken safety-net programs.
View Interactive
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The proposal to use a different inflation measure "is a very devious and underhanded way to continue the class warfare being waged against the middle class and working families," said Sen. Bernie Sanders (I., Vt.).
The idea, which has come up repeatedly in budget discussions over the past two years, would change how the government adjusts various programs to account for increases in the cost of living. Using a different inflation measure would mean smaller annual increases in the size of Social Security checks, federal pensions and veterans' benefits.
Using the different index would lead to a small annual change, but one that compounds over time. A hypothetical Social Security beneficiary who retired at age 62 in 2002 with a monthly benefit of $1,000 would receive $1,309 a month now under the current cost-of-living adjustments, but $1,263 if the chained CPI approach had been in effect.
On the tax side, the size of the standard deduction and income thresholds for various tax brackets also would rise more slowly, making more income taxable, and at higher rates.
By 2021, the change would raise taxes by about $100 a year on practically all households earning more than about $30,000, according to estimates by the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution.
In all, budget experts figure a switch to the chain-weighted CPI would reduce the projected deficit by about $200 billion over the next decade. Of that, about $72 billion would come from increased tax revenue. It's not a huge number, but if the new index were approved, Republicans would see that as proof of Democrats' willingness to countenance changes to entitlement programs.
Mr. Obama is seeking about $4 trillion in deficit reduction over 10 years, including $1.6 trillion in new tax revenue. Mr. Boehner has offered to increase revenue by $800 billion.
Messrs. McConnell and Boehner are both willing to apply the chained CPI to tax brackets as well as spending programs, according to spokesmen. The Republicans think it's worth a little extra in taxes to gain a curb on future entitlement spending.
Mr. Corker said Republicans regard the chained CPI change as an important starting point for what they hope will be a broader effort at overhauling entitlement programs, including Social Security, Medicare and Medicaid.
Many Democrats are reluctant to tackle Social Security as part of the deficit-reduction effort. AARP, the powerful association for seniors, has been writing letters and sending seniors to visit lawmakers, arguing against the chained CPI and other proposed entitlement changes.
President Obama has signaled continuing interest in measures to strengthen Social Security's long-term solvency. But he also says Social Security isn't causing current budget deficits.
"Social Security is not a driver of our deficits," White House spokesman Jay Carney said at a briefing last Wednesday. "The president has always expressed interest in working with Congress to take steps to further strengthen Social Security because it's such a vital program for our senior citizens and it needs to be in place for generations to come."
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Second post of morning
The Republican Tax Panic
The GOP should negotiate with Obama, not each other. .
If any Republicans thought that President Obama would respond with magnanimity in victory, they now know better. He is determined to rout them on taxes, give as a little as possible on spending, and blame them for any economic damage in the bargain. The question for the GOP is how to minimize the harm to the economy, as well as to their chances of a political and policy comeback in 2014 and beyond.
So it's a shame that Republicans are playing into Mr. Obama's hands, negotiating in public among themselves, prematurely giving up on the tax issue and undermining House Speaker John Boehner in the process. Mr. Obama isn't going to blink on the budget if he thinks Republicans are going to blink first, and so far the emerging GOP position seems to be to surrender on taxes first and hope Mr. Obama will have mercy on them later on entitlements.
Tennessee Senator Bob Corker made the case for this strategic retreat on "Fox News Sunday," arguing that if Republicans raise tax rates as Mr. Obama wants, "the focus then shifts to entitlements and maybe it puts us in a place where we actually can do something that really saves the nation."
But what is the evidence in the last four years, or even since the election, that Mr. Obama won't pocket that victory and then refuse to offer any but token changes on entitlements? Mr. Corker has proposed several specific and laudable entitlement changes, but note how Mr. Obama has declined to support a single one of them in public. After he has GOP fingerprints on tax rate increases, Mr. Obama is more likely to make Republicans trade onerous defense cuts for entitlement changes that are far less consequential than Mr. Corker has proposed.
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There are also the economic merits to consider, if that doesn't rudely intrude on all the political calculations. Republicans presumably campaigned against raising tax rates because they believed what they said about the costs to growth and small business. The economic evidence is overwhelming that they are right.
But now various Beltway sages want Republicans to say never mind, we were only kidding, tax rates don't matter to the economy. So because Mitt Romney lost, Republicans in Congress are supposed to repudiate their core economic principles.
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Associated Press
Tennessee Senator Bob Corker
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Mr. Obama says he merely wants tax rates to return to the "Clinton rates," but rates are already scheduled to go higher than that thanks to ObamaCare. There's the 0.9% Medicare surcharge on all income above $250,000, plus the 3.8% surcharge on investment income. The U.S. economy in 1993 also had far more growth momentum than it does today.
Bill Clinton agreed to cut the capital gains rate to 20% in 1997 but Mr. Obama wants it to be 23.8% at least. State tax rates are also higher than they were in the 1990s, especially in California, where the capital gains rate now is 13.3% on top of the federal rate. Combined that would be 37.1%. In Singapore, the capital gains tax is . . . zero.
Mr. Boehner's offer to raise revenue by reducing loopholes and deductions is therefore the right policy direction and consistent with a pro-growth tax reform. If Mr. Obama were open to a tax reform that reduced rates in return for fewer deductions, Republicans would be right to make a down payment this year and negotiate a larger reform in 2013. That is why we have supported raising revenue by closing loopholes, which are exploited the most by the richest Americans.
The problem is that Mr. Obama has backtracked on reform. In 2011 he was saying he wanted $800 billion in more revenue, and that he and the GOP could get it from deductions. Now he says he wants higher rates and fewer deductions in order to raise $1.6 trillion in more revenue over 10 years. He may also believe it's a concession to raise the top tax rate to 37% or 38% (from 35%) instead of the 39.6% Clinton rate as long as he also gets more revenue from capping deductions.
This latter choice would be the worst possible deal for the economy and for Republicans. Not only would they have agreed to raise rates, but they'd have given away the revenue from deductions that could be traded for lower rates. This wouldn't be a step toward tax reform but a double-barreled tax increase. And it would make a genuine pro-growth tax reform all but impossible.
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It's certainly true that Republicans can't stop a tax rate increase if Mr. Obama is determined to make it happen. The Bush-era rates automatically go up on January 1, and the House can't extend them alone.
But Mr. Obama also can't get what he wants without House Republicans. He needs their votes to extend current rates for lower-income taxpayers, as well as to prevent the Alternative Minimum Tax from hitting 27 million more taxpayers. Most of those new AMT taxpayers live in high-tax Democratic states. Meanwhile, the death tax rate reverts to 55% and a $1 million exemption. Senate Democrats running for re-election in 2014 won't want that on their resume.
For all of his bluster about blaming Republicans, Mr. Obama also knows a budget failure would do enormous harm to his chances of second-term success. It would guarantee at least two more years of trench budget warfare and poison the chances of immigration or other reform. Another recession would be on his watch, not on George W. Bush's.
The point is that Republicans have more leverage than they imagine, and they ought to act like it. A good start would be for the House to pass a bill this week extending all the tax rates for six months and fixing the defense spending cuts coming in January. Then ask Senate Democrats to pass their own bill, and they can negotiate with the President under regular Congressional order.
At the same time, Mr. Boehner could alert his new Members that he'll convene the next House to pass the same bill again on January 3. The world doesn't end on December 31 and the law can still be changed. Such resolve would show some leadership and demonstrate to Mr. Obama that Republicans are prepared to let the spending sequester begin to take place if he won't negotiate over spending in good faith.
Mr. Boehner and Republicans can also make clear to the voters that if Mr. Obama doesn't want to jump off the "fiscal cliff," he can always instruct the IRS not to change the tax withholding tables pending further negotiations. And he can instruct his budget office to instruct the Pentagon to exercise flexibility in the way that it implements the automatic spending cuts.
Mr. Obama wants to give the appearance of a looming fiscal crisis because it serves his political interest in spooking Republicans to give him everything he wants. He's pressing so hard for tax rate increases not because they will bring in much revenue but because he wants GOP tax cover for Democrats in 2014 and to get Republicans to concede that tax rates must rise. Once he pockets that, he'll be back by more.
Republicans need not play along, and they and the country will suffer if they do. Above all, they need to start negotiating as a team with Mr. Obama and stop making premature concessions for the TV cameras that only make the White House less likely to meet them half way.
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The fiscal cliff conversation here is divided between this thread as a matter of budget, and the Tax Policy thread because of the central role of taxes in the FC.
Obj. posted Sen. Rand Paul's thoughts on the TP thread to effect of the "Let the Dems own it." This makes sense to me, especially with incompetents like Boo Boo Boener and McConnell at the helm for the Reps.
Someone on this forum suggested that tactic first.
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Rob Portman: A Truly Balanced Approach to the Deficit
Raising taxes on the well-off would pay for nine days of spending..
By ROB PORTMAN
The dangers of the "fiscal cliff" are by now well known. Most agree that the year-end $500 billion in tax increases and $110 billion in arbitrary, across-the-board discretionary spending cuts, including defense, must be averted to avoid plunging the U.S. economy back into recession. But how the danger is averted is important. To keep from getting right back on another cliff, President Obama and Congress must address the underlying problems of excessive spending and weak economic growth.
Washington needs to pursue structural reforms in the country's important but unsustainable entitlement programs and in an inefficient, outdated tax code. By doing so, lawmakers can responsibly avoid the immediate cliff while addressing the long-term fiscal crisis and spurring job creation.
In January 2010, President Obama described the challenge well: "The major driver of our long-term liabilities . . . is Medicare and Medicaid and our health-care spending. Nothing [else] comes close."
The nonpartisan Congressional Budget Office agrees. According to the CBO, virtually 100% of the projected increase in budget deficits over the next 75 years comes from rising Social Security, Medicare, Medicaid and other mandatory spending.
The CBO projects that as the economy recovers, revenues will exceed the historical average of 18% of gross domestic product, even if all 2001 and 2003 tax cuts are extended. Federal spending, meanwhile, already exceeds its historical average of 20% of gross domestic product and is projected to rise to 40% within three decades. Much of this dramatic increase in spending will be the result of adding 77 million baby boomers to a Medicare system that, for the typical retiree, provides benefits of $3 for every $1 paid into the system.
Taxes cannot be raised high enough to chase the enormous spending growth projected—the math simply does not work. That is why House and Senate Republicans last year voted for a budget to begin reining in entitlements and closing the deficit.
President Obama's plan to deal with the fiscal cliff includes raising taxes on individuals and small businesses that make over $200,000 or, jointly, $250,000 a year. He has argued that we should repeal the 2001 and 2003 upper-income tax cuts because they are to blame for much of the increase in the deficit since 2001.
There is a continuing debate over whether and how to raise taxes on small businesses that pay their taxes as individuals and on those individuals earning more than $200,000.
However, CBO and Tax Policy Center data together show that only 4% of the $12 trillion swing from projected surpluses to actual deficits from 2002 through 2011 resulted from the upper-income tax cuts. Two recessions and soaring government spending were the main factors.
Ending all the upper-income tax cuts would pay for just nine days of annual spending. Social Security and health entitlements will cost 27 times more than the revenue from ending those tax cuts over the next decade.
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Corbis
.Still, negotiations require give and take, so Republicans have put revenues on the table. For instance, during the fall 2011 bipartisan super committee negotiations, Republicans (using the general Bowles-Simpson model of $3 in spending cuts for every $1 in new revenue) offered $250 billion in new revenues with pro-growth tax reform and entitlement savings. That summer, House Speaker John Boehner offered new tax-reform revenues in return for serious entitlement reforms, and he has continued to look for ways to forge bipartisan consensus. Democrats, however, have rejected all offers and demanded $1 trillion or more in tax increases without a commitment to structural entitlement reform and tax reform.
President Obama has called for a "balanced" solution of tax increases and entitlement reforms. Yet at this point he is essentially re-offering his budget from last February—a proposed $1.6 trillion in tax increases and virtually zero net spending savings. The CBO says the president's budget actually increases spending by $1 trillion over the decade, as its modest entitlement savings would be overwhelmed by new spending. Higher taxes for more spending isn't the kind of balance that Americans expect.
It should surprise no one that this unbalanced approach in the president's budget was rejected 99-0 in the Senate in May and 414-0 in the House in March.
Tweaking Medicare and Medicaid eligibility rules, benefits and payment rates may save some money in the short run, but it won't sufficiently slow the long-term growth of these programs caused by their outdated design. Reforms should not merely squeeze health beneficiaries or providers but should rather reshape key aspects of these programs to make them more efficient, flexible and consumer-oriented.
Especially in this weak recovery, the president's demands for new tax revenues must be met in the most pro-growth way possible. Instead of merely piling higher tax rates on top of our inefficient tax code, the president should agree to join with Congress in pursuing individual and corporate tax reform, including eliminating outdated preferences that often benefit the well-connected. A simpler, fairer tax code for everyone will also increase productivity, thus creating badly needed jobs and economic opportunity.
Avoiding the immediate fiscal cliff is critical to avert a recession and more job loss, but let's also take the opportunity to address the underlying problems causing our steep deficits. President Obama has said he is for tax reform and promises not to "kick the can down the road" on entitlements. Republicans are eager to work with him on both. By working together, both parties can spare America's children from a national debt that now tops $130,000 per household—and do it in a way that helps bring back jobs.
Mr. Portman, a Republican, is a senator from Ohio and a former director of the Office of Management and Budget.
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Jeff Sessions: We Can't Fix the Budget in Secret
'The world's greatest deliberative body' now is like the Russian Duma, with secret meetings and preordained votes..
By JEFF SESSIONS
The United States is on an unsustainable spending and debt course. Without reform, it will lead to economic disaster. Yet a fundamental alteration in U.S. policy won't occur until the American people understand the depth of the danger and the scale of change required. One thing is already clear: Such change can begin only with extensive, messy and even contentious legislative work carried on for months in the open light of day.
This is the exact opposite of the hidden negotiations to avert the so-called fiscal cliff. Washington has become possessed by the idea that a small group of negotiators, meeting in secret, can solve the deep, painful and systemic problems plaguing this country with a single "grand bargain," produced at the 59th minute of the 11th hour. This is a siren song.
The Senate was once called the world's greatest deliberative body. But the democratic process—which leads to consensus, truce or compromise—has been set aside. So for three straight years the Senate has produced no budget, no plan, no long-term proposal of any kind.
Instead, we have seen an endless series of secret conclaves: gangs of six, committees of 12, meetings at the White House, at Blair House, in the Capitol's labyrinth of hallways and hideaways. Meetings everywhere but in the committee room and the open air of the Senate floor.
No one denies that good people have been trying hard, but what have all these secret talks produced? Temporary fixes, stopgap measures and another set of emergency deadlines. One wise observer has said that the Senate now operates like the Russian Duma, where officials meet behind closed doors, put out the word, and the overwhelming votes materialize. Today in Washington—where we're faced with the consequences of our last secret deal, the Budget Control Act of 2011—the next round of secret meetings and hushed negotiations is under way.
Members of the Senate must reassert their chamber's historic role as the national institution where the great challenges of our time are debated, clarified and ultimately resolved in public view. Unfortunately, Majority Leader Harry Reid has executed a brilliant partisan strategy of protecting his members from public accountability by avoiding the public workings of the legislative process.
Following their victories in the historic midterm elections of 2010, Republican leaders too readily accommodated Sen. Reid's craven strategy. The country and their own party's political fortunes suffered as a result.
What we need is more distinction, not less. On these great issues of the economy and debt, the voters have sent Washington mixed signals and a divided Congress. It is thus all the more critical that the facts and choices be clarified. The Senate is the perfect institution—created for just such a time as this—to provide that clarity and consensus.
Proposals should be worked up in committee, where senators appointed by their colleagues have developed expertise in the issues that come before them. Amendments should be offered as part of an open process to modify and perfect legislation. The debate should be brought to the Senate floor.
It may take dozens of votes, even scores, to reach a consensus. But the American people need to be in on the process and have the opportunity to voice their opinion on concrete proposals. Have we forgotten that it is their future that is at stake?
At a minimum, any short-term fix that may be devised in order to avert the January cliff must spend at least one week on the Senate floor in order to give senators the time they need—and that the subject warrants—for amendment and debate. No Christmas Eve "deal" should be rushed through, using the threat of financial panic to secure its hurried passage.
Next year, the Senate should return to regular order, beginning with the production of its first budget plan in four years. Every senator, whose one vote is equal to that of every other, must stand up and call a halt to government by secret committee. Under Sen. Reid's leadership—without sufficient resistance from the GOP—the Senate has suppressed the needed debate and dodged the accountability that comes from casting and defending votes.
Nothing will do more to restore respect for the Senate than for the American people to see it engaged in full, honest and passionate debate. If some of our constituents are disappointed in the results or the votes cast by their senator, at least they can know that nothing was hidden from them, that everything was laid on the line for the future of this great Republic. They will know which senators gave their all to deal wisely and courageously with the great challenge of our time—and they can hold accountable those who did not.
Mr. Sessions, a Republican senator from Alabama, is the ranking member on the Senate Budget Committee.
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http://assetbuilder.com/scott_burns/will_the_real_federal_deficit_please_stand_up
Will the Real Federal Deficit Please Stand Up?
Scott Burns “When you find yourself in a hole, stop digging.” ***
The latest estimate of the federal deficit is $1.1 trillion. In spite of that, neither candidate for President has talked much about the deficit or offered a detailed plan to close it. The best short deficit discussion I’ve seen is a YouTube video made by Hal Mason, a retired accountant. When I last checked, nearly 2 million people had viewed “United States Budget Dilemma.wmv”.
Mr. Mason suggested it would be necessary to shut down most of our government to close the deficit. Of course, we might miss a few things. Say goodbye Justice. Hasta la vista Education. Bye-bye Agriculture, Commerce, Homeland Security, Housing and Urban Development, Energy, Interior, Labor, State, etc. And, by the way, this also includes the entire Defense department. All together those programs cost $1.2 trillion for 2012.
Make those simple cuts and we’d have enough tax revenue left to pay interest on the federal debt (about $225 billion) and continue printing the checks to support Social Security, Medicare, Medicaid and other “non-discretionary” programs that total about $2.25 trillion.
Alternatively, the budget could be balanced if we all volunteered to pay 46 percent more in taxes than we already pay. So far neither the 1 percent nor the 99 percent has stepped forward.
Sadly, that dismal picture doesn’t come close to showing just how over-promised and broke our country is. Do some studying and you will learn that the budget politicians talk about, the one known as the Unified Budget with the $1.1 trillion deficit, is a fiction. It is convenient for politicians but it is not a true representation of our financial condition. If it were subject to the same accounting standards as our corporations, it would get a qualified opinion from its auditors.
We can get a bit closer to reality by checking the most recent “Financial Report of the United States Government” (2011) from the Government Accounting Office. In it, Comptroller General Gene L. Dodaro observes “The comprehensive long-term fiscal projections presented…show that…the federal government continues to face an unsustainable fiscal path.”
He was being kind.
The reason can be found in the details of those financial statements. The statements include long-term estimates of the amount by which promised benefit payments for Social Security and Medicare exceed estimates of future revenues. The gap depends on the actuarial method used, but filling it would require a deposit, today, of $33.8 trillion to $46.3 trillion. Whichever actuarial method you use, the increase from 2010 to 2011 was over $3 trillion. In other words, government liabilities that are never discussed as part of federal debt are rising three times faster than the official $1 trillion deficit.
But wait, there’s more!
Even these figures are a government-manipulated fiction. The total unfunded liabilities for Medicare dropped by trillions from 2009 to 2010. How? By the passage of Obamacare. It contained major reductions in payments to doctors and medical service providers. There’s only one problem: The chief actuary for Medicare, Richard Foster, doesn’t believe those savings will be achieved. He has already declared, in the 2010 Trustees Report, that the reduction isn’t likely to happen. Basically, we’re still in a political fairyland.
So, is there a measure that we can trust?
I believe there is. Economists call it the fiscal gap, the comprehensive long-term difference between government revenues and government spending based on the most realistic estimates available. The foundation for this measurement is the Alternative Fiscal Scenario, the Congressional Budget Offices most realistic budget projection. The fiscal gap is economics’ standard measure of fiscal sustainability. Using it, economists have tracked the growth of the fiscal gap. It was $60 trillion in 2003, $175 trillion in 2007, $211 trillion in 2011 and $222 trillion in 2012.
Note that $222 trillion is a multiple of our gross domestic product that far exceeds any of the figures that are causing the economic crisis in Europe.
The person I speak with about this— enough to have co-authored “The Clash of Generations” (MIT Press, 2012) with him about this subject— is Boston University economist Laurence J. Kotlikoff. He points out that while the official deficit is $1.1 trillion for 2012, the increase in the fiscal gap for the same year was $11 trillion. That’s 10 times as much as the official deficit.
Can we argue about these numbers?
Not according to Kotlikoff. “No decent economist would use any measure but the fiscal gap to understand our long-term problem,” he said in a recent phone conversation. That means the true financial condition of our country is far, far worse than it is represented in public discussion.
Can you spell b-a-k-l-a-v-a?
Filed Under: Government, Taxes & Other Disasters
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Real deficit $11 trillion, real fiscal gap at $222 trillion, and we have a Presidential election based on likeability, and news coverage that the President's daughter got a cell phone, how exciting. Yes it would be nice to get a real auditing firm to look that operation over, top to bottom, and tell us honestly the real cost of every rule and program.
GM, I was surprised to see that story published in the NY Times - front page with big headlines - before the election. Oh, it wasn't?
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Professional journalist Martha Raddatz and her peers were too busy gazing adoringly at the gravy boat she got from Buraq.
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Why not return to Clinton levels of SPENDING?
(http://www.theblaze.com/wp-content/uploads/2012/12/r620-ca62a86b88ec8fb7d3d18bc265227044.jpg)
http://washingtonexaminer.com/article/2515887#.UMzUvVKIggD
Veronique de Rugy: Let's return to Clinton spending levels, too
December 13, 2012 The Washington Examiner
President Obama has been fixated on returning the top marginal income tax rates on higher income earners to their Clinton-era levels. Increasing these rates is troubling because even if the president got his way, it wouldn't make a dent in our deficit, and it would pose negative consequences for our economy in the long term. Moreover, our problem is a spending one, not a revenue one. So how about we return to Clinton-era spending levels?
However, aggregate labor supply data, such as the differences in hours worked among countries with different levels of taxes, suggest a very different conclusion. Nobel laureate Ed Prescott, in his famous 2004 paper "Why Do Americans Work So Much More Than Europeans?" shows that workers spend considerably more hours working when marginal tax rates on their incomes are lower. So basically, over time people will reduce the number of hours of work, economic growth slows down, and less revenue is collected.
And then there's the long run. In recent years, economists have shown that higher taxes may not dissuade current rich people from working, but they will hurt incentives for younger people to invest in education and career choices that would have made them the rich people of tomorrow. That too does not benefit future economic growth and tax revenue.
So overall, increasing taxes on the rich isn't a good idea. Yet, it is true that the Clinton years saw economic growth, increasing median income, vanishing deficits and relative peace. Why doesn't the president try to copy all Clinton-era policies? Because that would mean seriously cutting spending.
On Jan. 27, 1996, President Clinton proclaimed that "the era of big government is over, but we can't go back to a time when our citizens were just left to fend for themselves." He added, "So, again, last Tuesday, I asked Congress to join with me to make the cuts we agree on. Let's give the American people the balanced budget they deserve with a modest tax cut and the lower interest rates and brighter hope for the future it will bring." And they came through on that promise.
During his two terms in office, Clinton reduced spending as a share of gross domestic product from 21 percent in fiscal year 1994 to 18.2 percent of GDP in fiscal year 2001. Today, spending stands at 24.3 of GDP. According to the Office of Management and Budget, Obama's two-term average spending level is projected at 23.4 percent of GDP as opposed to 19.9 percent for Clinton. During his two terms, Clinton grew spending by 12.3 percent in real terms -- a sharp contrast with the Reagan years and the Bush years. When he left office, total spending was close to $2 trillion, and the federal government registered a surplus of $142 billion (all numbers are adjusted for inflation). In fiscal 2012, federal spending was $3.2 trillion, and our deficit was $1.1 trillion.
For all the talk about returning to Clinton-era policies, the president is sadly silent about his predecessor's spending levels. To be fair, the only way that we could go back to these spending levels is if Congress finally reforms Social Security, Medicare and Medicaid. And reforming those programs is also the only way to put this country back on a sustainable financial path. So what are we waiting for?
Dr. de Rugy is a senior research fellow of the Mercatus Center at George Mason University.
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Excellent find Doug. Maybe some of our lurkers will put it to good use , , ,
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Excellent find Doug. Maybe some of our lurkers will put it to good use , , ,
The chart is excellent visually, but the percentages on the 2012 side should be a percentage of the 2001 number, and since the Fed's accommodation of the fiscal mess is the cause of most dollar dilution, the dollars should be in dollars, not 2005 'adjusted' dollars. When time permits, I will take a try at my own chart.
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WSJ: "After the debacle of 2011, Mr. Obama could have treated the negotiations as the art of the bipartisan deal that could set the stage for immigration reform and other second-term achievements. Flush with victory, he could have at least made a gesture on entitlements.
Instead, he has treated the talks as an extension of the election campaign, traveling around the country at rally-style events at which he berates Republicans for not accepting his terms of surrender. Grant gave Lee more at Appomattox."
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http://news.investors.com/121912-637656-real-federal-outlays-up-78-since-98-spending-cap-key.aspx
Federal Spending Up 78% After Inflation Since 1998
By David Hogberg, Investor's Business Daily 12/19/2012
President Obama says he wants a "balanced" approach to the fiscal cliff. But critics argue the real problem is spending, which has far outstripped rising tax revenue as well as economic growth.
Federal government revenue rose from $1.7 trillion to $2.4 trillion from fiscal 1998 to 2012, slightly exceeding inflation. Revenue growth averaged 2.9% annually, despite two recessions, bear markets — and tax cuts.
But federal spending rose nearly twice as fast — 5.7% per year — surging from $1.6 trillion to $3.5 trillion over that same span.
The spending spike also exceeds growth in the population.
Some of the spending surge came during the Bush administration — the wars in Afghanistan and Iraq, increases in non-defense discretionary spending and the creation of the Medicare prescription drug entitlement.
But spending accelerated under Obama. While he inherited a budget increase from Bush in fiscal 2009, an omnibus bill he signed plus his stimulus package helped boost spending $535 billion in his first year, hiking total spending from $2.9 trillion in 2008 to $3.5 trillion in 2009. Spending has never returned to the already-high 2008 level even after controlling for inflation.
Dan Mitchell, senior fellow at the libertarian Cato Institute, says the U.S. government needs a spending cap.
"It's an issue of trendlines and that's everything in fiscal policy," Mitchell said. "If you are on a path where government spending grows faster than the private sector of the economy, which is your tax base, then in theory there is no level of taxation that will be enough to stabilize the system. ... If we had kept government spending down to just increases for inflation and population growth, we wouldn't be in the trouble we're in now."
Limiting spending to increases in inflation and population growth over 1998-2012 (an annual average of about 3.3%) would have given dramatically different results. The U.S. would have spent $2.6 trillion in FY 12, about $900 billion less than what it actually did. The latest deficit would be $157 billion, a fraction of the actual $1.089 trillion.
The government ran up $6.7 trillion in national debt from FY 1998-'12. Yet if spending had just risen with inflation and population, the U.S. would have reduced the debt by $177 billion.
(http://i603.photobucket.com/albums/tt114/dougmacg/WEBspend1219gif-1.jpg)
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(http://www.powerlineblog.com/admin/ed-assets/2012/12/Obama-Solution-copy.jpg)
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That is some good work you are bringing us there Doug.
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My understanding is that Ryan was on board with the Boehner Plan B that was shot down by the rank and file. The big failure was not on taxes but that nothing was gained on discretionary spending, entitlements or deficit reduction in return for the proposed surrender on taxes.
Republicans need the spending or entitlement deal to come out bipartisan, not unilateral leaving themselves with no cuts enacted and all the push-Granny-off-the-cliff blame.
The Republican collapse last night actually strengthened Boehner's hand. No amount of private arm twisting with a weak leader in matters in getting a deal.
The burden moves to the Senate. Does anyone new like a Marco Rubio, or leaving like Jim Webb, have any ideas that would keep Republicans largely together and pull over 4 or more Democrats? I don't see how, but that would put this back on the R House and Dem President to accept or take all blame.
The estate tax and AMT are caught in the balance. Also the 2% temporary cut in FICA, and unemployment benefit extensions. New Obamacare taxes are coming on line either way.
The end result I suppose will be a short extension and a continued fight in the new year. They have about 3 business days left, counting New Years' Eve.
Investors are betting this gets resolved with markets only down 1% at the moment. They know something that I don't.
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Stocks fall more than 1% on fiscal cliff fears
CNN Money Dec 21 1:11pm
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http://pjmedia.com/blog/math-is-coming/?singlepage=true
Math Is Coming
Math is remorseless, and it will eventually balance its numbers, not caring who is hurt in the process. More: Fiscal Cliff, the 11th Hour: GOP Says Dems Can Amend House Bills If They Like by
Frank J. Fleming
Bio
December 27, 2012 - 12:11 am All the debate over spending is starting to remind me of the movie Jaws. We have some people who believe there is this big threat headed our way, but the authorities all tell us not to panic — but instead of the mayor of Amity Island telling us the beaches are safe, President Obama is telling us we’ll grow our way out of this deficit.
Right now the Republicans and Democrats are hotly debating which of their two wholly inadequate plans we should use to avoid the fiscal cliff, but looking at the size of the deficit, they’re proposing different-sized Band-Aids where a tourniquet is needed. If you point this out, you’re called a Tea Party extremist who wants to throw old people off a cliff and deny underprivileged Ivy League law students free birth control. “You silly person. Budgets don’t have to balance. That’s just a superstition.”
Everyone is so used to politicians treating our tax dollars with less seriousness than the average person treats Monopoly money that they just don’t get why people are suddenly talking about the need for spending cuts. But this isn’t some idea invented by the Tea Party or Paul Ryan or the Koch brothers while sitting in their hollowed-out-volcano Koch Lair. They only mention cuts because they fear the one truly insisting on them: Math.
Politicians have long ignored Math. And it’s no wonder: Math is unelected, unsympathetic, and highly biased toward the rich and keeps demanding cuts to spending and changes to entitlements that are politically infeasible. In a nation filled with obese poor people, we’ve discovered a long list of things everyone should be entitled to besides food, clothing, and shelter — things people need, like subsidized hybrids — but heartless, uncompromising Math keeps looking at our revenue and telling us we can’t have all of that.
Thus Obama wants Math locked completely out of the fiscal cliff talks and instead wants unlimited power to raise the debt ceiling and then tax the rich because of the demands of Fairness — Fairness being the left’s favorite imaginary friend. Math won’t stop laughing at Obama’s plan to pay for everything by taxing the rich, so Obama just won’t work with it at all.
The Republicans at least acknowledge that Math exists but are only trying to compromise with it. We’re broke, and Obama wants to buy a Ferrari we can’t afford, and they’re trying to argue him down to a BMW we can’t afford. I guess they think if they make some changes to entitlements, Math will just relent and allow 2 + 2 to equal 5 so the rest will add up.
But Math can’t be ignored and won’t compromise. We can plead and cry all day about how much spending cuts will hurt those in need, but this will not move Math. It’s a remorseless adding machine, and it will eventually balance its numbers and doesn’t care what it will have to destroy in the process. But the politicians don’t believe this, and while Obama has so little concern about Math that he sometimes even taunts it (“Obamacare will reduce the deficit!”), some of us see what Math did to Greece and wonder when it’s coming for us. Thus we few ask for spending cuts, as they’re all that will save us. I know it’ll be hard to tell a five year old he won’t get the exact same Medicare coverage as his grandma — especially since he won’t understand what you’re talking about — but that’s the only way to turn Math’s wrath.
People don’t want to listen. But Math is coming. It’s $16 trillion in debt and growing, and one day it will rise out of the water, and even those ignoring it will finally be afraid and gasp, “We’re going to need a bigger boat.”
No, you idiots! Haven’t you been listening? We need a smaller boat. One we can actually afford.
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http://www.youtube.com/watch?feature=player_embedded&v=gZgOOWAQfwc
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http://www.nypost.com/p/news/opinion/opedcolumnists/uncle_sam_sorry_day_of_reckoning_YEbcwLR5gToBx67TFUJ40J
Uncle Sam’s sorry day of reckoning
By JAMES PETHOUKIS
Last Updated: 11:11 PM, December 28, 2012
Posted: 11:01 PM, December 28, 2012
Never mind New Year’s Eve — Monday is Debt Ceiling Day! According to the best guesstimate by Treasury Secretary Timothy Geithner, the federal government on Monday will reach its statutory borrowing limit of $16.4 trillion — or roughly 104 percent of America’s total economic output.
A legal limit on federal debt was first enacted during World War I and has been increased 13 times since 1995. The most recent increase came after a major political battle in the summer of 2011 — a conflict that also led Standard & Poor’s to strip the United States of its AAA credit rating.
Now we’re back up against it again, thanks to a year when Uncle Sam spent more than $1.3 trillion more than he took in.
Don’t worry, it won’t be Debt Default Eve. Treasury’s bean-counters still have a few tricks up their sleeves. With some clever financial futzing, Geithner says his department can “temporarily postpone the date that the United States would otherwise default on its legal obligations.”
He reckons Treasury can probably squeeze out another two months and $200 billion through moves such as suspending payments into the government-employee pension fund, dipping into a special fund infrequently used to stabilize the dollar or even selling off the nation’s gold reserves.
But then what? March madness in the financial markets if Democrats and Republicans can’t agree to raise the ceiling, perhaps in the current round of fiscal-cliff talks?
Certainly it would be very bad if the US missed a debt payment. Last year, Geithner said a default would “inflict catastrophic, far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment.”
True enough, but that isn’t the real risk here — though the ceiling will have to be raised eventually. The feds have plenty of dough to pay bondholders and run auctions to roll over maturing debt. In 2013, according to the Congressional Budget Office, the net interest expense of the US government will be approximately $218 billion, while revenue will be nearly $3 trillion.
And if worst comes to worst, Treasury could theoretically mint several trillion-dollar platinum coins — there are laws covering paper money and coinage made of gold, silver and copper — and deposit them at the Fed. “The effects on the currency market and inflation are unclear, to say the least,” said analyst Jaret Seiberg of the Washington Research Group in a recent report. Right, “to say the least.”
Still, none of this is a real confidence-builder for a US economy still struggling to gain momentum some 3 1/2 years after the official end of the Great Recession. Indeed, some analysts think the uncertainty caused by the 2011 debt-ceiling fight was at least partially to blame for the economy’s summer swoon that year.
But one can hardly blame Republicans, then or now, for viewing the debt ceiling as possible leverage for pushing the Obamacrats to get serious, finally, about cutting spending. If tax rates were left alone, according to the CBO, tax revenue would average about 18 percent of GDP over the next decade, equal to its 40-year average and about $2 trillion more than today’s revenue level.
It’s spending that’s out of whack here. It would average 23 percent of GDP through 2022 under current law — vs. its historical average of 20 percent. And then Medicare really starts to take its budgetary bite. No realistic amount of tax increases could completely offset that.
See, the real debt ceiling is the one eventually imposed by global financial markets at some point on a profligate Washington. When that happens, Congress won’t be able to raise the ceiling even if it wants to. The only options then to avoid a financial crisis will be draconian austerity — both massive tax hikes and brutal entitlement cuts.
To avoid such an extreme budgetary makeover, Congress and President Obama should raise the debt ceiling while also laying plans to cap future spending and reform entitlements. A major fiscal remodeling job would be a great way to kick off 2013.
James Pethokoukis is editor of The American Enterprise Institute’s Enterprise blog
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McConnell was on the Sunday shows yesterday saying: "The Tax Issue Is Finished, Over, Completed".
http://www.realclearpolitics.com/video/2013/01/06/sen_mitch_mcconnell_the_tax_issue_is_finished_over_completed.html
Boehner was re-elected Speaker. Boehner says I need this job like a hole in the head. Chosen for what members hope he has learned in the previous deals, not for the results. Boehner is interviewed here today: http://online.wsj.com/article/SB10001424127887323482504578225620234902106.html?mod=WSJ_Opinion_LEADTop Boehner says the President denies there is any spending problem, just a healthcare problem all solved by Obamacare. Boehner explains the context of saying go f*** yourself to Harry Reid. Boehner who never loses his temper probably showed members that his heart is in the right place with that outburst.
Failure to raise the Debt Ceiling does not (necessarily mean default on the debt. Those who say it does contend that you cannot replace existing debt as it comes due without additional borrowing authority. Not true according to others, such as incoming Senator Ted Cruz. Upon a failure to raise the debt ceiling, the federal government still has the tax revenues cash register open collecting money at the rate of $2.9T/yr. Interest on the debt is currently just under $0.4T/yr. The spending budget is $3.8T/yr. including the interest on the debt. No additional borrowing ever would empower the President to allocate the 2.9T across our most critical expenses of approved spending and cut the rest. That is actually quite logical. We raised "emergency spending" "temporarily" by a trillion dollars. We chose this economy and growth rate as the new normal. Mr. President, you got the tax deal you wanted, now spend it any way that you want - and not a penny more.
Higher debt requires higher income to pay for it. At the very least, Republicans should require significant pro-growth initiatives passed, not just spending cuts, in exchange for more borrowing.
The Sequester is now the real lever. With Obama in office for another 4 years and Hagel or other anti-war, type coming to the Pentagon, there is no need for Republicans to fear defense cuts; they are coming anyway. Dems thought the Republicans would force the sequester fix into the last deal and they didn't. We get total cuts of '$1.2T over 10 years' (in CBOspeak) through the sequester and that far more anyone can through 'negotiations' with the President who has no ability, experience or inclination to do that.
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Is anyone/everyone following the uproar over the Paul Krugman proposal that we mint the trillion dollar coin, by executive order to get around congressional aversion to raising the debt ceiling?
http://krugman.blogs.nytimes.com/2013/01/07/be-ready-to-mint-that-coin/
Krugman's proposal points to the elephant in the room: If we aren't really borrowing to pay for our unprecedented spending deficits, if we are in fact buying 70-90% of our own debt which is not really borrowing at all, is it really debt restricted by a debt ceiling? If QE is what it is, inflation and devaluation of our currency instead of debt, why are we calling it debt? People like Bernancke and Geithner are well aware of this question IMHO and keeping their mouths shut about it.
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"If we aren't really borrowing to pay for our unprecedented spending deficits, if we are in fact buying 70-90% of our own debt which is not really borrowing at all, is it really debt restricted by a debt ceiling?"
A very penetrating question.
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Thanks Crafty. I wonder if anyone will address it.
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I opposed balanced budget amendment proposals for decades because balancing the budget with high spending and high taxes was potentially worse IMO than the smaller imbalances we had back then. I still oppose all versions of it that have no limits on spending and taxation.
Previous Republican proposals limit federal spending to 18% of GDP and require a super majority to raise taxes.
http://budget.senate.gov/democratic/index.cfm/floor-speech-on-gop-balanced-budget-amendment-december-13-2011#1
I would go as high as 20% for the spending limit and require supermajorities to raise taxes or raise the debt ceiling.
Passage with 2/3rds in both chambers of a balanced budget, spending limit amendment should be a requirement for Republican consent for any major debt ceiling increase. We need an endgame to the madness.
Obama and the Dems in Washington DC have nothing to worry about because after passage in Washington because it still would require ratification by 3/4ths of the state legislatures. Taking a reasonable and realistic proposal to the states and to the peole would be a very positive step.
Senator Barack Obama, in all his years in the Senate, never voted for a debt ceiling increase. He called the deficits and debt during the Bush economic boom "unpatriotic". His characterization is far more true now than it was then. Increasing borrowing that is maxed out already without a plan to increase income is beyond unpatriotic, more like treason - if escalating the rhetoric is the game being played.
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Correction: Credit for the Krugman trillion dollar coin idea may go back to Homer Simpson in a 1998 Simpsons episode called 'The Trouble with Trillions':
http://online.wsj.com/article/SB10001424127887324581504578231812006460892.html?mod=WSJ_Opinion_MIDDLETopOpinion
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Correction: Credit for the Krugman trillion dollar coin idea may go back to Homer Simpson in a 1998 Simpsons episode called 'The Trouble with Trillions':
http://online.wsj.com/article/SB10001424127887324581504578231812006460892.html?mod=WSJ_Opinion_MIDDLETopOpinion
Homer is the lesser of the cartoonish buffoons in this case.
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I could have put this in the Monetary thread, but put it here as a budgetary matter.
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http://detlevschlichter.com/2013/01/the-true-significance-of-the-1-trillion-coin/
The true significance of the $1 trillion coin
Image by Stuart Miles
Under President Obama the debt of the United States government has grown by about 50%, and now stands at close to $16 trillion. Every year, the US government spends between $1.2 and $1.5 trillion more than it takes in. Every day that financial markets are open the US government has to borrow an additional $4 billion.
The pathetic fiscal cliff ‘compromise’ of last week has proved the most cynical students of the political elite correct in that there is not a snowball’s chance in hell that Washington will ever get this under control.
Can this go on forever? No, it cannot — although adherents of the Church of Modern Monetary Theory now proclaim that its holiness, the State, is not restricted by earthly matters, and that no limits apply to it. “It simply prints the money!” Back on earth, however, such recklessness has consequences, and these consequences will ultimately put a very nasty end to proceedings. But politics will not fix this. This much is certain.
Political theatre
One of the annoying little things that stand in the way of more debt is the dreaded debt ceiling debate, a quaint congressional tradition according to which the politicians in Washington have to periodically pretend that they can indeed exercise self-constraint and that they would even obey self-imposed limits. After the usual self-serving theatrics, both parties agree that the debt ceiling should be lifted, that spending must continue, and that more debt should be accumulated – in the interest of the American people, the US and the global economy, social peace, and because the show must go on.
Since March 1962, the debt ceiling has been raised 74 times.
Enter The Coin!
In order to make this farce a tad easier next time, the following plan has been concocted. It has recently made the headlines. You can read about it here and here:
The U.S. treasury is to issue a platinum coin with a notional value (that is, a value that is fixed entirely arbitrarily by the government) of $1 trillion, and this coin is deposited with the Federal Reserve. In fact, the coin is used to pay down $1 trillion of US government bonds held presently by the Fed (The Fed holds more than $2 trillion in government bonds). Thus, tradable government debt that counts against the debt ceiling is swapped for a ‘commemorative’ coin that does not count against the debt ceiling. $1 trillion of government debt thus magically disappears.
The US government has its fans who believe that anything, legally or illegally, should be done to keep it living beyond its means for as long as possible. These fans are supporting the plan. Among them is, not surprisingly, Paul Krugman, who fears nothing more than a congressionally enforced coitus interruptus before the protracted orgy of money-printing and deficit-spending has a chance to climax – as he keeps promising us – in a wonderful return of self-sustaining growth.
But the plan has many critics. Their criticism strikes me, however, as rather naïve and faint, and also missing the true significance of it all.
Weak criticism
The critics make the following points:
1) This is just a trick and may not be legal.
2) It eases the pressure on politics to reduce the deficit meaningfully.
3) This could lead us onto the dangerous road toward debt monetization and could be inflationary.
Let me address each of these points before I come to what I consider the most important aspect of this.
Ad 1): Oh pleeeeze! Is it a trick? Is it a gimmick? Could it be illegal? – Are you stuck in the 1980s? – Of course, it is a trick and probably illegal! But who cares? Please get real. We have long passed the point at which any of the major governments feel constrained by such things as constitutions, laws, contracts or past promises. We live in a time of ‘anything goes’. Remember: “We will do whatever it takes!”
Look at Europe: From the start of the European debt crisis to today, EVERY rule that was set up at the start of EMU in order to govern it and to discipline its members, has been violated, ignored or shamelessly re-interpreted. The political class is making up its own rules as it goes along. Parliaments are rubber-stamping everything, and if they hesitate they are told that they could be held responsible for the ‘next Lehman’. Sign here, or else….
As I explained here, the US government has already abandoned habeas corpus, has arbitrarily annulled private contracts and will force Americans into commercial transactions. You think they will stop at the laws governing the issuance of commemorative coins? Do you really think that the army of lawyers that works for Washington cannot come up with a reasonably acceptable explanation (read: this side of totally laughable) for whatever the government wants to do that will sufficiently appease the folks at Harvard Law Review?
We may not get this specific version of the plan but something similar will certainly be implemented in the near future. You can bet on it. It is simply in line with current modes of thinking and the present political culture – or lack thereof.
Ad 2) The politicians will feel less pressure to enact real budget reform. – Oh come off it! There is neither real desire nor ability nor the required character and decency among the political elite to fix this self-inflicted budget mess. If you needed a reminder of the spinelessness and stupidity ruling Washington you only have to look at the great fiscal cliff compromise that was reached last week and that the equity market, evidently still on a drug-high from snorting unlimited lines of free central bank money, has been celebrating deliriously ever since. Let me say this in reference to a great quote by the incomparable P.J. O’Rourke: To expect Washington to reform itself and rein in spending is akin to giving your car keys, your credit card and a bottle of Jack Daniels to your 17-year old son and expect him to act responsibly.
Ad 3) Could this be the start of debt monetization?
Well, duh.
Debt monetization has been going on for years, is alive and kicking, and gets bigger by the day. In the US and Britain, the central banks are the largest holders of their respective governments’ debt and the largest marginal buyers. The Bank of England has monetized about 30 percent of outstanding debt and now has more UK Gilts (government bonds) on its balance sheet than the entire UK pension and insurance industry combined. Under its current program of ‘open-ended’ QE3 (or QE4, or QEwhatever) the Fed buys $85 billion worth of new Treasuries and other securities every month.
Let’s get this straight: The whole raison d’etre of central banks is that they print money to fund the state. The Bank of England – the mother of all central banks – was set up specifically for this purpose in 1694. Since then a whole list of elaborate excuses has been drawn up for why central banks are needed and useful, a list that looks more ridiculous by the day: Central banks control inflation and guarantee monetary and economic stability? The exact opposite is true: Central banks create inflation and cause monetary and economic instability. There is no escaping the conclusion that they are organs of state planning and systematic market manipulation and thus fundamentally incompatible with the free market. But one true purpose remains: funding government. Increasingly, it is the dominant function of the ECB, the Bank of Japan, the Bank of England, and the US Federal Reserve to secure cheap credit for their respective governments and their out-of-control spending programs.
There is nothing new, surprising, or shocking about the $1 trillion coin proposal. It is perfectly in tune with the zeitgeist and with established trends in politics.
Bernanke will need a new script
So, what is significant about it? – Only one thing in my view: It exposes Bernanke as a liar.
Remember that Bernanke, and also his other central bank chums, such as Mervyn King and Mario Draghi, have tried to maintain the myth that they could one day – if markets allowed it or required it – reduce their bloated balance sheets. During the financial crisis, the Fed has ballooned its balance sheet from $800 billion to close to $3 trillion. We are supposed to believe that this is all temporary. Just to provide a stimulus. Nobody calls this debt monetization or ‘funding the government’. Same in Europe: Mervyn calls it ‘unlocking the credit markets’, Mario calls it ‘making sure the monetary transmission mechanism works’. The idea is that when the economy is finally mended the central banks can ‘normalize’ their balance sheets. More importantly, should inflation concerns arise, the central banks would quickly mop up all the excess bank reserves that they provided through ‘quantitative easing’ and sell the very assets they accumulated during the easing cycle. That would mean liquidating the central bank’s holdings of – among other things – government bonds.
But once the government has replaced liquid government bonds on the central bank’s balance sheet with illiquid coins the central bank’s maneuverability is severely restricted. When the public gets nervous about inflation, the central bank would have to reverse its crisis-policies and sell assets. There is (still) a market for US Treasury debt. However, there is no market for $1 trillion coins.
While the central bankers try to convince the public that their buying of government debt is a special case, an exception, a temporary policy measure, and that they could still defend the value of paper money if circumstances require, the politicians have other plans. They already consider central bank buying a permanent source of funding – unlimited and ever-lasting. I have long maintained that the central banks have no ‘exit strategy’, that they will simply not be allowed to reverse course. This is now becoming part of the official narrative, and central bankers who maintain otherwise are either hopelessly deluded or simply lying.
The deficits are here to stay and they will be funded by the printing press. No limit, no end, no exit.
Will this lead to inflation? _ Well, unless you are a fully signed-up member of the Church of Modern Monetary Theory, you know the answer.
This will end badly.
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Rivkin and Casey: The Myth of Government Default
The Constitution commands that public debts be repaid. There is no such obligation to fund entitlement programs..
By DAVID B. RIVKIN JR.
AND LEE A. CASEY
WSJ
Three false arguments, pushed hard by the Obama administration and accepted on faith by the media and much of the political establishment, must be laid to rest if the American people are to understand the issues at stake in the federal "debt ceiling" debate.
The first is that Congress's failure to raise the debt ceiling—the amount of money the federal government is authorized to borrow at any given time—will cause a default on the national debt. The second is that federal entitlement programs are constitutionally protected from spending cuts. The third is that the president can raise the debt ceiling on his own authority.
To take up the first canard: Contrary to White House claims, Congress's refusal to permit new borrowing by raising the debt ceiling limit will not trigger a default on America's outstanding public debt, with calamitous consequences for our credit rating and the world's financial system. Section 4 of the 14th Amendment provides that "the validity of the public debt of the United States, authorized by law . . . shall not be questioned"; this prevents Congress from repudiating the federal government's lawfully incurred debts.
The original concern of this provision was to guarantee the integrity of federal debts incurred during and immediately after the Civil War (while the debts of the Confederacy were nullified permanently), and to ensure that a newly "reconstructed" Congress—to which the Southern states were readmitted—would not reverse these decisions. However, the amendment's language was not limited to the Civil War-related debts. In Perry v. United States (1935), the Supreme Court made clear that the provision "indicates a broader connotation" protecting the nation's debts as a whole.
This means that a failure to raise the debt ceiling—to prevent new borrowing—does not and cannot put America's current creditors at risk. So long as this government exists, and barring a further constitutional amendment, those creditors must be paid.
Nor are they at risk in practice, since the federal government's roughly $200 billion in tax revenue per month is more than sufficient to service existing debts. If the executive chose to act irresponsibly and unconstitutionally and failed to make any debt payments when they come due, debt-holders would be able to go to the Court of Federal Claims and promptly obtain a money judgment.
These basic facts should inform any credible decisions by credit-rating agencies in establishing the government's creditworthiness. Significantly, these agencies have traditionally acted favorably when heavily indebted countries have not defaulted on their debt but cut deeply their public spending.
Second, despite White House claims that Congress must raise the debt ceiling to pay the bills it has incurred, the obligations protected as "debts" by the 14th Amendment do not include entitlement programs such as Medicare and Social Security. These programs are not part of the "public debt," which consist of loans that are made to the federal government through bonds and similar financial instruments. Entitlement programs are instead political measures that are fully subject to the general rule that one Congress cannot, by simple legislation, prevent a future Congress from making cuts.
This fundamental and vital distinction is clear from both the text and the drafting history of the 14th Amendment's Section 4. The wording of the section was revised before its enactment and ratification to replace the term federal "obligations" with that of "debts," a far more narrow (and manageable) category.
The distinction was recognized by the Supreme Court in Flemming v. Nestor (1960), which involved the power of Congress to modify Social Security benefits. The court noted that entitlements and "contractual arrangements, including those to which a sovereign itself is a party, remain subject to subsequent legislation by the sovereign."
Congress can reduce a wide range of payments to various beneficiaries at any time by amending the statutes that authorize them or simply by failing to appropriate sufficient funds to pay for them. Nor does Congress have any legal or constitutional obligation to borrow money to pay for entitlements.
Third, assertions, most recently made by Nancy Pelosi, that the president can rely on Section 4 as a pretext for raising the debt ceiling by himself are manifestly incorrect and constitutionally dangerous. Section 4 grants no power whatsoever to the president—instead, the 14th Amendment grants Congress the "power to enforce, by appropriate legislation, the provisions of this article."
More fundamentally, this argument—which has been tentatively advanced and then tentatively withdrawn by the White House, both during the 2011 debt-ceiling battle and in the last several weeks—is contrary to the language, structure and history of the Constitution.
Like the British Parliament before it, Congress controls the power of the purse—the authority to raise taxes, borrow money and direct how revenues are spent. In particular, Article I, Section 2, grants to Congress the power "to borrow money on the credit of the United States." There is no similar grant to the president. Any effort by the chief executive to borrow money without congressional action would be every bit as injurious to our constitutional system as presidentially ordered taxation.
True enough, the "debt ceiling" is not a constitutional requirement. Congress could choose instead—as used to be the case during most of our history—to vote separately on the issuance of each federal debt instrument. However, nowhere in the Constitution is the president authorized to borrow or spend money without congressional action, except insofar Congress itself may permit.
Once these false arguments are cleared away, the real issue in the debt-ceiling debate becomes clear: the proper level of federal spending. Should Congress fail to increase the debt ceiling as much as the president wants, the effective result would be major government spending cuts, with payments on public debt excluded.
This is tough medicine and not to be administered lightly. If Republicans are serious about winning this debate, they must strive to convince the American people that such spending cuts are necessary, given President Obama's openly articulated unwillingness to implement any meaningful spending cuts other than defense and his clear preference for limitless borrowing.
Whether they can succeed in this task is unclear. But the public must at least be allowed to ponder these vital issues without being misled by false claims involving debt default, the nature of federal obligations, and which branch of government is in charge of the public fisc.
Messrs. Rivkin and Casey are partners in the Washington, D.C., office of Baker Hostetler LLP and served in the White House and Justice Department during the Ronald Reagan and George H.W. Bush administrations.
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The Dwindling Deficit
By PAUL KRUGMAN
Published: January 17, 2013 228 Comments
It’s hard to turn on your TV or read an editorial page these days without encountering someone declaring, with an air of great seriousness, that excessive spending and the resulting budget deficit is our biggest problem. Such declarations are rarely accompanied by any argument about why we should believe this; it’s supposed to be part of what everyone knows.
This is, however, a case in which what everyone knows just ain’t so. The budget deficit isn’t our biggest problem, by a long shot. Furthermore, it’s a problem that is already, to a large degree, solved. The medium-term budget outlook isn’t great, but it’s not terrible either — and the long-term outlook gets much more attention than it should.
It’s true that right now we have a large federal budget deficit. But that deficit is mainly the result of a depressed economy — and you’re actually supposed to run deficits in a depressed economy to help support overall demand. The deficit will come down as the economy recovers: Revenue will rise while some categories of spending, such as unemployment benefits, will fall. Indeed, that’s already happening. (And similar things are happening at the state and local levels — for example, California appears to be back in budget surplus.)
Still, will economic recovery be enough to stabilize the fiscal outlook? The answer is, pretty much.
Recently the nonpartisan Center on Budget and Policy Priorities took Congressional Budget Office projections for the next decade and updated them to take account of two major deficit-reduction actions: the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade; and the roughly $600 billion in tax increases on the affluent agreed to at the beginning of this year. What the center finds is a budget outlook that, as I said, isn’t great but isn’t terrible: It projects that the ratio of debt to G.D.P., the standard measure of America’s debt position, will be only modestly higher in 2022 than it is now.
The center calls for another $1.4 trillion in deficit reduction, which would completely stabilize the debt ratio; President Obama has called for roughly the same amount. Even without such actions, however, the budget outlook for the next 10 years doesn’t look at all alarming.
Now, projections that run further into the future do suggest trouble, as an aging population and rising health care costs continue to push federal spending higher. But here’s a question you almost never see seriously addressed: Why, exactly, should we believe that it’s necessary, or even possible, to decide right now how we will eventually address the budget issues of the 2030s?
Consider, for example, the case of Social Security. There was a case for paying down debt before the baby boomers began to retire, making it easier to pay full benefits later. But George W. Bush squandered the Clinton surplus on tax cuts and wars, and that window has closed. At this point, “reform” proposals are all about things like raising the retirement age or changing the inflation adjustment, moves that would gradually reduce benefits relative to current law. What problem is this supposed to solve?
Well, it’s probable (although not certain) that, within two or three decades, the Social Security trust fund will be exhausted, leaving the system unable to pay the full benefits specified by current law. So the plan is to avoid cuts in future benefits by committing right now to ... cuts in future benefits. Huh?
O.K., you can argue that the adjustment to an aging population would be smoother if we commit to a glide path of benefit cuts now. On the other hand, by moving too soon we might lock in benefit cuts that turn out not to have been necessary. And much the same logic applies to Medicare. So there’s a reasonable argument for leaving the question of how to deal with future problems up to future politicians.
The point is that the case for urgent action now to reduce spending decades in the future is far weaker than conventional rhetoric might lead you to suspect. And, no, it’s nothing like the case for urgent action on climate change.
So, no big problem in the medium term, no strong case for worrying now about long-run budget issues.
The deficit scolds dominating policy debate will, of course, fiercely resist any attempt to downgrade their favorite issue. They love living in an atmosphere of fiscal crisis: It lets them stroke their chins and sound serious, and it also provides an excuse for slashing social programs, which often seems to be their real objective.
But neither the current deficit nor projected future spending deserve to be anywhere near the top of our political agenda. It’s time to focus on other stuff — like the still-depressed state of the economy and the still-terrible problem of long-term unemployment.
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"Mr. Boehner is also adorning this debt-ceiling delay with legislative language that requires the House and Senate to pass budget outlines, or see their pay withheld. This is a shot at Harry Reid's Senate, which has not passed a budget in four years." Today's WSJ lead editorial: http://online.wsj.com/article/SB10001424127887324624404578258221969657306.html?mod=WSJ_Opinion_LEADTop
- Odd that Republicans would want to draw attention to their obstructionism, or is Jack Lew lying?
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http://www.youtube.com/watch?v=rPRtIOmPOD0
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Trust them with your health care, but the Feds also know what is best to light and heat you house - all without even knowing you. There is a new federal furnace law for 2013, all replacements (after May 1) must be of the 'high efficiency' type.
Being in the housing business in a very cold climate, this is something I have studied at great length and am still learning. Not the Feds. They know what is best for you when the bill hits their desk, even if the sudden, unexpected cost of the mandate could cost you your home or business.
High efficiency furnaces are far mmore costly to buy and install, are way more complicated, are FAR less reliable, and aren't the best solution for all circumstances. Imagine that.
Today I came back from an extended trip to find my house totally frozen. That law isn't in effect yet but I take great pride in keeping my energy usage and expense very low without their help coercion. I was quite pleased with myself having a super high efficient setup in place, having had my thermostat turned way down and being gone during some of the coldest weather in memory, average lows of ten below and a high of five below Monday. Not counting wind chill. Saved more money than a call to Geico. Not counting the damage.
Older furnaces waste heat right up the chimney, which also keeps the chimney exhaust open and rising out of the house. Newer, high efficiency, condensing furnaces make a condensate in combustion. They create water vapor as an exhaust gas and then blow it out the side of the house. Great idea - in the summer, or in a mild climate or where you run the furnace constantly to keep the waste heat coming. By the nature of it, the outside of the house is a potentially cold place - where water vapor FREEZES. In my case, it froze the exhaust line all the way shut - rock solid with ice, which with the first safety pressure check shuts off all heat. Now in order to turn my furnace down I will need to add electric heat to the exhaust of my 96% furnace because the 4% loss isn't enough heat to keep the line open. Or as others do, I can turn my thermostat much higher up than I would with an older style furnace as a precaution, in order to compensate for the design problem and avoid destroying all the plumbing again.
What do the Feds say about the issues I raised. So what! Mandate it. Every state, every month, every climate is different, so let's pass a law that applies exactly the same to everyone - before the technology is ready. If it doesn't work, what do they care? Should I sit outside and wait for FEMA? They never came when my homes were hit by tornado.
There is something very condescending about believing that people will not do the right thing on their own unless those who know better pass a law.
In the old days, you had to make a good light bulb or furnace first, make it bright, warm, durable and cost competitive, something people would want and choose to buy. Not is in this elitist fascism system that replaced freedom.
Good luck with the Feds running your health care.
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Trust them with your health care, but the Feds also know what is best to light and heat you house - all without even knowing you. There is a new federal furnace law for 2013, all replacements (after May 1) must be of the 'high efficiency' type.
Being in the housing business in a very cold climate, this is something I have studied at great length and am still learning. Not the Feds. They know what is best for you when the bill hits their desk, even if the sudden, unexpected cost of the mandate could cost you your home or business.
High efficiency furnaces are far mmore costly to buy and install, are way more complicated, are FAR less reliable, and aren't the best solution for all circumstances. Imagine that.
Today I came back from an extended trip to find my house totally frozen. That law isn't in effect yet but I take great pride in keeping my energy usage and expense very low without their help coercion. I was quite pleased with myself having a super high efficient setup in place, having had my thermostat turned way down and being gone during some of the coldest weather in memory, average lows of ten below and a high of five below Monday. Not counting wind chill. Saved more money than a call to Geico. Not counting the damage.
Older furnaces waste heat right up the chimney, which also keeps the chimney exhaust open and rising out of the house. Newer, high efficiency, condensing furnaces make a condensate in combustion. They create water vapor as an exhaust gas and then blow it out the side of the house. Great idea - in the summer, or in a mild climate or where you run the furnace constantly to keep the waste heat coming. By the nature of it, the outside of the house is a potentially cold place - where water vapor FREEZES. In my case, it froze the exhaust line all the way shut - rock solid with ice, which with the first safety pressure check shuts off all heat. Now in order to turn my furnace down I will need to add electric heat to the exhaust of my 96% furnace because the 4% loss isn't enough heat to keep the line open. Or as others do, I can turn my thermostat much higher up than I would with an older style furnace as a precaution, in order to compensate for the design problem and avoid destroying all the plumbing again.
What do the Feds say about the issues I raised. So what! Mandate it. Every state, every month, every climate is different, so let's pass a law that applies exactly the same to everyone - before the technology is ready. If it doesn't work, what do they care? Should I sit outside and wait for FEMA? They never came when my homes were hit by tornado.
There is something very condescending about believing that people will not do the right thing on their own unless those who know better pass a law.
In the old days, you had to make a good light bulb or furnace first, make it bright, warm, durable and cost competitive, something people would want and choose to buy. Not is in this elitist fascism system that replaced freedom.
Good luck with the Feds running your health care.
Doug,
This is something to consider with a very possible grid collapse in the near future.
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"Doug, This is something to consider with a very possible grid collapse in the near future."
Very interesting. Do people know that without electricity you will not have heat even with most natural gas or oil systems? Without heat in a cold climate you will not have water.
The oldest furnaces I have are called gravity systems, natural gas with no blower at all. Electricity is required only in low voltage to run the thermostat circuit. Our government wants those removed and replaced with very complex circuitry with innumerable fault points. Is that good, is that bad, or is that none of their g*ddamned business?
The government program to address this should be back off and foster prosperity so that we might be able to procure, on our own, alternatives and backup systems.
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They aren't worried, they'll have an obamaheater to go with their obamaphone.
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No quarterly reports ( of course they would be fudged with ridiculous accounting swindling shell games anyway) since 2011. Obama violating a law HE SIGNED! Why we hear of it after the election is also another hint of corruption. Who has the power to enforce laws? Congress?
http://www.weeklystandard.com/blogs/obama-continues-violate-his-own-stimulus-law-not-releasing-quarterly-reports_697896.html
Yes the liberal *elite* , those *0.1% ers*, the *liberal politburo*, the self delegated ones who behind closed doors are conspiring what is best for the world including the journolisters have succeeded in keeping this quite.
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Here are the opening paragraphs of that article:
"Have you heard much about President Obama’s $787,000,000,000 economic “stimulus” (now estimated to cost $831,000,000,000) lately? In its last report, published in 2011, the president’s own Council of Economic Advisors released an estimate showing that, for every $317,000 in “stimulus” spending that had by then gone out the door, only one job had been created or saved. Even in Washington, that’s not considered good bang for the buck.
"Moreover, that was the fifth consecutive “stimulus” report that showed this number getting progressively worse.
"Alas, that was the last report we’ve seen. Never mind that Section 1513 of the “stimulus” legislation, which Obama spearheaded and signed into law, requires the executive branch to submit a new report every three months. It reads:
"“In consultation with the Director of the Office of Management and Budget and the Secretary of the Treasury, the Chairperson of the Council of Economic Advisers shall submit quarterly reports to the Committees on Appropriations of the Senate and House of Representatives that detail the impact of programs funded through covered funds on employment, estimated economic growth, and other key economic indicators.”"
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Serious consequences for our military , , ,
http://www.washingtontimes.com/news/2013/jan/30/let-the-sequesters-begin-some-republicans-say/?page=all#pagebreak
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E. Fuller Torrey: Fifty Years of Failing America's Mentally Ill
JFK's dream of replacing state mental hospitals with community mental-health centers is now a hugely expensive nightmare..
By E. FULLER TORREY
On Feb. 5, 1963, 50 years ago this week, President John F. Kennedy addressed Congress on "Mental Illness and Mental Retardation." He proposed a new program under which the federal government would fund community mental-health centers, or CMHCs, to take the place of state mental hospitals. As Kennedy envisioned it, "reliance on the cold mercy of custodial isolations will be supplanted by the open warmth of community concern and capability."
President Kennedy's proposal was historic because the public care of mentally ill individuals had been exclusively a state responsibility for more than a century. The federal initiative encouraged the closing of state hospitals and aborted the development of state-funded outpatient clinics in process at that time.
Over the following 17 years, the feds funded 789 CMHCs with a total of $2.7 billion ($20.3 billion in today's dollars). During those same years, the number of patients in state mental hospitals fell by three quarters—to 132,164 from 504,604—and those beds were closed down.
From the beginning, it was clear that CMHCs were not interested in taking care of the patients being discharged from the state hospitals. Instead, they focused on individuals with less severe problems sometimes called "the worried well." Federal studies reported individuals discharged from state hospitals initially made up between 4% and 7% of the CMHCs patient load, and the longer the CMHC was in existence the lower this percentage became.
It has now become politically correct to claim that this federal program failed because not enough centers were funded and not enough money was spent. In fact, it failed because it did not provide care for the sickest patients released from the state hospitals. When President Ronald Reagan finally block-granted federal CMHC funds to the states in 1981, he was not killing the program. He was disposing of the corpse.
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Meantime, during the years CMHCs were funded, Medicaid and Medicare were created and modifications were made to the Supplemental Security Income and Social Security Disability Insurance programs. None of these programs was originally intended to become a major federal support for the mentally ill, but all now fill that role. The federal takeover of the mental-illness treatment system was complete.
Fifty years later, we can see the results of "the open warmth of community concern and capability." Approximately half of the mentally ill individuals discharged from state mental hospitals, many of whom had family support, sought outpatient treatment and have done well. The other half, many of whom lack family support and suffer from the most severe illnesses such as schizophrenia and bipolar disorder, have done poorly.
According to multiple studies summarized by the Treatment Advocacy Center, these untreated mentally ill are responsible for 10% of all homicides (and a higher percentage of the mass killings), constitute 20% of jail and prison inmates and at least 30% of the homeless. Severely mentally ill individuals now inundate hospital emergency rooms and have colonized libraries, parks, train stations and other public spaces. The quality of the lives of these individuals mocks the lofty intentions of the founders of the CMHC program.
Perhaps the most remarkable aspect of this 50-year federal experiment is its inordinate cost. In 2009, 4.7 million Americans received SSI or SSDI because of mental illnesses, not including mental retardation, a tenfold increase since 1977. The total cost was $46 billion. The total Medicaid and Medicare costs for mentally ill individuals in 2005 was more than $60 billion.
Altogether, the annual total public funds for the support and treatment of mentally ill individuals is now more than $140 billion. The equivalent expenditure in 1963 when Kennedy proposed the CMHC program was $1 billion, or about $10 billion in today's dollars. Even allowing for the increase in U.S. population, what we are getting for this 14-fold increase in spending is a disgrace.
Including President Kennedy, five Democratic and five Republican presidents have presided over the 50-year federal experiment. Jimmy Carter and George H.W. Bush appointed presidential commissions to examine the failed programs, but nothing useful came from either.
Nor is President Obama likely to do anything, since his lead agency, the Substance Abuse and Mental Health Services Administration, has essentially denied that a problem exists. Its contribution to the president's response to the Dec. 14 Newtown tragedy focused only on school children and insurance coverage. And its current plan of action for 2011-14, a 41,000-word document, includes no mention of schizophrenia, bipolar disorder or outpatient commitment, all essential elements in an effective plan for corrective action.
The evidence is overwhelming that this federal experiment has failed, as seen most recently in the mass shootings by mentally ill individuals in Newtown, Conn., Aurora, Colo., and Tucson, Ariz. It is time for the federal government to get out of this business and return the responsibility, and funds, to the states.
The federal government, perhaps through the Institute of Medicine, would be responsible only for evaluating and rating state programs, much as it now does for education. The ultimate responsibility would rest with state legislatures and governors. Then, for the first time in 50 years, somebody could be held accountable for what has become an ongoing disaster.
Dr. Torrey is founder of the Treatment Advocacy Center and author of "American Psychosis: How the Federal Government Destroyed the Mental Illness Treatment System," forthcoming from Oxford University Press.
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Second post of morning:
The GOP's ObamaCare Flippers
How the law's perverse incentives—and the health lobby—captured Arizona's Governor. .
As D-Day looms for ObamaCare, one big question is how many states will sign up for its Medicaid expansion. The recent and spectacular flip-flop of Arizona Governor Jan Brewer is a case study in the political pressure and fiscal gimmicks designed to get states to succumb. It's also a study in the arcane and perverse ObamaCare incentives that are intended to gather ever more health-care spending under federal control.
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Arizona's current Medicaid program is well run by the program's standards—a low bar—but it is also too large. The program now finances one of every two in-state births and two of every three days seniors spend in nursing homes. Spending tripled in the last decade to $9 billion a year.
That's despite $1.8 billion in cuts since 2009. The state fisc was such a mess that in 2010 Arizona Medicaid banned paying for several types of organ transplants. In March of that year, Ms. Brewer wrote to Mr. Obama calling the Affordable Care Act "a vast new entitlement program that our country does not have the resources to support" and also one that "makes our situation much worse, exacerbating our state's fiscal woes by billions of dollars."
Arizona argued before the Supreme Court that the Medicaid mandate was unconstitutional, anti-federalist commandeering—and seven Justices agreed it was "a gun to the head" and allowed states to opt out without penalty.
But so much for that. In her State of the State address last month, Ms. Brewer pulled a political 180°—or maybe 540°—and said expanding Medicaid would "inject $2 billion into our economy and "save and create thousands of jobs." (Is Larry Summers moonlighting as a Brewer speechwriter?)
One secret of her switcheroo is Medicaid's "matching rate" formula, in which the feds pick up 67% of Arizona's existing spending and 100% (and later 90%) of the costs of ObamaCare's newly eligible population. The state supposedly no longer needs to spend "billions" but merely an extra $154 million in 2014—then bank $1.6 billion from Washington, which her budget documents call "a return on investment of more than 10-to-1."
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Arizona Governor Jan Brewer
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How can the state conjure such money from nothing? The answer is that Ms. Brewer and Arizona hospitals have cooked up a spending scheme to rip off national taxpayers to avoid even the $154 million the state would at first pay. The hospital lobby first floated this scheme in 2011 "for the specific purpose of generating matching federal Medicaid funds."
Here's how it works: Arizona will tax hospitals and insurers for the $154 million. Then it will return $154 million to the health industry via more Medicaid business that will cover the cost of the tax and then some. The money needs to make a round trip from providers to the state and back to providers to game that 67% federal matching rate.
So Arizona takes (say) $3 from a hospital and then turns around and pays the $3 back, using one of the hospital's own dollars that Arizona converted to "revenue" plus two dollars courtesy of Washington for its 67% federal share of the $3 payment. Arizona can then use the hospital's remaining $2 of the original $3 to pay for another $6 of Medicaid expansion.
Some 49 state now use this trick of so-called provider taxes to goose federal spending, up from 21 in 2003. (Alaska is the exception.) But the practice is so abusive that even Mr. Obama proposed new limits in his last two budgets.
This subsidy honeypot can't last forever, which is why other Governors are more skeptical about this Obama Medicaid windfall. When the money inevitably runs out, states will retain permanently larger obligations and lose budget autonomy for a generation or two as health care crowds out other priorities like education and roads.
Ms. Brewer was nonetheless besieged by health-industry lobbying, especially from hospitals that want more government money and the insurers that administer Medicaid. The campaign is orchestrated by Chuck Coughlin, Ms. Brewer's former political strategist, and Peter Burns, a former Brewer budget consultant.
Providers are especially powerful at the state and local level, and the goal now is to rush the Brewer-Obama condominium through the Phoenix legislature with little debate. A particular offender is the Arizona Hospital and Healthcare Association, a trade group whose 2012 agenda includes "Oppose Taxpayer Bill of Rights-style legislative referendums or bills that arbitrarily limit state spending."
Ms. Brewer's other rationale is that everybody else is doing it, and that if Arizona opts out of a larger Medicaid then "Arizona's tax dollars would simply be passed to another state." Well, no, Washington would simply spend less money that it doesn't have. In any event Arizona is already a net tax beneficiary—pulling down $1.19 from the feds for every dollar it sends to D.C., according to the Tax Foundation.
Ten other GOP Governors have rejected Mr. Obama's Medicaid bribe, with another 20, Democrats and Republicans, undecided. Twenty are expanding, including Republicans Brian Sandoval of Nevada, Susana Martinez of New Mexico, Jack Dalrymple of North Dakota and even, on Monday, Ohio's John Kasich. Thus does modern government create the carrots and sticks of ever-larger government.
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Ryan: CBO Report is a Warning of the Challenges Ahead
The President and Senate Democrats need to get serious about spending.
February 5, 2013
WASHINGTON—Today, the Congressional Budget Office released its Budget and Economic Outlook, which projected an $845 billion deficit for fiscal year 2013. In response, House Budget Committee Chairman Paul Ryan of Wisconsin issued the following statement:
“The CBO’s report is yet another warning that we need to get spending under control. The deficit is still unsustainable. By 2023, our national debt will hit $26 trillion. We can’t let that happen. We need to budget responsibly, so we can keep our commitments and expand opportunity.
“Unfortunately, the President has yet to produce a budget—in violation of federal law. And Senate Democrats haven’t passed a budget in nearly four years.
“This isn’t a partisan issue. It’s math. Unless the President and the Senate offer a credible plan to close the deficit, we will have a debt crisis—and the country will suffer.
“House Republicans have offered their solutions. Now the President and Senate Democrats must do the same.”
CBO’s Key Findings
• The CBO projects an $845 billion deficit for fiscal year 2013.
•In 2023, the federal government will collect twice as much revenue as it did in 2012. Even so, the deficit will hit $978 billion.
• The CBO projects the total debt will rise by $10 trillion by the end of the budget window (debt held by the public will rise by $8.7 trillion). By 2023, total debt will equal $26 trillion.
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WSJ
Don't Count on China to Bail Out the U.S.
Beijing's net investment in U.S. Treasurys over the past two years is essentially zero..
by TIMOTHY BEARDSON
Hong Kong
With the U.S. likely to continue running substantial deficits, Americans wonder if China is going to continue buying up U.S. Treasurys. The short answer is yes, China will continue to buy U.S. Treasurys—but Beijing will not likely finance America's mounting deficits and debt.
China's holdings of $1.17 trillion in U.S. Treasurys in November 2012—the most recent date for which we have a figure—are virtually unchanged from two years earlier, when they stood at $1.16 trillion. Beijing has purchased a lot of Treasurys over this period but many have been redeemed. Net new investment is essentially zero.
The largest buyer of new U.S. Treasurys during the past three years has been not China but the U.S. Federal Reserve. In fiscal year 2011, for example, the Fed bought more than three-fourths of all new Treasury debt.
Some additional perspective: China's holdings of U.S. Treasury securities in November 2012 were barely more than those of Japan and represented just over 7% of total U.S. public debt. Moreover, the rate of interest that Beijing is getting on its on its Treasury holdings—0.33%, according to an estimate in a study published by the Peterson Institute for International Economics—is well below its estimated 2.13% domestic cost of borrowing at home in China.
As much of China's holding of U.S. Treasurys is financed by issuing higher-interest debt to domestic investors, China incurs losses estimated to be $66 billion annually, according to the Peterson Institute study, "The Internal Cost of China's Currency Policy." The renminbi, China's currency, has been steadily rising against the dollar since 2005—by 33% from mid-2005 until 2013. Every upward movement in the Chinese currency creates a capital loss on Beijing's holdings in U.S. dollars. These are uncomfortable circumstances for China to be invested in Treasurys.
Nor is Beijing's financial position as strong as is often suggested. Its ratio of tax revenue to total GDP is one of the lowest of any major country. The ratio of total government revenue to GDP in 2011 was an estimated 34% in the U.S., 52% in France and 23% in China. The Chinese state extracted a smaller share of the country's GDP than any other significant country.
One reason for low government revenue is low business taxes. China's export industries often operate on very thin profit margins. For example, China had $4.6 billion worth of iPhone exports in 2009, of which just over 3.5% represented value added in China. The rest of the value represented in these exports arose from components manufactured elsewhere and imported to China for assembly.
With thin profit margins, overall tax revenues aren't sufficient to build up the military as fast as the government would like. Moreover, state spending on health care, education and care for the elderly has been held back. And yet—with hospitalization impossibly expensive for many, no university in the world's top 100 at a time of state-mandated innovation, and a tripling in the elderly to over 300 million before 2040—spending on these matters are of growing concern.
The International Monetary Fund estimated in 2011 that China's public debt was 26% of its GDP. The reported budget is normally balanced and its debt is mostly in domestic currency. However, the off-balance-sheet liabilities of provincial and municipal government are hard to quantify: Official estimates exceed $1 trillion and unofficial estimates reach as high as $4 trillion. In addition, ministries such as the railway ministry have found ingenious ways of accumulating off-balance-sheet debt. There is also the unquantified level of village debt, which has started to attract attention. One estimate from the Ministry of Finance is that village debt alone amounts to 10% of GDP.
No one seems to know the real total debt-to-GDP ratio of China, but a more reasonable estimate could be 60%. I believe what this will mean is that—rather than ride to the rescue of the Western world's financial system—China will devote more attention to managing carefully its own debt. While Beijing may continue to roll over its maturing U.S. Treasurys, it is unlikely to substantially increase its exposure.
Mr. Beardson founded and ran Crosby Financial Holdings, the largest investment bank in the Far East. His book "Stumbling Giant: The Threats to China's Future" will be published by Yale University Press in May 2013
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Don't Fear the Sequester To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Senior Economist
Date: 2/19/2013
The double dip that never was, is certain this time…right? When automatic federal spending cuts – the sequester – takes place on March 1st, just say Sayonara to economic growth.
That’s the conventional wisdom these days. And, by the way, this is the third time these spending cuts have hit the pouting pundits’ radar screen. Back in August 2011, politicians made a deal to raise the debt ceiling, which set up a special “super committee,” made up of six Democrats and six Republicans, which was supposed to make a deal to cut the deficit. Standard and Poor’s cut the US debt rating to AA+ from AAA, but the super committee failed. Big surprise, right? As a result, across-the-board spending cuts were scheduled to go into effect on January 1, 2013 – the spending sequester.
But, of course, that didn’t happen either. As part of the “fiscal cliff” deal at the start of the year, they agreed to postpone the sequester until March 1st.
Since then, Republicans have allowed the debt ceiling to rise again, thinking it was a loser politically, and instead have focused on the sequester as the appropriate vehicle to gain leverage on Democrats. They want to use the sequester as a tool to get broader spending reduction, especially reform of entitlement programs that are really at the core of our long-term budget problems. But this will not happen, and the sequester is highly likely to go into effect, as scheduled, on March 1.
The first thing to realize is that implementing the sequester is not the end of the world. Not by a long shot.
According to the Congressional Budget Office, if the sequester goes into effect as scheduled, it will reduce spending from its current path by $43 billion over the last seven months of this fiscal year – March to September. While this is 2% of all federal spending over that timeframe, it’s only 0.5% of GDP and it’s not an actual cut in the level of spending.
Many pundits throw around a figure of $85 billion in “cuts” for the remainder of this year, but that refers to “budget authority,” not outlays. (Budget authority is what an agency can spend, outlays are what it actually spends.) Yes, if the sequester stays in place, outlay cuts would catch up to cuts in budget authority. And, contractors could lay-off people today if they don’t see the authority for future spending.
But the reduction in planned spending increases of just $43 billion will not be as catastrophic as many fear. The phase-out of the payroll tax cut of the last two years, all by itself, is supposed to raise revenue by more than $100 billion per year. And, so far, we’ve yet to see evidence of a downturn.
Most importantly, this whole argument about spending cuts is based in Keynesian economics and misses the point. Federal spending is way too high. And every dime the government spends must be paid for by the private sector, in the form of taxes or debt (which is just taxes at a later date). The bigger the federal government, the smaller the private sector, the less dynamic the economy is and the fewer jobs are created.
As a result, we believe the sequester could be good for the economy and job creation. Unfortunately, a large share of the sequesters’ budget cuts fall on the military (particularly defense procurement) instead of the entitlement programs that are driving our long-term spending problems. But, hey, this is what they agreed to and maybe it will force some lawmakers to get serious about actually fixing our problems rather than just kicking the can down the road.
Our biggest worry is that after March 1, President Obama makes a simple request to add back to military spending without finding budget cuts elsewhere to pay for it – or worse, with tax hikes – and Congress goes along. That would reverse the positive impact of the sequestration.
The bottom line is that the supposed negative impact of spending cuts is a figment of the exaggerated and fearful nature of the punditry. Don’t fear the sequester; lean into the wind and pray that someone in DC is willing to do the right thing.
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A bit of reality from Westbury, for once.
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Hysterics Over 'Cuts'
February 20, 2013
The Foundation
"We must not let our rulers load us with perpetual debt." --Thomas Jefferson
Editorial Exegesis
"During the summer 2011 debt ceiling battle, President Obama's White House came up with the idea of sequestration. It is a mechanism designed to trigger automatic spending cuts in the event that a congressional 'super committee' couldn't agree to at least $1.2 trillion in deficit reduction. Congress passed the White House proposal, and Obama signed it into law. And in November 2011, Obama vowed, 'I will veto any effort to get rid of those automatic spending cuts to domestic and defense spending. There will be no easy offramps on this one.' How times have changed. With the automatic spending cuts scheduled to go into effect March 1, it's now Obama who is imploring Congress to undo them. As is his wont, he's resorting to demagoguery to make his case. Surrounding himself with first responders during a speech on Tuesday, Obama predicted a virtual apocalypse if the cuts he once supported now go into effect. 'Emergency responders like the ones who are here today -- their ability to help communities respond to and recover from disasters will be degraded,' he said. 'Border Patrol agents will see their hours reduced. FBI agents will be furloughed. Federal prosecutors will have to close cases and let criminals go. Air traffic controllers and airport security will see cutbacks, which means more delays at airports across the country. Thousands of teachers and educators will be laid off. Tens of thousands of parents will have to scramble to find child care for their kids. Hundreds of thousands of Americans will lose access to primary care and preventive care like flu vaccinations and cancer screenings.' ... Over a decade, the $1.2 trillion in scheduled cuts are barely more than a rounding error when compared with the $48 trillion the federal government would otherwise spend, according to the Congressional Budget Office. To say the sequester will not be painful for many would be untrue. But if Obama wants to preserve his credibility, he should probably stifle the Chicken Little routine. The historical and continued growth in government spending will not even stop to take a breath, because the 'cuts' in spending are actually just reductions in the projected growth of government spending. ... If Obama can't manage an ever-growing budget like this one without turning criminals loose on the population, then perhaps he's out of his league serving as president." --The Washington Examiner
Upright
"When the Budget Control Act ... was adopted, it called for the automatic cuts to begin on January 1, 2013 -- three months into the [U.S. Government] fiscal year. To the surprise of no one, the House and the Senate and the President didn't want to live with the fruits of their fruitlessness, and so on January 2, 2013 they passed a quick law delaying the effects of sequestration until March 1, 2013 -- five months into the fiscal year. That bill was grandly named the American Taxpayer Relief Act of 2012. That's the one that raised income taxes on rich people and payroll taxes on the rest of us thus providing tax relief to no one. ... You might have noticed that the House, the Senate and the President are so worried about this looming March 1 deadline that they are -- all 536 of them -- on vacation. ... Here's what we know: The Congress and the President are incapable of cutting anything from any program, ever. If the only way to reduce spending is by instituting automatic cuts, then I am for allowing the sequester to take effect and see what happens." --columnist Rich Galen
"Instead of letting obsolete government programs die, bureaucrats come up with new excuses to keep spending. ... The Washington Post reports on a federally supported program that is so bad that even President Obama wants it cut. The Christopher Columbus Fellowship spent 80 percent of its money on overhead. Three Republicans introduced legislation to end it, but the subsidy lives on, because one senator, Thad Cochran, R-Miss., likes it. So America continues to move toward bankruptcy. Instead of addressing that, the politicians will spend more. Instead of announcing 15 new 'manufacturing' hubs, the president should just announce 300 million 'do whatever you want with your own money' hubs. Then American citizens can do as they please. That would actually do some good." --columnist John Stossel
"Many lawmakers view commitment as nothing more than a marriage of convenience that lasts only through Election Day. Where else can a presidential candidate run for office proclaiming 'Read my lips: no new taxes' and within months of assuming office, support a massive tax hike on the American people? Politicians including President Obama, Vice President Joseph R. Biden Jr. and Sen. Robert P. Casey Jr. of Pennsylvania pledged fidelity to the Second Amendment during their campaigns, yet now these Democrats propose and support the most comprehensive attack on gun ownership in generations." --The Washington Times
"I am unalterably opposed to a bunch of billionaires financing a boss to pick candidates in 50 states. This is the opposite of the Republican tradition of freedom and grassroots small town conservatism. No one person is smart enough nor do they have the moral right to buy nominations across the country. That is the system of Tammany Hall and the Chicago machine. It should be repugnant to every conservative and every Republican." --Newt Gingrich on Karl Rove's new PAC
Insight
"The further a society drifts from truth, the more it will hate those that speak it." --English novelist and journalist George Orwell (1903-1950)
"The more rules and regulations, the more thieves and robbers there will be." --Father of Taoism Lao-Tzu (570-490 BC)
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George Will hits Obama's slow hanging curve ball out of the park:
http://www.washingtonpost.com/opinions/george-will-the-manufactured-crisis-of-sequester/2013/02/22/d22d4466-7c81-11e2-82e8-61a46c2cde3d_story.html
George F. Will
Opinion Writer, Washington Post
The manufactured crisis of sequester
The sequester has forced liberals to clarify their conviction that whatever the government’s size is at any moment, it is the bare minimum necessary to forestall intolerable suffering. At his unintentionally hilarious hysteria session Tuesday, Obama said: The sequester’s “meat-cleaver approach” of “severe,” “arbitrary” and “brutal” cuts will “eviscerate” education, energy and medical research spending. “And already, the threat of these cuts has forced the Navy to delay an aircraft carrier that was supposed to deploy to the Persian Gulf.”
“Forced”? The Navy did indeed cite the sequester when delaying deployment of the USS Truman. In the high-stakes pressure campaign against Iran’s nuclear weapons program, U.S. policy has been to have two carriers in nearby waters. Yet the Navy is saying it cannot find cuts to programs or deployments less essential than the Truman deployment. The Navy’s participation in the political campaign to pressure Congress into unraveling the sequester is crude, obvious and shameful, and it should earn the Navy’s budget especially skeptical scrutiny by Congress.
The Defense Department’s civilian employment has grown 17 percent since 2002. In 2012, defense spending on civilian personnel was 21 percent higher than in 2002. And the Truman must stay in Norfolk? This is, strictly speaking, unbelievable.
The sequester’s critics correctly say it is not the most intelligent way to prune government; priorities among programs should be set. But such critics are utopians if they are waiting for the arrival of intelligent government. The real choice today is between bigger or smaller unintelligent government.
Obama, who believes government spends money more constructively than do those who earn it, warns that the sequester’s budgetary nicks, amounting to one-half of 1 percent of gross domestic product, will derail the economy. A similar jeremiad was heard in 1943 when economist Paul Samuelson, whose Keynesian assumptions have trickled down to Obama, said postwar cuts in government would mean “the greatest period of unemployment and industrial dislocation which any economy has ever faced.”
Federal spending did indeed shrink an enormous 40 percent in one year. And the economy boomed.
Because crises are government’s excuse for growing, liberalism’s motto is: Never let a crisis go unfabricated. But its promiscuous production of crises has made them boring.
Remember when, in the 1980s, thousands died from cancers caused by insufficient regulation of the chemical Alar sprayed on apples? No, you don’t because this alarming prediction fizzled. Alar was not, after all, a risk.
Remember when “a major cooling of the climate” was “widely considered inevitable” (New York Times, May 21, 1975) with “extensive Northern Hemisphere glaciation” (Science magazine, Dec. 10, 1976) which must “stand alongside nuclear war as a likely source of wholesale death and misery” (International Wildlife, July 1975)? Remember reports that “the world’s climatologists are agreed” that we must “prepare for the next ice age” (Science Digest, February 1973)? Armadillos were leaving Nebraska, heading south, and heat-loving snails were scampering southward from European forests (Christian Science Monitor, Aug. 27, 1974). Newsweek (April 28, 1975) said meteorologists were “almost unanimous” that cooling would “reduce agricultural productivity.”
Today, while Obama prepares a governmental power grab to combat global warming, sensible Americans, tuckered out with apocalypse fatigue, are yawning through the catastrophe du jour, the sequester. They say: Cry “Havoc!” and let slip the hamsters of sequestration.
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"More Americans need to become familiar with the concept of baseline budgeting. In simple terms, if an agency's budget is $100, and they are expecting an increase of $10.00 next year, but they only get $8.00, politicians characterize that as a $2.00 cut in spending. Concerning the entire $1.2 trillion in 'cuts' engendered by the sequester, it must be understood that they are not really cuts at all. They are really a lowering of the projected increase in federal spending going forward. The CBO cuts through the fog. 'For the 2014-2023 period, deficits in CBO's baseline projections total $7.0 trillion. With such deficits, federal debt would remain above 73 percent of GDP -- far higher than the 39 percent average seen over the past four decades,' it reports. Thus, over the next decade, we are 'cutting' our way to adding another $7 trillion of debt to the $16-plus trillion we have already amassed. As far as the administration, Democrats and their media enablers are concerned, any attempt to mitigate that 'paying-for problem' will turn America into a Third World nation of vegetable eaters. Yet the simple truth remains inarguable: absent the genuine entitlement reform critically necessary to get our spending under control, we are headed for national bankruptcy. At that point, even vegetables may be a luxury item." --columnist Arnold Ahlert
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I sure feel silly now, having been so worried about the nat'l debt. WHEW!
http://politicker.com/2013/03/mayor-bloomberg-dont-panic-about-the-sequester/
Bloomberg: Don’t Panic About the Sequester
By Colin Campbell 10:08am
Mayor Bloomberg in Washington earlier this week. (Photo: Getty)
At midnight tonight, a bevy of steep spending cuts will hit the federal government unless Congress and the White House agree to an alternative deficit-cutting proposal. Although the national media has been relentlessly focused on this deadline, Mayor Michael Bloomberg said it will only affect New York City if the so-called “sequestration” continues for a significant length of time.
“It depends on how long,” Mr. Bloomberg said on his weekly WOR radio show with John Gambling. “If it lasts a few weeks, no. If it does, yeah. We get 10 or 12 percent of our budget from the federal government, not all of that is going to be cut back, but there would be effects–not good effects. But in the context of, ‘Is anything going to change tomorrow? Are we going to run out of money tomorrow?’ I’m sure I’ll get that question at the [next] press conference. No.”
Furthermore, while saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe “an infinite amount of money” and there is no specific amount that would cause the country to default.
“We are spending money we don’t have,” Mr. Bloomberg explained. “It’s not like your household. In your household, people are saying, ‘Oh, you can’t spend money you don’t have.’ That is true for your household because nobody is going to lend you an infinite amount of money. When it comes to the United States federal government, people do seem willing to lend us an infinite amount of money. … Our debt is so big and so many people own it that it’s preposterous to think that they would stop selling us more. It’s the old story: If you owe the bank $50,000, you got a problem. If you owe the bank $50 million, they got a problem. And that’s a problem for the lenders. They can’t stop lending us more money.”
Nevertheless, Mr. Bloomberg said it wouldn’t be easy to find the spending cuts that do emerge. Accordingly, when Mr. Gambling suggested cutting “waste” could solve a significant portion of the deficit, Mr. Bloomberg flat-out disagreed.
“Listen, I’ve worked now in government for 11 years,” he said. “One of the problems is the definition of ‘waste.’ You think the programs that I want are waste. And I think the problems that you want are waste. It’s not like somebody is taking wheelbarrows full of dollar bills and throwing them out the window. It’s a question of definition, what is ‘waste’ and what is not. Everything we have was put in by Congress, signed by the president. There was a reason for it, or a constituency for it. Most of the tax breaks are designed to encourage or discourage economic activity. There’s a reason for it.”
Follow Colin Campbell on Twitter or via RSS. ccampbell@observer.com
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A home owner would not want one year mortgage, yet the Treasury keeps doing that even though we know interest rate will return to normal adding interest costs of perhaps a trillion a year to our spending.
WSJ today: http://online.wsj.com/article/SB10001424127887323978104578330320974074546.html?mod=WSJ_Opinion_LEADTop
...the maturity structure of U.S. debt is quite short. I estimate that our government rolls over 40% of its debt every year, and 65% within three years, accounting for Federal Reserve holdings, coupon payments and use market values.
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Short term at near zero interest is GREAT if you plan to pay it off soon. Bernancke, Geithner, Obama and Lew are doing more damage to our country right now that what we can immediately measure.
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(http://www.coyoteblog.com/wp-content/uploads/2013/03/sequester-cut-debt-500x500.png)
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That is a great graph GM! It tells so much more context than the 2 1/2 french fries out of Big Mac meal analogy which is the calorie cutback from the baseline up from the extreme, make temporary spending permanent, peak.
http://www.powerlineblog.com/archives/2013/02/how-much-would-the-sequester-cut-into-a-big-mac-extra-value-meal.php
How about spending at Bill Clinton levels if that was the last great, Democratic, fiscal President who cared and truily felt our pain. We would have a trillion dollar surplus right now.
http://www.usgovernmentspending.com/year2000_0.html
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Forgive me for hammering on this point again:
As utterly valid as the point being made is, the left side of the graph is set in a way that visually confuses:
An increase of 1.0 to 1.5 is a 50% increase yet the same .5 increase from 3.0 to 3.5 is a 16.67% increase.
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Forgive me for hammering on this point again:
As utterly valid as the point being made is, the left side of the graph is set in a way that visually confuses:
An increase of 1.0 to 1.5 is a 50% increase yet the same .5 increase from 3.0 to 3.5 is a 16.67% increase.
Hey, I don't make 'em, just post them here.
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Not a criticism of you GM-- indeed I make a point of saying the the point of the graph is quite correct-- I simply am sharing with one and all the visual overstatment created when graphs are not , , , what's the word I'm looking for? , , , logarithmic?
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Here Wesbury takes on some points I have made. IMO his analysis is not without plausibility , , ,
Rising Interest Rates Won't Cause Fiscal Armageddon
Monday Morning Outlook
Rising Interest Rates Won't Cause Fiscal Armageddon To view this article, Click
Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Senior Economist
Date: 3/4/2013
The fiscal situation in Washington is still a mess; deficits and spending are still
way too high, but both spending as a percent of GDP and annual budget deficits are
declining. After peaking at more than $1.4 trillion in 2009 our forecast for this
year is a deficit of about $830 billion, or 5.1% of GDP. At the same time spending
has fallen from over 25% of GDP at its peak to near 22%.
Long-term, that’s not good enough. Even if deficits keep falling in the next
few years, spending on Social Security and Medicare is set to soar. If those
programs aren’t reformed, we will eventually be swamped with either too much
debt or growth-killing tax hikes.
For those who need a more immediate threat to satisfy their economic hypochondria,
some bears have been harping on a different budget threat. The idea is that
Bernanke’s artificially low interest rates have covered up a serious problem.
And once those rates go back to normal, interest costs are going to soar and –
poof! – there goes all the progress on the deficit.
Right now the federal debt is $16.5 trillion, so, in theory, a 1 percentage point
increase in rates mean an extra $165 billion in annual interest payments.
That’s a huge potential jump considering net interest for the federal
government was $223 billion last year.
But this theory has holes. First, the relevant debt for calculating the impact of a
change in rates is not the total $16.5 trillion debt. That includes debt the
government owes itself (like for the Social Security Trust Fund) plus debt owned by
the Fed (the interest gets paid back to the Treasury). Excluding these, leaves
roughly $10 trillion, which means an extra 1 point in rates would add $100 billion
to the deficit, not $165 billion.
Second, investors would be wrong to assume “normal” rates must be many
multiples of what Treasury now pays. New Treasuries have very low rates. But much
Treasury debt was issued back when rates were higher. As a result, the average
interest rate on marketable debt is now around 2%.
The Fed thinks short rates will eventually go to a 4% average while long-term rates
rise to 4.5%. Let’s split the difference and say Treasury will eventually have
to pay 4.25%, rather than 2%. If so, net interest, which is now 1.4% of GDP will
rise to 3% of GDP, roughly the same as it was for much of the 1980s and 1990s, when
the economy was doing quite well.
Last, and often overlooked, is that if interest rates are rising then the economy is
probably stronger. This would mean tax revenue is rising faster as well. So any
boost in interest costs would be offset somewhat by higher receipts. For example, an
extra 1 point in real GDP growth for only one year should add more than $30 billion
per year in revenue.
On the downside, it’s true that rates may go even higher than the Fed now
thinks, but with an average debt maturity of about 5 years, it also takes time for
higher rates to feed through to higher interest costs.
Again, we are not suggesting things are fine with our country’s fiscal
situation. But among all our fiscal challenges, the last one we should obsess about
is a crisis happening when the economy is better and the Fed is finally raising
rates. The pouting pundits of pessimism are over-reacting once again.
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"Right now the federal debt is $16.5 trillion"
I wish that were true. It's not.
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http://www.deseretnews.com/article/865571048/The-real-national-debt-is-far-worse-than-you-think-critics-say.html?pg=all
The real national debt is far worse than you think, critics say
By Eric Schulzke, Deseret News
Published: Friday, Jan. 18 2013 10:30 p.m. MST
With the U.S. government now poised to hit a $16.4 trillion legal federal debt barrier, another fiscal and constitutional crisis looms. Nobel laureate economist Paul Krugman has called for a $1 trillion coin. Others think the coin idea is absurd. Last week, the Obama administration, after dancing around it for days, officially disavowed it.
Shutterstock
Enlarge photo»
Summary While everyone focuses on raising the debt ceiling past $16.4 trillion, a handful of accountants and policy activists argue that the real debt is much, much higher and is only hidden by irregular accounting practices that hide the truth.
Goodbye fiscal cliff, hello debt ceiling.
With the U.S. government now poised to hit a $16.4 trillion legal federal debt barrier, another fiscal and constitutional crisis looms. Nobel laureate economist Paul Krugman has called for a $1 trillion coin. Others think the coin idea is absurd. Last week, the Obama administration, after dancing around it for days, officially disavowed it.
But still others think the coin idea simply misses the point.
“Congress doesn’t even know what the real numbers are,” said Rep. Jim Cooper, D-Tennessee. “The real national debt isn’t $16 trillion. I wish it were that low. The real national debt is closer to $60 or $80 trillion.”
“The federal government is the last accounting-free zone in America,” Cooper said.
Cooper belongs to a small but vocal band of policy advocates who argue that the entire fiscal reform debate ignores the scope of unworkable promises made to one generation and unbearable burdens placed on the next.
That chorus includes two former GOP congressional leaders, Christopher Cox and Bill Archer, who in November published an op-ed article in the Wall Street Journal calling for “real accounting.”
“The U.S. Treasury ‘balance sheet’ does list liabilities such as Treasury debt issued to the public, federal employee pensions, and post-retirement health benefits,” Cox and Archer wrote. “But it does not include the unfunded liabilities of Medicare, Social Security and other outsized and very real obligations.”
Bipartisan fiasco
The trouble, critics argue, is that the government uses “cash accounting” for its largest liabilities — which mean they only score Medicare and Social Security obligations on the books as debt as payments come due.
Real accounting — the “accrual accounting” used by private industry — scores debt burdens the moment obligations are made.
The IRS does not allow any corporation that makes more than $5 million to use cash accounting, said Sheila Weinberg, who heads the Institute for Truth in Accounting, “because it is so unreliable and possibly misleading.”
ITA is a nonpartisan advocacy group that lobbies to change the way state and federal governments do their bookkeeping. Over the years, Weinberg has been a close ally of Cooper on this issue.
Cooper, a Democrat, says that both parties are fully culpable. Bush administration officials in 2007 and 2008 blocked a push to put social insurance obligations on the federal books. And Cooper calls the 2003 Medicare prescription drug benefit, a pet project of Bush adviser Karl Rove, “quite possibly the worst piece of legislation in American history.”
At the Institute for Truth in Accounting’s website, two debt clocks rapidly click upward. The official clock listed now exceeds $16.5 trillion, already past the legal ceiling. The other clock is labeled “The Truth.” That clock now stands at more than $72.5 trillion.
“If we had good financial statements,” said Michael Scott, a veteran of the Treasury and the Security Exchange Commission, “you would understand that every plan that exists today — whether Simpson-Bowles, or Paul Ryan, or others — does nothing to balance the budget on a fully costed, accrual basis.”
No free goods
Until 1990, private management teams “would give labor generous pensions and post-retirement benefits because they saw these as free goods,” said Scott, who has worked extensively with both private companies (United Airlines) and public entities (the Postal Service) to restructure fiscal failure.
Corporations stressed for cash, he said, would make vague promises payable in the distant future and leave them off the books. “But once they started to put it on the balance sheet and had it flow through the income statement, people started to see how expensive the benefits were.”
In 1990, accounting standards for private business changed, requiring them to put pensions and post-retirement health care on their books. “This caused enormous problems for companies like Ford, Chrysler, the legacy airlines and the steel industry,” Scott said, leading to several bankruptcies and even radical pension restructuring in the private sector.
But for the government, loose accounting continues.
Like Cooper, Scott sees the 2003 Medicare prescription drug benefit, which narrowly passed with Republican support, as a watershed moment in fiscal irresponsibility.
Both the Congressional Budget Office and the Office of Management and Budget, which answers to the White House, priced the bill at $395 billion over a 10-year window, Scott said. But the Medicare actuaries, whose job is to predict the future using today’s data, looked at the same bill and decided that over 75 years it was a $16.6 trillion unfunded liability.
The unfunded liability is the amount of unpaid bills that would remain if current tax and benefits policies continued without change.
"Would a congressman have voted for it if the price tag had said $16.6 trillion?” Scott asked.
What surplus?
A mild-mannered accountant, ITA’s Sheila Weinberg has been fighting the budget transparency battle since the 1990s, when she realized that both parties were making promises they could not fulfill. In 2000, she became incensed when Al Gore wanted to put the budget “surplus” into a lockbox, while George W. Bush wanted to return it to the voters.
“What surplus?” Weinberg asked.
Weinberg really gets piqued when members of Congress “guarantee” Social Security benefits. “It’s a crime to promise people benefits and then not put money aside to pay those benefits,” said Weinberg. In fact, she notes, Social Security by law cannot make payments once the money has run out.
Last year, Weinberg catalogued 42 such “guarantees” on congressional websites. “Social Security benefits may be modest,” reads the website of Rep. Jan Schankowsky, D-Illinois, “but they are guaranteed — unlike retirement savings lost in the Great Recession.”
House Ways and Means Committee Chairman Sander M. Levin, D-Missouri, issued a similar statement on the 75th anniversary of the Social Security Act. "On this 75th Anniversary, millions of Americans can attest to the strength, and value, of Social Security’s guaranteed benefits,” Levin said.
If Weinberg had her way, Levin, Schankowsky and scores of other representatives and senators would be taken to the woodshed for “guaranteeing” to taxpayers benefits the federal financial statements view as not binding obligations.
Skeptical auditors
The real numbers are hiding in plain sight, but to find them you have to look in the fine print of the “Nation By the Numbers” table in the federal government’s Consolidated Financial Statement.
That table shows “total liabilities” of $17.5 trillion in 2011, which combines debt held by the public and binding commitments to veterans and federal employees. But underneath that line in smaller font is a line for social insurance. That item adds $33.8 trillion to the tab. Another miscellaneous line adds $6.4 trillion.
“If you want to see what the total burden that every child born has to pay his share of, it’s the $17.5 trillion plus the $33.8 trillion plus the $6.4 trillion,” said Hal Steinberg, a member of the Federal Advisory Accounting Standards Board, which sets federal accounting standards.
Even the $33.8 trillion is hotly disputed, as auditors, who want real bookkeeping, find themselves at odds with bureaucrats, who want lower numbers.
The 75-year unfunded liability for total social insurance liabilities in the federal financial statement are pegged at $30.9 trillion in 2010 and $33.8 trillion in 2011 — both a huge drop from 2009, when the burden stood at $45.9 trillion. Why the sudden drop?
The reason, Steinberg said, is that “The Affordable Care Act is assuming there will be tremendous savings in Medicare costs,” savings won through “productivity gains” and by slashing doctors’ fees.
But many experts doubt either of these savings will materialize, and among the skeptics are Medicare’s own actuaries and the external auditors. “The numbers through 2009 got an unqualified opinion from the auditors,” Steinberg said. “In 2010 and 2011, the auditors had to qualify their opinion, because the actuaries said that they did not think those cost projections would necessarily hold up.”
A letter from Medicare actuaries in May 2011 said, “In our view, the scheduled physician payment reduction is implausible and there is a strong likelihood that the productivity adjustments will not be sustainable in the long range.”
No promises
Medicare and Social Security obligations are not included alongside veterans and employee benefits in national debt figures, Steinberg said, because FASAB has determined that Social Security and Medicare are not binding commitments.
“Current law says that when the Social Security trust fund runs out of money, which would be in the year 2033, they are prohibited by law to continue to make payments of the full amount," Steinberg said. "They can only make payments to the extent that they have contributions coming in."
“There is no exchange transaction here,” Steinberg said, as when an employee works in exchange for guaranteed benefits. In essence, Social Security is a government benefit that can be changed at any time. And because there is no contract to break, there is no accounting liability.
“When the (FASAB) board was looking at the best way to report this,” Steinberg said, “the feeling was not to put this on the balance sheet as a liability. It really wasn’t a liability.”
Perhaps equally to the point, he added, “The number would end up being so large that no one would be able to relate to it.” For both reasons, Steinberg said, FASAB chose to separate the social insurance liabilities in a separate location in the report.
Weinberg at the Institute for Truth in Accounting said she could live with scoring Medicare and Social Security off the books, but only if policy leaders made it clear there is no commitment.
She gets her hackles up when policymakers try to have it both ways, treating these programs as sacred promises for political gain — but hiding the cost in the books.
Weinberg said the no-promises-day-to-day approach would work if a few criteria were met. Payroll taxes should be treated as a “tax,” she said, not a “contribution.” Politicians and government officials must stop referring to “trust funds” and “guarantees.” If they do, she wants it legally treated as fraud. Personalized annual Social Security statements must no longer be mailed to taxpayers. Finally, Weinberg wants a serious education campaign undertaken to correct the record in taxpayers’ minds.
Weinberg is not holding her breath. “Politicians aren’t stupid,” she said. “They do these books on a cash basis because they don’t want to increase the deficit but they want to get re-elected.”
Eric Schulzke writes on national politics for the Deseret News. He can be contacted at eschulzke@desnews.com
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http://online.wsj.com/article/SB10001424127887323353204578127374039087636.html
Cox and Archer: Why $16 Trillion Only Hints at the True U.S. Debt
Hiding the government's liabilities from the public makes it seem that we can tax our way out of mounting deficits. We can't. By CHRIS COX AND BILL ARCHER
A decade and a half ago, both of us served on President Clinton's Bipartisan Commission on Entitlement and Tax Reform, the forerunner to President Obama's recent National Commission on Fiscal Responsibility and Reform. In 1994 we predicted that, unless something was done to control runaway entitlement spending, Medicare and Social Security would eventually go bankrupt or confront severe benefit cuts.
Eighteen years later, nothing has been done. Why? The usual reason is that entitlement reform is the third rail of American politics. That explanation presupposes voter demand for entitlements at any cost, even if it means bankrupting the nation.
A better explanation is that the full extent of the problem has remained hidden from policy makers and the public because of less than transparent government financial statements. How else could responsible officials claim that Medicare and Social Security have the resources they need to fulfill their commitments for years to come?
As Washington wrestles with the roughly $600 billion "fiscal cliff" and the 2013 budget, the far greater fiscal challenge of the U.S. government's unfunded pension and health-care liabilities remains offstage. The truly important figures would appear on the federal balance sheet—if the government prepared an accurate one.
But it hasn't. For years, the government has gotten by without having to produce the kind of financial statements that are required of most significant for-profit and nonprofit enterprises. The U.S. Treasury "balance sheet" does list liabilities such as Treasury debt issued to the public, federal employee pensions, and post-retirement health benefits. But it does not include the unfunded liabilities of Medicare, Social Security and other outsized and very real obligations.
As a result, fiscal policy discussions generally focus on current-year budget deficits, the accumulated national debt, and the relationships between these two items and gross domestic product. We most often hear about the alarming $15.96 trillion national debt (more than 100% of GDP), and the 2012 budget deficit of $1.1 trillion (6.97% of GDP). As dangerous as those numbers are, they do not begin to tell the story of the federal government's true liabilities.
The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure.
Why haven't Americans heard about the titanic $86.8 trillion liability from these programs? One reason: The actual figures do not appear in black and white on any balance sheet. But it is possible to discover them. Included in the annual Medicare Trustees' report are separate actuarial estimates of the unfunded liability for Medicare Part A (the hospital portion), Part B (medical insurance) and Part D (prescription drug coverage).
As of the most recent Trustees' report in April, the net present value of the unfunded liability of Medicare was $42.8 trillion. The comparable balance sheet liability for Social Security is $20.5 trillion.
Were American policy makers to have the benefit of transparent financial statements prepared the way public companies must report their pension liabilities, they would see clearly the magnitude of the future borrowing that these liabilities imply. Borrowing on this scale could eclipse the capacity of global capital markets—and bankrupt not only the programs themselves but the entire federal government.
These real-world impacts will be felt when currently unfunded liabilities need to be paid. In theory, the Medicare and Social Security trust funds have at least some money to pay a portion of the bills that are coming due. In actuality, the cupboard is bare: 100% of the payroll taxes for these programs were spent in the same year they were collected.
In exchange for the payroll taxes that aren't paid out in benefits to current retirees in any given year, the trust funds got nonmarketable Treasury debt. Now, as the baby boomers' promised benefits swamp the payroll-tax collections from today's workers, the government has to swap the trust funds' nonmarketable securities for marketable Treasury debt. The Treasury will then have to sell not only this debt, but far more, in order to pay the benefits as they come due.
When combined with funding the general cash deficits, these multitrillion-dollar Treasury operations will dominate the capital markets in the years ahead, particularly given China's de-emphasis of new investment in U.S. Treasurys in favor of increasing foreign direct investment, and Japan's and Europe's own sovereign-debt challenges.
When the accrued expenses of the government's entitlement programs are counted, it becomes clear that to collect enough tax revenue just to avoid going deeper into debt would require over $8 trillion in tax collections annually. That is the total of the average annual accrued liabilities of just the two largest entitlement programs, plus the annual cash deficit.
Nothing like that $8 trillion amount is available for the IRS to target. According to the most recent tax data, all individuals filing tax returns in America and earning more than $66,193 per year have a total adjusted gross income of $5.1 trillion. In 2006, when corporate taxable income peaked before the recession, all corporations in the U.S. had total income for tax purposes of $1.6 trillion. That comes to $6.7 trillion available to tax from these individuals and corporations under existing tax laws.
In short, if the government confiscated the entire adjusted gross income of these American taxpayers, plus all of the corporate taxable income in the year before the recession, it wouldn't be nearly enough to fund the over $8 trillion per year in the growth of U.S. liabilities. Some public officials and pundits claim we can dig our way out through tax increases on upper-income earners, or even all taxpayers. In reality, that would amount to bailing out the Pacific Ocean with a teaspoon. Only by addressing these unsustainable spending commitments can the nation's debt and deficit problems be solved.
Neither the public nor policy makers will be able to fully understand and deal with these issues unless the government publishes financial statements that present the government's largest financial liabilities in accordance with well-established norms in the private sector. When the new Congress convenes in January, making the numbers clear—and establishing policies that finally address them before it is too late—should be a top order of business.
Mr. Cox, a former chairman of the House Republican Policy Committee and the Securities and Exchange Commission, is president of Bingham Consulting LLC. Mr. Archer, a former chairman of the House Ways & Means Committee, is a senior policy adviser at PricewaterhouseCoopers LLP.
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You are entirely correct about the deception in the failure to discuss the magnitude of unfunded liabilities.
That said, does not Wesbury also make a number of fair points in that he is discussing the consequences to interest payments on the $16.6T? There are no interest payments to be made on unfunded liabilities.
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You are entirely correct about the deception in the failure to discuss the magnitude of unfunded liabilities.
That said, does not Wesbury also make a number of fair points in that he is discussing the consequences to interest payments on the $16.6T? There are no interest payments to be made on unfunded liabilities?
Gee, our catastrophic debt isn't as catastrophic as some would say? I feel much better now.
So, every American alive right now just needs to come up with a spare quarter million dollars and not worry about the interest rates.
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His article addresses specifically the potential consequences of an increase in interest rates on the cost of financing the $16.6T debt. This is very much a concern I have raised specifically a number of times here. His analysis of the concerns that others and I have raised in this regard raises a number of points that I had not considered.
Please note the editing replacement of the question mark of my final sentence with a period. Thus
"There are no interest payments to be made on unfunded liabilities." Your points, as correct as they are, address a different point.
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Whether we agree with Wesbury or not, he is a serious economist and I trust that he gets these numers right.
"both spending as a percent of GDP and annual budget deficits are
declining. After peaking at more than $1.4 trillion in 2009 our forecast for this
year is a deficit of about $830 billion, or 5.1% of GDP. At the same time spending
has fallen from over 25% of GDP at its peak to near 22%."
That $1.4T was about 11% of GDP and now we are at less than half that?
Is that not a BFD?
Is not a 3% drop in federal spending as a % of GDP a BFD as well?
Who amongst us knew this? I'm guessing not a one. Why is that? We search for truth around here and if we can't answer that and then don't find out the answer to that then , , ,
And, changing subjects, this is how to fight our Alinskyite president!
http://www.weeklystandard.com/blogs/senator-obamas-golf-weekend-tiger-cost-much-341-federal-workers-furloughed_704915.html
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When we refinance our debt these days, who is buying it?
Even if we are not racking up debt on unfunded liabilities, those continue to metasticize at incredible rates.
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The answer is in one of the other pieces you posted tonight: foreigners. As I pointed out in my response to that posting of yours, I found the piece in question frustrating in its absence of analysis as to why they do that and what might cause them to change doing that.
We are in complete agreement on the ongoing matasticization of unfunded liabilities. Indeed, IMHO it is the very heart of the problem. The danger to our republic is great.
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I'd like to see the source of the numbers he cites. I'm not buying it.
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Thomas Sowell:
"Back in my teaching days, many years ago, one of the things I liked to ask the class to consider was this: Imagine a government agency with only two tasks: (1) building statues of Benedict Arnold and (2) providing life-saving medications to children. If this agency's budget were cut, what would it do?
The answer, of course, is that it would cut back on the medications for children. Why? Because that would be what was most likely to get the budget cuts restored. If they cut back on building statues of Benedict Arnold, people might ask why they were building statues of Benedict Arnold in the first place."
http://www.realclearpolitics.com/articles/2013/03/05/budget_politics_117268.html#ixzz2Mfmw6iyv
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"An increase of 1.0 to 1.5 is a 50% increase yet the same .5 increase from 3.0 to 3.5 is a 16.67% increase."
I believe the left side of the graph is spending in trillions, since close to zero in 1913. Adjusted for inflation, but otherwise I think it is not manipulated. Please take a look again. You are correct on the way percentages can be used in different ways, like when Wesbury says something is up 1% three years in a row from a horribly depressed level instead of saying it is still down 30% from 5 years ago.
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"The Fed thinks short rates will eventually go to a 4% average while long-term rates
rise to 4.5%."
Wesbury here is accepting what the Fed is saying to make his point. Looks like rosy scenario to me. If our worst fear after multi-trillions of quantitative easing and when real economic growth returns is that interest rates might hit 4%, I wouldn't be worried either. I don't buy it. Interest rates could be twice that and have been far worse not that long ago, after much less 'quantitative easing' than now.
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"does not Wesbury also make a number of fair points in that he is discussing the consequences to interest payments on the $16.6T? There are no interest payments to be made on unfunded liabilities."
True. He makes a good point that paying interest to ourselves isn't much of a cost, but the quantitative easing and future devaluations of our currency have other hidden costs yet to reveal themselves.
Unfunded liabilities mean future deficits, future debt, future interest, future impossibilities of balancing budgets or lowering tax burdens. I said interest costs could go to a trillion, but I mean at debt levels that will inevitably be higher than today (and interest rate FAR above 4.5%) before we get a handle on all this, if we ever do.
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"both spending as a percent of GDP and annual budget deficits are
declining. After peaking at more than $1.4 trillion in 2009 our forecast for this
year is a deficit of about $830 billion, or 5.1% of GDP. At the same time spending
has fallen from over 25% of GDP at its peak to near 22%."
That $1.4T was about 11% of GDP and now we are at less than half that?
Is that not a BFD?
Is not a 3% drop in federal spending as a % of GDP a BFD as well?
Who amongst us knew this? I'm guessing not a one."
I think we knew that, we can check the threads. On the first point, a deficit of 1.4T is mind-boggling. As that shrunk, it still was 4 deficits in a row all over a trillion. (Then we measure it as a percentage of the entire economy to make it look smaller!?) The damage of that is cumulative and that has been the focus. From the disastrous lows, the economy has been growing slowly. We know that mostly from the Wesbury posts you bring to the board, against all ridicule. The truth is good to know no matter what it is and you deserve credit.
I, for one, believe we could survive 16 trillion in debt and 4 trillion in quantitative easing - if we would get our act together today but we aren't.
Don't forget that the control in the increases in spending happened under these horrible PR disasters for the Republican House. Boehner with his cigarette and his tan who none of us think puts a good face or words on our message surrendered to spending a trillion above where it should be has won the argument from there in the sense that the slope of the spending curve is no longer straight up. Obama didn't do that, but he 'succeeded' in making a trillion more in temporary, emergency spending permanent.
Federal Spending at 22% of GDP when most people pay zero is still abominable. At 25% we were at amazingly depressed levels of GDP so the 22% is with no cut in spending. Yes 22% is better than ratios during utter collapse when we were losing tens of trillions in wealth but if we compare this to 'normal' we are still way off track. 18% of GDP is where spending should have been capped in the Balanced Budget Amendment, maybe 19% in compromise with big government liberals, with super majorities required to ever anything above that level (IMHO).
Misleading in those numbers (the 22%) is that it takes the measurement after the world's largest entitlement ever (?) Obamacare has been passed but has no spending, speaking of unfunded liabilities! Also it is the last year of tax receipts before a multitude of new GDP killing tax rate increases, federal and state, apply. We can't really follow that trend line forward when we know we have already changed the rules.
We make healthcare more affordable by levying a new tax on medical devices and strive to reach full employment by nailing every company that hits 50 full time employees. Cause spending to go up and relative GDP growth to go down. Nothing but cognitive dissonance if getting a handle on spending was anyone's objective.
A simpler way than dollars of changing value is look at the ratio of people who will be pulling the wagon versus how many will ride in it. We are gaining in population while we are losing people from our workforce. We are making more and more rules to worsen that and reelecting the people who are causing it. We are offering to pay for far more of people's basic living expenses to not work, not work full time or to not maximize their income while we increase the penalties on the dwindling numbers who do. We are chasing existing businesses overseas while putting concrete barriers in front of our would-be startups, the big employers of tomorrow. Take all current trend lines forward and the budget problem doesn't get solved; it only gets worse.
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The answer is in one of the other pieces you posted tonight: foreigners. As I pointed out in my response to that posting of yours, I found the piece in question frustrating in its absence of analysis as to why they do that and what might cause them to change doing that.
We are in complete agreement on the ongoing matasticization of unfunded liabilities. Indeed, IMHO it is the very heart of the problem. The danger to our republic is great.
http://www.marketplace.org/topics/economy/final-note/who-are-biggest-holders-us-debt
Who are the biggest holders of U.S. debt?
Mark Wilson/Getty Images
Flags fly over the Federal Reserve Building in Washington, D.C.
by Kai Ryssdal
Marketplace for Monday, June 4, 2012
Story.This final note today, an observation about U.S. government debt. Treasury bonds -- now that interest rates on the 10 year are the lowest they've ever been.
You know how we always talk about foreigners -- China, especially -- being the ones who hold all our debt?
Not true at all. We saw an item on CNBC's website today listing the top 15 buyers of Treasuries. There's China, of course at No. 3. Japan at No. 5. That's it for countries in the top 10.
The biggest holder of U.S. debt? The Social Security Trust Fund. And No. 2?
C'mon, any guesses?
Yep, the Fed. Can you say 'quantitative easing'?
**So, how long are we going to be able to pay our Visa with our Mastercard?
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A very, very good question. I would couple it with my wonderment that we have been able to do so at all for so long. Truly it is something I cannot explain. How can we have negative interest rates? Even as we acknowledge govt. manipulation of inflation data, why is inflation not higher?
In a moment of ego, I might note that this point about the Fed financing the deficit is a point that I have been making here for quite some time with quite some vigor when I hammer on 40% of spending being borrowed and over 70% of it financed by the Fed.
Following the logic a bit further and applying it to GM's posted piece (and please note, I do feel it was worthy of being posted) we can say that it missed this central point entirely when it said we were being financed by foreigners and the excrement would hit the fan when they ceased lending us money.
As GM adds to my knowledge, after the Fed in number one position, that SS is #2.
I acknowledge the various points made in response to my underlining of the Wesbury data about deficit as a % of GDP and fed spending as a % of GDP. Yes our Republic and our economy are in grave danger, and our foe is slippery indeed and my point here should not be misunderstood as diminishing that in any degree.
That said I repeat that but for my posting of the Wesbury piece I do not think that most/any of us here realized the extent of the improvement. Indeed, although he was too stupid and too in love with the sound of his interruptions to realize it, Hannity got spanked tonight by BO econ advisor Oglesby with exactly these points.
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Minimum Wage Mandates: The Tools of Racists Everywhere
Posted By Walter Williams On March 6, 2013 - www.frontpagemag.com
Let’s work through an example. Suppose 100 yards of fence could be built using one of two techniques. You could hire three low-skilled workers for $15 each, or you could hire one high-skilled worker for $40. Either way, you get the same 100 yards of fence built. If you sought maximum profits, which production technique would you employ? I’m guessing that you’d hire one high-skilled worker and pay him $40 rather than hire three low-skilled workers for $15 each. Your labor costs would be $40 rather than $45.
Suppose the high-skilled worker came into your office and demanded $55 a day. What would be your response? You’d probably tell him to go play in the traffic and hire the three low-skilled workers. After all, hiring the three low-skilled workers for $45, to get the same 100 yards of fence, would be cheaper than the $55 a day now demanded by the high-skilled worker.
The high-skilled worker is not stupid and knows that’s exactly what you’d do. He will do a bit of organizing first, convincing decent, caring people that low-skilled workers are being exploited and not earning a living wage and that Congress should enact a minimum wage in the fencing industry of at least $20. After Congress enacts a minimum wage of $20, what then happens to the chances of a high-skilled worker’s successfully demanding $55 a day? They go up because he’s used the coercive powers of Congress to price his competition out of the market. Because of the minimum wage, it would cost you $60 to use the three low-skilled workers.
The minimum wage not only discriminates against low-skilled workers but also is one of the most effective tools of racists everywhere. Our nation’s first minimum wage came in the form of the Davis-Bacon Act of 1931. During the legislative debate over the Davis-Bacon Act, which sets minimum wages on federally financed or assisted construction projects, racist intents were obvious.
Rep. John Cochran, D-Mo., supported the bill, saying he had “received numerous complaints in recent months about Southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” Rep. Miles Allgood, D-Ala., complained: “That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.” Rep. William Upshaw, D-Ga., spoke of the “superabundance or large aggregation of Negro labor.” American Federation of Labor President William Green said, “Colored labor is being sought to demoralize wage rates.” The Davis-Bacon Act, still on the books today, virtually eliminated blacks from federally financed construction projects when it was passed.
During South Africa’s apartheid era, the secretary of its avowedly racist Building Workers’ Union, Gert Beetge, said, “There is no job reservation left in the building industry, and in the circumstances, I support the rate for the job (minimum wage) as the second-best way of protecting our white artisans.” The South African Nursing Council condemned low wages received by black nurses as unfair. Some nurses said they wouldn’t accept wage increases until the wages of black nurses were raised. The South African Economic and Wage Commission of 1925 reported that “while definite exclusion of the Natives from the more remunerative fields of employment by law has not been urged upon us, the same result would follow a certain use of the powers of the Wage Board under the Wage Act of 1925, or of other wage-fixing legislation. The method would be to fix a minimum rate for an occupation or craft so high that no Native would be likely to be employed.”
Whether support for minimum wages is motivated by good or by evil, its effect is to cut off the bottom rungs of the economic ladder for the most disadvantaged worker and lower the cost of discrimination.
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I think we need to raise the minimum wage to 100.00 an hour, so everyone can be rich!
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"Whether support for minimum wages is motivated by good or by evil, its effect is to cut off the bottom rungs of the economic ladder for the most disadvantaged worker and lower the cost of discrimination."
Walter Williams and Obj have this right. The media judges our minimum wage argument by how it polls, not how it cuts off employment.
GM: "I think we need to raise the minimum wage to 100.00 an hour, so everyone can be rich!"
It would be interesting to see a big government liberal try to explain why a 100/hr minimum would not be a good idea. 'Well if you set it too high no one would hire the less skilled workers...' Yes, that's right.
It comes down to who owns the discussion. If the question is minimum wage at 6 or 7 versus 9 or 10, why not choose higher? If the question was to let people work versus leaving 20 or 25 million black or minority youth out of the workforce, maybe fewer locked out of the productive workforce would be better. The question isn't how much pay but how should we value work. Should we value it in a free and open marketplace or have Soviet style central planners take care of it?
The real way wages and prosperity rise is to allow more businesses with more money compete to make the very most productive use of a limited supply of labor. Instead we discourage that. We are blocking out with all means available the formation of new businesses and the expansions of existing ones that would otherwise drive up the demand for labor.
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Every lefty I talk to rejects the 100.00 an hour minimum, but can't explain why or give me what a "living wage" should be.
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"Every lefty I talk to rejects the 100.00 an hour minimum, but can't explain why or give me what a "living wage" should be."
That's right. If they tell you why 100/hr is absurd to pay for unskilled labor of limited value then they would also be telling you why $9 is also absurd to pay someone producing less than that.
Minimum wage, to belabor the point, is what you pay someone before they develop significant productive skills of value to the organization. Should a person with no experience, knowledge or skills be paid on the first day enough to support a family of four comfortably? Not in the real world.
Livable wage today in America is near zero. People almost do not have to work to support a family of four and still risk obesity with the excesses.
What livable wage implies is the level of income would you need to earn in order to require no assistance from the government and live acceptably. In America today, that might be reaching the 51st percentile of income or more, roughly 50,000 per household, not per person.
Should we require all people to be paid above average income?? Only in Lake Wobegon are all the people above average.
The government should focus on getting government sector pay and benefits up or down to market levels.
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Good debate tactic that $100 minimum wage thing-- I will be using that!
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The wars and national defense did not cause our trillion dollar deficits or the 16.5 trillion dollar debt, but measured in tenths of trillions, cutbacks and wars winding down are at least a little help in curbing spending growth:
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/30/why-defense-spending-dropped-22-last-quarter-and-shrunk-gdp/
Government defense expenditures dropped by a staggering 22.2 percent annual pace between October and December. According to the Bureau of Economic Analysis, the Pentagon spent significantly less on just about everything except military pay.
(http://www.washingtonpost.com/blogs/wonkblog/files/2013/01/quarterly-change-defense-expend.png)
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I don't dine at Dunkin Donuts nor care what they choose to serve. What I care about is their freedom to make those decisions. Actual sign explaining new regs:
http://www.powerlineblog.com/admin/ed-assets/2013/03/BloombergCity.bmp
(image too large to post)
Because of new laws, you will have to add your own sugar and you will have to add your own flavor with different rules for different sizes depending on whether your beverage is hot or cold. Understand? No one does.
Artificial sweeteners just found to be dangerous in the latest research are not regulated. Yet.
Good f-ing grief. Do they think health nuts go into these places? After cigarettes, we joked about what is next. The old joke of ordering 6 glazed doughnuts and Diet Coke has become the law.
They can prohibit from buying a toilet large enough to flush but allow you to have a 500 gallon hot tub. Prohibit sugar in drinks but not in donuts. Ban Mercury emissions from coal, then require it in light bulbs. Ban 100w incandescent bulbs but allow unlimited use of specialty bulbs. Stop the hitting in Football while subsidizing the stadiums where people love that. Eliminate headers in soccer but allow martial arts.
Don't joke about what they will regulate next.
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Interesting observation by Stephen Moore that the reason the Senate has not passed a budget in 4 years in violation of their own law is because the Senate Budget committee was run by Kent Conrad, a moderate Dem from a liberty state (we don't use re-blue designations) who was spending hawk more than a tax raiser.
With Patty Murray in charge now, expect a budget and expect trillions in tax increases coming out of the Dem Senate. Only 51 votes is required to pass a Senate budget, contrary to what Jack Liar Lew recently said.
http://online.wsj.com/article/SB10001424127887323628804578344801727234218.html?mod=WSJ_Opinion_MIDDLESecond
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http://www.realclearpolitics.com/video/2013/03/10/paul_ryan_2013_gop_budget_assumes_repeal_of_obamacare.html
Paul Ryan: Republican budget assumes repeal of Obamacare
Chris Wallace: Well, that's not going to happen.
Doug: Who originates appropriations bills for fiscal year 2014, the Pelosi-Reid congress of 2009?
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Rep. Andy Harris of Maryland: "So let me get it — let me get it straight. Under the president’s cut of $58 million to the 317 program, you think you could get around that to avoid cutting vaccines to children, but under a sequester ($30 million 'cut'), that the president blames on Republicans, you don’t know if you can do that?"
Tom Frieden, Director of the Centers for Disease Control: We’re going to do everything we can to limit any damage that occurs because of the across-the-board cut, but it reduces our flexibility significantly.
http://washingtonexaminer.com/the-gop-congressman-who-destroyed-obamas-sequester-scare-story/article/2524071
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Dem Senators want to raise taxes by a trillion and a half and still never balance the budget even working with a ridiculously long ten year time frame.
Kick the can down the road. Who lives down the road? Our children. What American generation would leave their children worse off than themselves? Only our own as far as I know.
http://www.powerlineblog.com/archives/2013/03/do-we-have-a-debt-crisis.php
http://www.investors.com/editorial-cartoons/michael-ramirez/647968
(http://2-ps.googleusercontent.com/h/www.powerlineblog.com/admin/ed-assets/2013/03/800x570xRAMFNLclr-031413-legacy-IBD.jpg.cms_.jpeg.pagespeed.ic.cj0c_0Z5Sb.jpg)
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As the number receiving disability checks approaches 12 million and the number of new recipients growing faster than job growth, it seems to me we should either: a) fire the surgeon general for completely ignoring the known cause of this epidemic, or b) celebrate the fact that we now have the healthiest disabled workers to ever walk this planet, helping to support our restaurants, bars and golf courses across the fruited plain.
http://www.theatlantic.com/business/archive/2013/03/disability-insurance-americas-124-billion-secret-welfare-program/274302/
http://apps.npr.org/unfit-for-work/
http://economics.mit.edu/files/7388
Obama's economy is empirically causing American disability, more than heart attacks or strokes, cigarettes or sodas:
(http://cdn.theatlantic.com/static/mt/assets/business/Disability_Unemployment_Rate.png)
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I'd love to see the data for 2011-12 as part of the graph , , ,
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I'd love to see the data for 2011-12 as part of the graph , , ,
It would appear that both the SSDI new application rate and the unemployment rate are in a flat line pattern right now, both at unacceptably high levels: http://www.ssa.gov/oact/STATS/dibStat.html
What should be shocking, and isn't, is that disability is more closely tied to economic not medical condition.
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By DAMIAN PALETTA
WASHINGTON—President Barack Obama's budget proposal next week will include a number of tax and spending changes, including new limits on the growth of Social Security benefits, that he offered to House Republicans in December, a senior administration official said.
The White House will also propose higher tobacco taxes to help pay for early-childhood education, new limits on tax-preferred retirement accounts for the wealthy and rules that would prohibit Americans from simultaneously collecting disability and unemployment benefits.
The budget changes would amount to roughly $1.8 trillion in deficit reduction over 10 years, with close to $700 billion coming from changes to the tax code and the rest coming from spending cuts and lower interest payments on government debt. This would lower the deficit, as a share of the economy, to 2.8% by 2016 and 1.7% by 2023, the senior administration official said.
In contrast, the Congressional Budget Office has estimated that if current policy stayed in place, the deficit would reach 2.5% of the economy by 2016 and then rise to 3.8% by 2023. House Republicans say their budget proposal, which wouldn't increase taxes but would cut spending deeply and overhaul entitlement programs, would cut the deficit to 0.4% of the economy by 2016 and then eliminate it entirely by 2023.
The White House budget blueprint, which will be released Wednesday, will include several items that many Democrats detest, notably using a different version of the consumer-price index to slow the growth rate of federal benefits such as Social Security.
Republican leaders are expected to welcome the spending cuts but reject the tax increases Mr. Obama will propose. The Social Security changes alone would likely reduce spending by $130 billion over 10 years.
The budget also would propose $400 billion in cuts to health programs over 10 years, including reduced payments to drug companies, among other things. The plan would also make changes to programs like farm subsidies and federal pensions to achieve more deficit reduction.
These changes would replace the so-called sequester, the across-the-board spending cuts that began March 1 and are affecting a range of military and other government programs.
The central tax change would limit the value of tax breaks that upper-income Americans can claim on their taxes, which the White House has previously estimated would bring in close to $600 billion over 10 years.
Many Democrats have fretted that the White House would include these changes in the budget, essentially locking the proposals into Mr. Obama's official vision for the country and the economy.
The proposed cuts to future Social Security payments are already causing consternation among Democrats, with many liberals saying they will oppose such changes. Liberals were heartened by comments made by Vice President Joseph Biden in August, when he said he could "flat guarantee you there will be no changes in Social Security." He told voters they could take that to the bank.
But Mr. Obama has always been more careful when talking about the program, saying some changes would be needed to ensure long-term solvency.
Proposing such changes is a calculated risk for Mr. Obama. Many Democrats fear House Republicans could swiftly move to try to implement the spending cuts proposed by the White House and put Democrats in the awkward position of voting against things Mr. Obama proposed. To address this, Mr. Obama is expected to make clear next week that the spending cuts and tax increases are part of a package and that the proposal can't be split into pieces.
But White House officials felt that they had already—quite publicly—proposed many of these changes and it would hurt them in negotiations to backpedal now. (See related White House document. ) On Wednesday evening, just hours after the budget is offered to Congress, Mr. Obama plans to dine with a number of Senate Republicans to talk about the budget and other issues.
Lawmakers and budget watchers will also be monitoring other parts of the budget, particularly areas in which Mr. Obama has promised to increase spending without adding to the deficit. The senior administration official said, for example, that the White House would propose expanding access to early-childhood education by raising taxes on cigarettes and other tobacco products.
Another proposal likely to draw attention would block individuals from accumulating more than $3 million in tax-preferred retirement accounts such as IRAs. Administration officials believe amounts above this threshold enable people to take advantage of tax rules.
"The budget would limit an individual's total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million in 2013," the senior administration official said. "This proposal would raise $9 billion over 10 years."
The White House will also wade into the thorny issue of disability- and unemployment-insurance benefits. It will propose barring Americans from collecting unemployment benefits and disability benefits that cover the same period of time. Americans collecting unemployment benefits are supposed to be able to prove they are looking for work, and Americans collecting Social Security disability benefits are supposed to be able to prove they are unable to work. Social Security administrative law judges have complained in recent years that a number of people seeking disability benefits are simultaneously either applying for or collecting unemployment checks.
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Workers Stuck in Disability Stunt Economic Recovery .
By LESLIE SCISM and JON HILSENRATH
Former truck driver James Ottesen, of Mason, Ohio, said being on disability "kind of reminds me of welfare.'
The unexpectedly large number of American workers who piled into the Social Security Administration's disability program during the recession and its aftermath threatens to cost the economy tens of billions a year in lost wages and diminished tax revenues.
Signs of the problem surfaced Friday, in a dismal jobs report that showed U.S. labor force participation rates falling last month to the lowest levels since 1979, the wrong direction for an economy that instead needs new legions of working men and women to drive growth and sustain a baby boomer generation headed to retirement.
Michael Feroli, chief U.S. economist for J.P. Morgan, JPM +0.88%estimates that since the recession, the worker flight to the Social Security Disability Insurance program accounts for as much as a quarter of the puzzling drop in participation rates, a labor exodus with far-reaching economic consequences.
The unemployment rate in Friday's report fell to a four-year low of 7.6%, which most times signals job growth. This time it reflected workers leaving the workforce, a problem that could persist: Economists say relatively few people are likely to trade their disability checks for paychecks, in part because the program doesn't give much incentive to leave.
Former truck driver James Ottesen, who began receiving monthly payments in 2009, said, "I'm not real happy" about being on disability. "It kind of reminds me of welfare." He said he would "like to get re-educated to do something" because "my body is broke but my mind is not."
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But even if the 53-year-old Ohio man learned of a job he could do with herniated discs, he said, the government disability program feels like "a blanket covering you, and to walk out from it…at my age, it's a little intimidating."
Federal Reserve Chairman Ben Bernanke has worried that the financial crisis would lead to a permanent loss of workers, setting up what economists call hysteresis, a term borrowed from physics to describe temporary market changes that lead to permanent economic losses.
It is no longer a theoretical problem, said David Autor, a professor at the Massachusetts Institute of Technology, who has studied the disability program. The economy has a case of hysteresis, he said, created by the permanent transfer of workers to disability rolls.
Many newcomers to the disability roster are low-wage earners with limited skills, Mr. Autor said, and they are "pretty unlikely to want to forfeit economic security for a precarious job market."
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More Claimants in Private Plans Return to Work
Real Time Economics: Disability Fund to Be Depleted by 2016
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Payments, tied to a worker's wage history, average $1,130 a month, which totals $13,560 a year. That is about $2,000 a year more than the federal poverty level for a single person and about $2,000 less than full-time wages at the federal minimum of $7.25 an hour. After two years, people on disability are eligible for Medicare health insurance—another government benefit that encourages recipients to stay put.
Between December 2007, when the recession started, and June 2009, when it ended, the number of Americans receiving federal disability benefits grew to 7.6 million from 7.1 million. Then the rolls swelled, reaching 8.9 million in March, about 5.4% of the civilian workforce ages 25 to 64, according to J.P. Morgan estimates. That compares with 1.7% of the U.S. workforce in 1970.
Economic growth is driven by the number of workers in an economy and by their productivity. Put simply, fewer workers usually means less growth.
Since the recession, more people have gone on disability, on net, than new workers have joined the labor force. Mr. Feroli estimated the exodus to disability costs 0.6% of national output, equal to about $95 billion a year.
"The greater cost is their long-term dependency on transfers from the federal government," Mr. Autor said, "placing strain on the soon-to-be exhausted Social Security Disability trust fund."
Last year, Social Security paid nearly $137 billion to 8.8 million disabled workers and 2.1 million of their spouses and children; related Medicare costs were about $80 billion. Program trustees estimate that by 2016, Social Security won't be able to pay all of its disability claims.
In past recessions, discouraged workers dropped out of the labor force but returned when the economy picked up steam. About two-thirds of Americans ages 16 and older were either working or looking for work at the start of the current recovery in 2009.
But rather than expanding, the proportion of workers has since fallen to 63.3%, according to the government's March statistics, released Friday.
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With overall participation down, the labor force—a measure of people working and people looking for work—is barely growing. In March it was up just 0.2% from a year earlier and has grown by just 318,000 people since the recession ended in June 2009 to 155 million workers. In the decade before the recession, the labor force grew on average by 1.2% per year.
Some lawmakers and public-policy analysts are calling for an overhaul of the disability program. Senate and House panels held hearings last year addressing shortcomings, including the failure to return more people to work.
The White House released details of its proposed budget Friday that called for closing loopholes that allow people to collect full disability and unemployment benefits over the same period.
The federal program provides a safety net to workers with severe illnesses and injuries. To obtain an award, workers must prove they haven't worked substantially for at least five months, and Social Security must determine that a medical impairment will prohibit work for at least a year.
With an expanded list of disabilities added by Congress in 1984, more than half of people awarded benefits now qualify because of musculoskeletal problems—including back pain—mood disorders and other mental problems, according to Social Security data. Such claims can take a year or more to assess because of their often-subjective nature.
Economists have found that more people apply for disability during periods of high unemployment, partly because they can't find work. Ailments they might endure during good times are instead used as an avenue out of the labor force.
The economic downturn drove about 2.2 million additional applications for disability, relative to what would have occurred in the absence of the slump, according to estimates by Mark Duggan, an economics and public-policy professor at the University of Pennsylvania's Wharton School, who has co-written research on the disability program with Mr. Autor.
About one million of those applicants likely remain out of the labor force, either because they got benefits or their applications were pending, Mr. Duggan said. Private disability insurance returns workers in far greater proportion.
In recent years, about a third of applicants have been accepted at the initial stage, which typically takes more than four months. Those rejected can appeal to administrative law judges for decisions that can take nearly two years, according to Messrs. Duggan and Autor.
With the economy improving, the disability roster is now expanding at a slower pace, though many economists expect its share of working-age people to continue growing.
The boom in disability is part of a longer-term trend that places the burden of economic casualties on the federal government. Some states use the program to reduce welfare costs, according to congressional testimony last year by David Stapleton, director of the Center for Studying Disability Policy at nonpartisan consulting firm Mathematica Policy Research.
States save money when federal disability checks replace state-paid benefits. Workers on federal disability also can switch from state-supported health insurance programs—such as Medicaid—to Medicare, he said.
The nation's burgeoning disability roster stems partly from the aging workforce: Baby boomers' bodies are breaking down, and some economists believe that the problem will level off once they reach retirement.
But boomers aren't the only ones seeking help, Of the nearly nine million former workers receiving federal disability payments, more than 2.5 million are in their 20s, 30s and 40s.
"It is difficult to overstate the role that the SSDI program plays in discouraging" employment among these young people, Messrs. Autor and Duggan said in one of their research papers, urging reform.
With its origins in the 1950s, the government disability program has for decades paid little attention to getting people back to work, largely because when it was created, medical treatments rarely improved the prospects of older factory workers in physically demanding jobs, the professors noted.
In 2011, the latest data available, fewer than 0.5% of beneficiaries left disability rolls to work again. Most leave the program by advancing to the Society Security retirement program, or they die.
The Social Security Administration has run an initiative since 1999 called Ticket to Work that offers vocational rehabilitation, career counseling and job-placement help. But the Government Accountability Office, the investigative arm of Congress, has repeatedly faulted the agency for failing to substantially boost participation: About 3% of those eligible were enrolled, a 2011 GAO study found.
Social Security Chief Actuary Stephen Goss said in an interview that the agency, by law, was geared toward providing "benefits to those with a longer-term, by-and-large permanent disability."
Social Security is committed to improving Ticket-to-Work, he said. In general, he said, his administrators are doing "a very good job with the staffing and resources that are available," given the surge in applications after the financial crisis.
Some disability experts suggest the government try tailoring special services and training for applicants most likely to return to work. "Right now, we have an income benefit that is not based on what you can do," said David Mann, a Mathematica researcher.
Mr. Mann, age 30, said many disabled people can work with the right help, and he included himself. Paralyzed in a diving accident as a teenager, he graduated from Princeton University and earned a doctorate in economics from the University of Pennsylvania. He uses a motorized wheelchair to navigate Mathematica's Princeton, N.J., offices.
Social Security administrators have been unable to keep up with periodic medical evaluations of SSDI beneficiaries, according to the program's inspector general. The backlog of required assessments shrank last year to 1.3 million people from 1.5 million, according to government data.
Such medical reviews in 2011 found 23,271 people able to return to work out of more than 345,000. The inspector general estimated that overdue medical reviews between 2005 and 2011 cost taxpayers $1.9 billion to $3.7 billion in benefits that shouldn't have been paid.
Mr. Ottesen used to drive trucks for a Cincinnati produce business until he flunked a job-required physical exam and lost his job. He said he had been driving despite his back pain.
He was initially denied federal disability benefits, and, like many applicants, he hired a lawyer, at government expense, to appeal.
Social Security pays for such legal help, based on the idea that experts help move cases faster, helping hold down the application backlog. Last year, Social Security paid $1.4 billion in fees to disability advocates.
After Mr. Ottesen was approved for a monthly disability payment of about $1,100, he considered looking for another line of work, he said, but "I don't know anything but driving a truck."
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By WILLIAM POOLE
President Obama will release his overdue budget on Wednesday. It will doubtless project a reduction in the federal budget deficit—a projection that journalists, commentators and policy makers should ignore. To do otherwise is to be complicit in fraud. Strong statement? Not really.
For 50 years or so the federal government has deliberately and to an increasing extent misstated probable future budget deficits. Democrats and Republicans are guilty. The White House is guilty. And so is Congress. Private firms that deliberately misrepresent their financial statements in this fashion would be guilty of a crime.
The magnitude of the misrepresentation is breathtaking. For one example, the bitterly contested "fiscal cliff" legislation (the American Taxpayer Relief Act of 2012) raised the top income tax rate to 39.6%. However, the Congressional Budget Office's latest (early February) deficit projection for 2013-22 is now $4.6 trillion higher than the baseline deficit it projected in mid-2012. After the tax increase, how can that be?
Easy. Congress requires the CBO to present its baseline budget projections on the basis of "current law." Congress then manipulates current law to understate probable future outlays beyond the present year, and to overstate probable future revenues. These manipulations change CBO baseline budget projections based on current law. Voilà, actual deficits exceed projections, and the previous budget projections are rendered meaningless.
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Bloomberg News
.Congress can misrepresent the effects of any given piece of legislation in complex ways. It does not do so by entering, say, $800 million when the correct number is $900 million. Instead, Congress enacts certain tax and spending measures as "temporary" when it has no intention of allowing the provision to lapse; or it assumes legislative provisions in current law that would cut spending will be made, when Congress knows they never will.
Fortunately, some years ago the CBO began to present "alternative scenario" budget projections, in which differences from current-law projections are explained in detail. In its early February update, one example is that the 25% cut in physician Medicare reimbursements scheduled for next Jan. 1 will not occur. That adjustment increases the projected deficit in 2023 by $16 billion, and cumulatively by $138 billion from 2014-23. Congress has overridden the scheduled cut in physician reimbursements every year since 2003, in a legislative provision known as the "doc fix."
Another item in CBO's February "alternative" budget projection notes the effect on the deficit of extending certain expiring tax provisions in current law; that adjustment raises the projected 2014-23 deficit by $954 billion. In a footnote, the CBO says that "[t]hese estimates reflect the impact of extending about 75 provisions. Nearly all of those provisions have been extended previously; some, such as the research and experimentation tax credit, multiple times."
Keep in mind that these provisions may be extended piecemeal, and for differing periods, in various pieces of legislation over the course of the year. The American Taxpayer Relief Act of 2012 had about 30 of these so-called extenders.
What are traders, portfolio managers, journalists and citizens to do in the face of such practices? My recommendation is to ignore the official current-law scoring estimates of the federal budget, unless you have sufficient analytical resources to sort through the legislative details, line by line, and figure out what is really going on.
Some Republican commentators are too harsh on the CBO, saying or implying that it is complicit in the misleading projections. Federal law requires that CBO present current-law budget projections. To make that point clear, in its most recent budget update—a document 77 pages long—a search turns up 61 occurrences of "current law," "current laws," and "current-law."
The CBO goes out of its way to emphasize the problems with the budget projections it presents. Its "alternative scenario" projections are featured prominently. You may not like these alternative projections, because you would specify the alternative differently, but they are the only truly honest and useful effort in town.
The House and Senate budget committees could assist us by requesting that the CBO score all proposed legislation according to its alternative scenario as well as according to current law. If the committees won't do so, the ranking minority member of each committee could do so by sending a letter to the CBO.
U.S. fiscal policy is in a chaotic state. Policy decisions are wrapped around the convoluted budget accounting that Congress and the White House use to obfuscate, dissemble and hide what is really being done. That is a tragedy, and our democracy is worse for it.
Mr. Poole is a senior fellow at the Cato Institute and a former president of the Federal Reserve Bank of St. Louis.
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BTW, an underreported element of BO's COLA adjustment is that it also applies to the indexing of tax brackets i.e. the lower COLA means that tax bracets will move up slower as well. In other words, it serves to increase taxes.
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The 'Smoke and Mirrors' Budget
April 12, 2013
"The natural cure for an ill-administration ... is a change of men." --Alexander Hamilton, Federalist No. 21
Finally, after more than two months of delays and excuses, Barack Obama released his budget for fiscal 2014. "It's a budget that doesn't spend beyond our means," he boasted. Unless, of course, you consider a projected $744 billion deficit to be "beyond our means." Furthermore, he added, "it's a budget that doesn't make harsh and unnecessary cuts that only serve to slow our economy." That would be because he doesn't make any real cuts at all, much less harsh ones.
Obama's $3.8 trillion budget relies on further tax increases on the wealthy, despite his having just won a $660 billion tax increase on top earners at the beginning of the year. Now he wants to limit deductions and institute the "Buffett Rule" that households earning $1 million or more must pay at least 30 percent in taxes. In exchange, Obama threw in something new to ostensibly appeal to Republicans -- slowing the growth of Social Security and Medicare through revising benefit calculations and reimbursement rates. In reality, that allows him to reinforce that he's only doing it to "compromise" with the GOP, from whom he hopes to extract the aforementioned tax hikes.
The president claims $1.8 trillion in so-called deficit reduction over a decade, but all of the supposed deficit reduction is achieved through tax increases. As National Review's Veronique de Rugy points out, "$1.2 trillion of the $1.8 trillion number comes from replacing the sequester cuts" that are already in place. And his tax increases will likely add up to over $1 trillion -- nearly twice what he claims.
But not to worry, he says, "There's not a lot of smoke and mirrors in here."
On top of that, Obama's budget is not the "middle road" or "compromise" that his Leftmedia minions would have you believe. Under his plan $5.3 trillion will be added to the deficit over 10 years. Since he was off by $1.6 trillion on his first five-year projection, we'll pass on believing this one. Spending for FY2014 would be $170 billion higher than the Congressional Budget Office's baseline (which by the way is also twice this year's sequester), $240 billion higher than Paul Ryan's House budget and even $80 billion higher than the Senate Democrats' budget.
Other lowlights include the following:
He trims defense spending growth by a further $100 billion over 10 years, bringing it to just 2.4 percent of GDP -- lower than any year since before World War II. That's a disastrous gamble that displays the commander in chief's contempt for his constitutional duty to ensure national defense.
His budget caps tax-free retirement savings because, as the White House explains, some people are putting away "substantially more than is needed to fund reasonable levels of retirement savings." He proposes to "limit an individual's total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013." So Obama now gets to decide how much of your hard-earned money you can save for retirement?
He increases the cigarette tax to $1.95 per pack (from $1.01 now and $0.39 when he took office) to pay for preschool for all four-year-olds from low- and moderate-income families.
He adds new or increased spending on infrastructure, high-speed rail, green energy, college tuition subsidies, job training, and so on and so on.
We would list the cost of ObamaCare, but the White House worked diligently to so spread and bury the burden that it's becoming difficult to identify. We do know that Obama admits the insurance exchanges will cost at least twice initial projections, and that's only counting the less-than-half of states that are participating. That doesn't bode well for the rest of ObamaCare, though it's certainly in line with what we feared all along.
None of this is to say we expected better of Obama. He's a tax-and-spend statist through and through, and it will take a change of administration to get this nation back on the right course.
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This chart is from Scott G (and BEA):
(http://4.bp.blogspot.com/--7Pw9G0kHLc/UWXNfvhlgbI/AAAAAAAANbU/vRzQ1N1gEWA/s400/Spending+vs+Revs+%25+GDP.jpg)
Looking at the past 45 years we should constitutionally set federal spending limits at 19.5% of the economy. Below that is wishful thinking and spending above that is generational theft.
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Yes.
At the same time something we here need to include more in our analysis of BO's deficits in the unusually low percentage of tax revenues. What is our sound bite answer to somone who says that if revenues were 19.5% then the deficit would be "only" $xxx and "only "x& of GDP?
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Yes.
At the same time something we here need to include more in our analysis of BO's deficits in the unusually low percentage of tax revenues. What is our sound bite answer to somone who says that if revenues were 19.5% then the deficit would be "only" $xxx and "only "x& of GDP?
How does a retailer with anemic sales increase revenues? Raise the price? Never.
The amount of capital gains taxes the government is collecting from me is zero, same as it would be at the 100% tax rate. The transactions that don't happen because of high tax rates are impossible to measure. In a healthy, low tax rate economy, these same investments could have been sold and captured a new gain every 2 or 3 years. I made a point earlier about velocity. When things are moving, that same dollar can be paid to and earned and invested by many people and taxed many times in a year instead of once, or sitting still, or sitting on the sidelines.
Spending should be capped as percent of the economy. But with taxes, we need to maximize the dollars to pay for the expenses, not increase or maximize the percentage. When we try to maximize the percentage, we get the stagnation instead of revenue growth.
The other 'tax' is over-regulation. Also hard to estimate the amount of revenue that is killing.
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http://www.foxnews.com/world/2013/04/12/despite-sequester-state-department-ups-support-for-un/
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http://www.washingtonpost.com/opinions/george-f-will-whats-behind-the-funding-of-the-welfare-state/2013/04/17/8686d412-a6bd-11e2-8302-3c7e0ea97057_story.html
What's behind the funding of the welfare state
By George F. Will,
The regulatory, administrative state, which progressives champion, is generally a servant of the strong, for two reasons. It responds to financially powerful and politically sophisticated factions. And it encourages rent-seekers to exploit opportunities for concentrated benefits and dispersed costs (e.g., agriculture subsidies confer sums on large agribusinesses by imposing small costs on 316 million Americans).
Such government inevitably means executive government and the derogation of the legislative branch, both of which produce exploding government debt. By explaining these perverse effects of progressivism, the Hudson Institute’s Christopher DeMuth explains contemporary government’s cascading and reinforcing failures.
Executive growth fuels borrowing growth because of the relationship between what DeMuth, in a recent address at George Mason University, called “regulatory insouciance and freewheeling finance.” Government power is increasingly concentrated in Washington, Washington power is increasingly concentrated in the executive branch, and executive-branch power is increasingly concentrated in agencies that are unconstrained by legislative control. Debt and regulation are, DeMuth discerns, “political kin”: Both are legitimate government functions, but both are now perverted to evade democratic accountability, which is a nuisance, and transparent taxation, which is politically dangerous.
Today’s government uses regulation to achieve policy goals by imposing on the private sector burdens less obvious than taxation would be, burdens that become visible only indirectly, in higher prices. Often the goals government pursues by surreptitious indirection are goals that could not win legislative majorities — e.g., the Environmental Protection Agency’s regulation of greenhouse gases following Congress’s refusal to approve such policies. And deficit spending — borrowing — is, DeMuth says, “a complementary means of taxation evasion”: It enables the political class to provide today’s voters with significantly more government benefits than current taxes can finance, leaving the difference to be paid by voters too young to vote or not yet born.
Two developments demonstrate, DeMuth says, how “delegation and debt have become coordinate mechanisms of legislative abnegation.” One is Congress’s anti-constitutional delegation of taxing authority to executive-branch regulatory agencies funded substantially or entirely by taxes the agencies levy, not by congressional appropriations. For example, DeMuth notes, the Federal Communications Commission’s $347 million operating expenses “are funded by payments from the firms it regulates,” and its $9 billion program subsidizing certain Internet companies is funded by its own unilateral tax on telecommunication firms. The Consumer Financial Protection Bureau, another freebooting agency not tethered to the appropriations process, automatically receives a share of the profits of the Federal Reserve banks.
A second development is “the integration of regulation and debt-financed consumption.” Recently, a Post headline announced: “Obama administration pushes banks to make home loans to people with weaker credit.” Here we go again — subprime mortgages as federal policy. Is this because lowering lending requirements and forcing Fannie Mae and Freddie Mac to securitize the loans worked so well last time? This illustrates DeMuth’s point about how unfettered executive government uses debt-financed consumption and “regulatory conscription of private markets” to force spending “vastly beyond what Congress could have appropriated in the light of day.”
High affluence and new technologies have, DeMuth believes, “led to unhealthy political practices.” Time was, the three basic resources required for effective political action — discretionary time, the ability to acquire and communicate information and persuasion skills — were scarce and possessed only by elites. But in our wealthy and educated society, interest groups can pressure government without being filtered by congressional hierarchies.
Legislative leaders — particularly, committee chairs — have lost power as Congress has become more porous and responsive to importuning factions using new media. Congress, responding to the increased difficulty of legislating, has delegated much lawmaking to specialized agencies that have fewer internal conflicts. Congress’s role has waned as that of autonomous executive agencies has waxed. The executive has driven the expansion of the consumption of benefits that are paid for by automatic entitlement transfer payments, by government-mandated private expenditures and by off-budget and non-transparent taxation imposed by executive agencies.
Government used to spend primarily on the production of things — roads, dams, bridges, military forces. There can be only so many of such goods. Now, DeMuth says, government spends primarily for consumption:
“The possibilities for increasing the kind, level, quality and availability of benefits are practically unlimited. This is the ultimate source of today’s debt predicament. More borrowing for more consumption has no natural stopping point short of imploding on itself.”
Funding the welfare state by vast borrowing and regulatory taxation hides the costs from the public. Hence its political potency. Until the implosion.
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Doug:
This seems to me a very powerful observation by Will. Would you please post it in the American Creed thread as well please?
TIA,
Marc
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Damn - just when I was about to become a minority as a white man. After 10 of millions of illegals are granted amnesty. Why stop at 33 million amnesties? Why not simply replace the ENTIRE work force of the United Staes with poorer people from around the world who would love to come here work harder for less? But I digress:
http://www.economist.com/news/leaders/21576662-governments-should-be-colour-blind-time-scrap-affirmative-action
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I put this under government programs. I notice a lot of liberal media blowback about gasoil potential (through fracking) in the form of recent articles about the "huge" potential of electric cars, methane, biofuels, wind and still with the solar.
****GM Still Taking Taxpayers for a Ride
By Rich Duprey | More Articles | Save For Later
May 1, 2013 | Comments (9)
Last September when Reuters calculated that General Motors (NYSE: GM ) was losing almost $50,000 on every Chevy Volt it sold the carmaker was apoplectic with indignation at the "grossly wrong" numbers being thrown around. Sure they were losing money, every new technological advance does, but as they built more cars and then released Volt 2.0 they would become profitable.
Well, GM has certainly built more Volts over the last six months or so and they've even sold a few more, too, but then so has Tesla Motors (NASDAQ: TSLA ) and Nissan (NASDAQOTH: NSANY ) . In fact Tesla sold more of its all-electric Model S cars in the first quarter of the year than GM did with its Volt, and Nissan turned itself around enough so that its LEAF outsold the Volt in March.
We'll get the April sales numbers in a day or so to see if any traction has been made as spring has gotten under way, and if GM was able to recover from March sales plunging 35%. One thing hasn't changed month to month and that is that the Volt is still a money-losing proposition for GM and for the taxpayers who bailed it out.
In a presentation yesterday, CEO Dan Akerson admitted GM is still losing money on every Volt sold and will continue to do so for the foreseeable future. So what's the solution? Not to admit defeat, that's for sure, at least certainly not when the taxpayer is still nominally footing the bill for your company. Nope, what you do is double down and say you're going to make even more of your money-losing cars than you did before and you're going to make them even cheaper than they are now!
Akerson didn't say how much GM was losing on each Volt, but he did say that if it ever hoped to make a profit on them the carmaker would need to cut as much as $10,000 from the cost of production. That, however, won't be happening until the next-gen model is introduced, which won't be until 2015 or 2016 at the earliest.
The already heavily subsidized Volt starts at less than $40,000 before a $7,500 tax credit kicks in. Last year the Congressional Budget Office estimated that the government's efforts to foist electric vehicles on a public that doesn't really want them will cost taxpayers $7.5 billion through 2019, including grants of $2.4 billion to lithium-ion-battery makers (you know, like bankrupt A123 Systems and Ener1). So how GM will be able to take that much cost out of building the Volt without eliminating any of its features is anyone's guess.
Despite generous rebates, ridiculously low leasing offers, and using fleet sales to juice monthly sales numbers the Volt remains rather unpopular among the car-buying public. In the meantime, though, taxpayers can enjoy the ride GM is taking them on.
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Yes, unfortunately the electric car is a government program. General Motors still needs a subsidy?? In the US the electric car runs on coal more than any other fuel source, so the fuel emission argument over gasoline is false. Like Ethanol. Don't tell the taxpayers and motorists paying for it. If we shifted our electricity to all-nuclear, the electric car would be CO2-free, but we aren't. The best advancement we could make right now would be to encourage more vehicles to run on compressed natural (CNG). To go down that road we would have to legalize fracking. The environmental protesters don't want us to even use sand: http://minnesota.cbslocal.com/2013/04/29/cops-35-arrested-in-two-winona-sand-fracking-protests/
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JPMorgan Warned Over ‘Manipulative Schemes’ in Energy Markets
Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.
The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.
The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.
READ MORE »
http://dealbook.nytimes.com/2013/05/02/jpmorgan-caught-in-swirl-of-regulatory-woes/?emc=na
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Instead of my rambling in a somewhat unorganized fashion here is one post from a think tank. I will try to explore more on these sites.
http://www.cato.org/sites/cato.org/files/articles/gokhale_article.pdf
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http://www.washingtontimes.com/news/2013/may/7/tax-increases-begin-ease-budget-deficit/
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http://www.washingtontimes.com/news/2013/may/7/tax-increases-begin-ease-budget-deficit/
Let's keep an eye on this, tax revenues are a pretty good measure of economic activity.
"In April alone the federal government ran a $112 billion surplus."
April is always a 'surplus' tax collection month.
If we are seeing a year to year improvement right now, it is in the context of comparing with a record fifth straight trillion dollar deficit year, not exactly the gold standard of fiscal performance.
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OK, gents, some challenging data in here. How do we explain? Regarding alleged slower rise of medical costs due to Obamacare is what I posted the other day in the Health Care thread from the WSJ-- that other forces, market forces were in play prior to Obamacare. This may be a tough point to make in sound bite form however , , ,
By David Lauter, Washington Bureau
May 14, 2013, 6:56 p.m.
WASHINGTON — The federal deficit is shrinking more quickly than expected, and the government's long-term debt has largely stabilized for the next decade, the Congressional Budget Office said Tuesday in a report that could strengthen the Obama administration's hand in the budget battles with congressional Republicans.
The budget office continues to say the federal government faces a long-range budget problem — mostly caused by the costs of an aging population — but its new forecast pushes the crunch point for that problem off into a considerably more distant future: well after the 2020 presidential election.
The deficit projection for this year — $642 billion — is almost 25% less than the deficit the budget office had forecast as recently as February. At the new level, the annual deficit would be back to where it was before President Obama took office. It would continue to fall for the rest of Obama's tenure, the budget office now projects. By contrast, the deficit for fiscal year 2012 came in at just over $1 trillion.
Three major factors account for most of the long-term improvement: a better economy, a continued slowdown in the rate of medical inflation — which reduces the cost of Medicare and Medicaid — and higher taxes that Congress approved as part of the "fiscal cliff" deal in January, the budget office said.
In addition, the automatic budget cuts that took effect this spring have reduced spending in the short term. The government also will benefit this year from dividend payments it is getting from the two giant housing finance agencies bailed out during the financial crisis.
The federal government's annual deficit this year amounts to about 7% of the gross domestic product. By 2015, the budget office forecasts, the deficit will fall to just over 2% of GDP, a level that most economists would consider relatively insignificant. At that point, the deficit would begin to climb slowly again, reaching about 3.5% of GDP by the end of the decade.
The report also forecasts that the federal debt will shrink relative to the size of the economy for the rest of Obama's term. The budget office expects the debt to begin to rise slowly after 2018 as the effects of an aging population increase the cost of retirement programs.
The federal deficit is the gap between what the government spends each year and its revenue, mostly taxes. The government has run a deficit almost every year for the last half-century. The federal debt represents the accumulated money that the government borrows to cover that deficit.
The numbers have an important political impact. Republicans have pushed for big reductions in government programs this year, arguing that the country could face a debt crisis if spending is not curtailed. The Obama administration and congressional Democrats have argued that big new reductions have less urgency because the budget picture is already getting better. The new figures from the budget office, which both parties rely on as a nonpartisan arbiter, will probably give more impetus to the Democrats' position.
The report also signaled that the next confrontation in Washington's budget wars may not come until late fall. Republican leaders have planned to push for budget cuts when Congress next votes on raising the federal debt ceiling. Because the debt is now growing more slowly than expected, the deadline for that vote probably won't come until October or November, the report says.
Underscoring the political dynamic, Republicans, who trumpeted news of higher deficits during Obama's first term, fell largely silent in reaction to the new figures.
The office of House Speaker John A. Boehner (R-Ohio) declined to comment. The House Budget Committee, chaired by Rep. Paul D. Ryan (R-Wis.), issued a short statement calling the report a "fresh reminder of Washington's out-of-control spending" and noting that by decade's end the federal government will collect $5 trillion in tax revenue.
Liberal Democrats, by contrast, said the new numbers showed that government spending was falling too fast and that the sharply lower deficits amounted to an austerity policy that is hurting economic growth.
"It would be nice if policymakers … recognized that we need less austerity now and more health savings [and revenue] later," Jared Bernstein, a former administration economic advisor, noted on his blog. The deficit, he wrote, "is coming down too fast given the still weak economy."
Other Washington deficit hawks reacted cautiously. Maya MacGuineas, head of the Campaign to Fix the Debt, issued a statement calling the updated numbers "a good sign" but added that the country still faced a "long-term fiscal imbalance."
"We need to keep making steady improvements to keep the good news coming," she said.
The revised outlook comes as congressional Republicans are trying to figure out a budget strategy that can unite their disparate factions.
In January, GOP leaders got a deal through the House to avert the so-called fiscal cliff, but only by relying on Democratic votes. Aides to the leadership admit that no consensus exists among their members about how to raise the debt ceiling and avoid a default by the government when the deadline hits.
The president maintains that the debt ceiling should be raised without any conditions attached. Republicans are expected to continue to insist upon some concessions — either new budget cuts or, perhaps, a commitment to reforming the federal tax code.
"We're going to have a big conversation with our members … to talk about a way forward," Boehner said last week. "Dealing with the long-term structural spending problem we have, frankly, is at the core of it. But we also know we can't cut our way to prosperity. We need real economic growth."
House Ways and Means Committee Chairman Dave Camp (R-Mich.) and House Majority Leader Eric Cantor (R-Va.) have been meeting with members to discuss options for a tax reform plan. Camp said last month that he expected a tax plan to pass the House but did not hazard a guess about whether agreement could be reached with the Democratic majority in the Senate.
david.lauter@latimes.com
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Gee, panic liquidation of assets boosts taxes received for now...
Bet you won't see this trend continue.
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Happy Memorial Day everyone.
Now back to coverage of our bloated and badly run government. How is it that in $7 trillion in new debt and going on $30 trillion in Obama spending none of it found its way into repairing or rebuilding the third(?)(4th?)(5th?) federal interstate bridge to fall? We were just too focused on the important stuff, like paying people not to work.
http://en.wikipedia.org/wiki/List_of_bridge_failures
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There were serious cuts to diplomatic security under this president. Funny that they aren't highlighting that accomplishment.
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Yes, strange that none of the savings on Benghazi security found its way into Interstate bridge maintenance. Where else did the money go? Who else besides me was worried about funding smoking cessation studies for government funded sex change recipients? No worries, those programs were fully funded. The bridge can wait.
Taxpayers Spend $536,526 to Study Smoking Cessation for LGBT Community
By Fred Lucas May 23, 2013
(CNSNews.com) – The National Institutes of Health issued a $536,526 grant to the University of Illinois, Chicago, for a two-year program ending in July to study the smoking cessation of lesbian, gay, bisexual and transgender population.
“The purpose of this study is to develop and evaluate the benefits of culturally targeted smoking cessation intervention for lesbian, gay, bisexual and transgender smokers,” the NIH grant description said. “Findings will contribute to the scientific literature on reducing smoking-related health disparities among underserved populations.”
The funding began on Sept. 30, 2010 and will conclude on July 31, 2013.
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The Many Ways That Cities Cook Their Bond Books
The $3 trillion municipal debt market is rife with creative accounting.
By STEVE MALANGA
It has been a busy few weeks for the Securities and Exchange Commission. In May, the SEC charged two cities—Harrisburg, Pa., and South Miami, Fla.—with securities fraud for allegedly deceiving investors in their municipal bonds.
This follows similar fraud charges against states, New Jersey in 2010 and Illinois in March, after SEC investigators uncovered what they called "material omissions" and "false statements" in bond documents related to those state's pension funds.
With Harrisburg, however, the SEC has gone further and charged the city government with "securities fraud for its misleading public statements when its financial condition was deteriorating and financial information available to municipal bond investors was either incomplete or outdated." The SEC says this is the first time the regulator has "charged a municipality for misleading statements made outside of its securities disclosure documents."
The Harrisburg charges are part of a broader SEC effort to scrutinize state and local government issuers in the nation's $3 trillion municipal-bond market. "Anyone who follows municipal finance knows that budgets can sometimes be a work of fiction," says Anthony Figliola, a vice president at Empire Government Strategies, a Long Island-based consulting firm to local governments. "Harrisburg is the tip of the iceberg."
And a mighty iceberg it is. The 2012 State of the States report, released in November by Harvard's Institute of Politics, the University of Pennsylvania's Fels Institute of Government and the American Education Foundation, found state and local governments are carrying more than $7 trillion in debt, an amount equal to nearly half the federal debt. Often, the report said, "States do not account to citizens in ways that are transparent, timely or accessible."
Consider the practices of Stockton, Calif., which last June became the nation's biggest city to file for bankruptcy. In 2011, Stockton's new financial managers issued a blistering critique of past accounting practices and acknowledged that the city's previous financials had hidden significant costs, including the real cost of employee compensation and retirement obligations. Bob Deis, the new city manager, declared that Stockton's financials bore "eerie similarities to a Ponzi scheme."
If so, the city's bondholders have been taken for a ride. In bankruptcy court earlier this year, a judge ruled that Stockton could suspend payments on its bonds even while continuing to fund its employee retirement system.
Similarly, when another California city, San Bernardino, went bust last year, some city officials alleged that it had been filing inaccurate financial records for nearly 16 years. At best, officials said, the city's bookkeeping had been "unprofessional." The SEC began an investigation last fall. Meanwhile, the city has defaulted on bond payments, leaving investors in the lurch.
One area that has come under special scrutiny is pension-fund accounting, because states have latitude in choosing how to value their retirement debts. The SEC noted that Illinois used accounting that funds a larger percentage of an employee's pension costs near the end of his career, a method that increases the risks that the system could go bust. The SEC said Illinois didn't properly reveal the risks posed by this sophisticated accounting wrinkle.
The SEC accused New Jersey of failing to disclose to investors that it wasn't sticking to a plan to adequately fund its pension system. In this, the Garden State isn't alone. Many states underfund their pension systems, even by their own accounting standards.
A June 2012 study by the Pew Center on the States found that 29 states didn't make their annual required contribution for pensions in 2010, the last year for which data were available. It isn't clear how many of the more than 3,000 local government pension systems follow the same practice, although a survey this January by Pew of 61 large cities found nearly half didn't make their full contributions.
In the South Miami case the SEC zeroed in on a complex bond deal that changed over time in a way that threatened the tax-free status of the securities. The SEC essentially warned South Miami that municipalities that employ such schemes need to fully understand the consequences for investors. In this particular case, South Miami paid $260,000 to the Internal Revenue Service to preserve the tax-free status of the bonds for investors.
Municipal investors have often ignored such questionable practices thanks to a generation of low default rates. Many also assume that even when a local government gets into financial trouble, bondholders are always first in line to be paid.
But officials in some troubled cities are pushing back against the notion that investors should get the best deal among creditors. Harrisburg City Council members have balked at a state-proposed bailout plan because they claim it places much of the burden on taxpayers without penalizing investors. Last year, City Councilman Brad Koplinski called the plan's 1% increase in the state-imposed income tax on Harrisburg residents "a bad decision for the people of Harrisburg, people who did nothing to get our city into our fiscal crisis.''
Investors will hear more of this talk as municipalities face growing budget pressures. Recently, former New York Lt. Gov. Richard Ravitch warned the municipal bond industry that the promises governments have made to repay investors may not take precedent over other obligations. States and cities face "a unique challenge," he said, "in trying to maintain services and meet their retirement commitments to workers," emphasizing that this was "not necessarily a good message" for investors.
Under these circumstances muni-bond investors should be practicing a stronger form of "buyer beware." Yet even that is difficult if governments issue reports designed to disguise their true financial condition. If investors finally catch on to this, it might put an especially deep chill on the market for municipal securities. Less than forthcoming city and state governments will deserve the consequences.
Mr. Malanga is a senior fellow at the Manhattan Institute.
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"The fore horse of this frightful team is public debt. Taxation follow that, and in
its turn wretchedness and oppression."
--Thomas Jefferson, Letter to Samuel Kerchival, 1816
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This is legal?
What is this? :?
****Weiner wife Abedin being probed over employment status
By GEOFF EARLE, Bureau Chief
Last Updated: 1:31 AM, June 15, 2013
Posted: 8:15 PM, June 14, 2013
Anthony Weiner and Huma Abedin
WASHINGTON — One of the Senate’s most aggressive investigators is probing longtime Hillary Rodham Clinton aide Huma Abedin’s employment status, asking how she got a sweetheart deal to be a private six-figure consultant while still serving as a top State Department official.
Abedin, one of Clinton’s most loyal aides, is married to former Rep. Anthony Weiner, who’s in the midst of a vigorous effort to beat back his own scandal and become mayor.
The inquiry by Sen. Charles Grassley (R-Iowa), compiled in a three-page letter to Abedin and Secretary of State John Kerry, adds drama to Weiner’s bid.
Abedin has been essential to his attempt to move past his sexting scandal.
The couple hauled in as much as $350,000 in outside income on top of Abedin’s $135,000 government salary after Weiner quit Congress amid a sexting scandal when he got caught sending out Tweets of his crotch.
Abedin, who served as Clinton’s deputy chief of staff when Clinton was secretary of state, later became a “special government employee” who was able to haul in cash as a private contractor.
The change in status came to light only last month. Abedin took on the new assignment after she gave birth to son Jordan and began working from New York.
One of the clients she did consulting work for while on the government payroll was Teneo Holdings, a firm founded by longtime Bill Clinton aide Doug Band.
Grassley, the top Judiciary Committee Republican, wrote that he was concerned Abedin’s status “blurs the line between public- and private-sector employees, especially when employees receive full-time salaries for what appears to be part-time work.”
He peppered Abedin and Kerry with 13 questions about her employment. Among them: “Who authorized the change in status in your official title?” and “Who was made aware of the change in status?”
A State Department official, noted there were 100 such consultants at the agency, saying, “Miss Abedin’s status was approved through the normal process.”
The official couldn’t immediately answer who signed off on the consulting deal, saying Abedin submitted it to the ethics office in June of last year.
A person close to Abedin said she voluntarily disclosed that she worked for Hillary Clinton personally – “to allow Huma to begin planning for [Clinton’s] activities post-State,” as well as for the Clinton foundation and Teneo Holdings.
The person added that Teneo conducts “no business” with State and that Abedin “did not provide ‘political intelligence.’”
One source diagnosed the situation this way: “She has the Clinton disease. When your husband gets knocked down, get up right away or else.”
Grassley’s letter quotes from Teneo’s Web site, on which the firm calls itself the “next chapter in strategic advisory.”
“In what ways did the department interact with the companies for which you consulted?” the letter asks
Grassley suggested Abedin was providing clients “political intelligence.”****
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is responsible and not expecting taxpayers to pick up the tab. Unfortunately single mothers who get government pay checks form a huge voter block. They will nearly ALL vote for Hillary. This article celebrates food stamps by celebrating Rosa Diaz who of course is just trying to feed her children. It sounds like she has NO other income and the only money for food is food stamps. I thought food stamps are supposed to supplement not be the total sum to buy food.
Deep in the article is this, "For Diaz, who is five months pregnant, this means less anxiety about being able to feed her family all month long". Instead of outrage we are supposed to accept the food stamp program as a blessing offered to feed *the children*.
Or this line, "At $384 a month, she usually pitched in an extra $100 of her own money to keep her family fed." As though adding $25 bucks a week of her "own money" is doing US a favor! Folks most of the time we are being robbed. I doubt half of the food stamp program could be considered legitimate. :-(
****Food stamp hike helps families cope
$210M is likely to flow through Tenn.'s economy
Jul. 1
An increase in food stamp benefits in April under the federal stimulus package has helped single mother Rosa Diaz, 21, stock the pantry for her family, including her 2-year-old son, Reco Diaz, and her sister. BILLY KINGSLEY / THE TENNESSEAN
An increase in food stamp benefits in April under the federal stimulus package has helped single mother Rosa Diaz, 21, stock the pantry for her family, including her 2-year-old son, Reco Diaz, and her sister. BILLY KINGSLEY / THE TENNESSEAN
Written by
Bonna Johnson
THE TENNESSEAN
Who will benefit from the nearly $5 billion in federal stimulus money that is expected to flow into Tennessee? The Tennessean goes to the front lines for a weekly report on how the money is being spent. Read more at tennessean.com/stimulus.
BUY THIS, NOT THAT
The food stamp program was renamed the Supplemental Nutrition Assistance Program (SNAP) last October, although most people still refer to the monthly benefits as food stamps. In April, the federal stimulus program increased monthly benefits about 13 percent.
SNAP benefits can be used to purchase these items:
• Breads and cereals
• Fruits and vegetables
• Meats, fish, poultry
• Dairy products
• Seeds and plants that produce food for the household to eat
But not these items:
• Beer, wine, liquor, cigarettes or tobacco
• Pet food
• Soap, paper products and household supplies
• Vitamins and medicines
• Food that will be eaten in the store
• Hot foods
SOURCE: U.S. Department of Agriculture
TRACKING FOOD STAMPS
The food stamp program in Tennessee has grown dramatically as more households seek assistance in the worsening economy and as monthly payments got a boost in April through the federal stimulus package.
Month | Individuals | Households | Food stamps
May 2008 — 910,872 — 411,010 — $93.4 million
March 2009 — 1.06 million — 487,784 — $122 million
April 2009 — 1.08 million — 489,680 — $144 million
May 2009 — 1.09 million — 500,059 — $146 million
SOURCE: Tennessee Department of Human Services
TRACKING THE STIMULUS
Slowly cruising the aisles of her favorite grocery store, Rosa Diaz kept an eye out for specials to help her stock up on staples, like fruit juice and packaged snacks for her 2-year-old son.
"That's a decent price," Diaz said as she placed a couple of large jugs of orange juice, advertised at two for $3, in her shopping cart.
Ever since her food stamps increased in April — from $289 a month to $375 — the 21-year-old single mother can afford to fill up the pantry for her small family, which also includes her younger sister, and keep them fed until she gets more money the next month.
"Sometimes we came to the end of the month, and we didn't have any more food," said Diaz, who stretches her monthly allotment by staying away from expensive name brands and searching out sales at the H.G. Hill store near her apartment in Madison.
As part of the federal stimulus package, families on food stamps across the country got a boost in their monthly benefits of about 13.6 percent. On average, a family of four received an $80 increase per month, according to the U.S. Department of Agriculture.
The stimulus-funded bump in food stamp payments is intended to not only increase the purchasing power of poor families but also help the economy grow by infusing millions more into grocery stores, which in turn pay their employees and suppliers, and trickling down to the farmers growing crops and even the truckers hauling food.
In just the first three months since the increase in payments, an additional $49 million in stimulus funds has been spent in food stamps in Tennessee, according to Michelle Mowery Johnson, spokeswoman for the Tennessee Department of Human Services.
Over the course of the next fiscal year, which started July 1, some $210 million in stimulus funds is expected to flow through the Tennessee economy because of the increase in food stamps, she said.
Anti-hunger advocates don't expect recipients to start purchasing caviar and Perrier now that they have more money.
"I think the impact is probably that it's going to help people buy more food," said Brian Zralek, executive director of Manna Inc., a Nashville anti-hunger group.
For Diaz, who is five months pregnant, this means less anxiety about being able to feed her family all month long. Indeed, benefit amounts have not kept pace with the cost of groceries and needed to be increased anyway, said Richard Dobbs, policy director for food stamps at DHS.
"It's really helped," Diaz said. "They needed to do something."
At the same time, though, it's not going to help her buy a new car or pay her rent, she said. The worsening economy, plus a bit of bad luck, has made it increasingly difficult for the young mother to make ends meet.
She had been working with her mother and sister in a cleaning business, but as the economy took a downward turn, they lost clients. After her car was wrecked recently, she's had no regular transportation to get to the clients they have left.
"Things are still hard," Diaz said.
A second stimulus
Diaz isn't the only one feeling the limitations of President Barack Obama's $787 billion stimulus package approved in February. There is already talk of a second stimulus even as Republicans criticize the current package for not working and failing to create jobs.
Enrollment in the food stamp program, which was recently renamed the Supplemental Nutrition Assistance Program, has been rising in Tennessee as layoffs mount and the Tennessee unemployment rate climbed above 10 percent in May.
While the aim is to help poor families weather the recession, they likely would have gotten the same increase in October, when the federal government usually applies a cost-of-living adjustment anyway, Dobbs said. Because of the April increase, there won't be another increase this year, he said.
At the same time, though, he sees the higher payments as a way to help protect the jobs of cashiers and shelf stockers. And, "the more benefit we provide to (recipients) to purchase food, that frees up more income to pay rental expenses or utility bills or medical bills," Dobbs said.
Many grocers, though, have not noticed the extra injection of money into the economy and said it may take more time.
"The initial thought is that they haven't seen a direct impact from the food stamp increase," said Jarron Springer, president of the Tennessee Grocers and Convenience Store Association.
Christy Davis, a clerk with Johnny Howell Produce at the Nashville Farmers Market, said she's not noticed any change now that her food stamp customers have more to spend. About one-third of sales of Howell's farm-fresh produce are paid through food stamps, she said.
At the Madison H.G. Hill, business is up, but not so much from higher food stamp payments, said owner Todd Reese. "More people are going to the grocery store instead of eating out," he said.
Pump primer
Some economists credit an increase in food stamp amounts — along with unemployment benefits — as being the most effective way to prime the economy's pump.
"People who receive these benefits are very hard-pressed and will spend any financial aid they receive within a few weeks," wrote Mark Zandi, an economist with Moody's Economy.com, in a 2008 report. "These programs are also already operating, and a benefit increase can be quickly delivered to recipients."
Infrastructure spending, no matter how "shovel-ready" the projects, won't help the economy so quickly, Zandi wrote in a forecast earlier this year.
Critics, though, say higher food stamp payments won't help the economy grow faster and instead will expand welfare spending to unaffordable levels.
"Every dollar Congress hands out from food stamps must be taxed or borrowed from someone else," said Brian Riedl, a senior federal budget analyst at the conservative Heritage Foundation, a critic of the stimulus package.
"You're taking water out of one side of the pool and dumping it into another side of the pool, but you haven't raised the water level."
Raising food stamp payments may be a humane policy, Riedl said, "but that doesn't mean you're growing the economy any faster."
It's perfectly fair to say you don't want people to starve, Riedl said, and that's what officials should use as a line of argument instead of claiming that the increase in food stamp payments will stimulate economic growth.
For Makeesha Ayodele, 30, it all comes down to feeding her two children, ages 10 and 4.
At $384 a month, she usually pitched in an extra $100 of her own money to keep her family fed.
When her payment rose to $440 in April, she could use some of that extra hundred bucks "to help pay part of my rent and keep the cell phone on," said Ayodele, who was back at the Nashville food stamps office last week trying to get back on the program after losing her benefits in May.
Contact Bonna Johnson at 615-726-5990 or bjohnson@tennessean.com.****
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This is legal?
What is this? :?
****Weiner wife Abedin being probed over employment status ...
ccp, Thanks for finding this. Huma is pretty close to the center of the political universe. Huma is/was Hillary's closest confident. The right wing nuts (anyone to the right of me) were sure she was Hillary's lesbian lover; Huma accompanied Hillary everywhere. Then she was the 'Muslim' in the inner circle affecting our diplomatic policies. She has relatives with ties to CAIR etc.(?) Then she was set up to be Anthony Weiner's wife, a powerful and outspoken congressman - before his bizarre weiner scandal. They had Muslim-Jewish wedding?? Then she was the wife standing by him, sort of. Clintons did not endorse Weiner for mayor - yet. A soft spot for sex scandals? Huma is still with Hillary? Still with Weiner. Now this scandal breaks. Yes, she takes full time pay, sells access or whatever it is she is selling on the side, and we don't get to know who is involved or how this operation works.
I really don't want to spend another decade studying Clinton scandals!
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Muslim women are forbidden from marrying non-muslims, so it's suspected Weiner has said the shahada.
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Muslim women are forbidden from marrying non-muslims, so it's suspected Weiner has said the shahada.
As with Bill-Hillary, it could just be a sham marriage. Who knows and who has time to care... Ughh.
But still, if and when Huma becomes first lady, after her husband survives his scandal to become NYC Mayor and then the first Jewish President, and after our Attorney General survives his scandal to become the first African American VP as his just reward for not investigating IRS, Benghazi or anything else, Huma will be one of the most powerful people in the Weiner-Holder administration.
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How very optimistic, Doug!
You're assuming we'll still have elections by then....
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Editorial: Cash the biggest crop in this farm bill
Most of $955 billion approved by Senate goes for food stamps and crop subsidies.
ORANGE COUNTY REGISTER
We find remarkable that the Senate approved Monday a so-called "farm bill" that calls for nearly $1 trillion in questionable spending and hardly a discouraging word has been heard on Capitol Hill.
Chalk that up to still-fresh outrage over revelations of the Obama administration's monitoring of Americans' phone records, Internet accounts and credit card transactions, and still-simmering concerns about Internal Revenue Service abuses and Justice Department abrogation of press freedom.
Article Tab: Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Agriculture Committee, speaks to reporters as the Senate votes on a farm bill that sets policy for farm subsidies, food stamps and other farm and food aid programs for the next five years, at the Capitol in Washington, June 10. At rear is Sen. John Hoeven, R-ND. Officially known as the Agriculture Reform, Food and Jobs Act of 2013, the agriculture policy measure would cost taxpayers $100 billion annually with the bulk of that amount allocated to the federal food stamp program.
Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Agriculture Committee, speaks to reporters as the Senate votes on a farm bill that sets policy for farm subsidies, food stamps and other farm and food aid programs for the next five years, at the Capitol in Washington, June 10. At rear is Sen. John Hoeven, R-ND. Officially known as the Agriculture Reform, Food and Jobs Act of 2013, the agriculture policy measure would cost taxpayers $100 billion annually with the bulk of that amount allocated to the federal food stamp program.
Anyway, the Agriculture Reform, Food and Jobs of Act of 2013 cleared the Senate floor by a comfortable 66-27 vote. The spending bill will cost the taxpayers $955 billion. That's 60 percent more than the previous farm bill, in 2008.
Most of the outlays in the bill actually have nothing to do with crops. In fact, 80 percent of spending goes to the Supplemental Nutrition Assistance Program, better known as food stamps.
The welfare program – the "Food" part of the Agriculture Reform, Food and Jobs Act – has grown 70 percent over five years, with a record 23.1 million households currently enrolled.
More at link: http://www.ocregister.com/articles/food-512813-bill-program.html
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WSJ excerpt, http://online.wsj.com/article/SB10001424127887324021104578551291160259734.html
Niall Ferguson: The Regulated States of America
Tocqueville saw a nation of individuals who were defiant of authority. Today? Welcome to Planet Government.
...On foreign policy, it may still be true that Americans are from Mars and Europeans from Venus. But when it comes to domestic policy, we all now come from the same place: Planet Government.
As the Competitive Enterprise Institute's Clyde Wayne Crews shows in his invaluable annual survey of the federal regulatory state, we have become the regulation nation almost imperceptibly. Excluding blank pages, the 2012 Federal Register—the official directory of regulation—today runs to 78,961 pages. Back in 1986 it was 44,812 pages. In 1936 it was just 2,620.
True, our economy today is much larger than it was in 1936—around 12 times larger, allowing for inflation. But the Federal Register has grown by a factor of 30 in the same period.
The last time regulation was cut was under Ronald Reagan, when the number of pages in the Federal Register fell by 31%. Surprise: Real GDP grew by 30% in that same period. But Leviathan's diet lasted just eight years. Since 1993, 81,883 new rules have been issued. In the past 10 years, the "final rules" issued by our 63 federal departments, agencies and commissions have outnumbered laws passed by Congress 223 to 1.
Right now there are 4,062 new regulations at various stages of implementation, of which 224 are deemed "economically significant," i.e., their economic impact will exceed $100 million.
The cost of all this, Mr. Crews estimates, is $1.8 trillion annually—that's on top of the federal government's $3.5 trillion in outlays, so it is equivalent to an invisible 65% surcharge on your federal taxes, or nearly 12% of GDP. Especially invidious is the fact that the costs of regulation for small businesses (those with fewer than 20 employees) are 36% higher per employee than they are for bigger firms.
Next year's big treat will be the implementation of the Affordable Care Act, something every small business in the country must be looking forward to with eager anticipation. Then, as Sen. Rob Portman (R., Ohio) warned readers on this page 10 months ago, there's also the Labor Department's new fiduciary rule, which will increase the cost of retirement planning for middle-class workers; the EPA's new Ozone Rule, which will impose up to $90 billion in yearly costs on American manufacturers; and the Department of Transportation's Rear-View Camera Rule. That's so you never have to turn your head around when backing up.
President Obama occasionally pays lip service to the idea of tax reform. But nothing actually gets done and the Internal Revenue Service code (plus associated regulations) just keeps growing—it passed the nine-million-word mark back in 2005, according to the Tax Foundation, meaning nearly 19% more verbiage than 10 years before. While some taxes may have been cut in the intervening years, the tax code just kept growing.
I wonder if all this could have anything to do with the fact that we still have nearly 12 million people out of work, plus eight million working part-time jobs, five long years after the financial crisis began. ...
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The opponents included most Democrats, because there is a "$1 billion cut" in the food stamp program (readers here know a cut is not a cut), along with some Republicans that doesn't believe a welfare program belongs in the farm bill. The urban Democrat - rural Republican, big government coalition has been fractured.
Separate the two and let them stand on their own merits, says Stephen Moore, WSJ
(http://online.wsj.com/article/SB10001424127887323893504578559150879457238.html?mod=WSJ_Opinion_MIDDLESecond)
Maybe someone can tell me what states in this union cannot afford to feed their own people in 2012, requiring a federal program, and how a monstrous bill like this is justified by a simple mention in the constitution of regulating interstate commerce.
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http://news.msn.com/us/july-4th-fireworks-furloughed-at-military-bases
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If you think the federal student-loan program looks like a bad deal for taxpayers, imagine how it would look with honest accounting. And now you don't need to imagine thanks to a new report that's receiving far too little attention. Turns out that the official "savings" for taxpayers of $184 billion over the next decade really add up to $95 billion in losses.
Here's the scam: Lawmakers peddle what is a massive subsidy for universities while claiming that student loans generate a windfall for the taxpayer. This phony windfall is conjured by creative accounting that politicians mandated via the Federal Credit Reform Act of 1990. Specifically, the law requires a deliberate under-counting of the cost of defaults.
This is partly how a Democratic Congress and President Obama managed to enact ObamaCare in 2010 while claiming that their big entitlement expansion would reduce costs. The health plan was paired with legislation that made the U.S. Department of Education the originator of roughly 90% of all student loans, which in turn generated billions in imaginary budget "savings."
To its credit, the Congressional Budget Office has noted on various occasions that while the law forces it to use this Beltway math, CBO knows it's not accurate under fair-value accounting. And in a new report on the costs of student loans made in the decade ending in 2023, CBO quantifies the size of this discrepancy at $279 billion. CBO adds with its typically wry understatement that Washington's mandated accounting method "does not consider some costs borne by the government."
That's for sure. Now keep in mind that the $95 billion net loss for taxpayers happens under current law. This includes Monday's doubling of rates that pushed subsidized Stafford loans for undergrads up to 6.8% from 3.4%. Politicians on both sides of the aisle say they don't want the rate increase to stick, and they are working on a bipartisan compromise that would be retroactive to July 1.
It's too much to hope that the politicians will swear off fraudulent accounting or try to reduce defaults. But one positive development is a growing bipartisan consensus that student-loan rates should rise as the government's own costs of borrowing rise.
The House has already passed a bill that would prevent student rates from doubling but would also protect taxpayers in the future by floating the rates at some spread above the 10-year Treasury note rate, depending on the type of loan.
Senate liberals like Tom Harkin (D., Iowa) came into the debate demanding that subsidized Stafford loans remain at a fixed 3.4%. Freshman Elizabeth Warren (D., Mass.) even introduced a plan to lend to kids at the Federal Reserve's discount window rate, currently 0.75%. Senator Warren claims to understand finance, by the way.
Refreshingly, someone at the White House budget office figured out that offering low fixed rates to students could be disastrous as the Treasury's own borrowing costs start to go north. Since Mr. Obama and Democrats have driven private firms almost entirely out of this market, the private lenders can't be squeezed anymore to pay for the next round of subsidies. So the President's budget also calls for tying rates to the 10-year Treasury note, though his plan is more taxpayer-unfriendly than the House bill.
The President's baby step toward fiscal sanity seems to have caught his liberal allies by surprise. Hence the recent hilarious spectacle of Ms. Warren, a Democrat, resisting a GOP effort to force a vote on the President's proposal.
Ms. Warren feared the vote because moderate Democrats increasingly accept that rates have to be tied to something resembling economic reality. Last week Senators Joe Manchin (D., W.Va.) and Tom Carper (D., Del.) joined Maine Independent Angus King and Republicans Lamar Alexander, Richard Burr and Tom Coburn to introduce a compromise plan that ties rates to the 10-year Treasury.
But bitter-enders including Majority Leader Harry Reid still want to gore the taxpayer with a fixed 3.4% rate, financed by tax increases. When Congress returns after this week's recess, expect Mr. Reid to force a vote on a one-year extension of his sweetheart rate for colleges. Fortunately for taxpayers, the Senate will also likely vote on the bipartisan plan that moves toward market rates.
If Mr. Reid wins, a $95 billion taxpayer hit will look like a lowball estimate. Either way, you can count on politicians like him to keep claiming they're saving you money.
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Deficit? What Deficit?
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 7/15/2013
Hope that title caught your attention, but, you should know, we are only half joking. In June, the federal government recorded a $116.5 billion surplus! Yep, you read that right – surplus! – the largest surplus for any June ever. Government spending fell to $170 billion for June, 47% below last year.
Don’t get to thinking Ronald Reagan and Bill Clinton have returned - they haven’t. Deficits will return in the months, quarters, years, and decades, ahead. Nonetheless, the size of the surplus surprised analysts and created a brighter near- to mid-term outlook for the budget. In the long-term there are still major – really major – issues looming, mainly entitlements.
Also, we don’t want you thinking the June numbers were completely kosher. Some big one-off factors played a large role. Fannie Mae made a $59 billion payment to the Treasury, or should we say to the taxpayers. And in the arcane world of federal budget accounting this counts as negative spending. Go figure. Meanwhile, with June 1 on a Saturday, $34 billion in monthly payments were sent on May 31, instead of June. Add those two back into spending and the picture looks different.
Still, some good things are happening. Tax receipts rose 10% from a year ago on the back of a recovering economy. While some will say it’s tax rate changes from earlier this year, tax receipts have risen for four consecutive years.
Spending growth, even adjusting for the one-off factors, has slowed sharply – with total federal spending basically flat the past four years. Federal spending has dropped from 25% of GDP back down to 21% since 2009.
We say that with some enthusiasm because we want spending as a share of GDP to be falling. Lower spending as a share of GDP mean higher P-E ratios and stronger economic growth. But don’t get too excited. Federal spending is still way too high. At 21% of GDP it’s higher than any year from 1947 through 1974, or 1995 through 2008.
But the slower spending trend, combined with higher tax revenues, will contain the deficit. The deficit should be about 4% of GDP this year, down from over 10% in 2009. In 2014, it should be more like 3%, and then lower still in 2015. With deficit shares of GDP this low, the debt-to-GDP ratio will start heading south.
None of this alleviates our long-term problem with entitlements from eventually turning the ship back toward rougher and colder waters. Nothing looks like it will get done on this front anytime soon. The Obama Administration would rather declare victory with smaller deficits and avoid serious long-term budget negotiations. There’s no money – we mean votes – in it for the Democrats – the party that supports these programs of redistribution.
As a result, we are left with a situation in which we have to content ourselves with recent gradual progress, hope spending hawks can maintain the sequester as long as possible, and lay the groundwork for entitlement reform under the next president, whether a Republican or a Democrat.
You read that right: whether a Republican or a Democrat. In fact, because politics is backwards, we may need a Democrat in power to actually fix these programs. The reason: people view Republicans as mean-spirited and un-caring. It’s not true, but Nixon went to China, Carter deregulated airlines and trucking, and Clinton reformed welfare. Bush was more protectionist than Obama. If our next president wants to boost economic growth, the only way is by reforming entitlements.
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by STEPHEN MOORE
The biggest under-reported story out of Washington this year is that the federal budget is shrinking and much more than anyone in either party expected.
Consider the numbers: According to the Congressional Budget Office, annual outlays peaked at $3.598 trillion in fiscal 2011. After President Obama's first two years in office, many in Washington expected that number to hit $4 trillion by 2014. Instead, spending fell to $3.537 trillion in fiscal 2012, and is on pace to fall below $3.45 trillion by the end of this fiscal year (Sept. 30). The $150 billion budget decline of 4% is the first time federal expenditures have fallen for two consecutive years since the end of the Korean War.
This reversal from the spending binge in 2009 and 2010 began with the debt-ceiling agreement between Mr. Obama and House Speaker John Boehner in 2011. The agreement set $2 trillion in tight caps on spending over a decade and created this year's budget sequester, which will save more than $50 billion in fiscal 2013.
As long as Republicans don't foolishly undo this amazing progress by agreeing to Mr. Obama's demands for a "balanced approach" to the 2014 budget in exchange for calling off the sequester, additional expenditure cuts will continue automatically. Those cuts are built into the current budget law.
In other words, Mr. Obama has inadvertently chained himself to fiscal restraints that could flatten federal spending for the rest of his presidency. If the country sees any normal acceleration of economic growth (from the anemic 1.4% growth rate so far this year), the deficit is on a path to drop steadily at least through 2015. Already the deficit has fallen from its Mount Everest peak of 10.2% of gross domestic product in 2009, to about 4% this year. That's a bullish six percentage points less of the GDP of new federal debt each year.
Admittedly, this fiscal progress follows the gigantic budget blowout that began with the last year of George W. Bush's presidency and the first two years of Mr. Obama's. In fiscal 2009 alone, federal spending surged by $600 billion. That same year, outlays as a share of GDP reached a post-World War II high of 25.2%. But by the end of this fiscal year, outlays as a share of GDP could fall to as low as 21.5%. At least for now, the great Washington spending blitz of the Obama first term is over.
Some $80 billion of the outlay savings have come from one-time partial repayments back to the government for the hundreds of billions spent on the bailouts of banks and of Fannie Mae and Freddie Mac. And defense hawks won't be happy that at least half of the fiscal retrenchment has been due to cuts in military spending. The defense budget is on a pace to hit its lowest level (as a share of GDP) since the days of the post-Cold War "peace dividend" during the Clinton years. These deep cutbacks could be dangerous to national security, but as the wars in Afghanistan and Iraq were winding down, defense would have been cut under any scenario. To their credit, at least Speaker Boehner and House Republicans have made sure that the defense drawdown has gone toward deficit reduction—instead of being spent on domestic social-welfare programs, as happened after the Vietnam War.
The sequester cuts in annual budgets for the military, education, transportation and other discretionary programs have also been an under-appreciated success, with none of the anticipated negative consequences.
Discretionary spending soared to $1.347 billion in fiscal 2011, according to the CBO, but was then cut by $62 billion in 2012 and another $72 billion this year. That's an impressive 10% shrinkage. And these are real cuts, not pixie-dust reductions off some sham baseline. Discretionary spending as a share of the economy hit 9.4% of GDP in fiscal 2010 but fell to 7.6% this year and is scheduled to slide to 6.4% in Mr. Obama's last year in office.
The sequester is squeezing the very programs liberals care most about—including the National Endowment for the Arts, green-energy subsidies, the Environmental Protection Agency and National Public Radio. Outside Washington, the sequester is forcing a fiscal retrenchment for such liberal special-interest groups as Planned Parenthood and the National Council of La Raza, which have grown dependent on government largess.
But the fiscal story isn't all rosy. The major entitlements remain on autopilot and are roaring toward insolvency. Thanks in large part to Mr. Obama's aversion to practical fixes, the Congressional Budget Office calculates that through July of this year Social Security, Medicare and Medicaid spending are up $73 billion from just last year. This doesn't include ObamaCare, which is scheduled to add $1 trillion of new costs over the next decade.
So the fiscal progress reported here is no excuse for complacency. But it does call into question the wisdom of a government-shutdown confrontation over the budget this fall or a debt-default showdown that runs the risk of suspending the spending caps and sequester and revitalizing an increasingly irrelevant president.
Liberals had hoped that re-electing Mr. Obama, the most pro-spending president since LBJ, would unleash another four years of Great Society government expansion. Instead, spending caps and the sequester are squashing these progressive dreams. Welcome to the new fiscal reality in Washington. All Republicans need to do is enforce the budget laws Mr. Obama has already agreed to. Entitlement reforms will come when liberals realize that the unhappy alternative is to allow every program they cherish to keep shrinking.
Mr. Moore is a member of the Journal's editorial board.
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Optimism or impending train wreck? You make the call. The deficit is falling temporarily and then forecast to skyrocket.
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On their present course, spending and debt are forecast to rise sharply starting in 2015, even with severe underfunding of national defense. Government health-care spending will more than double over the next decade to $1.8 trillion annually in 2023, while annual debt-service costs will quadruple to $823 billion as interest rates normalize.
Over the last century, government's fiscal machinery has been mostly gas pedal, little brake. In 1913, the 16th Amendment gave Washington open-ended power to tax income and borrow against it, with no offsetting restraint on spending or debt.
Constitutional limits on the scope of federal activity have gone unenforced. Automatic entitlement spending sidesteps the constitutional requirement that "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law."
Going a step further, Congress has embedded the Consumer Financial Protection Bureau inside the Federal Reserve, giving it access to limitless funding (up 80% from 2012 to 2013, reaching over $500 million) and no congressional control over spending, mission creep or staff. CFPB unionized on May 9 and is expected to have over 1,500 employees in 2014, double the number in 2012.
http://online.wsj.com/article/SB10001424127887323665504579032752188578872.html?mod=WSJ_Opinion_LEADTop
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I understand the point of having those who use the government "service" pay for it (akin to those who drive over certain roads are the ones who pay the tolls for the upkeep) but this also means the government employees are all beholden to these companies. A similar situation exists at the FDA with at least part of it's' budget being paid for by pharmaceutical/medical device companies. Of course there is bias and conflict of interests.
Corruption will invariably be even worse than it already is.
*****Silicon Valley patent office shelved
SAN JOSE, Calif. (AP) — Silicon Valley's high-tech firms are fighting what they consider a deeply personal federal cut this summer that shelves a planned patent office in this innovation-fueled region.
While most of the country is feeling some pinch from the automatic budget cuts known as sequestration, tech leaders say this one is unique and unfair, because the Commerce Department's promised satellite patent offices were never going to be funded by taxpayers. Instead, they're supported by the $2.8 billion in annual patent fees collected from inventors, entrepreneurs and companies.
"We were really upset," said Emily Lam, a director at the Silicon Valley Leadership Group, an association representing local high tech firms. "It makes absolutely no sense that an office funded almost entirely by fees would be subject to sequester."
But U.S. Patent and Trademark Office chief financial officer Tony Scardino said the government's across-the-board austerity policy doesn't make exceptions for fee-supported programs. And if there's a "continuing budgetary stalemate" this fall, he said that could cause further delays.
Silicon Valley firms seek more U.S. patents than any other region in the world, and San Jose is the nation's top patent-producing city, with 7,074 patents last year. And California is the nation's patent leader, with seven of the top 10 patent-producing cities.
The U.S. Patent Office currently has a backlog of 590,000 nationwide, and it can take more than two years to have an application reviewed.
Until two years ago, the only U.S. Patent and Trademark Office was in Arlington, Va. Silicon Valley companies often would have to send a chief scientist to Arlington for a few days to meet with examiners, losing valuable time and money.
..View gallery."
David P. Clark, CEO of Petzila, poses with Bella, the …
David P. Clark, CEO of Petzila, poses with Bella, the company's mascot, on Wednesday, Aug. 28, 2013, …
Then a 2011 law raised patent fees in exchange for promises from officials to use those new revenues to speed up the patent process and establish four satellite offices for the first time in the agency's 200-plus year history.
But that's not exactly what happened.
With budget cuts came a federal decision that 8.6 percent of all patent fees are immediately diverted from the Patent Office into the U.S. Treasury; in total, the U.S. Patent and Trademark Office will lose between $120 million and $130 million in patent fees it collects this year.
There are three satellite office projects underway: the first opened in Detroit in July, 2012, and permanent locations for others were selected in Denver and Dallas before sequestration.
Last month, the General Services Administration — which owns and operates federal properties — said it was suspending its search for permanent patent office space in Silicon Valley, dashing hopes of local startups.
"It was terribly disappointing," said Dave Clark, who launched a high tech pet products startup called Petzila in San Jose this year with his business partner Simon Milner.
Eight months into the pet-friendly technology business, they say at least 20 percent of their energy has gone toward getting a patent. That's time they'd rather spend developing, manufacturing, marketing and financing their first product: a wall mounted system called PetziConnect that allows pet owners to remotely say hello to their dog and, at the click of an icon, give Fido a treat.
..View gallery."
David P. Clark, CEO of Petzila, poses with Bella, the …
David P. Clark, CEO of Petzila, poses with Bella, the company's mascot, on Wednesday, Aug. 28, 2013, …
"It would be a godsend if we could meet with a patent examiner; It would cut our costs and time in half, and cut our anxiety by 60 percent," said Clark. "Nothing compares to a face-to-face conversation."
A local patent office staffed with as many as 150 new examiners would have provided entrepreneurs with nearby staff familiar with high tech, and a streamlined process, business leaders said.
"The more educated about the technology the examiners are, the better job they're going to be able to do in figuring out what applications are patent worthy and which should be rejected," said senior patent counsel Suzanne Michel at Google, which has tens of thousands of applications pending.
A local Congressional delegation is now seeking a sequestration exemption for the office.
Rep. Mike Honda, D-Calif., whose district includes Silicon Valley, said shelving the office "is going to set us back in terms of our own competitive edge, like trying to run a race with your ankles hobbled."
"It's too bad," said Jonah Probell, who writes semiconductor intellectual property patents for a small firm in Sunnyvale, Calif.
For now, Silicon Valley Patent Office Director Michelle Lee, a former Google patent law division head, is working out of a small, temporary space with just a handful of administrative judges in rooms borrowed from another government agency in Menlo Park, Calif. — not nearly enough to meet the needs of the region.
Meanwhile, lawmakers and bureaucrats on the East Coast will decide when they can release funds to open a permanent, fully staffed Silicon Valley Patent Office. To date, officials have said they plan to go ahead with it, but they have provided no timetable.
"Which, who knows, that might be never," said Probell.*****
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Sean Hannity had a recent radio debate with Sen. Mike Lee and Karl Rove. Both sides the debate, meaning that we are screwed.
Mike Lee could not answer how he would get suport from more than 44 Senators much less Pres. Obama to ever sign a bill that will defund the signature accomplishment of his Presidency. Rove could not answer how else he would stop it before it is fully implemented and too big with too much momentum to stop.
Rove who is a polling expert said that the American people side with Republicans in opposing Obamacare but don't side with Republicans if it leads to a government shutdown.
Lee argues that Obamacare, if funded right now with Republicans fingerprints in both chambers, will never be repealed. Lee refuses to accept responsibility for a government shutdown if the Republican majority House fully funds all of government except Obamacare, while the Democrat majority Senate and President refuses to pass and sign that bill.
Rove says we have been through this before and Republican lost. Lee says no, there was nothing equivalent to Obamacare at stake in 1995 or 2011.
Actually the shutdowns from November 14 through November 19, 1995 and from December 16, 1995 to January 6, 1996 led to better spending discipline and a balanced budget that Democrats now brag about. The more recent brinksmanship led to at least a pause in the trillion dollar deficits.
I side with Mike Lee; do what is right and let polling take care of itself. In reality this strategy will fail because Republicans will not stand together while Democrats own the bully pulpit and the message from the media.
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Let the low information voters bask in the obamacare awesomeness!
At this point, let it burn. Let's just find out exactly what's in it.
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Let the low information voters bask in the obamacare awesomeness!
At this point, let it burn. Let's just find out exactly what's in it.
We already know a hundred trillion dollars of unfunded liabilities does not scare these people or force change.
To the Republicans in congress: If you fund it, it is YOUR failure. Did you get nominated and elected by telling your constituents you would vote to continue whatever programs flaming liberals that preceded you passed? Or did you promise to do everything in your power to stop this.
My advice: Do what you said you would do when you were elected. Vote only for government that you support. Our government should be the size and scope of the smallest of what the House, Senate and President all support, and larger only when you control all three.
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They haven't really felt the pain yet. If the mostly spineless 'pubs actually were able to defund O-care, it'd still be a trainwreck, but the STATE Media would of course push the narrative that it was going to be healthcare eutopia until the mean republicans took it all away because racism!
Let the low information voters bask in the obamacare awesomeness!
At this point, let it burn. Let's just find out exactly what's in it.
We already know a hundred trillion dollars of unfunded liabilities does not scare these people or force change.
To the Republicans in congress: If you fund it, it is YOUR failure. Did you get nominated and elected by telling your constituents you would vote to continue whatever programs flaming liberals that preceded you passed? Or did you promise to do everything in your power to stop this.
My advice: Do what you said you would do when you were elected. Vote only for government that you support. Our government should be the size and scope of the smallest of what the House, Senate and President all support, and larger only when you control all three.
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This show is a take off on 'The Office' called 'The Government', set at the U.S. Department of Every Bureaucratic Transaction (U.S. DEBT). See the first two episodes of 'Spend it or Lose it, the continuing story of a federal agency trying desperately to spend its way to a bigger budget' at the links:
http://www.youtube.com/watch?v=n_oxgrFokck
www.youtube.com/watch?v=x2-KuGO2SjQ
http://www.bankruptingamerica.org/
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Sallie Mae Loans for Kindergarten
Paying for K-12 private school tuition & expenses
Sallie Mae’s K-12 Family Education Loan is an ideal solution for families who need additional flexibility in paying for private education beyond financial aid, personal savings, or traditional payment plans. Get the money you need for tuition, books, computers, musical instruments, sports, room and board, and extracurricular activities.
https://www.salliemae.com/student-loans/private-school-loan/
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Morning Jolt
. . . with Jim Geraghty
September 19, 2013
What Do You Mean, We're Flying into a Budget Dogfight with No Parachute?
I don't oppose the Ted Cruz-Mike Lee plan for brinksmanship on stopping Obamacare . . . I just wish there was a clear backup plan in case it doesn't work.
________________________________________ Mad Women Debate 2013 ________________________________________
When you raise that question, you often hear a response of, "if we don't fight now, when will we fight?" That's a valid but separate argument. That's an argument for trying it; my question is about what the GOP should do if it doesn't work. And if you don't think there's at least a chance that the public recoils from a government shutdown and overwhelmingly blames the Republicans for this . . . well then, you're willfully blind. This isn't something that is guaranteed to work as long as we believe in it enough. This isn't Tinkerbell.
Because it looks like a government shutdown's dead ahead:
House Republican leaders bowed to conservative demands and announced plans Wednesday to strip out money for President Obama's healthcare law in a stopgap spending bill to keep the government running after Sept. 30.
The reversal by Speaker John Boehner (R-Ohio) raises the stakes in a fiscal fight that could shutter much of the federal government. The continuing resolution (CR) the House plans to vote on as soon as Thursday is likely to be dead on arrival in the Senate, where Democratic leaders have vowed to reject any attempt to unravel Obama's signature domestic policy achievement.
During a closed-door meeting Wednesday morning, GOP leaders also told members they would move legislation in the next week to raise the federal debt ceiling while also delaying the implementation of ObamaCare for a year and laying out a path forward for tax reform and the construction of the Keystone XL oil pipeline — all Republican priorities.
Conservatives applauded the shift, a week after they rebelled against a leadership plan that would merely have forced the Senate to vote separately on a measure defunding the healthcare law.
"It looks like they did exactly what we wanted them to do," Rep. Mick Mulvaney (R-S.C.) said.
Obama seems convinced that if there's a government shutdown, he wins -- which suggests that he won't flinch as the deadline approaches. And his side is getting ready for one:
The White House told federal agencies on Tuesday to prepare for a government shutdown.
President Obama's budget director Sylvia Matthews Burwell in a memo to agencies said they should set their plans in case Congress fails to pass a funding measure by the end of the month. The government would shut down Oct. 1 without action by Congress.
Moe Lane: "I support defunding, but let me be blunt: I've been covering politics for over a decade, and I've never seen 'and then a miracle happens' work as part of a legislative strategy. Absent use of Orbital Mind Control Lasers, this scenario almost certainly ends with the Republican leadership having to decide whether to play chicken with the US economy. In their place, I'd be damned hesitant to pull the trigger, too."
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I can't for the life of me figure out why disability claims go up in a recession. Wouldn't workplace injuries be going down with 5 million more out of the workforce? It's almost as if they are doing it for the money...
http://www.washingtonpost.com/business/economy/us-disability-rolls-swell-in-a-rough-economy/2013/09/20/a791915c-1575-11e3-804b-d3a1a3a18f2c_story.html
“The disability program is increasingly becoming a long-term unemployment program,” said Richard Burkhauser, a Cornell University professor who co-wrote a book on disability policy and has testified before Congress about the program. “We see a lot of it now because of the effects of the recession.”
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I can't for the life of me figure out why disability claims go up in a recession. Wouldn't workplace injuries be going down with 5 million more out of the workforce? It's almost as if they are doing it for the money...
http://www.washingtonpost.com/business/economy/us-disability-rolls-swell-in-a-rough-economy/2013/09/20/a791915c-1575-11e3-804b-d3a1a3a18f2c_story.html
“The disability program is increasingly becoming a long-term unemployment program,” said Richard Burkhauser, a Cornell University professor who co-wrote a book on disability policy and has testified before Congress about the program. “We see a lot of it now because of the effects of the recession.”
Plowhorse!!
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http://www.washingtonpost.com/business/economy/us-disability-rolls-swell-in-a-rough-economy/2013/09/20/a791915c-1575-11e3-804b-d3a1a3a18f2c_story.html
“The disability program is increasingly becoming a long-term unemployment program,” said Richard Burkhauser, a Cornell University professor who co-wrote a book on disability policy and has testified before Congress about the program. “We see a lot of it now because of the effects of the recession.”
[“The disability program is increasingly becoming a long-term unemployment program,” said Richard Burkhauser, a Cornell University professor who co-wrote a book on disability policy and has testified before Congress about the program. “We see a lot of it now because of the effects of the recession.”]
Plowhorse!!
Yes, now that we know plow-horse equals soup-line.
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Saving the Sequester
While the defund distraction plays on, Congress tries to gut the spending caps..
One cost of the media circus around Ted Cruz is that almost no one is following the classic Washington misdirection play over the automatic sequester spending cuts. While right and left are preoccupied with their hero or bugbear, the politicians are attempting to break the spending caps.
The exceptions are Republican Senators Tom Coburn of Oklahoma and Jeff Flake of Arizona, a pair of genuine fiscal conservatives who are sounding the alarm on this fiscal jail break. House Speaker John Boehner and Senate Minority Leader Mitch McConnell had better pay attention or the hard-fought budget victories of 2011 will vanish in this year's fiscal showdown.
Readers may have forgotten about the sequester since President Obama predicted hellfire and national damnation when it started to take effect earlier this year. In 2011, Mr. Obama proposed and Republicans agreed to 10 years of caps on discretionary spending (not including entitlements like Social Security) as part of the debt-ceiling deal, which created the Budget Control Act.
Mr. Obama proposed the automatic cuts only because he thought Republicans would never be able to live with them, and he now regrets it. The horrors the President predicted never did take place as government agencies found ways to save the roughly 5% in 2013 without hitting essential services. But the cuts have been effective at accomplishing one of the GOP's (and the Tea Party's) stated goals: cutting the economic burden of government spending.
Total federal outlays are down from a high of $3.6 trillion in fiscal 2011 to an estimated $3.45 trillion in the 2013 fiscal year that ends on September 30. Assuming no recession and adherence to the caps, federal expenditures will keep shrinking as a share of the economy over the rest of the Obama Presidency. Federal discretionary spending hasn't declined for two consecutive years since the Truman Administration.
The spending cap for 2014 is pegged at $967 billion. Republicans in the House—at the behest of defense hawks—have already made the mistake of raising that number to $986 billion in the continuing resolution budget bill that the House passed last week. The House earmarks all of that extra $19 billion for defense, as it should, but Senate Democrats will shift most of that to domestic spending.
House conservatives were so busy patting themselves on the back for adding the ObamaCare provision that they failed to notice the higher spending level. Or maybe they didn't care. One of the "defund" ringleaders in the House is Georgia's Tom Graves, who is now in favor of the extra $19 billion. It's no accident he's on the Appropriations Committee that decides where the spending goes.
Meanwhile, as the ObamaCare histrionics continue in the Senate, Majority Leader Harry Reid wants to raise the caps for 2014 by as much as another $70 billion to closer to $1.058 trillion in discretionary spending. That was the spending marker that Democrats put down earlier this year in their 2014 budget resolution (which was never reconciled with the House). By focusing so much on the futile effort not to fund ObamaCare, Republicans may let Democrats gut their single biggest fiscal achievement since 2010.
Conservative activists outside of Congress would normally be blowing the whistle on this. But the folks at Heritage Action and the Tea Party Patriots are focusing on the political theater of defunding ObamaCare while downplaying the political reality of what the government actually spends. These are the very folks who are accusing Republicans for being spineless for not joining the defund chorus that has little or no chance of succeeding while President Obama occupies the White House.
***
What they're forgetting is that the sequester is the best political leverage Republicans have to gain a concession from Democrats—on ObamaCare or anything else. The ever-tighter spending caps on domestic discretionary spending are squeezing the liberal constituencies that live off government. As the likes of Planned Parenthood and welfare and other transfer payments get squeezed, the political pressure increases on Democrats to give up something tangible in return for easing the caps.
The shrewder Republicans understand this, which is why they've been hoping to use the sequester as part of the negotiation over the federal debt limit that will hit next month. An offer to ease the sequester has a far better chance to win entitlement reforms worth the name, perhaps including a delay in some or all of ObamaCare, than does a government shutdown that Mr. Obama would welcome so he can blame Republicans one more time.
The "defund" drama is Beltway kabuki that is distracting from the real fiscal choices that will be made in the coming weeks. What a shame it would be if by focusing so much on the health-care defunding they can't accomplish in the budget fight, Republicans gave up the sequester spending caps that are their best hope for delaying part or all of ObamaCare.
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"As Churchill would say, had his bust not been bounced from the Oval Office, never in the field of human spending has so much been owed by so many for so little."
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I wrote these words of encouragement to my Republican congressman last night:
Please stay strong. I am proud of you! The President, who now thinks he heads a one-branch government, voted against both Justices Roberts and Alito, and he voted against raising the debt limit when it involved spending on a program he opposed. Now you have the power of a co-equal branch and the power of the purse.
I like the strategy of passing piecemeal funding bills. That way any worthy program the President says should not be shut down by the House is one Senate vote and his signature away from being funded.
It is crucial to not fund the one program Republicans were elected to stop. Any vote to fund Obamacare will mean you (we) own it - perhaps forever.
In the debate over tactics, I never heard a credible answer to question of how we will stop it later, if not now. What other failed program have we ever ended later - after one more election?
These are historic times. Thank you for being there and for staying strong.
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I like the piecemeal funding bills too! That's the way to make them account for every program and justify it.
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http://hotair.com/archives/2013/10/02/unreal-park-workers-installing-more-barricades-around-wwii-memorial-to-keep-vets-out/
Unreal: Park workers installing more barricades around WWII Memorial to keep vets out; Update: Vets enter Memorial
posted at 10:41 am on October 2, 2013 by Allahpundit
Not just barricades, either. My friends, it’s come to this:
(https://pbs.twimg.com/media/BVg5rW3IgAAn7FI.jpg)
I’m rushing this post out because, per Ed’s stellar round-up from earlier this morning, the Honor Flight vets are headed to the Memorial regardless. Members of Congress, among them Michele Bachmann, are already there, as are reporters of all stripes. If you use Twitter, I recommend following the Standard’s John McCormack, National Review’s Betsy Woodruff, and the Examiner’s Charlie Spiering, who took the photo I used for our front-page thumbnail of the feds actually deploying forklifts to set up gates around a memorial that’s open 24 hours a day with little supervision under normal circumstances. As I write this at a few minutes after 10:30 ET, Spiering is tweeting that the vets are scheduled to arrive within the next 15 minutes. Is your government really about to arrest 96-year-olds who fought at Guadalcanal because this bit of sub-moronic shutdown theater is too precious to them to forfeit? Stay tuned. It wouldn’t be the first own-goal they’ve scored because their pettiness overwhelmed their sense of optics.
By the way, the WWII Memorial isn’t the only one with a gate in front of it this morning. When McCormack strolled over to the World War I Memorial, he found this. No joke:
(https://pbs.twimg.com/media/BVkshNuCMAA8yza.jpg)
The sign reads, “Because of the federal government shutdown, this National Park Service area is closed, except for First Amendment activities.” So if you want to protest there, you’re good. If you want to quietly remember the dead, get off the damned lawn.
An exit question via Legal Insurrection while we wait for updates: How come the Lincoln Memorial isn’t open now if it was open “>during the 1995 shutdown?
(https://pbs.twimg.com/media/BVipkwMCcAALLZh.jpg)
Update: A Park Service spokesman says they were told to close the memorial by the Office of Management and Budget. Paging Darrell Issa: Time to find out who made the decision at OMB. And why.
Update: If you’re near a TV, you might want to turn on CNN. Tapper is there at the Memorial; if there’s some sort of confrontation, I assume they’ll cut to him live.
Update: The vets have arrived.
(https://pbs.twimg.com/media/BVlHW1aCUAE32qI.jpg)
Dan Foster says, “This is President Obama’s Bonus Army.”
Update: Forced to choose between locking up elderly World War II heroes and letting them past the barricades, the Park Service bows to political reality:
Chad Pergram ✔ @ChadPergram
Source signals they are going to let the WWII vets and lawmakers into the WWII Memorial on the Mall
8:59 AM - 2 Oct 2013
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http://action.eriksoderstrom.com/voteforvets/
164 Democrats Vote Against Funding Veterans' Benefits
HJ Res. 72
Vote summary: 264-164. Failed (required 2/3 majority).
This bill would have restored funding for American veterans' benefits. The 164 Democrats listed on this page don't think veterans' benefits are important enough to pay for. Click the tweet buttons to ask them why.
•Andrews
•Bass
•Beatty
•Becerra
•Bishop (GA)
•Blumenauer
•Bonamici
•Brady (PA)
•Brown (FL)
•Brownley (CA)
•Butterfield
•Capps
•Capuano
•Cárdenas
•Carney
•Cartwright
•Castor (FL)
•Castro (TX)
•Chu
•Cicilline
•Clarke
•Clay
•Cleaver
•Clyburn
•Cohen
•Connolly
•Conyers
•Costa
•Courtney
•Crowley
•Cuellar
•Cummings
•Davis (CA)
•Davis, Danny
•DeFazio
•DeGette
•Delaney
•DeLauro
•Deutch
•Dingell
•Doggett
•Doyle
•Duckworth
•Edwards
•Ellison
•Engel
•Enyart
•Eshoo
•Esty
•Farr
•Fattah
•Frankel (FL)
•Fudge
•Gabbard
•Garamendi
•Grayson
•Green, Al
•Green, Gene
•Grijalva
•Gutiérrez
•Hahn
•Hanabusa
•Hastings (FL)
•Higgins
•Himes
•Holt
•Honda
•Horsford
•Hoyer
•Huffman
•Israel
•Jackson Lee
•Jeffries
•Johnson (GA)
•Johnson, E. B.
•Kaptur
•Kelly (IL)
•Kennedy
•Kildee
•Kind
•Kirkpatrick
•Kuster
•Langevin
•Larsen (WA)
•Larson (CT)
•Lee (CA)
•Levin
•Lewis
•Lofgren
•Lowenthal
•Lowey
•Lujan Grisham (NM)
•Luján, Ben Ray (NM)
•Maloney, Carolyn
•Matsui
•McCollum
•McDermott
•McGovern
•McNerney
•Meeks
•Meng
•Michaud
•Miller, George
•Moore
•Moran
•Nadler
•Napolitano
•Neal
•Negrete McLeod
•Nolan
•O'Rourke
•Pallone
•Pascrell
•Pastor (AZ)
•Payne
•Pelosi
•Perlmutter
•Pingree (ME)
•Pocan
•Price (NC)
•Quigley
•Rahall
•Rangel
•Richmond
•Roybal-Allard
•Ruppersberger
•Ryan (OH)
•Sánchez, Linda T.
•Sanchez, Loretta
•Sarbanes
•Schakowsky
•Schiff
•Schwartz
•Scott (VA)
•Scott, David
•Serrano
•Sewell (AL)
•Shea-Porter
•Sherman
•Sires
•Slaughter
•Smith (WA)
•Speier
•Swalwell (CA)
•Takano
•Thompson (CA)
•Thompson (MS)
•Titus
•Tonko
•Tsongas
•Van Hollen
•Vargas
•Veasey
•Vela
•Velázquez
•Visclosky
•Walz
•Wasserman Schultz
•Waters
•Watt
•Waxman
•Welch
•Wilson (FL)
•Yarmuth
Source: clerk.house.gov/...
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(http://cdn.pjmedia.com/instapundit/wp-content/uploads/2013/10/VETERANSTROPHY.jpg)
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(http://cdn.pjmedia.com/instapundit/wp-content/uploads/2013/10/VETERANSTROPHY.jpg)
http://thelead.blogs.cnn.com/2013/10/01/why-was-the-world-war-ii-memorial-barricaded/
Why was the World War II Memorial barricaded?
Lawmakers on Capitol Hill do not seem any closer to an agreement that would end the government shutdown.
On Tuesday, when veterans came to the World War II Memorial only to discover it had been barricaded because of the shutdown, they moved the blockade, then continued on to pay their respects.
But the memorial is a federal site in a public space. According to the National World War II Memorial website, "The memorial is operated by the National Park Service and is open to visitors 24 hours a day, seven days a week."
Why was there a need for barricades in the first place?
"Park Service did not want to barricade these, but unfortunately we have been directed, because of the lack of appropriations, to close all facilities and grounds," said National Mall and Memorial parks spokeswoman Carol Johnson.
"I know that this is an open-air memorial, but we have people on staff who are CPR trained, (and) we want to make sure that we have maintenance crew to take care of any problems. What we're trying to do is protect this resource for future generations," said Johnson.
CNN's Erin McPike reports.
**Hmmmm. So I guess all those Park Police officers aren't trained in CPR? :roll:
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http://pjmedia.com/tatler/2013/10/02/exclusive-judicial-watch-files-foia-for-information-related-to-closing-of-wwii-memorial/
Exclusive: Judicial Watch Files FOIA for Information Related to Closing of WWII Memorial
by
Bryan Preston
Bio
October 2, 2013 - 9:48 am
Government watchdog Judicial Watch has filed a Freedom of Information Act request to get to the bottom of the National Park Service’s actions at the World War II Memorial in Washington this week. The NPS has barricaded the memorial and on Tuesday tried to prevent veterans from visiting the memorial, which has no amenities and is normally open to the public at all times.
The Judicial Watch FOIA request reads:
(http://pjmedia.com/tatler/files/2013/10/ww2-memorial-foia.jpg)
The National Park service has closed facilities that are either unmanned or take no federal funding, and says that the Obama administration ordered the shutdown. Anna Eberly, Managing Director of the Claude Moore Colonial Farm in Virginia, told Tatler that the NPS is renting the barricades that it is using to enforce the closures, an increase in the service’s operating costs at a time that the government is partially shut down.
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(http://www.investors.com/image/ISS1c_131001.png.cms)
Shutdown Preparations Prove Most Government Is Waste
http://news.investors.com/ibd-editorials/093013-673139-most-of-white-house-staff-revealed-as-waste.htm
Big Government: When the government shuts down, the president will do without three-fourths of his White House staff — 1,265 taxpayer-salaried federal workers. That's a fraction of the government's total waste.
House Democratic leader Nancy Pelosi, who didn't show up to vote on the budget last week, recently claimed, "the cupboard is bare. There's no more cuts to make" in a government that spends almost $4 trillion each year.
But it's funny how when the massive state apparatus is starved of its cash flow, lots of things magically appear in that bare cupboard.
A Sept. 26 letter from the assistant to the president for management and administration to the director of the Office of Management and Budget (couldn't those jobs be merged?) comically outlines the shutdown plan.
"Approximately 436 employees will be designated as excepted or exempt to perform excepted functions," the manager of the White House budget tells the manager of the executive branch budget. "The remaining 1,265 will be placed in furlough status once they have concluded activities necessary to shut down their offices."
Activities like what? Turning off the lights?
The Executive Office of the President "has carefully reviewed its personnel needs ... to ensure that the mission ... is carried out without significant interruption."
But the letter says during the shutdown it'll take 12 taxpayer-paid employees "to support the vice president in the discharge of his constitutional duties." Call them the dirty dozen, since they take care of what Vice President John Nance Garner called "a bucket of warm spit."
What do these 12 absolutely essential non-Secret Service vice-presidential staff do, guarantee that Joe Biden doesn't make a gaffe during the shutdown?
He also gets one staffer for the vice president's residence. Can't "average Joe," who as a senator famously rode the commuter train with the riffraff from Delaware to Washington every day, make his own meals for a few days? Or put up with Dr. Jill's cooking?
Why are 61 U.S. Trade Representative employees required during the shutdown "for developing, coordinating, and advising the president on U.S. trade policy"?
And how many of the more than 20 members of the first lady's staff, at least four of whom are paid six figures by the taxpayers, will be deemed non-essential?
The White House is just a microcosm of the out-of-control growth in federal government personnel. Shameless federal worker unions already plan to sue to get paid for days they stay home during the shutdown.
One thing a government shutdown does is prove that millions of them can, and should, stay home every day.
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http://jewishworldreview.com/cols/sowell100413.php3#.UlF1Aj-8Ctt
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second post
http://nationalreview.com/article/359767/how-constitutionally-fund-government-andrew-c-mccarthy
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Yes Sowell hits the nail on the head. Now we need a small army of mouthpieces to hit the airwaves everywhere to make these same talking points ala the Clinton spin machine.
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I've been posting it around FB and have seen many of my FB friends posting it forward.
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Yes Sowell hits the nail on the head. Now we need a small army of mouthpieces to hit the airwaves everywhere to make these same talking points ala the Clinton spin machine.
Yes! Sowell spells out so clearly what I and others have been struggling to express. Here is the text of that column in its entirety - Hat tip Crafty.
Who Shut Down the Government?
By Thomas Sowell
Even when it comes to something as basic, and apparently as simple and straightforward, as the question of who shut down the federal government, there are diametrically opposite answers, depending on whether you talk to Democrats or to Republicans.
There is really nothing complicated about the facts. The Republican-controlled House of Representatives voted all the money required to keep all government activities going — except for ObamaCare.
This is not a matter of opinion. You can check the Congressional Record.
As for the House of Representatives' right to grant or withhold money, that is not a matter of opinion either. You can check the Constitution of the United States. All spending bills must originate in the House of Representatives, which means that Congressmen there have a right to decide whether or not they want to spend money on a particular government activity.
Whether ObamaCare is good, bad or indifferent is a matter of opinion. But it is a matter of fact that members of the House of Representatives have a right to make spending decisions based on their opinion.
ObamaCare is indeed "the law of the land," as its supporters keep saying, and the Supreme Court has upheld its Constitutionality.
But the whole point of having a division of powers within the federal government is that each branch can decide independently what it wants to do or not do, regardless of what the other branches do, when exercising the powers specifically granted to that branch by the Constitution.
The hundreds of thousands of government workers who have been laid off are not idle because the House of Representatives did not vote enough money to pay their salaries or the other expenses of their agencies — unless they are in an agency that would administer ObamaCare.
Since we cannot read minds, we cannot say who — if anybody — "wants to shut down the government." But we do know who had the option to keep the government running and chose not to. The money voted by the House of Representatives covered everything that the government does, except for ObamaCare.
The Senate chose not to vote to authorize that money to be spent, because it did not include money for ObamaCare. Senate Majority Leader Harry Reid says that he wants a "clean" bill from the House of Representatives, and some in the media keep repeating the word "clean" like a mantra. But what is unclean about not giving Harry Reid everything he wants?
If Senator Reid and President Obama refuse to accept the money required to run the government, because it leaves out the money they want to run ObamaCare, that is their right. But that is also their responsibility.
You cannot blame other people for not giving you everything you want. And it is a fraud to blame them when you refuse to use the money they did vote, even when it is ample to pay for everything else in the government.
When Barack Obama keeps claiming that it is some new outrage for those who control the money to try to change government policy by granting or withholding money, that is simply a bald-faced lie. You can check the history of other examples of "legislation by appropriation" as it used to be called.
Whether legislation by appropriation is a good idea or a bad idea is a matter of opinion. But whether it is both legal and not unprecedented is a matter of fact.
Perhaps the biggest of the big lies is that the government will not be able to pay what it owes on the national debt, creating a danger of default. Tax money keeps coming into the Treasury during the shutdown, and it vastly exceeds the interest that has to be paid on the national debt.
Even if the debt ceiling is not lifted, that only means that government is not allowed to run up new debt. But that does not mean that it is unable to pay the interest on existing debt.
None of this is rocket science. But unless the Republicans get their side of the story out — and articulation has never been their strong suit — the lies will win. More important, the whole country will lose.
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http://online.wsj.com/article/SB10001424052702304906704579113661593684356.html?mod=hp_opinion
Niall Ferguson: The Shutdown Is a Sideshow. Debt Is the Threat
An entitlement-driven disaster looms for America, yet Washington persists with its game of Russian roulette..
By NIALL FERGUSON
In the words of a veteran investor, watching the U.S. bond market today is like sitting in a packed theater and smelling smoke. You look around for signs of other nervous sniffers. But everyone else seems oblivious.
Yes, the federal government shut down this week. Yes, we are just two weeks away from the point when the Treasury secretary says he will run out of cash if the debt ceiling isn't raised. Yes, bond king Bill Gross has been on TV warning that a default by the government would be "catastrophic." Yet the yield on a 10-year Treasury note has fallen slightly over the past month (though short-term T-bill rates ticked up this week).
Part of the reason people aren't rushing for the exits is that the comedy they are watching is so horribly fascinating. In his vain attempt to stop the Senate striking out the defunding of ObamaCare from the last version of the continuing resolution, freshman Sen. Ted Cruz managed to quote Doctor Seuss while re-enacting a scene from the classic movie "Mr. Smith Goes to Washington."
Meanwhile, President Obama has become the Hamlet of the West Wing: One minute he's for bombing Syria, the next he's not; one minute Larry Summers will succeed Ben Bernanke as chairman of the Federal Reserve, the next he won't; one minute the president is jetting off to Asia, the next he's not. To be in charge, or not to be in charge: that is indeed the question.
According to conventional wisdom, the key to what is going on is a Republican Party increasingly at the mercy of the tea party. I agree that it was politically inept to seek to block ObamaCare by these means. This is not the way to win back the White House and Senate. But responsibility also lies with the president, who has consistently failed to understand that a key function of the head of the executive branch is to twist the arms of legislators on both sides. It was not the tea party that shot down Mr. Summers's nomination as Fed chairman; it was Democrats like Sen. Elizabeth Warren, the new face of the American left.
Yet, entertaining as all this political drama may seem, the theater itself is indeed burning. For the fiscal position of the federal government is in fact much worse today than is commonly realized. As anyone can see who reads the most recent long-term budget outlook—published last month by the Congressional Budget Office, and almost entirely ignored by the media—the question is not if the United States will default but when and on which of its rapidly spiraling liabilities.
True, the federal deficit has fallen to about 4% of GDP this year from its 10% peak in 2009. The bad news is that, even as discretionary expenditure has been slashed, spending on entitlements has continued to rise—and will rise inexorably in the coming years, driving the deficit back up above 6% by 2038.
A very striking feature of the latest CBO report is how much worse it is than last year's. A year ago, the CBO's extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year's long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year.
As the CBO noted last month in its 2013 "Long-Term Budget Outlook," echoing the work of Harvard economists Carmen Reinhart and Ken Rogoff: "The increase in debt relative to the size of the economy, combined with an increase in marginal tax rates (the rates that would apply to an additional dollar of income), would reduce output and raise interest rates relative to the benchmark economic projections that CBO used in producing the extended baseline. Those economic differences would lead to lower federal revenues and higher interest payments. . . .
"At some point, investors would begin to doubt the government's willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Moreover, even before that point was reached, the high and rising amount of debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget."
Just how negative becomes clear when one considers the full range of scenarios offered by CBO for the period from now until 2038. Only in three of 13 scenarios—two of which imagine politically highly unlikely spending cuts or tax hikes—does the debt shrink from its current level of 73% of GDP. In all the others it increases to between 77% and 190% of GDP. It should be noted that this last figure can reasonably be considered among the more likely of the scenarios, since it combines the alternative fiscal scenario, in which politicians in Washington behave as they have done in the past, raising spending more than taxation.
Only a fantasist can seriously believe "this is not a crisis." The fiscal arithmetic of excessive federal borrowing is nasty even when relatively optimistic assumptions are made about growth and interest rates. Currently, net interest payments on the federal debt are around 8% of revenues. But under the CBO's extended baseline scenario, that share could rise to 20% by 2026, 30% by 2049, and 40% by 2072. By 2088, the last date for which the CBO now offers projections, interest payments would—absent any changes in current policy—absorb just under half of all tax revenues. That is another way of saying that policy is unsustainable.
The question is what on earth can be done to prevent the debt explosion. The CBO has a clear answer: "ringing debt back down to 39 percent of GDP in 2038—as it was at the end of 2008—would require a combination of increases in revenues and cuts in noninterest spending (relative to current law) totaling 2 percent of GDP for the next 25 years. . . .
"If those changes came entirely from revenues, they would represent an increase of 11 percent relative to the amount of revenues projected for the 2014-2038 period; if the changes came entirely from spending, they would represent a cut of 10½ percent in noninterest spending from the amount projected for that period."
Anyone watching this week's political shenanigans in Washington will grasp at once the tiny probability of tax hikes or spending cuts on this scale.
It should now be clear that what we are watching in Washington is not a comedy but a game of Russian roulette with the federal government's creditworthiness. So long as the Federal Reserve continues with the policies of near-zero interest rates and quantitative easing, the gun will likely continue to fire blanks. After all, Fed purchases of Treasurys, if continued at their current level until the end of the year, will account for three quarters of new government borrowing.
But the mere prospect of a taper, beginning in late May, was already enough to raise long-term interest rates by more than 100 basis points. Fact (according to data in the latest "Economic Report of the President"): More than half the federal debt in public hands is held by foreigners. Fact: Just under a third of the debt has a maturity of less than a year.
Hey, does anyone else smell something burning?
Correction: Net interest payments on the federal debt are about 8% of revenues. The Oct. 5 op-ed "The Shutdown Is a Sideshow. Debt Is the Threat" misstated the payments as a percentage of GDP.
Mr. Ferguson's latest book is "The Great Degeneration: How Institutions Decay and Economies Die" (Penguin Press, 2013).
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- The Daily Caller - http://dailycaller.com -
Americans cross Obama’s parkway barriers
Posted By Neil Munro On 11:51 PM 10/06/2013 In Politics | No Comments
Many Americans crossed the barriers that were set this weekend by President Barack Obama’s deputies to block public access to the Potomac River from Virginia’s George Washington Memorial Parkway.
In many quiet acts of civil disobedience, Americans removed car barriers and cut police tape, or walked across barriers after parking on grass verges or in adjacent suburbs.
Once past the federal barriers, they were able to enjoy the bike paths, parkland and overlooks — on what singer Woody Guthrie described as “your land” — during the sunny, 80-degree weekend.
Still, the Obama administration blocked easy access to the river for many Americans, except for boat club members or property owners in the 22308 zip code, where riverside homes sell for at least $1.5 million.
The federal barriers were set along 20 miles of the parkway, starting at a government-built parking lot at President George Washington’s Mount Vernon home and continuing northwards to scenic overlooks in McLean, Va.
“I’ll take my chances,” said one man as he unloaded his two children on a grassy verge beside Roosevelt Island, just across from Washington’s Georgetown district.
But their day in the sun was darkened by a locked gate on the narrow bridge from the parkway to the island that celebrates President Teddy Roosevelt, who is widely regarded as the first presidential advocate for national parks.
Motorists who pushed through the barriers were applauded by other Americans.
OCTOBER 6, 2013 — Cars driving past barricades on the Washington Memorial Parkway (Neil Munro/TheDC)
“They’re right to do that,” a cyclist told The Daily Caller as motorists drove through an opened barrier at a private marina near the Belle Haven Country Club, located just south of Alexandria, Va.
Still, many citizens were stopped by the barriers. Some were blocked because they could not get their boat down the blockaded slips, and others because they were not willing to risk a parking ticket from patrolling police cars.
A family, complete with three kids and a speedboat, found themselves at a scenic overlook 300 feet above the northern end of the river because all the normal slips were blocked. They told TheDC that they would turn back south to search for an unguarded boat ramp.
OCTOBER 6, 2013 — Motorists ignore a government shutdown sign and park on a scenic overlook on the George Washington Memorial Parkway (Neil Munro/TheDC)
In several places, Americans gathered together to park in large groups around knocked-aside barriers.
But their respect for the law prevented them from puncturing the water-filled plastic barriers — at least during daylight — that are too heavy to be shoved aside.
GOP governors have also pushed back.
In Wisconsin, Gov. Scott Walker defied the federal edict, and cleared away barriers hindering Americans.
The state “has clarified areas where the federal procedures are over-reaching,” said an email from Cathy Stepp, secretary of the Wisconsin Department of Natural Resources.
In contrast, the administration’s progressive officials were unapologetic about their massive resistance to public access of the federal parks and memorials.
“Republicans are willing to vote funding to reopen national parks, museums, memorials, veterans’ payments and the D.C. government. Why is the White House against it?” one reporter asked White House press secretary Jay Carney on Wednesday.
“Because… It’s a gimmick and it is unsustainable and it’s not serious,” he insisted.
On Friday, Carney was unable to cite any actions taken by Obama to reduce the government’s blockade of parks or websites.
Jonathan Jarvis, the service director at the National Park Service, insisted Thursday he had no choice but to send officers out to close the parks, overlooks and parking lots because he had to furlough 21,000 park service officers.
“To meet the standard of protection for these places…I had to shut them down,” Jarvis declared in a C-Span “Washington Journal” interview.
Law enforcement officers were stationed around parks and monuments to deter Americans from walking on their government’s turf.
“We’ve been told to make life as difficult for people as we can,” a park ranger told The Washington Times. “It’s disgusting.”
Vice President Joe Biden used a Thursday tweet to applauded a park official who patrolled the perimeter of the World War II monument.
“’I’m proud of you,’ VP called to tell the Park Ranger who was chastised by a GOP Rep today at the WWII Memorial,” said the tweet.
The monument was built to applaud the Americans who destroyed Germany’s Nazi regime and Japan’s militaristic empire.
On the southern end of the riverside parkway, several small overlooks remained blocked by plastic fences, and the Civil War-era Fort Hunt Park was padlocked.
At Roosevelt Island, officials replaced at least one set of lightweight barriers that were visible Saturday with heavy, water-filled barriers that fully blocked the parking lot on Sunday.
On Sunday, just north of Ronald Reagan airport, a police officer parked himself in the road to deter more Americans from joining about 40 trucks, family vans and SUVs that were parked on the grass beside Gravelly Point field. The cop tried to chase away additional autos, but none of the autos parked on the verge showed parking tickets.
TheDC, however, did find a parking ticket on a car that was parked behind the ersatz gates of a government-owned lot at Mount Vernon, the home of the nation’s first American president.
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Article printed from The Daily Caller: http://dailycaller.com
URL to article: http://dailycaller.com/2013/10/06/americans-cross-obamas-parkway-barriers/
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First we know that the 17% government shutdown is entirely the making of the Democrats refusing to delay the parts of Obamacare by one year that they have not already delayed by one year.
Second is the so called debt ceiling default. The Occupier of the Oval Office says we must pay our obligations. In fact, that is written in the constitution, not a partisan issue, see below. What he really is saying with his analogies is that the credit committee of your bank MUST raise your credit limit because of the spending decisions you have already made. We all know it doesn't work that way in the real world. You pay fees and penalties when you go past your credit limit, and they profit from your irresponsibility.
In a previous post, we learned from G M / CBO that it would take the equivalent of 11% cuts of all non-interest spending for 25 years to get debt down to where it was at the start of the Obama administration. Assuming OMB and POTUS read CBO, wouldn't you think there would be some talk right now about where to cut now that the tax rate increases are all in place, assuming some level of fiscal responsibility is the goal. They aren't and it isn't.
Does a serious leader really not have a contingency plan?
Meanwhile over at the Republican majority House we have potential co-conspirators, well intended with questionable backbones, negotiating with themselves over what involvement they would like in this generational theft crime in progress. They know they get blamed for shutdowns, and they know they will be blamed for the default - by those self-appointed to assess blame across mainstream print and airwaves. Somewhere down deep they also know right from wrong.
Is default what happens next if there was no hike in the debt ceiling? No. Not if the President carries out his constitutional responsibilities.
The federal government spends $16.7 billion a day and takes in about $14 billion a day in cash receipts, implying an average daily borrowing requirement of about $2.7 billion. Quite simply, without a credit limit increase, the US government would have to get by on current revenues, like everyone else at the end of their credit line. Revenues would have to drop by 90% before we would be unable to pay the interest on current debt.
Leaving the debt ceiling in place is just a forced spending cut. A rather abrupt one that one might think would force big spenders into negotiations.
Another point well covered on these pages is that we don't immediately borrow to cover what we print or issue in currency anyway. The amount of currency and debt we actually issue to enable the spenders is determined by the Keynesians in charge over at the Fed. Speaking of enablers, see today's new appointment. Also see the talk of quantitative tapering versus not tapering in recent discussions. These are not congressional issues in the eyes of these appointees.
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http://www.powerlineblog.com/archives/2013/10/the-federal-government-cant-and-wont-default-on-its-debt-obligations.php
The Federal Government Can’t, and Won’t, Default on Its Debt Obligations
One remarkable aspect of the shutdown/debt limit battle is the irresponsibility (on the part of the Obama administration) and incompetence (on the part of the news media) concerning the claim that the federal government will default on its debt obligations if Congress fails to raise the debt limit. President Obama and his minions have clearly suggested that default is a real possibility:
“As reckless as a government shutdown is … an economic shutdown that results from default would be dramatically worse,” Obama said on Thursday. Clearly targeting Republicans, he said a default would be “the height of irresponsibility.”
Then, on the same day, Obama’s Treasury Department released a brutal statement that said a default would prove catastrophic, causing credit markets to freeze and leading to “a financial crisis and recession that could echo the events of 2008 or worse.”
Within the last few hours, Obama repeated that Congress must “remove the threat of default and vote to raise the debt ceiling.”
But there is no threat of default. Constitutionally, the federal government must pay its debts. The Fourteenth Amendment, Section 4, states:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
I believe this provision is universally understood to mean that the federal government must pay its debt obligations, both principal and interest, even if that means prioritizing debt service over other government spending. So the question is, if Congress does not raise the current debt ceiling, will the federal government run out of money needed to pay its existing debts? The answer is clearly No. A reader supplies the math:
On average the federal government’s daily expenditures are about $16.7 billion; receipts are about $14 billion, implying an average daily borrowing requirement of about $2.7 billion. So the planned flow of revenues is now about $650 billion less than the planned flow of expenses…about $2.7 billion a [business] day, $650 billion annually.
So the “default” scenarios are bogus. Interest on the $16 trillion in debt is covered by a factor of about 10x by revenues! That puts the federal government deep into AAA land. Revenues would have to fall by a staggering 90% to jeopardize interest payments.
And, of course, retiring principal by “rolling over” maturing debt can never require an increase in the debt ceiling, since there is no net increase in the nation’s debt, even if the money used to repay the original principal is borrowed.
So what will actually happen if Congress doesn’t increase the debt ceiling by approximately October 17? The government’s debt obligations will be paid, but reductions in other spending will start to become necessary. In effect, leaving the debt ceiling as is would function as a spending cut. This is why the Democrats hate the idea so much. They know there is zero chance of default, but they are horrified at the prospect that voters and taxpayers may find out that there is a relatively simple way to bring about spending reductions that would create, in effect, a balanced budget. Hence the hysteria.
To be fair, some Republicans, including John Boehner, have also made public statements that support the plausibility of the default threat. Don’t ask me why. Others, like Rand Paul on yesterday’s Meet the Press, have tried to set the record straight:
NBC: Very quickly before I let you go. As you well know, there is a debt ceiling vote on the horizon. Will Republicans let this country go into default?
SEN. PAUL: I think it’s irresponsible of the president and his men to even talk about default. There is no reason for us to default. We bring in $250 billion in taxes every month, our interest payment is $20 billion. Tell me why we would ever default. We have legislation called the full faith and credit act and it tells the president, you must pay the interest on the debt. So this is a game. This is kind of like closing the World War II memorial. They all get out on TV and they say, we’re going to default. They’re the ones scaring the marketplace. We should never default.
The NBC reporter, Savannah Guthrie, apparently knew all along that talk about default is nonsense, because she immediately came back with this:
NBC: Let’s say you pay the interest on the debt and you don’t have a technical default. Wouldn’t there be dramatic consequences on the economy, anyway, the spirit of it?
There is only one kind of default: the “technical” kind. Cutting spending is not some other, “non-technical” type of default. And as for the impact on the economy, many economists believe that getting government spending under control is the best thing we can do to boost economic growth.
So next time you hear hysterical talk about default on the news, remember that those who raise the default specter either have no idea what they are talking about, or are trying to fool the uninformed.
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http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/08/whats-happening-in-the-treasury-bill-market-today-should-terrify-you/
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http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/08/whats-happening-in-the-treasury-bill-market-today-should-terrify-you/
This would be a non-issue if we didn't have president Cloward-Piven in power.
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I Was There
In his press conference yesterday, President Obama added another item to his growing list of historical misrepresentations about spending and debt ceiling negotiations.
After claiming that never “in the history of the United States” had elected officials used the debt ceiling as political leverage (false), and after insinuating that it’s somehow unusual to expect presidents to negotiate over spending bills (absurd), Obama yesterday mixed a false history of the Clinton-Gingrich shutdowns into his press room lecture.
“ack in the '90s we had a government shutdown,” he said. “That happened one time, and then after that, the Republican Party and Mr. Gingrich realized this isn't a sensible way to do business. You know, we shouldn't engage in brinksmanship like this, and then they started having a serious conversation with President Clinton about a whole range of issues, and they got some things that they wanted. They had to give the Democrats some things that the Democrats wanted. But it took on, you know, a sense of normal democratic process."
As one of the principal negotiators in the 1995-1996 budget showdown between Republicans and President Clinton, it is clear to me the President has a number of very important things wrong.
First, there were two shutdowns, not one, and that was important. In mid-November of 1995, the government closed for several days after Clinton vetoed our Continuing Resolution which contained more spending cuts than he was willing to accept.
The public blamed Republicans for the first shutdown much more than they blamed Clinton. A CNN/Gallup poll released at the time found that Americans blamed the GOP over the President by 2-to-1, 49 percent to 26 percent. In part this was because the press was anti-Republican. But in part it was because we’d made so clear beforehand that we were willing to close the government if necessary.
The pressure on us to cave was enormous. Instead, we refused to give-in, and worked with President Clinton to pass a very short-term extension of government funding and increase in the debt ceiling as negotiations continued. A month later, no compromise had been reached, and despite the media pressure on us, we allowed the government to close again, this time for three weeks.
Which leads to President Obama’s second false claim: that it wasn’t until after the shutdowns that we began a “serious conversation” with President Clinton to advance our priorities.
This could not be more mistaken. Clinton and I spoke virtually every day during the shutdowns. We were constantly negotiating. And more importantly, although the shutdowns were in some ways a temporary PR setback for Republicans (they did no lasting damage), they were critical in convincing the President and the country that we were serious about doing what said we’d do in 1994--and that we were willing to be tough to get it done. That was of enormous strategic value going forward.
President Obama is right that the shutdowns of 1995 were a pivotal moment which cleared the way for the success Republicans had afterward. But he’s very wrong about the reason.
It was after the shutdowns and significantly because of them that we achieved some of the greatest growth and opportunity for all Americans in a generation.
In 1996, we passed welfare reform, and in the next several years two out of every three Americans on welfare either went to work or went to school.
The House Republican majority was reelected for the first time since 1928.
We passed four consecutive balanced budgets, the only ones in our lifetimes.
We cut taxes for the first time in 17 years, including the largest capital gains tax cut in American history.
These big victories very well might not have happened if not for the shutdowns in 1995-1996.
The policy changes helped power an economic boom so big that it produced a $5 trillion turnaround in the fiscal outlook of the United States between January 1995 and January 1999, from a $2.7 trillion deficit over ten years to a $2.3 trillion surplus. The nation’s ten-year debt outlook went from 56 percent of GDP to just 12 percent.
What President Obama calls “brinksmanship” and not a “sensible way to do business” may be one of the most successful negotiations ever for Americans.
Republicans today face a very similar challenge to the one we faced in 1995, and with similar pressure to cave. Yet just as in 1995, they are proving to the President that he must take the Congress seriously.
Americans should hope Obama learns that lesson as well as President Clinton did, and with such strong results.
Your Friend,
Newt
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second post
The pettiness of the nastiness boggles the mind:
http://swordattheready.wordpress.com/2013/10/04/obama-regime-threatens-pastors-priests-with-arrest-during-shutdown/
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Third post
Two Times More Debt Than Growth
Senate Budget Committee Republicans compared GDP growth over the last two years to the growth of the national debt: "President Obama said that increasing the debt limit does not increase the debt. But when the Treasury department started using so-called extraordinary measures to avoid a breach of the debt ceiling in May, 2011, the debt limit stood at $14,294 billion. Today it stands at $16,699 billion.... That's a $2,405 billion increase in 2 years. Meanwhile, the economy, as measured by GDP only increased by $1,199 billion between the second quarter of 2011 and the second quarter of this year. So the debt increased twice as much as the economy over the last two years, the very definition of unsustainable."
:-o :-o :-o
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The Obama-Reid Gamble
The dance we are watching this weekend is a very important moment in modern American history with big implications for how the executive and the legislative branches interact in the future.
The House Republicans have staked out a position that they can use their constitutional power of the purse to force the President to negotiate over key issues.
President Obama and Senate Democratic Leader Reid believe they can break the House Republicans and force them to reopen the government and pass a debt ceiling hike with no negotiations and no conditions.
Senate Republicans are split between a majority who want any deal that will end the pain and a militant minority who accept the conflict and pain as the price of forcing very large changes.
Obscured to some extent by the focus on the partial government shutdown and the anxiety over the debt ceiling is the continuing failure of Obamacare and the endless stories about websites failing and people discovering higher rather than lower prices.
What is increasingly clear is that President Obama and Senator Reid have adopted a calculated strategy of trying to isolate and break the morale of the House Republican leadership.
The President is faced with the danger that the conservative Republicans will learn how to use the power of the purse to design a plan for the next three years that will force concession after concession from him.
He has decided on a bold and very risky strategy of refusing to negotiate as long as the House attempts to use its power of the purse to force concessions.
The Democrats have adopted harsh language to describe House Republicans as terrorists wearing body bombs, hostage takers, and even traitors. The mainstream media has enthusiastically picked up all insults and repeated them endlessly.
The intensity of this vilification indicates the Democrats’ strategic desire to break the House Republicans.
Historically there have been 17 government shutdowns since 1976. All were settled. All were part of the American system of constitutional government when the legislative and executive branches are in conflict. This is the eighteenth shutdown but the level of hostility and vicious language is far greater than any earlier shutdown.
Similarly, debt ceilings have been negotiated with various amendments beginning in 1953 under President Eisenhower. For 60 years, Presidents have accepted that the constitutional give-and-take requires negotiating over debt ceilings.
President Obama is trying a very daring expansion of presidential power effectively taking away from the House its constitutional prerogatives and demanding it give him what he wants on his terms with no amendments and no conditions.
This is not a personality defect. This is a cold, calculated strategy.
If the House Republicans hang on and actually get concessions they will have set the stage for three more years of forced concessions.
If President Obama hangs on and coerces a clean continuing resolution and a clean debt ceiling hike he will have set the stage for three years of presidential dominance.
It was an indication of the President's determination that after his Secretary of the Treasury warned that the financial world would collapse next week if we didn’t raise the debt ceiling, he rejected a six week clean increase of the debt ceiling because it did not meet his requirements.
It will be interesting to see if he accepts concessions on anything or holds out on everything through the weekend.
A lot is at stake.
Your Friend,
Newt
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Inter alia, Obamacare is up 7 points in the polls?!? Has Cruz's play been a big mistake?
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Don't Abandon the Sequester
The automatic spending cuts are the best leverage Republicans have.
The way the budget showdown is going, Democrats may soon require the Republicans to pay ransom before they'll allow the GOP to reopen the government and raise the debt ceiling. That's how badly the party's Ted Cruz faction has messed up the politics of all this. But we sure hope part of that price won't be to abandon the budget caps that are the only restraint on President Obama's spending plans.
Democrats hate the spending caps and sequester because they squeeze their pet domestic programs, and two recent reports illustrate how much. The Congressional Budget Office's latest monthly update, for the first 11 months of fiscal 2013 through August, shows that total federal outlays are down $127 billion over the same period last year. This means that when the report comes in for the full fiscal year overall federal spending may have fallen two years in a row for the first time since the end of the Korean War.
Meanwhile, the Congressional Research Service has released a new report that shows the sequester caps are providing better fiscal discipline than any budget deal has since 1980. The report looked at nine major deficit reduction deals and concludes: "In nominal (i.e., not adjusted for inflation) terms, the Budget Control Act achieves the greatest amount of deficit reduction of any act since 1980 over five years, based on the estimates produced near the time of enactment where five year totals are available."
Adjusting for inflation, the report finds that the Budget Control Act's estimated deficit reduction over five years will be second only to the 1990 George H.W. Bush-George Mitchell deal. The Bill Clinton package of 1993 that liberals love came in third.
Keep in mind that a little less than half of all the deficit reduction in 1993 and about 40% in 1990 came from tax increases. The 2011 Budget Control Act is reducing future deficits through spending cuts alone. This means the current sequester isn't hurting economic growth by reducing incentives to save and invest.
As for the politics of the sequester, a poll released last week finds that the sequester cuts of roughly 5% across the board (about 8% in defense) have barely been noticed by most Americans. The United Technologies-National Journal poll asked: "Have you seen any impact of these cuts in your community or on you personally since they took place, or not?" Seventy-four percent said they'd seen no impact, while 23% said they had.
The harm that President Obama predicted in January, and that Democrats keep claiming, simply hasn't appeared. This polling on the sequester is a lot better for Republicans than the blame they're getting for the shutdown.
It would be better government if Congress could set spending priorities, and defense spending in particular can't keep falling without harming U.S. security. Many Senate Republicans would like to abandon the sequester to spend more on defense or go back to allocating domestic pork.
But the sequester is the only leverage that Republicans have in any negotiation with President Obama once the debt ceiling is inevitably raised and the partial shutdown ends. If Republicans abandon the sequester now as the price of reopening the government, they will be back at the same old stand of Mr. Obama insisting on another tax increase in return for any entitlement reform. It would turn a political retreat into a policy rout.
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Has Cruz's play been a big mistake?
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Yes, most certainly, if short term polling is the objective. Republicans suffer from no messaging. The signal to noise ratio is 1 to 1000, and then polling steps in to become the reality, even though everyone knows the Republicans are funding every program except the one they were elected to oppose.
I simply don't see the alternative. Obamacare had zero Republican votes to pass and had a majority of the people are still against it. If you vote to fund it, you own it and government healthcare becomes a permanent and growing entitlement. Ask a Brit, every future election becomes about who will spend the most on healthcare. Everyone knows a dependent; everyone is a dependent.
Some say the better play was to force change with the debt ceiling. Ask the people if they prefer 18 or 26 trillion in the near term to 17 trillion and it should poll pretty well. One chamber of congress can, in effect, force an instant balanced budget amendment. We take in tenfold what we need pay interest. Spending cuts would be forced. Further tax increases could be refused.
Regarding the shutdown, I have read about monuments closed and children dying in the media which could be easily rectified with piecemeal spending bills, but I haven't personally witnessed one ill-effect yet. Federal workers are getting a paid vacation, as I understand it.
After the Clinton-Newt shutdowns, Clinton got reelected and the Republican congress got reelected, the budget got balanced and every Clinton (and Newt) bragging right left today came through that, even though the storylines and polling at the time were awful.
How this one will be perceived later depends on how it ends. If andwhen Republicans cave, Ted Cruz and House Republicans made a big noise over nothing. If Republicans display backbone and message, the Democrats will have to make some agreement with them to continue on with their governance.
The Obama years are ticking away locked up in a standoff; that is not all bad.
How each person perceives the brinkmanship strategy depends on how close to the brink you think this country really is. I believe, as do liberals, that the implementation of Obamacare is a temporary disaster on the road to permanent socialized healthcare. This is the brink, the edge at the top of a very steep place, the threshold of danger, the point of no return. If so, how it sell to moderates is secondary to doing the right thing.
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http://www.washingtonpost.com/opinions/americas-default-on-its-debt-is-inevitable/2013/10/10/1451d416-302c-11e3-bbed-a8a60c601153_print.html
America’s default on its debt is inevitable
By James Grant, Published: October 10
James Grant is the editor of Grant’s Interest Rate Observer.
“There is precedent for a government shutdown,” Lloyd Blankfein, the chief executive officer of Goldman Sachs, remarked last week. “There’s no precedent for default.”
How wrong he is.
The U.S. government defaulted after the Revolutionary War, and it defaulted at intervals thereafter. Moreover, on the authority of the chairman of the Federal Reserve Board, the government means to keep right on shirking, dodging or trimming, if not legally defaulting.
Default means to not pay as promised, and politics may interrupt the timely service of the government’s debts. The consequences of such a disruption could — as everyone knows by now — set Wall Street on its ear. But after the various branches of government resume talking and investors have collected themselves, the Treasury will have no trouble finding the necessary billions with which to pay its bills. The Federal Reserve can materialize the scrip on a computer screen.
Things were very different when America owed the kind of dollars that couldn’t just be whistled into existence. By 1790, the new republic was in arrears on $11,710,000 in foreign debt. These were obligations payable in gold and silver. Alexander Hamilton, the first secretary of the Treasury, duly paid them. In doing so, he cured a default.
Hamilton’s dollar was defined as a little less than 1/20 of an ounce of gold. So were those of his successors, all the way up to the administration of Franklin D. Roosevelt. But in the whirlwind of the “first hundred days” of the New Deal, the dollar came in for redefinition. The country needed a cheaper and more abundant currency, FDR said. By and by, the dollar’s value was reduced to 1/35 of an ounce of gold.
By any fair definition, this was another default. Creditors both domestic and foreign had lent dollars weighing just what the Founders had said they should weigh. They expected to be repaid in identical money.
Language to this effect — a “gold clause” — was standard in debt contracts of the time, including instruments binding the Treasury. But Congress resolved to abrogate those contracts, and in 1935 the Supreme Court upheld Congress.
The “American default,” as this piece of domestic stimulus was known in foreign parts , provoked condemnation in the City of London. “One of the most egregious defaults in history,” judged the London Financial News. “For repudiation of the gold clause is nothing less than that. The plea that recent developments have created abnormal circumstances is wholly irrelevant. It was precisely against such circumstances that the gold clause was designed to safeguard bondholders.”
The lighter Roosevelt dollar did service until 1971, when President Richard M. Nixon lightened it again. In fact, Nixon allowed it to float. No longer was the value of the greenback defined in law as a particular weight of gold or silver. It became what it looked like: a piece of paper.
Yet the U.S. government continued to find trusting creditors. Since the Nixon default, the public’s holdings of the federal debt have climbed from $303 billion to $11.9 trillion.
If today’s political impasse leads to another default, it will be a kind of technicality. Sooner or later, the Obama Treasury will resume writing checks. The question is what those checks will buy.
“Less and less,” is the Federal Reserve’s announced goal. Under Chairman Ben Bernanke (with the full support of the presumptive chairman-to-be, Janet Yellen), the central bank has redefined price “stability” to mean a rate of inflation of 2 percent per annum. Any smaller rate of depreciation is an unsatisfactory showing to be met with a faster gait of money-printing, policymakers say.
In other words, the value of money has become an instrument of public policy, not an honest weight or measure. In such a setting, an old-time “default” is impossible. How can a creditor cry foul when the government to which he is lending has repeatedly said that the value of the money he lent will shrink?
The post-1971 dollar derives its value from the stamp of the government that issues it. Across the seas, this imprimatur is starting to look a little tenuous. Lend us your dollars for 10 years, the Treasury proposes. We will pay you the lordly interest rate of 2.7 percent per annum. And at the end of those 10 years, we will hand you back your principal, which will almost certainly buy less than the money you lent.
This is the unsustainable conceit of the world’s superpower-cum-super debtor. By deed, if not audible word, we Americans say: “The greenback is the world’s great monetary brand. You have no choice but to use it. Like it or lump it.” But the historical record of paper currencies is clear: Governments always over-issue it. The people finally do lump it.
What to do? Let us face facts: We have defaulted in the past. Let us confront the implied message of the Federal Reserve’s pro-inflation policy: We will default in the future, though no lawyer will call it “default.” And let us preempt the world’s flight from our intangible money by taking steps to fashion a 21st-century improvement. We have the gold and the brains to find the solution.
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What I've been reading says that this is pure hyperventilation.
We have more than enough to pay our obligations. The other stuff that comes after is where the axe will fall.
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What I've been reading says that this is pure hyperventilation.
We have more than enough to pay our obligations. The other stuff that comes after is where the axe will fall.
The constitution requires we pay our debts, however Buraq hasn't let laws or the constitution get in his way thus far.
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From immigration thread: "President Barack Obama said on Tuesday that stalled immigration reform would be a top priority once the fiscal crisis has been resolved."
Announcing this to his adversaries in the House is more proof that he wants this shutdown to continue and not get resolved.
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Yes, one can blame the big corporations. I submit the blame goes to government. Why are we subsidizing these employees? If we remove these subsidies maybe they would work harder to get to higher positions. Or perhaps they would not work at server jobs . Then the big corporations would be forced to pay more wages. Around here a large proportion of low wagers are from other countries. If we just stop allowing companies to hire these people their large numbers would not keep wages at the bottom. The left and right has sold out.
****The harsh price Americans pay for fast-food jobs
October 16, 2013: 9:39 AM ET
Some 52% of families of cooks, servers, and other fast-food workers receive public aid, nearly twice the percentage of the overall workforce.
By Elizabeth G. Olson
130925130920-fast-food-worker-california-minimum-wage-620xa
FORTUNE -- Taxpayers spend at least $7 billion annually to subsidize food stamps and other public assistance programs that fast-food industry workers depend on to get by, according to two new studies.
Some 52% of families of cooks, servers, and other fast-food workers receive public aid -- which is nearly twice the percentage of the overall workforce, based on an examination of public data on such assistance programs by the University of California Berkeley Labor and Education Center and the University of Illinois.
"These are conservative estimates that do not include programs like child care assistance or subsidized lunch programs," says Ken Jacobs, chair of the Berkeley Labor Center and co-author of the report, in a briefing.
While the fast-food industry vigorously disagrees with the recently published report, the researchers say their data supports claims by fast-food workers, who have staged walkouts in 60 cities over the past year to highlight their lack of full-time schedules and benefits like health care and to call for a $15 hourly wage.
"People who work in fast-food jobs are paid so little," Jacobs says, "that having to rely on public assistance is the rule, rather than the exception, even for those working 40 hours or more a week."
MORE: The next Most Powerful Women in tech
A separate study, also issued this week, directly blames 10 fast-food heavyweights, including McDonald's (MCD), Burger King (BKW), Subway, Dunkin' Donuts (DNKN), and Domino's (DPZ), for more than half the total cost of the benefits, some $3.8 billion.
McDonald's alone accounts for $1.2 billion of the cost to taxpayers, the National Employment Law Project study found. The massive burger chain and others use a low-wage, no benefits model that forces workers to turn to the public safety net, the report found.
"The seven largest traded companies paid $53 million in compensation to their CEOs, but low-paid workers are unable to afford the basic necessities," says Jack Temple, author of the NELP report.
Other corporations singled out by the NELP were Yum Brands (YUM), Wendy's, Dairy Queen, Little Caesar's, and Sonic.
Berkeley's Jacobs says that "one of the most surprising findings is that more than two-thirds of the fast-food workers were over age 20, and 68% are the main earners in their families, and more are parents raising a child than teenagers living with their parents."
"The CEO of McDonald's makes more in a day than I do in a year," says Devonte Yates, 21, who earns $7.25 an hour at a Milwaukee McDonald's and receives food stamps. "Taxpayers are basically subsidizing the CEO, who has more money than he knows what to do with, and corporations need to pick up that slack."
In its defense, members of the restaurant industry argue that students make up a big chunk of their core workers and dispute the studies' findings.
"In addition to providing more than 13 million job opportunities, the restaurant industry is one of the best paths to achieving the American dream, with 80% of restaurant owners having started their careers in entry-level positions. In fact, nine out of 10 salaried employees started as hourly workers," Scott DeFife, the National Restaurant Association's executive vice president in charge of policy and government affairs, said in a statement.
DeFife called the studies "misleading" and accused the researchers of failing "to recognize that the majority of lower-wage employees works part-time to supplement a family income. Moreover, 40% of line staff workers in restaurants, the primary focus of the reports, are students."
Jacobs says that only one-third of such workers are under 19. He also noted the large share of families on public assistance, even those who work 40 hours a week. "So it's not just a question of work hours, but of wages."
MORE: Toyota Prius plug-in drops in price, amid waning interest
The median wage for fast-food workers nationally is $8.69 per hour, according to the studies, and only 13% of those jobs offer health benefits, compared to 59% of jobs overall in the U.S. The median fast-food worker also works only 30 hours weekly, in comparison to the average 40-hour workweek.
The states where fast-food jobs cost taxpayers the most are California, at $717 million; New York, at $708 million; Texas, at $556 million; Illinois, at $368 million; and Florida, at $348 million, according to Jacobs.
The 10 largest fast-food companies made more than $7.4 billion in profits in 2012, according to the study data.
On Capitol Hill, Sen. Tom Harkin (D-Iowa), said that "anyone concerned about the federal deficit only needs to look at this report to understand a major source of the problem: multi-billion dollar companies that pay poverty wages and then rely on taxpayers to pick up the slack, to the tune of a quarter of a trillion dollars every year in the form of public assistance to working families.
"Seven billion of this is just for fast-food workers, more than half of whom, even working full time, still must rely on programs like food stamps and Medicaid just to make ends meet."
McDonald's USA, in a statement, defended its track record of providing jobs to "hundreds of thousands of people across the country," and noted that "wages are based on local wage laws and are competitive to similar jobs in that market. We also provide training and professional development opportunities to anyone that works in one of our restaurants."
Despite spreading to dozens of cities, worker walkouts have done little to prick the industry's conscience, but Temple, author of the NELP study, says that "companies are very sensitive to their brand because its success depends on popularity.
"The tipping point is going to be continuing activities we've seen this past year until companies see business as usual is not going to cut it."
Posted in: Burger King, compensation, Dunkin' Donuts, Fast-food industry, Income inequality, Low-wage jobs, McDonald's, Public assistance, Subway****
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Harkin: ..."multi-billion dollar companies that pay poverty wages and then rely on taxpayers to pick up the slack"
The problem isn't market pay for entry jobs. The problem is the second half of this equation, taxpayers picking up slack.
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Rep. David Schweikert of Arizona, a former county Treasurer:
"There is no such thing as default unless there is an actual evil attempt from the administration. When you have 18 percent of GDP coming in in cash, less than 2 percent going out in debt coverage—I’m stunned you all fall for it in the press. None of you (reporters present) were math majors, were you?”
http://www.slate.com/blogs/weigel/2013/10/15/house_republicans_want_to_make_it_harder_for_treasury_to_avoid_a_debt_crisis.html
http://www.powerlineblog.com/archives/2013/10/none-of-you-reporters-were-math-majors-were-you.php
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Re Harsh Price for Fast Food Jobs: I saw this contested this morning on the basis of it being a serious political hack job, not a legitimately performed study/analysis, in the service of unions pushing for higher minimum wages.
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Re Harsh Price for Fast Food Jobs: I saw this contested this morning on the basis of it being a serious political hack job, not a legitimately performed study/analysis, in the service of unions pushing for higher minimum wages.
It's actually being pushed by companies that make automated restaurant equipment.
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This is worth a read IMHO. Paints an accurate picture of what Obama sees in upcoming budget battles. Now that he knows how to get his way, he will end sequester limits, raise taxes (further) on 'the rich', and use money to pay for bigger and bigger government. A strategy almost too obvious to post.
http://www.realclearpolitics.com/articles/2013/10/19/obama_only_interested_in_busting_gop_120393.html
Obama Only Interested in Busting GOP
By Lawrence Kudlow - October 19, 2013
Judging from the speech Obama gave following the deal to end the government shutdown, Republicans better get wise to the president's next fiscal gambit when the three-month stop-gap budget and debt measures come due. As was the case with his hard-line defense of Obamacare, the president likely will be inflexible on ending sequestration budget caps, pushing for massive tax hikes and permitting only the most inconsequential entitlement reforms.
Obama is interested in busting the GOP in 2014. He's not interested in true budget restraint or other economic-growth measures.
Example: This week, instead of a conciliatory work-together message for the negotiations ahead, President Obama gave us another Republican scold speech: "All of us need to stop focusing on lobbyists and bloggers and talking heads on radio, and professional activists who profit from conflict."
But of course, it was Obama who wouldn't negotiate. And it was Obama and his followers who demonized the GOP with words like "hostage," "ransom," and "terrorists."
Another example: Out of nowhere in his post-shutdown speech, the president pledged to "close these corporate-tax loopholes that don't help create jobs and freeze up resources for the things that do help us grow, like education and infrastructure and research."
Huh? Where did this come from? There's no discussion of corporate tax reform in the whole speech, except for this one derogatory mention. So don't count on progress for the single biggest growth and jobs creator, namely full-fledged business tax reform. It may be in Obama's budget, but it's not really on his agenda.
The real agenda is to jack up taxes on businesses and the wealthy. On top of this year's $700 billion tax hike, the Democrats are going back to the $1 trillion tax-hike idea mentioned in recent years by Obama, Harry Reid and Nancy Pelosi.
True pro-growth tax reform should broaden the base, lower marginal rates and simplify the code. The Democratic objective, however, is to raise as much additional taxpayer money as possible.
Why? Well, of course, to provide the spending fuel after they get rid of the budget-capping sequester. The Obama democrats are manic about this. They know that the sequester has effectively stopped their grandiose spending plans, and is actually bringing the discretionary budget back to 2007 levels. In fact, the real budget-winning move of recent years was the Republican reverse bait and switch (the bait came from the White House) in 2011 to embrace the sequester and implement it. It's the only true pro-growth fiscal measure we've seen in the Obama years.
Closing tax loopholes is a good idea so long as it is accompanied by lower marginal tax rates on the other side. (Repatriating over $1 trillion in overseas corporate profits at a minimal sanction of 5 percent would also help grow the economy.) So companies, wealthy entrepreneurs and small-business owners shouldn't be fooled when they hear the president talk about closing tax loopholes. Why is he saying this? That's easy: He wants to spend more money on his pet projects. More for the teachers' unions, the local construction unions, the quick-fix, shovel-ready infrastructure projects, the clean-energy Solyndras and all the other oddball social programs put in place by this administration.
Government spending cuts amount to tax cuts, which provide economic stimulus. But Obama and the Democrats want no part of it. Step back and read the president's economic speeches in August and September. You see a pattern: Raise taxes on businesses and successful entrepreneurs, kill the sequester and use the new tax revenues to spend more and grow the government -- and probably even finance Obamacare, which is going bankrupt even before it starts and has become the laughingstock of the country with its catastrophic breakout.
Finally, while Obama again may occasionally say otherwise, the Democratic Party opposes all manner of entitlement reforms. All. That includes the chained-CPI reform (which would lower benefits), Medicare means-testing, longer retirement eligibility, and higher co-pays for federal-employee benefits.
Labor doesn't want this stuff. House and Senate Democrats don't want it. And I seriously doubt if the president would push for it. Which means, in terms of the new budget conference (another fiscal cliff?) due to report in mid-December, the GOP better be super careful not to end the sequester budget caps in return for phony entitlement reforms.
Republicans had no coherent message going into the shutdown fiasco. But they can change that. They can now adopt a clear policy that maintains the sequester budget caps, pushes hard for pro-growth tax reform, and makes no apologies for rolling back the taxing, spending, mandating, budget-busting behemoth that is Obamacare.
The budget and debt battle of the next three months is actually going to be war. Obama knows this. Does the GOP?
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My friend Donald is an MD in MA. He is concerned about the debt and deficits and recognizes that Obama is not perfect. At the same time he asks:
"As I said earlier, I understand the debt is ultimately destructive to our society. The blame though is all over the place and involves both parties. The stimulus package which Obama signed was in motion before Bush left. But how much of that increase of 70% over the last 5 years can be directly blamed on Obama? He entered office with the country in a financial mess. Surely you can't say Obama created any significant amount of that debt in his first 6-12 months. The monster was already charging ahead in part fueled by lower tax revenue due to a recession he did not create. Since getting into office he and Congress have been at total loggerheads with obstructionism being the one and only mantra and agenda of the GOP. No statesmen can function in that environment, and they don't.
"My question is this why is Obama alone blamed for the increase of $7T ? Does Bush's "blame" for how out of whack our budget is end on his last day in office? I think not. Similarly, Obamacare's effect on the economy will not end on his last day in office. What if a Republican is elected in '16. Would he/she be blamed for any increase in debt during his/her term?"
OK gents, lets give him a thoughtful answer.
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My friend Donald is an MD in MA. He is concerned about the debt and deficits and recognizes that Obama is not perfect. At the same time he asks:
"As I said earlier, I understand the debt is ultimately destructive to our society. The blame though is all over the place and involves both parties. The stimulus package which Obama signed was in motion before Bush left. But how much of that increase of 70% over the last 5 years can be directly blamed on Obama? He entered office with the country in a financial mess. Surely you can't say Obama created any significant amount of that debt in his first 6-12 months. The monster was already charging ahead in part fueled by lower tax revenue due to a recession he did not create. Since getting into office he and Congress have been at total loggerheads with obstructionism being the one and only mantra and agenda of the GOP. No statesmen can function in that environment, and they don't.
"My question is this why is Obama alone blamed for the increase of $7T ? Does Bush's "blame" for how out of whack our budget is end on his last day in office? I think not. Similarly, Obamacare's effect on the economy will not end on his last day in office. What if a Republican is elected in '16. Would he/she be blamed for any increase in debt during his/her term?"
OK gents, lets give him a thoughtful answer.
According to the Bureau of Labor Statistics, in 2008 our unemployment rate was at 5.8 percent.
Our national debt was at $10.2 trillion.
In 2008 when Obama took office, gas prices were at $1.71 for regular conventional, according to U.S. Department of Energy.
We now have a record number of Americans on food stamps. Then again, this is Obama's first real job, so he's still getting the hang of it, I guess.
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My friend Donald is an MD in MA. He is concerned about the debt and deficits and recognizes that Obama is not perfect. At the same time he asks:
"As I said earlier, I understand the debt is ultimately destructive to our society. The blame though is all over the place and involves both parties. The stimulus package which Obama signed was in motion before Bush left. But how much of that increase of 70% over the last 5 years can be directly blamed on Obama? He entered office with the country in a financial mess. Surely you can't say Obama created any significant amount of that debt in his first 6-12 months. The monster was already charging ahead in part fueled by lower tax revenue due to a recession he did not create. Since getting into office he and Congress have been at total loggerheads with obstructionism being the one and only mantra and agenda of the GOP. No statesmen can function in that environment, and they don't.
"My question is this why is Obama alone blamed for the increase of $7T ? Does Bush's "blame" for how out of whack our budget is end on his last day in office? I think not. Similarly, Obamacare's effect on the economy will not end on his last day in office. What if a Republican is elected in '16. Would he/she be blamed for any increase in debt during his/her term?"
OK gents, lets give him a thoughtful answer.
According to the Bureau of Labor Statistics, in 2008 our unemployment rate was at 5.8 percent.
Our national debt was at $10.2 trillion.
In 2008 when Obama took office, gas prices were at $1.71 for regular conventional, according to U.S. Department of Energy.
We now have a record number of Americans on food stamps. Then again, this is Obama's first real job, so he's still getting the hang of it, I guess.
http://www.texasinsider.org/obamas-numbers-unemployment-gasoline-the-national-debt/
Unemployment is the highest consistently since the Great Depression. Under Reagan unemployment was coming down from a point even higher than Obama faced.
The Reagan recovery entered 1984 with 8 percent unemployment and by the fall it was in the 7.2 to 7.4 range. It ended 1984 at 7.3 percent and people were confident that the recovery would continue and unemployment would get even lower (which it did).
Gasoline prices have skyrocketed under President Obama. Gasoline was $1.81 a gallon in Charlotte the day after Obama became President. It was $3.79 this Labor Day. Gasoline has literally gone up a penny a day throughout the month of August (31 cents a gallon for the month). The Labor Day price was the highest in history.
By contrast the Reagan deregulation of oil production and gasoline distribution (ending Jimmy Carter’s gasoline rationing and waiting lines at gas stations as you could only buy gas every other day based in the last number of your license plate) produced a dramatic increase in supply and an equally dramatic decline in cost.
There was a profound reason the Reagan campaign had “leadership that is working” as one of its themes. There was an equally good reason that “morning in America” was one of the slogans.
In 1984 people felt better off because they were better off. Obama has to explain failure, while Reagan could run for reelection on a wave of success.
The third number testifies to the bankruptcy of the Obama-left wing strategy.
The Obama proposition was that big enough government spending would rebuild the economy.
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My friend Donald is an MD in MA. He is concerned about the debt and deficits and recognizes that Obama is not perfect. At the same time he asks:
"As I said earlier, I understand the debt is ultimately destructive to our society. The blame though is all over the place and involves both parties. The stimulus package which Obama signed was in motion before Bush left. But how much of that increase of 70% over the last 5 years can be directly blamed on Obama? He entered office with the country in a financial mess. Surely you can't say Obama created any significant amount of that debt in his first 6-12 months. The monster was already charging ahead in part fueled by lower tax revenue due to a recession he did not create. Since getting into office he and Congress have been at total loggerheads with obstructionism being the one and only mantra and agenda of the GOP. No statesmen can function in that environment, and they don't.
"My question is this why is Obama alone blamed for the increase of $7T ? Does Bush's "blame" for how out of whack our budget is end on his last day in office? I think not. Similarly, Obamacare's effect on the economy will not end on his last day in office. What if a Republican is elected in '16. Would he/she be blamed for any increase in debt during his/her term?"
OK gents, lets give him a thoughtful answer.
According to the Bureau of Labor Statistics, in 2008 our unemployment rate was at 5.8 percent.
Our national debt was at $10.2 trillion.
In 2008 when Obama took office, gas prices were at $1.71 for regular conventional, according to U.S. Department of Energy.
We now have a record number of Americans on food stamps. Then again, this is Obama's first real job, so he's still getting the hang of it, I guess.
http://www.texasinsider.org/obamas-numbers-unemployment-gasoline-the-national-debt/
Unemployment is the highest consistently since the Great Depression. Under Reagan unemployment was coming down from a point even higher than Obama faced.
The Reagan recovery entered 1984 with 8 percent unemployment and by the fall it was in the 7.2 to 7.4 range. It ended 1984 at 7.3 percent and people were confident that the recovery would continue and unemployment would get even lower (which it did).
Gasoline prices have skyrocketed under President Obama. Gasoline was $1.81 a gallon in Charlotte the day after Obama became President. It was $3.79 this Labor Day. Gasoline has literally gone up a penny a day throughout the month of August (31 cents a gallon for the month). The Labor Day price was the highest in history.
By contrast the Reagan deregulation of oil production and gasoline distribution (ending Jimmy Carter’s gasoline rationing and waiting lines at gas stations as you could only buy gas every other day based in the last number of your license plate) produced a dramatic increase in supply and an equally dramatic decline in cost.
There was a profound reason the Reagan campaign had “leadership that is working” as one of its themes. There was an equally good reason that “morning in America” was one of the slogans.
In 1984 people felt better off because they were better off. Obama has to explain failure, while Reagan could run for reelection on a wave of success.
The third number testifies to the bankruptcy of the Obama-left wing strategy.
The Obama proposition was that big enough government spending would rebuild the economy.
http://www.weeklystandard.com/blogs/us-adds-two-times-more-debt-economic-output-last-2-years_762311.html
U.S. Adds Two Times More Debt than Economic Output in Last 2 Years
8:29 AM, Oct 9, 2013• By DANIEL HALPER
The Republican side of the Senate Budget Committee has put together this chart to show that U.S. has added two times more debt than economic output in the last two years:
(http://www.weeklystandard.com/sites/all/files/images/image001-1_0.png)
"President Obama said that increasing the debt limit does not increase the debt," the minority side of the Senate Budget Committee says in a statement. "But when the Treasury department started using so-called extraordinary measures to avoid a breach of the debt ceiling in May, 2011, the debt limit stood at $14,294 billion.
"Today it stands at $16,699 billion, which was reached when Treasury started using extraordinary measures in May of this year. That's a $2,405 billion increase in 2 years.
"Meanwhile, the economy, as measured by GDP only increased by $1,199 billion between the second quarter of 2011 and the second quarter of this year.
"So the debt increased twice as much as the economy over the last two years, the very definition of unsustainable. The growth of a nation’s debt cannot for long exceed the growth of its economy – which is precisely what is happening now."
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http://www.cnbc.com/id/101125221
Treasury may have even less room for maneuver in 2014
Published: Friday, 18 Oct 2013 | 2:18 PM ET
The Obama administration was able to scrape up against the government's debt ceiling for five months this year before it came to the brink of default. It could have less breathing room in 2014.
Obama on Thursday signed into law a bill that would suspend a $16.7 trillion cap on the national debt until early February, when it will reset to whatever level the debt has reached.
Absent a decision to raise it again, the Treasury Department has tools to manage its cash a little longer before it starts missing payments.
The question is how long.
This year, the Treasury bumped up against the debt ceiling in May but was able keep under it for another five months by doing things like stopping investments in some pension funds for federal workers. These steps are known in Washington as the Treasury's "extraordinary measures."
They give the Treasury a buffer against an economically damaging default.
When the debt cap is reset next year, several respected budget experts think the Obama administration might run out of wiggle room by mid-March.
"Extraordinary measures are unlikely to last long," Shai Akabas and Brian Collins, analysts at the Bipartisan Policy Center think tank in Washington, wrote in a report on Friday.
That's because the new debt ceiling date falls at a time when the Treasury is sending out lots of tax refund checks, they said, adding that they expect the cap to reset at $17.3 trillion, reflecting about a $600 billion increase in U.S. debt.
The Treasury was not immediately available for comment.
Alec Phillips, an economist at Goldman Sachs in Washington who tracks fiscal issues for the bank, also thinks the Treasury will probably run out of room by mid-March.
"However, if revenues are higher than expected or tax refunds are lower than expected, the date could be pushed (out)slightly further," he said in a report.
If the administration were able to stretch the borrowing capacity until the end of March, there is a chance that a dividend payment from government-controlled mortgage giant Freddie Mac could give Treasury even more breathing room.
Freddie Mac has operated under government stewardship since it was bailed out by taxpayers during the financial crisis, and the firm is expected to make a roughly $30 billion payment to the Treasury in the coming quarters.
If the payment came at the end of the fourth quarter, before the debt limit is reset, it would have no impact on the amount of time Treasury could squeeze out of extraordinary measures, Phillips said. But if it came at the end of March, it could give the administration an extra buffer against default.
--By Reuters
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In the case of Senator and then President Barack Obama, it is important to note that he was a majority leader (in fact, not title) of the Senate for the two years coming into the Presidency. The non-renewing effect of tax rate cuts played a role in the economic stall. His actions favoring Fannie Mae and CRA lending rules played a role in the crash. (Not sole blame by any means!) The emergency measures, TARP, Stimulus I, QE1, etc. that were started in the fall prior to his inauguration were done all with his support and consent. The budget year that started Oct 1, 2008 had his seal of approval on it as well. Had he fallen out of an airplane into the White House in Jan. 2009 instead, I would view his first year and his first term differently.
If you take together his contribution to the crash and his Presidency, and that his policies all tend to both slow economic growth and to increase spending, he is responsible for a boatload of debt, still amassing.
Let's go through the points made by Donald:
"I understand the debt is ultimately destructive to our society. The blame though is all over the place and involves both parties." - True
"But how much of that increase of 70% over the last 5 years can be directly blamed on Obama? He entered office with the country in a financial mess. Surely you can't say Obama created any significant amount of that debt in his first 6-12 months."
- He supported all the policies that led to the disaster and dealt with it. Obama says the crash was caused by Bush tax cuts but in fact it was the impending end of the tax rate cuts, along with the housing debacle that triggered the fall.
"The monster was already charging ahead in part fueled by lower tax revenue due to a recession he did not create."
- You would have to ask Donald what policies he thinks created or caused this recession. Nothing significant regarding domestic policy or fiscal policy went through the House or Senate in the two years leading up to the crash that did not have his approval, and Hillary's, the front runners for the coming election. He was not fighting off the easy money at the Fed. He was not fighting to stop irresponsible lending practices in housing, 90% of which was from the federal government. He was winning the fight to end tax rate cuts that had spurred the economy to 50 consecutive months of job growth. He took office and the majority in Congress with unemployment at 4.6%. There should be SOME accountability for that. Bush had no new domestic or economic policies advanced after Pelosi-Reid (and Obama) took over the Congress in his last two years.
"Since getting into office he and Congress have been at total loggerheads with obstructionism being the one and only mantra and agenda of the GOP. No statesmen can function in that environment, and they don't."
- This is not true. Pres. Obama had total control of Congress the first two years including a 60th vote in the Senate. Squandered it on passing a program that failed in the polls, that he didn't even want implemented until his second term, and lost the House of Representatives over it. He compromised absolutely nothing on that program and its passage with Republicans and he reaped what he sowed. He called his opponents andtheir tactics terrorists, arson, ransom, etc. The loggerhead was not someone else's fault. In fact Republicans had a healthcare plan on the table with all the popular provisions, pre-existing conditions etc. The only changes he made were to win Democrat votes in Nebraska and Connecticut.
"My question is this why is Obama alone blamed for the increase of $7T ? Does Bush's "blame" for how out of whack our budget is end on his last day in office? I think not. Similarly, Obamacare's effect on the economy will not end on his last day in office. What if a Republican is elected in '16. Would he/she be blamed for any increase in debt during his/her term?"
- I agree with Donald in the concept of runners left on base at the start and end of a Presidency. I also don't think the President alone deserves all credit and or blame for the term, so the exact amount of blame is hard to quantify. But it was enough to most certainly be "destructive to our society".
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This seems persuasive to me on a point on which I have harped for some years now. Have I been wrong?
Fear of Debt Spiral Misplaced To view this article, Click Here
Brian S. Wesbury - Chief Economist
Bob Stein, CFA - Deputy Chief Economist
Date: 10/28/2013
Now that things have settled down in Washington DC, politicians are focusing on a “grand compromise” to fix the budget. Without reform, growth in entitlements will eventually push federal spending back to levels last seen in World War II.
While there are all kinds of things to worry about in any negotiations about entitlements, some analysts are spreading an even more horrifying story. They say low interest rates are hiding a potential catastrophe. Once interest rates rise, they claim, the budget and the total debt of $17 trillion are going to soar with interest costs boosting spending so fast that deficits will turn into an uncontrollable death spiral.
Right now the federal debt is $17 trillion. And, if interest rates rise from artificially low 0%, 1%, 2.5% levels, to more sustainable rates of closer to 4%, look out below. On $17 trillion, that could mean an extra $500 billion per year in interest costs, a huge jump considering that in 2013 net interest costs were only $220 billion. This will force more borrowing and even more debt and even more interest costs down the road.
But, this theory has several major holes. First, the relevant debt for calculating the impact of a change in interest rates is not $17 trillion. The government owns about $7 trillion of its own debt, including IOUs held by the Social Security Trust Fund (with only accounting interest costs) and bonds held at the Fed (where the interest goes back to the Treasury). This creates other problems, but it limits the impact of rising rates on the budget. Excluding these, leaves roughly $10 trillion in debt.
Second, although interest rates on newly-issued debt averaged about 1% this spring, some debt was financed years ago at higher rates. As a result, the average maturity of the debt is about 4½ years and its average interest rate is about 2%. So, if rates go back to 4%, that would generate an additional cost of $200 billion per year (2 extra points applied to $10 trillion), not the $500 billion that hysterical analysis promotes.
Of course, the extra $200 billion per year is still a lot of money; it’s about 1.5% of GDP. That $200 billion plus the debt service costs we already have would put us at about 2½% of GDP, no higher than they were from 1984 to 1998, when the US economy did quite well.
Third, the extra costs won’t happen overnight; they’ll take several years to filter through after we get higher rates, because the Treasury doesn’t have to roll over the entire debt every year. The average maturity of 4½ years means rising costs will roll out more slowly than many people think.
Last, and often overlooked, is that if rates are rising then the economy is probably stronger and taxes are rising faster as well. For example, an extra 1 point in real GDP growth for only one year should add more than $30 billion per year in revenue. Economics always has more than one moving part
We’re certainly not suggesting things are fine with our fiscal situation. There (sic) not. Long-term reforms are essential. But let’s focus on the real long-term threat, not exaggerated threats that seem to be driven from raw fear and not analysis.
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Just 10 trillion ? Well, why don't we just monetize that as well? Wesbury kind of forgets to mention all the looming entitlements we're committed to.
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If a liberal made that argument I would call it straw. Our worst fear is that interest rates will go to 4%?! They have been higher than that for most of the time since Eisenhower's first term, as much as 5 times higher in irresponsible times. (link below) Our debt a little ways down the road isn't going to be $17 trillion; it has gone up billions just since he wrote that yesterday. If we have $10 trillion of our own money invested, let's say through social security receipts, what is our return on the money we pay ourselves? Zero? Did we not have the opportunity cost of investing that money elsewhere? And a leading economist says that has no cost? Good grief.
No, the worst (short term) fear is more like this: $17 trillion will soon be $25 trillion in the blink of an eye and if interest rates spiral up out of control they could be worse than they were under Carter when the prime rate was 21.5%. http://www.fedprimerate.com/wall_street_journal_prime_rate_history.htm
If we want to quantify a fear and worst case scenarios in the near term, take $25 trillion times, say, 25% interest and the cost is 6.25 trillion per year, more than all that we take in now by double.
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http://www.ftportfolios.com/Commentary/EconomicResearch/2013/11/1/how-to-trade-the-budget-crisis
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I guess this thread is as good as any. I couldn't find a law enforcement thread and it doesn't quite fit under military issues:
http://www.belgrade-news.com/opinion/columnists/john_w_whitehead/article_f21c8780-515d-11e3-9f97-001a4bcf887a.html#user-comment-area
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I think the "Citizen-Police Interactions" thread on the Martial Arts forum would be best.
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I guess this thread is as good as any. I couldn't find a law enforcement thread and it doesn't quite fit under military issues:
http://www.belgrade-news.com/opinion/columnists/john_w_whitehead/article_f21c8780-515d-11e3-9f97-001a4bcf887a.html#user-comment-area
Haven't I done enough debunking of the "militarization of police" nonsense?
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What do we make of the Ryan-Murray budget deal?
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What do we make of the Ryan-Murray budget deal?
What do we think of paying $8 trillion in ransom with no promise or expectation that we will get our country back alive or unharmed, knowing they will come back for more and more, and knowing that they know we fear them and will pay whatever any and all demands?
It's pretty good, I think. Better than the Iran deal in that he has indicated he is willing to give up his nuclear arsenal.
What ever happened to 'the power of the purse' and having all spending bills originate in the House? This will 'originate' in the House only after it has been approved by the powers of the Senate and White House.
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FWIW, I'm willing to tolerate it. What is the alternative in the aftermath of our side getting blamed for the shut down? AS I sometimes say "Intelligence is the amount of time it takes to forget a lesson." With Obamacare about to hit the fan on Jan 1 do we really want to go down that road again?
Also, the cuts to our military are going way too far IMHO and if I understand correctly, half of the increases go to our military. This is a very good thing.
Also, if I understand correctly, the 99 week unemployment insurance is being returned to its standard 26 weeks.
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That is the thinking, end the stalemate blame game until we have new election and new congress. And after the next election we will again have divided government - with a higher spending baseline.
It would be nice if we never again had to hear about fictitious cost savings in the out years of ten year budgets that are in place for less than two.
I am for a strong military but less money is required when the Commander in Chief is against weapons, defense systems and interventions.
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My understanding is that military spending is like turning a big ocean going tanker-- it takes a LONG time to turn, start, or stop.
I'm REALLY not liking what I am reading about what the sequester cuts are doing and am glad to see them being lessened.
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"military spending is like turning a big ocean going tanker-- it takes a LONG time to turn, start, or stop." - True.
I'm REALLY not liking what I am reading about what the sequester cuts are doing and am glad to see them being lessened.
- Point taken.
OTOH, defense spending 2013 was $821B, cut back to 2010 levels but more than years 2003-2009 with two wars going. http://www.usgovernmentspending.com/federal_budget_estimate_vs_actual_2013_XXbs1n#usgs302
If it is being spent unwisely, increasing the total won't necessarily address that.
One might also say: Domestic spending is like turning a big ocean going tanker-- it takes a LONG time to turn, start, or stop.
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The (other) good news in the budget deal (give Paul Ryan credit for this) is that so-called tax loopholes were left untouched, leaving the closing of loopholes, exclusions and tax system gimmicks on the table for real tax reform that could lower the rates across the board and help grow the economy - if we ever become interested in that.
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$20.7 trillion was spent on the war on poverty. This graph shows (nearly) 50 years of data. Looks like no improvement to me.
(http://consultingbyrpm.com/wp-content/uploads/2014/01/Two-Poverty-Trends.png)
http://socialwork.columbia.edu/sites/default/files/file_manager/pdfs/News/Anchored%20SPM.December7.pdf
http://www.nationaljournal.com/all-powers/what-the-50-year-war-on-poverty-tells-us-about-government-20140107
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Obama will get that budget to you. . .eventually. Sometime. It's in the mail.
Published by: Robert Laurie
He'll be 'at least' a month late, as usual.
He'll be 'at least' a month late, as usual
By law, the President must submit his budget proposal for the upcoming fiscal year by the first Monday in February. Barack Obama doesn't care. You'll get his budget when he decides to give it to you. That attitude has so far resulted in four blown deadlines. According to Congressional Quarterly, he's about to make it five.
The White House is said to be at least a month behind its own schedule for developing a fiscal 2015 budget, which by statute is supposed to be submitted to Congress on the first Monday in February. That will slow work on next year’s spending bills, even though the budget accord negotiated by House Budget Chairman Paul D. Ryan, R-Wis., and Senate Budget Chairwoman Patty Murray, D-Wash., established overall discretionary spending levels. There is no penalty for a late presidential budget submission, but appropriators cannot hold hearings until they have a chance to review the administration’s proposals. Last year, Obama’s budget was released two months late, in early April, a delay that factored into Congress’ failure to clear any fiscal 2014 spending bills in 2013.
As Townhall points out, the three previous Presidents were late with their proposals a whopping 4 times in 20 years. Obama has now been late five of six times during his tenure. You can say that doesn't matter, since not even Democrats are willing to vote for the craziness his budgets contain, but it still means he's missed more of these deadlines that any President in almost a hundred years.
We're sure this is thrilling news for the left, since it will probably make it easier for Harry Reid to simply ignore the entire budget process -something he is often wont to do. CQ believes that Reid and the Dems will use the Paul Ryan / Patty Murray budget deal as cover, so they can dodge their legal budgetary duties.
The expectation is Senate Majority Leader Harry Reid, D-Nev., will keep a Senate budget deal off the floor, arguing the Ryan-Murray pact makes it unnecessary. Senate debate on a budget resolution could open the door to numerous amendments that the chamber’s Republicans can use to force highly partisan votes just months before the elections.
Heaven forbid the Dems have to stand up for the things in which they believe - during an election year!
Chastise the President all you like, but he's a man who knows what his priorities are. Budget be damned, he has to hit the golf course, go snorkeling, grab some shave ice, play basketball, and take a few selfies. If there's time, he'll host a Jay-Z concert in the White House. After that, maybe - if you're lucky - he'll deal with those pesky numbers.
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He came back from his 4 million dollar vacation so he could lecture America on a lack of economic equality. Say thank you, you bitter clingers.
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The Chris Christie scandal in a nutshell, as explained in the media: The Port Authority has a program to close lanes on a key bridge at busy times in order to study how much worse the congestion and traffic delays will be as compared to the usual lousy to horrible. Some aide of Christie allegedly triggered this program for the wrong reasons, to retaliate against a Mayor who would not endorse the Governor for reelection.
I disagree. The scandal is the existence of such a program in the first place.
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Robert Samuelson, Washington Post:
"The War on Poverty's success at strengthening the social safety net... should not obscure its failure as an engine of self-improvement."
http://www.realclearpolitics.com/articles/2014/01/13/how_we_won_--_and_lost_--_the_war_on_poverty_121197.html
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http://www.lawfareblog.com/2014/01/a-guide-to-the-coming-onslaught-of-presidential-administration/
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Congress Handcuffs Pentagon Cost-Cutters
Bases that can't be closed, weapons that can't be retired, benefits that can't be touched. What's left? The essentials.
By Todd Harrison And Mark Gunzinger
Jan. 26, 2014 5:20 p.m. ET
While the budget battles in recent years have been difficult for many parts of the federal government, they have forced the Pentagon into a perpetual state of crisis management, limping from one budget showdown to the next. This fiscal chaos is not conducive to carrying out the nation's defense.
If military spending must decline as part of an overall reduction in federal spending, Congress should abide by three simple rules: (1) a gradual decline in military spending rather than a sharp drop; (2) a greater degree of budgetary certainty for the coming years; and (3) the flexibility necessary for the Pentagon to make smart, strategically informed reductions.
The Ryan-Murray budget agreement, passed by Congress late last year, conforms to two of these rules. It reduces the cuts required in 2014-15 so that spending reductions are phased in gradually. It also gives the Defense Department more certainty in its future funding because both the House and Senate passed the two-year deal in a bipartisan manner. While Congress must still pass appropriations bills that conform to the budget caps, Ryan-Murray allows Pentagon planners to do something they haven't done in several years—prepare a realistic defense budget that has a chance of passing.
One important task remains. Congress needs to give the Pentagon greater flexibility to make smart reductions informed by strategy. This requires more than passing an annual appropriations bill and avoiding sequestration. It means Congress must set aside parochial political interests and allow the Pentagon to make tough decisions that are likely to be unpopular with some constituencies.
For example, the Defense Department has repeatedly asked Congress for another Base Realignment and Closure Commission so it can shed excess bases and facilities, which the military estimates is about 20% of its existing infrastructure. Yet current law prohibits the Pentagon from closing these unneeded bases and facilities, forcing it to waste billions of dollars every year. While no private company would tolerate such waste, key members of Congress have blocked efforts to close bases because this wasteful spending supports jobs in their districts.
The Pentagon has also asked for sensible reforms to rein in its growing personnel costs, such as raising the fee working-age military retirees pay for health insurance by a few dollars per month. Congress has repeatedly blocked these reforms, and as a result the cost per service member for pay and benefits grew by 57% from 2001 to 2012 when adjusted for inflation and excluding war-related costs. This growth was due to a number of factors, including rising health-care costs, higher than requested pay raises, and new and expanded benefits such as Tricare for Life, a Medicare supplemental policy provided free of charge to military retirees 65 and older.
If Congress will not allow the Pentagon to change military compensation to slow this growth, it will have little choice but to cut the number of military personnel. And if compensation costs continue growing while the overall budget declines, the Pentagon will have to continue cutting people to the point where the military may be too small to protect all of our nation's global security interests.
The Pentagon also needs greater freedom to retire legacy weapons. The Air Force has said it needs to retire some older aircraft—including the A-10 ground-attack aircraft and the KC-10 aerial refueler—to fit within Congress's budget constraints. Both planes have been incredibly valuable in the past, and the A-10 in particular has proven its worth in Iraq and Afghanistan. If resources weren't constrained both aircraft would be worth keeping. But the budget is constrained, and the Air Force has determined it has other aircraft that can do the same jobs. Because the Defense Department is now more focused on countering threats in the Asian-Pacific region than preparing for major ground wars, the A-10, whose primary mission is providing close air support for ground forces, is understandably a lower priority.
Yet some members of Congress are already working to prevent the Air Force from making financially smart and strategically informed reductions. The other military services have similar issues, with Congress repeatedly blocking the Navy from retiring older ships and forcing the military to keep production lines open for legacy weapons it no longer wants to buy.
With all of these constraints layered on top of one another—not being able to close bases, reform compensation or retire legacy weapons—the Pentagon has few degrees of freedom left. If the nation wants effective and efficient government, it has to start making smart decisions. It is time for Congress to set aside politics and give the Defense Department the flexibility to do what is best for the nation, both fiscally and strategically.
Messrs. Harrison and Gunzinger are senior fellows at the Center for Strategic and Budgetary Assessments in Washington, D.C.
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Debt Limit Reached
The federal government reaches its borrowing limit today, leaving Treasury
Secretary Jack Lew to resort to "extraordinary measures" to avoid default. He
can hold off until the end of February, he says. Republicans are still trying
to figure out what item to demand in exchange for raising the debt ceiling,
which doesn't exactly put them in a strong bargaining position. We expect them
to just concede to a "clean" hike in order to make a better election issue out
of it. Meanwhile, federal spending goes in the same direction it always does:
up.
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http://thehill.com/blogs/on-the-money/budget/198044-house-gop-pulls-debt-plan-move-to-clean-bill
From the article:
The lack of consensus within the majority has sapped its leverage, leading to Boehner’s decision on Tuesday to hand control of the floor over to Democrats.
“We don’t have 218 votes, and when you don’t have 218 votes, you have nothing.”
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Given how the play by Ted Cruz, Rand Paul, and Mike Lee worked out last time, to try it again would fit the definition of insanity: Doing the same thing and expecting a different result.
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The federal government is wasting an astonishing hundred billion dollars a year in improper welfare payments to recipients not entitled to them. This is an amount of money greater than the GDP of most nations on earth, more than Morocco and within striking distance of Hungary. The figure comes from a study by Veronique de Rugy and Jason Fichtner [George Mason University / Cato], who produced the following chart based on the OMB's High-Error Programs Report:
(http://www.americanthinker.com/blog/assets/jason-vero-imp-Chart-small.png)
http://www.americanthinker.com/blog/2014/02/100_billion_in_improper_welfare_payments_per_year.html
http://www.paymentaccuracy.gov/high-priority-programs
Medicare fee-for-service, Medicare Advantage, and Medicaid top the chart and combine for $61.9 billion in improper spending, which should surprise no one given their sheer size. But their relatively high rates of errors should especially worry us as the federal government is expanding its reach into the health-care market - does anyone think the Affordable Care Act will be any different from other federal health programs?
Interestingly, though Medicare fee-for-service is the biggest drain in absolute terms - wasting nearly $30 billion in 2012 - it's far from the worst offender on a dollar-for-dollar basis. The Earned Income Tax Credit is responsible for $12.6 billion in improper payments, almost a quarter of what the program spent in 2012.
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Paul Ryan Unveils GOP Plan to Balance Budget in 10 Years
Budget Blueprint Proposes Changes to Medicare, Medicaid, Food Stamps, Other Programs
By Damian Paletta and Kristina Peterson
April 1, 2014 10:30 a.m. ET
Paul Ryan speaks at the CPAC Conference last month in National Harbor, Maryland. Getty Images
House Budget Committee Chairman Paul Ryan (R., Wis.) Tuesday proposed eliminating the government's budget deficit in 10 years through major changes to Medicare, Medicaid, food stamps and other programs—and took the controversial step of counting in assumptions on how the plan would spur economic growth.
The fiscal year 2015 budget blueprint is a largely political document that establishes House Republicans' commitment to eliminating the deficit as a top priority. Mr. Ryan says it would cut $5.1 trillion in projected spending over a decade, with 40% of that coming from simply repealing the Affordable Care Act.
To replicate a point of pride in his budget blueprint last year — namely balancing the federal budget in 10 years--Mr. Ryan this year has opted to formally incorporate an estimated economic boost that he says would result from reducing the deficit, in turn lowering interest rates and spurring growth.
"The greater economic output that stems from a large deficit-reduction package would have a sizable impact on the federal budget," Mr. Ryan writes in his plan.
For example, Mr. Ryan estimates that in 2024, the government under his plan would spend $4.995 trillion and bring in $4.926 trillion in revenue. That would result in a deficit of $69 billion.
But the budget includes a new line item that didn't exist in his past proposals, which Mr. Ryan has labeled "macroeconomic fiscal impact" and which he says would further reduce the deficit by $74 billion that year. This would result in a $5 billion net surplus.
Building in assumptions about economic growth is a controversial part of budget math, and Mr. Ryan didn't include the same assumptions in prior proposals. This sort of analysis is popular with Republicans, who often cite it in proposals to cut taxes. . Steve Bell, a former top Senate budget aide now with the Bipartisan Policy Center, called Mr. Ryan's move "unconventional," but wouldn't expound further.
Mr. Ryan's budget also broadly calls for reining in the federal government and expanding the role of states and private companies in an effort to boost growth and lower costs for an array of programs, including food stamps and Medicaid. It would include deep cuts to domestic programs, far beyond the sequester-level reductions that some members of both parties have recently worked to reverse.
The GOP budget resolution stands no chance of passing the Democratic-controlled Senate, but budgets have long served as important markers of party priorities. In this year's midterm elections, Democrats are likely to seize on Republican proposals to cut spending and refashion Medicare, while GOP lawmakers will tout their commitment to reducing the deficit.
The government has roughly $17.5 trillion in debt. Lawmakers from both parties have said the debt will grow to unsustainable levels if policy makers don't take action.
The White House in March proposed reducing the deficit—but not eliminating it—through a combination of spending cuts and tax increases. Democrats and Republicans in recent years have taken steps to reduce the growth of the debt by restraining spending and allowing certain tax cuts to expire. The deficit has fallen sharply as a result, but it is expected to grow again due to a wave of worker retirements and projections of higher health care costs.
Mr. Ryan faces an extra political hurdle this year: Winning back the support of the 62 House Republicans who voted against a two-year spending deal that he reached with Senate Budget Committee Chairman Patty Murray (D., Wash.) in December. Because Democrats will oppose the plan from Mr. Ryan, he will need many of those GOP votes to win approval for his proposal in the House.
The GOP budget includes the overall spending level for fiscal year 2015 from that deal, which some Republicans opposed because it temporarily loosened spending caps. Republicans on the Budget Committee have said they hope balancing the budget in 10 years, in part by overhauling federal health and safety-net programs, will lure back GOP support.
Mr. Ryan's new budget would spend roughly $42.6 trillion over 10 years, compared to $47.8 trillion under current policies.
This year's House GOP budget includes greater savings than last year's plan from repealing the Affordable Care Act, the president's 2010 health care overhaul. It includes $2.066 trillion in savings over 10 years from scrapping the health law, compared to $1.783 trillion in last year's plan.
This element has long proven controversial, though, as the nonpartisan Congressional Budget Office has said repealing the law would actually make the deficit worse in the next decade. It wasn't immediately clear how this year's additional savings would materialize.
Mr. Ryan's budget also says that defense cuts proposed by the Obama administration are overzealous. The GOP budget, for instance, pushes back against Mr. Obama's proposed troop reduction, labeling the drawdown a "significant risk in an environment that, as has been noted, is extremely challenging and uncertain." It calls for more Army and Marine Corps. funding than the White House had requested.
Notably, Mr. Ryan's budget doesn't endorse the ambitious tax overhaul released by Ways and Means Committee Chairman Dave Camp (R., Mich.) in late February, which has drawn criticism as it seeks to take on special interests in the tax code. Mr. Camp on Monday announced he won't seek re-election to Congress.
Rather than include his tax plan, the GOP budget doesn't embrace any particular proposal but "calls for a tax code that is simpler, fairer and more competitive." Mr. Ryan is considered Mr. Camp's likely successor, since the Michigan lawmaker's chairmanship was set to expire under the GOP's term-limit rules.
The budget blueprint does mention Mr. Camp's plan, as well as proposals introduced by GOP Reps. Michael Burgess of Texas and Rob Woodall of Georgia, saying Congress should "should consider these and the full myriad of pro-growth plans."
Mr. Ryan's budget doesn't include new proposals to revamp anti-poverty programs, but Mr. Ryan has said he would offer new ideas sometime this year. It reiterates past proposals to turn over more control of the Supplemental Nutrition Assistance Program, also known as food stamps, and Medicaid to states.
Mr. Ryan's proposal would create a new alternative to Medicare that would allow older Americans to choose private insurance plans and receive government support for premiums. They could also choose to stay in traditional Medicare.
People who are now aged 56 and older would be exempt from any changes, but younger people would automatically face the premium support choice going forward. Last year people aged 55 and older were exempt. Some Democrats have been receptive to this idea, but many others have said it would allow Republicans eventually to dismantle Medicare.
The plan also tweaked how to calculate the government's contribution so seniors in many private plans would see their costs go down, compared to current law, though some remaining in traditional Medicare might pay more.
Senate Democrats have signaled that they have no plans to vote on a budget resolution this year after reaching an agreement with Republicans several months ago on spending levels for the current and 2015 fiscal years.
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Sorry I do not have a URL, but I gather Obama's budget just was voted down in the House 413-2.
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Though the press corps isn't reporting it, this is turning out to be a boom year for Uncle Sam. Federal tax revenue is hitting new records, even with mediocre economic growth.
The Congressional Budget Office reports in its April budget update that tax revenues for the first seven months of fiscal 2014 are up 8.2% to $1.74 trillion, or $132 billion more than a year earlier. That's probably bigger than your raise this year. Individual tax receipts are up 3.6% due to higher rates, payroll levies are up 12.2% and corporate income taxes have soared by 14.5% to $156 billion.
Intriguingly, CBO reports that even this gusher is as much as $20 billion less than it predicted in its most recent 10-year fiscal projections. This may be due to slower than expected growth caused in part by the big tax wallop to the economy. The higher tax rates, which President Obama says aren't high enough, are nonetheless yielding a windfall for Congress to spend.
By the way, this revenue boom doesn't include $57 billion from Fannie Mae FNMA +10.02% and Freddie Mac. FMCC +9.29% The Treasury is forcing the toxic mortgage giants to turn over all of their earnings to the feds, and the take so far this year is $42 billion more than in the first seven months of fiscal 2013. Under the perverse federal budget rules, those payments aren't counted as tax revenues but instead are counted against spending as "net negative outlays." Thus federal spending looks $57 billion lower in the first seven months than it actually is.
The federal deficit was still $301 billion through April, which is down from $488 billion but should still be much lower five years into an economic expansion. But don't blame taxpayers, who are certainly doing their part.
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How LBJ ruined America:
**********Great Society's decline: The high cost of Lyndon Johnson's grand project
By George Will
JewishWorldReview.com | Standing on his presidential limousine, Lyndon Johnson, campaigning in Providence, R.I., in September 1964, bellowed through a bullhorn: “We’re in favor of a lot of things and we’re against mighty few.” This was a synopsis of what he had said four months earlier.
Fifty years ago this Thursday, at the University of Michigan, Johnson had proposed legislating into existence a Great Society. It would end poverty and racial injustice, “but that is just the beginning.” It would “rebuild the entire urban United States” while fending off “boredom and restlessness,” slaking “the hunger for community” and enhancing “the meaning of our lives” — all by assembling “the best thought and the broadest knowledge.”
In 1964, 76 percent of Americans trusted government to do the right thing “just about always or most of the time”; today, 19 percent do. The former number is one reason Johnson did so much; the latter is one consequence of his doing so.
Barry Goldwater, Johnson’s 1964 opponent who assumed that Americans would vote to have a third president in 14 months, suffered a landslide defeat. After voters rebuked FDR in 1938 for attempting to “pack” the Supreme Court, Republicans and Southern Democrats prevented any liberal legislating majority in Congress until 1965. That year, however, when 68 senators and 295 representatives were Democrats, Johnson was unfettered.
He remains, regarding government’s role, much the most consequential 20th-century president. Indeed, the American Enterprise Institute’s Nicholas Eberstadt, in his measured new booklet “The Great Society at Fifty: The Triumph and the Tragedy,” says LBJ, more than FDR, “profoundly recast the common understanding of the ends of governance.”
When Johnson became president in 1963, Social Security was America’s only nationwide social program. His programs and those they subsequently legitimated put the nation on the path to the present, in which changed social norms — dependency on government has been destigmatized — have changed America’s national character.
Between 1959 and 1966 — before the War on Poverty was implemented — the percentage of Americans living in poverty plunged by about one-third, from 22.4 to 14.7, slightly lower than in 2012. But, Eberstadt cautions, the poverty rate is “incorrigibly misleading” because government transfer payments have made income levels and consumption levels significantly different. Medicare, Medicaid, food stamps, disability payments, heating assistance and other entitlements have, Eberstadt says, made income “a poor predictor of spending power for lower-income groups.” Stark material deprivation is now rare:
“By 2011 . . . average per capita housing space for people in poverty was higher than the U.S. average for 1980. . . . [Many] appliances were more common in officially impoverished homes in 2011 than in the typical American home of 1980. . . . DVD players, personal computers, and home Internet access are now typical in them — amenities not even the richest U.S. households could avail themselves of at the start of the War on Poverty.”
But the institutionalization of anti-poverty policy has been, Eberstadt says carefully, “attended” by the dramatic spread of a “tangle of pathologies.” Daniel Patrick Moynihan coined that phrase in his 1965 report calling attention to family disintegration among African Americans. The tangle, which now ensnares all races and ethnicities, includes welfare dependency and “flight from work.”
Twenty-nine percent of Americans — about 47 percent of blacks and 48 percent of Hispanics — live in households receiving means-tested benefits. And “the proportion of men 20 and older who are employed has dramatically and almost steadily dropped since the start of the War on Poverty, falling from 80.6 percent in January 1964 to 67.6 percent 50 years later.” Because work — independence, self-reliance — is essential to the culture of freedom, ominous developments have coincided with Great Society policies:
For every adult man ages 20 to 64 who is between jobs and looking for work, more than three are neither working nor seeking work, a trend that began with the Great Society. And what Eberstadt calls “the earthquake that shook family structure in the era of expansive anti-poverty policies” has seen out-of-wedlock births increase from 7.7 percent in 1965 to more than 40 percent in 2012, including 72 percent of black babies.
LBJ’s starkly bifurcated legacy includes the triumphant Civil Rights Act of 1964 and Voting Rights Act of 1965 — and the tragic aftermath of much of his other works. Eberstadt asks: Is it “simply a coincidence” that male flight from work and family breakdown have coincided with Great Society policies, and that dependence on government is more widespread and perhaps more habitual than ever? Goldwater’s insistent 1964 question is increasingly pertinent: “What’s happening to this country of ours?”
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Excellent post. Please post it in Liberal Fascism as well.
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I took note of this content before noticing the author was Ron Paul. He gets this about half right (and half wrong) IMHO.
http://townhall.com/columnists/ronpaul/2014/05/20/tax-reform-useless-without-spending-reform-n1840207
Tax Reform Useless Without Spending Reform
Recently, Republican leaders in Congress unveiled a "tax reform" plan that they claimed would provide the American people with a simpler, fairer, and more efficient tax system. While this plan does lower some tax rates and contains some other changes that may make next April a little less painful for Americans, there is little in it to excite supporters of liberty.
Taxes may even increase under this plan for some Americans, as it eliminates some of those tax deductions labeled “loopholes.” When I served in Congress I opposed bills that “closed loopholes” because closing loopholes is just a fancy way of saying raising taxes. Anything that leaves more money in the hands of the people is beneficial to both liberty and economic efficiency. As economist Thomas DiLorenzo put it, "...private individuals always spend their own money more efficiently than government bureaucrats do,” therefore sound economics, as well as a concern for liberty, requires opposition to any proposal to "let government bureaucrats spend more of the people's hard-earned money.”
Tax reformers also stray from sound economics when they endorse a tax system that is designed to direct consumption and savings. I share the concern that the current tax system distorts people’s behavior by discouraging savings. However, the solution is not for the government to create a tax code that punishes consumption in order to encourage savings. A truly efficient market is one where individuals are completely free to determine how to allocate their incomes between consumption and savings. No politician or bureaucrat can know the proper allocation of savings and investment that meets the needs of every individual, and government policies designed to cause individuals to devote more of their income to savings than they otherwise would distorts the market just as much as policies that encourage excess consumption.
The Republican tax plan adopts what is called “dynamic scoring.” Dynamic scoring is designed to recognize that tax cuts, by incentivizing work and investment, can increase revenue to the government. This is the argument of the famous Laffer curve. It has always seemed odd to me that a supposed free-market economist would argue for tax cuts on the grounds that it would enrich the state's coffers. After all, the more money the state has the greater its ability to violate our liberties. Does this mean that those concerned with liberty should vote against tax cuts? Of course not; the solution is to make sure tax cuts are big enough that they cost the government revenue.
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When the contemporary tea party was new, I thought the over-riding theme was to cut spending first. You also need to grow the economy in order to get relieve from the record high demand for government services. He is right about a couple of concerns. If you insist on tax cuts being revenue neutral, you have missed part of the point - smaller government. And if you close all loopholes without gaining serious reductions in tax rates, you have actually increased taxes and sabotaged the potential for real reform.
I suggest moving in incremental steps. Cut some spending up front and lock out baseline increases. Make a big move toward right-sizing our regulatory burden. Enact round one of tax rate cuts. Get things rolling and repeat the incremental cut process. I don't believe the electorate will go from supporting the furthest left President to slashing government down to a Ron Paul levels in a single step. Something more like the penny plan has a better chance of slipping through: http://www.onecentsolution.org/
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The Veterans Scandal Is Only the Start
If the country can't meet basic needs now, wait until the looming deficit disaster finally strikes.
WSJ
By William A. Galston
May 20, 2014 6:53 p.m. ET
The recent revelations about the Department of Veterans Affairs point to serious problems. But the root of the scandal is not what self-serving bureaucrats failed to do or tried to cover up; it is a federal budget that prevents us from meeting even the national needs on which our polarized political parties can agree.
Whatever the disagreements about the long wars of the past decades, Democrats and Republicans agree that we must fully honor the debt we have incurred to the tiny fraction of the population that does the fighting for the rest of us. Yes, the budget for the VA has risen sharply since 2002. But the number of returning veterans has risen even faster. Many live with grievous wounds from which they would have succumbed in previous conflicts. Many others struggle with the multiple effects of repeated deployments. Aging Vietnam-era patients require more care, and new responsibilities such as coping with Agent Orange add to the VA's burden.
In 2002, reports the Financial Times, 46.5 million veterans made outpatient visits to VA facilities. In 2012, the number of such visits had risen to 83.6 million. Between late 2010 and the summer of 2013, average waiting times for veterans' claims soared from 100 days to 375 days.
Roughly 42%—$66 billion—of the VA's budget is subject to annual appropriations. That's the nub of the problem. Our inability to agree on a sustainable approach to long-term fiscal policy has led, by default, to a relentless squeeze on discretionary spending that will hobble us at home and abroad. Last week, for example, the House Armed Services Committee approved an appropriations bill incompatible with long-term restraints in current law. Buck McKeon (R., Calif.), the committee chairman, admitted as much. He was, he said, hoping that "some miracle happens" so that we "get money . . . next year that we don't have now." He won't.
Enlarge Image
Getty Images
The Congressional Budget Office's latest budget projections showed that between 2013 and 2024, discretionary spending—defense and nondefense—is scheduled to fall from 7.2% of GDP to 5.1%, the lowest share since at least 1962. With only five cents out of each dollar of national income, we are supposed to defend the country, care for veterans, address the needs of children and the poor—and invest in the research, education and infrastructure on which America's future depends. It can't be done.
Not so fast, say the critics: As the economy expands, even a smaller share can yield increased resources. That's true in principle, but not in current practice. Last February, the CBO calculated the cost of maintaining appropriations, adjusted for inflation, at 2014 levels over the next decade. That total exceeded currently enacted limits by $735 billion.
Ten years from now, the funds available for the military and domestic programs will buy less than they do today. Meanwhile, costs in both categories are likely to rise faster than the rate of inflation. "Doing more with less" is a catchy slogan, but it only diverts attention from the real problem: the contradiction between our needs and the resources we commit to meet them.
The current structure of the federal budget makes this outcome inevitable. By 2015, federal revenues will recover from the Great Recession and stabilize at about 18% of GDP over the next decade. By 2024, however, we are on track to spend fully 17% of GDP on just two items—mandatory programs and interest on the debt—leaving almost nothing for discretionary spending. It only gets worse in the following decade.
That's a formula for endlessly increasing deficits and an ever-rising ratio of debt to GDP. After bottoming out at $469 billion next year, the CBO projects, the annual deficit will begin to rise again and will exceed $1 trillion by the early 2020s. After doubling from 35% to more than 70% during the Great Recession, debt as a share of GDP will near 80% by 2024. Although we reached a truce in the budget wars, we've only postponed the problem.
We know roughly how many veterans the wars in Iraq and Afghanistan will add to the VA's rolls, and we can estimate what they will cost per capita. Non-magical thinking would budget the amount required to meet their needs. We would have an honest public debate about the size and shape of the armed forces in coming decades, and we would appropriate what is necessary to make that blueprint a reality.
We would ask ourselves how much the government should invest in areas that promote growth, and we would stop pretending that shortfalls won't have consequences. We would also stop pretending that meeting the needs of the poor would be cheaper if we transfer programs to the states, and that cutting waste, fraud and abuse would solve our problems. And then, finally, we would be forced to confront the fiscal and economic consequences of putting revenues and mandatory programs on autopilot.
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Americans Got $2 Trillion in Benefits from Federal Government in 2013
http://cnsnews.com/news/article/ali-meyer/americans-got-2-trillion-benefits-federal-government-2013
That is more than half the budget. (SOME of these people deserve federal benefits.)
Benefits are nice, if you can get them, but for the most part, THEY HAVE NOTHING TO DO WITH GOVERNING.
In other news, new debt under this one President is now over 7 TRILLION DOLLARS.
Hope and change? Throwing money at problems is not exactly new.
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http://www.usatoday.com/story/news/politics/2014/08/05/federal-spending-transparency-money-missing/13485581/
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http://dailysignal.com/2014/08/27/new-report-shows-u-s-deficit-just-year-huge/?utm_source=facebook&utm_medium=social
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http://dailysignal.com/2014/08/27/new-report-shows-u-s-deficit-just-year-huge/?utm_source=facebook&utm_medium=social
Does this account for Obama's stash of money as well?
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I doubt if those numbers fully capture the new health care losses.
I wonder what the correlation is between defense spending reductions and future war impending.
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http://www.washingtontimes.com/news/2014/sep/9/welfare-marijuana-jeff-sessions-tackles-loophole/
Welfare recipients can use debit (EBT) cards for marijuana
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Among his first acts as president in 2009, Barack Obama pushed the so-called "stimulus" -- $800 billion in new spending to reinvigorate the economy after the recession. Predictably, it failed to do what he promised. But it did set a new, higher baseline for federal spending and jack up the federal debt. In selling his snake oil, Obama promised "unprecedented measures that will allow the American people to hold my administration accountable," including Recovery.gov, a website meant for tracking spending. Now, however, The Washington Post reports, "y the end of the month, the ability to see which entities received contracts and grants through the American Recovery and Reinvestment Act is going to vanish from Recovery.gov, officials say, making it impossible to track where the more than $800 billion ended up." That's because the government "is not renewing its license with Dun & Bradstreet, a major U.S. financial firm that assigns an identification number to all entities doing business with the federal government. When the license expires at the end of this month, those identification numbers -- and other associated data -- will no longer be available to the government. No numbers, no way to track the money." It's just the price of Hope 'n' Change™.
see more at http://www.washingtonpost.com/business/economy/data-on-800-billion-in-stimulus-spending-will-disappear-this-year-here-is-why/2014/09/09/ad277ff4-350a-11e4-8f02-03c644b2d7d0_story.html
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Scott saw my previous post and brings this post of his to our attention:
http://scottgrannis.blogspot.com/2012/10/arra-was-all-about-income-redistribution.html
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"the multiplier [to grow the economy by stimulating demand] is way less than one"
"if you reclassify things such as education, housing assistance, and health as transfer payments, then over 75% of the $840 billion allocated to "stimulus" was essentially income redistribution"
"Only 8%—$65.5 billion—went for transportation and infrastructure (i.e., the "shovel-ready" projects"
- He was out on the stump right after the $840 billion saying that we needed to invest in infrastructure. Well, why didn't we?!
Not a dime went to increase anyone's incentive to work harder or invest more.
- The sad story of the last 8 years.
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As China's economy gets poised to overtake Obama's America, we can still take pride in being number one in the world in social spending programs:
USA SPENDING 30 TIMES MORE PER CAPITA THAN CHINA ON SOCIAL PROGRAMS
The enormous welfare handouts, which Hoft relates are now in excess of $1 trillion annually, are unsustainable. Contrarily, he contends that Asia Pacific, including Australia, Japan, and China, are prospering by increasing their reliance on capitalism, creating smart tax policy, and spending substantially less than the U.S. on social programs.
http://www.breitbart.com/Big-Government/2014/09/22/Book-USA-Spending-30-Times-More-Per-Capita-Than-China-on-Social-Programs
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China's leadership understands communism doesn't work. Too bad the same can't be said for us.
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Hat tip to Mark Levin who spoke on his radio show tonight about Michele Malkin's article about the CDC. This is a real eye opener. Let me get this straight. Private companies are funding government agencies like the CDC????
What the heck is that all about?
This cannot be kosher:
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Lead StoryThe Centers for Everything But Disease Control
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By Michelle Malkin • October 14, 2014 09:33 PMScreen Shot 2014-10-14 at 9.16.35 PM
The Centers for Everything But Disease Control
by Michelle Malkin
Creators Syndicate
Copyright 2014
So now the federal health bureaucrats in charge of controlling diseases and pandemics want more money to do their jobs. Hmph. Maybe if they hadn’t been so busy squandering their massive government subsidies on everything but their core mission, we taxpayers might actually feel a twinge of sympathy.
At $7 billion, the Centers for Disease Control 2014 budget is nearly 200 percent bigger now than it was in 2000. Those evil, stingy Republicans actually approved CDC funding increases in January larger than what President Obama requested.
What are we getting for this ever-increasing amount of money? Answer: A power-hungry busybody brigade of politicized blame-mongers.
Money, money, it’s always the money. Yet, while Ebola and enterovirus D68 wreak havoc on our health system, the CDC has been busying itself with an ever-widening array of non-disease control campaigns, like these recent crusades:
Mandatory motorcycle helmet laws. CDC Director Dr. Thomas Frieden appoints a 15-member “Community Preventive Services Task Force” to promote pet Nanny State projects. An obscure Obamacare rule–Section 4003(b)(1)–stealthily increased the task force’s authority to study “any policies, programs, processes or activities designed to affect or otherwise affecting health at the population level.” Last year, the meddling panel extended the agency’s reach into transportation safety with a call to impose a federal universal motorcycle helmet law on the country. Is riding a Harley a disease? Why is this the CDC’s business?
Video games and TV violence. At Obama’s behest, in the wake of high-profile school shootings, the CDC scored $10 million last year to study violent video games and media images, as well as to assess “existing strategies for preventing gun violence and identifying the most pressing research questions, with the greatest potential public health impact.” Whatever that means. Why is this the CDC’s business?
Playground equipment. The CDC’s “Injury Centers” (Did you know there are 13 of them?) have crafted a “national action plan” and funded countless studies to prevent boo-boos and accidents on the nation’s playgrounds. Apparently, there aren’t enough teachers, parents, local school districts, and county and state regulators to police the slides and seesaws. Why is this the CDC’s business?
“Social norming” in the schools. The CDC has funded studies and campaigns “promoting positive community norms” and “safe, stable, nurturing relationships (SSNRs)” in homes and schools. It’s the mother of all government values clarifications programs. So bad attitudes are now a disease. Again, I ask: Why is this the CDC’s business?
After every public health disaster, CDC bureaucrats play the money card while expanding their regulatory and research reach into anti-gun screeds, anti-smoking propaganda, anti-bullying lessons, gender inequity studies and unlimited behavior modification programs that treat individual vices–personal lifestyle choices–as germs to be eradicated.
Here’s a reminder of what the CDC does with money that’s supposed to go to real disease control. In 2000, the agency essentially lied to Congress about how it spent up to $7.5 million earmarked each year since 1993 for research on the deadly hantavirus. “Instead, apparently without asking Congress, the CDC spent much of the money on other programs that the agency thought needed the funds more,” The Washington Post found. The diversions were impossible to trace because of shoddy CDC bookkeeping practices. The CDC also misspent $22.7 million appropriated for chronic fatigue syndrome and was investigated in 2001 for squandering $13 million on hepatitis C research.
As I pointed out years ago, the CDC has its own private funding pipeline in the form of “Friends of CDC,” an Atlanta-based group of deep-pocketed corporations, now including ATT, Costco, General Motors, Google, IBM and Microsoft. To date, the entity has raised some $400 million to support the CDC’s work.
Too bad some of those big bucks can’t be earmarked to find a cure for bureaucratic obesity and a vaccine for mission creep.
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Forgotten in all of this is how much these programs harm their recipients!
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"We have the world’s second-largest welfare state — just behind France."
http://www.washingtonpost.com/opinions/robert-samuelson-our-giant-welfare-state/2014/11/25/28f815bc-74c1-11e4-a755-e32227229e7b_story.html
Our giant welfare state
By Robert J. Samuelson November 25 Washington Post
We Americans pride ourselves on not having a “welfare state.” We’re not like Europeans. We’re more individualistic and self-reliant, and although we may have a “social safety net” to protect people against unpredictable personal and societal tragedies, we explicitly repudiate a comprehensive welfare state as inherently un-American.
Dream on.
Call it a massive case of national self-deception. Indeed, judged by how much of their national income countries devote to social spending, we have the world’s second-largest welfare state — just behind France.
This is not just conjecture. The Organization for Economic Cooperation and Development (OECD) — a group of wealthy nations — has recently published new figures on government social spending. Covered is unemployment insurance, disability payments, old-age assistance, government-provided health care, family allowances and the like. By this measure alone, the United States is hardly a leader. It ranks 23rd in the world with social spending of roughly 19 percent of gross domestic product (GDP). This is slightly below the OECD average of 22 percent. France is the champ at nearly 32 percent. (The data are generally the latest available, including some estimates for 2014.)
But wait. Direct government spending isn’t the only way that societies provide social services. They also channel payments through private companies, encouraged, regulated and subsidized by government. This is what the United States does, notably with employer-provided health insurance (which is subsidized by government by not counting employer contributions as taxable income) and tax-favored retirement savings accounts.
The OECD report brims with insights about welfare systems. Did you know, for example, that China — heir to a communist social system — has a puny welfare state compared with most wealthy nations? In 2009, its social spending equaled 7 percent of GDP. Or did you realize that, despite all the talk of “austerity,” government social spending has hardly been reduced in most countries. The OECD reports cuts in a few nations (Greece, Germany and Canada, among them) but also finds that “in most countries social spending remains at historically high levels.”
The main message that Americans can take from this report is that we need a higher level of candor. The very complexity of our hybrid system seems intended to disguise the reality that we have a welfare state. We have created a new vocabulary to validate our denial. From our “safety net,” we distribute “entitlements” that are not “handouts” and don’t qualify as “welfare” payments. We pretend (or some of us do) that our Social Security taxes have been “saved” to provide for our retiree payments, when today’s Social Security checks are mainly financed by the payroll taxes of today’s workers, just as yesterday’s checks were financed by the taxes of yesterday’s workers.
If we were more honest about these matters, we might have an easier time debating what are admittedly difficult and unpopular choices. Who deserves benefits, how much and why? What are the consequences for taxpayers and the larger society? Does our hybrid mix of public and private power make sense? These are insistent issues that won’t vanish even though we pretend they don’t exist.
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In the United States ...total social spending is the second highest in the world ...
A focus on public budgets misses two important features that affect social spending totals and international comparisons of social expenditure: 1) private social expenditure and 2) the impact of tax systems.
http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf
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Are we so big that we don't even report our program failures anymore?
Another Govt-Backed Solar Company Crashes
http://www.newsmax.com/Ira-Stoll/solar-solyndra-bailout/2014/12/01/id/610204/
Better solar technology is coming next year. Why wait for a private market to function freely when you can pretend to command an economy - like the highly successful Soviets.
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The Power of the Purse
The ‘omnibus’ bill is no way to govern, but it offers hope for 2015.
Dec. 10, 2014 8:16 p.m. ET
The 113th Congress is sprinting to a finish, and few besides Harry Reid will lament its passing. In its final budget splurge, however, Congress is at least showing hints of better governance and how a Republican majority might effectively use the power of the purse next year.
House and Senate appropriators late Tuesday unveiled a $1.01 trillion bill to fund the federal government through September. Its 1,600 pages contain thousands of spending and policy changes that deserve more time to assess. Yet the House plans to vote Thursday.
Blame for this rush job is bipartisan, starting with Mr. Reid, who six years ago shut down regular appropriations to shield Democrats and the White House from having to make spending choices. Government has lurched from one short-term funding bill to the next, and an important measure of the new GOP majority will be if it returns to regular budget order.
We’ll also be watching Speaker John Boehner to see if he honors his promises to give the House and the public 72 hours to review legislation. The Dec. 11 deadline for government funding has been known for months, yet Mr. Boehner is now presenting his Members with a choice of passing his bill or shutting down the government. He owes voters better.
This Gargantua is nonetheless giving Republicans a chance to press some of their priorities. The bill funds 11 of 12 parts of the government through September and generally stays within the spending caps laid out in last year’s budget agreement—providing $521 billion to defense and $429 billion for domestic discretionary programs. It funds the Department of Homeland Security only through February, when Republicans will tee up a debate over President Obama’s immigration decree.
Some on the right are calling the caps a sham, and that’s partly true, since the bill adds $64 billion to fight Islamic State and $5.4 billion for Ebola that are outside the caps. Then again, the war has to be funded and defeating Ebola should be a priority.
More encouraging is that Republicans are showing how they can use Congress’s spending power to steer policy. Most of government has been on autopilot since 2010. This week’s bill starts to set new spending priorities.
The bill cuts nearly $350 million from an Internal Revenue Service that targeted conservative nonprofits and is acting as tax collector for ObamaCare. It slices $60 million from the imperial Environmental Protection Agency, whose budget is 21% below 2010 levels and will soon have as many employees as it did in 1989. The bill even does the unheard of and eliminates funding for programs, including Mr. Obama’s Race to the Top initiative that has stopped pushing useful education reform.
There are also useful policy riders, notably on regulation. Republicans began to reform the Dodd-Frank financial law by amending a rule that threatened to raise costs on Main Street businesses. They are also banning the Fish and Wildlife Service from placing the sage grouse on the Endangered Species list, ending the threat of a government land grab in 11 states. They are sparing farmers from an EPA plan to apply the Clean Water Act to small ponds and irrigation ditches, and truckers from new rules that slash their work weeks.
School districts will soon have more flexibility in implementing Michelle Obama’s proscriptive school-lunch menus. Failing multi-employer pension plans will be able to reduce benefits to reduce the chances that the plans are dumped on taxpayers.
And Republicans are helping taxpayers and the cause of free speech by raising the contribution limits to political parties. The higher limit, which will increase by 10 times to $324,000, is designed to allow the parties to fund their conventions with private dollars, since Republicans have eliminated taxpayer funds for those political shindigs.
Republicans were forced to concede on some of their highest priorities, such as the Keystone XL pipeline and substantive changes to ObamaCare, and they also gave in to Democratic spending increases for financial regulators, college loans, mass transit and federal employees, among other things. But Democrats still control the Senate, and Mr. Obama has the veto pen.
The omnibus nonetheless shows that Republicans can use the power of the purse if they pick the right fights and don’t insist on strategy of their-way-or-a-shutdown. Some breathless Beltway conservatives don’t seem to understand the difference.
Democrats like Henry Waxman used their majorities to build the entitlement and administrative state in increments year after year even with Republicans in the White House. Their method was to press small but notable liberal initiatives on so many fronts that the President’s men couldn’t stop them all. If the GOP brings along some Democrats in Congress, Mr. Obama find it even harder to veto. The mistake is portraying anything less than total victory as surrender.
The omnibus bill has plenty of barnacles, and its rush-to-a-vote is a disgrace, but Republicans are using it to make more policy progress than they have in four years. Next year they can make even more, if they understand that their spending power is formidable but not unlimited.
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The rule or promise that you have to read all of a bill to vote for it is apparently no longer operative. They will spend over a trillion dollars in over 1500 pages, $.654 billion per page - and no one has read it. http://rendevouswithdestiny.blogspot.com/2014/01/congressman-no-one-read-1t-omnibus-bill.html
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NASA's Monumental Waste
NASA once put a man on the moon just seven years after setting out to do so. The space agency enjoyed glorious triumphs and persevered through tragic disasters over the years, but we've never seen anything quite like this. The Washington Post reports, "In June, NASA finished work on a huge construction project here in Mississippi: a $349 million laboratory tower, designed to test a new rocket engine in a chamber that mimicked the vacuum of space. Then, NASA did something odd. As soon as the work was done, it shut the tower down. The project was officially 'mothballed' -- closed up and left empty -- without ever being used. ... The reason for the shutdown: The new tower -- called the A-3 test stand -- was useless. Just as expected. The rocket program it was designed for had been canceled in 2010." So how did this happen? "[A]t first, cautious NASA bureaucrats didn't want to stop the construction on their own authority. And then Congress -- at the urging of a senator from Mississippi -- swooped in and ordered the agency to finish the tower, no matter what. The result was that NASA spent four more years building something it didn't need. Now, the agency will spend about $700,000 a year to maintain it in disuse." A grossly over-budget monument to nothing now stands in Mississippi as a sad reminder that money without proper vision is a terrible waste. More...
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Ignorance of the law is no excuse, while they add new "laws" at the rate of 75k pages per year, federal alone.
Were we under-regulated prior to 2014??!! Are they done now - is everything fully regulated?
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Obama Imposed 75,000 Pages of New Regulations in 2014
(All without a vote from Congress.)
http://www.thenewamerican.com/usnews/constitution/item/19803-obama-imposed-75-000-pages-of-new-regulations-in-2014
Federal Regulations Cost U.S. $2 Trillion Per Year, Study Shows
http://www.thenewamerican.com/economy/item/19116-federal-regulations-cost-u-s-2-trillion-per-year-study-shows
http://www.regulations.gov/#!searchResults;rpp=25;po=0;np=15;dct=FR%252BPR%252BN
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Scott Grannis:
Dynamic scoring is here to stay and it's huge
Posted: 06 Jan 2015 10:23 PM PST
For the past year or so, I've been talking about how dynamic scoring was on track to fundamentally change the way the Congressional Budget Office evaluates legislative proposals. Today it was made official, as Ed Lazear notes in tomorrow's WSJ:
The House of Representatives on Tuesday adopted a rule that will change Washington and lawmaking for the better. When legislation is proposed, the Congressional Budget Office is tasked with estimating its fiscal consequences. In most cases, the CBO assumes there is no effect on economic growth, positive or negative. In the future, the House will instruct the CBO to take macroeconomic effects into account when estimating the cost of legislation.
With this, a long-time dream of supply-siders has been realized. It will surely mark a turning point in the economic history of the U.S. economy.
Predictably, some Democrats denounced the change. In my view, this issue should transcend politics because it is simply a question of basic economics. If you raise or lower taxes, you will change people's behavior. If these dynamics are not properly considered, then legislation can and most likely will suffer from negative and "unforeseen" consequences.
As Scott Hodges of the Tax Foundation today noted:
Dynamic scoring is not a plot to cut taxes without paying for them, rather it is an important tool for raising the tax IQ of members of Congress so that they understand the different effects that various tax increases or tax cuts have on the economy. The ultimate goal is to enact tax policies that improve the lives of all Americans, which won’t happen if we continue to protect Washington’s status quo.
Read the whole thing
http://taxfoundation.org/blog/latest-critique-dynamic-scoring-ring-hollow-against-actual-results
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Over the years, I've heard this before. I can't get a job, I am too old to do what I do, and I am depressed and anxious and can't sleep. As a result apply for disability. Hey everyone else is taking advantage of the "system" so I don't really disagree:
http://www.cnsnews.com/news/article/ali-meyer/1-3-disability-have-mental-disorder-429-dc
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Over the years, I've heard this before. I can't get a job, I am too old to do what I do, and I am depressed and anxious and can't sleep. As a result apply for disability. Hey everyone else is taking advantage of the "system" so I don't really disagree:
http://www.cnsnews.com/news/article/ali-meyer/1-3-disability-have-mental-disorder-429-dc
Sure, Obama has his money stash to cover everyone.
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What Democrats and the CBO Don’t Get
The numbers reveal that a robust economy, not higher taxes, is the most reliable way to increase federal revenue.
By Michael Solon
Feb. 2, 2015 7:37 p.m. ET
WSJ
The recent rule change by House Republicans to incorporate the macroeconomic impact of major legislation into official budget estimates—“dynamic scoring”—has triggered heated criticisms. But three decades of hard accounting data, in addition to supporting the rule change, should prompt Washington to reconsider the way it thinks about what drives federal revenues.
Since 1984 the Congressional Budget Office has tracked all revisions to its triennial projections of federal revenues, outlays and deficits to account for economic, technical and legislative changes. Its data—from the “Changes in CBO’s Baseline Projections” tables that are published annually in the CBO Budget Outlook, the Budget Update and the Analysis of the President’s Budget—indicate which federal policies grew or shrank the economy significantly enough to generate measurable revenue gains or losses. The data also reveal the failures of core Democratic economic policies and flaws within the CBO’s current economic model.
One fact above all others emerges from the data: Economic growth is the single most powerful determinant of federal revenues.
The CBO today projects that if annual gross domestic product were to average one percentage point higher (in real terms), there would be an additional $2.9 trillion in revenues and $370 billion less in federal spending over a decade. Conversely, its 10-year revenue projections have fallen $5.6 trillion since 2007. Most of the lost revenue was not due to the financial crisis and recession, but to the historically weak recovery.
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Here’s another vital fact: Economy-driven revenue changes can dwarf legislative changes. Consider the budget summit deal enacted in November 1990. The CBO projected that the law’s variety of tax hikes would raise $159 billion in revenues over five years. Two months later the CBO reported that the 1990 recession would cut revenue projections by $206 billion—wiping out 130% of the revenue supposed to be gained by higher taxes.
Or consider a more recent example: In December 2013 the tax cuts for upper incomes and small businesses enacted in the George W. Bush years were allowed to expire, effectively a $615 billion, 10-year tax hike. Yet the CBO’s revenue estimates were lowered in both February and August of 2014, because of economic weakness. The projected revenue loss over a decade: $1.9 trillion.
A week ago Monday the CBO reported additional 10-year revenue losses of $234 billion from slower growth, offsetting three-fourths of the $320 billion in new taxes proposed in the president’s State of the Union address the previous Tuesday.
Economic growth also can add far more to revenues than legislatively driven tax hikes. The CBO projected that President Clinton’s 1993 tax increase would raise $268 billion over five years. But after the 1997 bipartisan agreements on budget restraint, welfare reform and capital-gains tax cuts, revenues surged, which the CBO said in 2000 arose “from the strength of the economy and changes in characteristics of income.” The CBO’s projected revenues for that year “are now $303 billion more than estimated in 1997.”
In other words, the government gained in one strong year more than the first five years of Clinton’s 1993 tax hike. Overall, an extra $1.34 trillion in revenues flowed from September 1997 to January 2001 solely for economic reasons—five times higher than the projected revenues from the 1993 tax hike.
The CBO data also help identify the periods and policies where both public revenues and private incomes grew the most or the least. These data reveal flaws both in Democratic economic remedies and within the CBO’s economic model.
Once President Obama ’s agenda of stimulus and expansion of government power was implemented—along with the Federal Reserve’s record low interest rates—the CBO projected strong economic growth after 2010. In the three annual budget reports after the stimulus bill’s passage, the CBO projected average GDP growth for 2011, 2012 and 2013 of 4.3%, 3.8% and 3.4%, respectively. Instead, growth averaged 2%.
The Clinton administration is another example. Republicans took control of Congress in 1994, and over the next few years pushed through restraints on spending and regulation. As a result of declining federal borrowing, interest rates also were lower. After 1997 the CBO repeatedly projected real gross domestic product growth outside the initial year to drop to a 2.1% average during 1997 to 2000. Yet actual GDP growth averaged 4.7%.
Among many other changes, the 1986 Tax Reform Act lowered the top marginal income-tax rate to 28% from 50%. Instead of projecting an economic boost, the CBO immediately lowered projected average gross national product growth rates for 1987 through 1989 to 2.9% from 3.3% (CBO projections were changed to GDP in 1992). The final GNP figures averaged 3.8% growth, including a strong 4.2% surge in 1988 when the full rate reductions kicked in.
Neither Democrats nor the CBO appear to alter their assumptions or correct their model for economic reality. Both discount the impact of marginal tax-rate changes. The CBO has repeatedly projected since 2001 that the U.S. would enjoy numerous years of 3% or higher growth. But the only two years that occurred were in 2004 and 2005, immediately after the accelerated reductions in virtually all marginal tax rates.
The overwhelming weight of CBO accounting supports dynamic scoring. CBO revisions confirm that slow growth since 2007 has triggered a massive revenue gap, that all revenues lost in past recessions have been recaptured in recoveries until the current one, and that pro-growth policies have delivered revenue surges.
No evidence in the CBO data appears for the macroeconomic feedback that Democrats claim and the CBO assumes from stimulus spending. The data highlight the economic and fiscal benefits to the private and public sectors from tax reductions and “austerity” programs that Republicans tend to pursue but the CBO and Democrats tend to dismiss. Such findings may not change the CBO’s future projections or Democratic policy assumptions, but these are the undeniable facts of the CBO’s past accounting.
Mr. Solon was budget adviser to Senate Republican Leader Mitch McConnell and is currently a partner at US Policy Metrics.
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We used to have a dissident County Commissioner who gave out the equivalent of Former Sen Proxmire's Golden Fleece awards for outrageous uses of wasted taxpayer money. He point out things like this and say, don't tell me we don't have enough money! This program below isn't what is breaking our budget, but letting the government get SO big that this sort of thing can happen is exactly what bankrupts us.
Puerto Ricans [in Spanish speaking Puerto Rico] Getting Disability Checks [from Uncle Sam] Because They Don't Speak English
http://news.investors.com/blogs-capital-hill/040715-746878-ig-report-finds-some-awarded-disability-because-they-cannot-speak-english.htm#ixzz3WkfBO8Yp
Is not knowing how to speak English a disability? According to the Social Security administration, it can be.
In fact, it's even a disability in Puerto Rico, where 84% of the population doesn't speak English "very well," and where Spanish is one of the official languages.
That's the finding of an Inspector General report, which said that from 2011 to 2013... Puerto Ricans were deemed eligible for Social Security Disability Insurance benefits because they spoke only Spanish.
In one case cited by the IG, a 50-year-old dental assistant who claimed she suffered depression and back pain was approved for Social Security Disability Insurance, even though she was well enough to perform light work, because she wasn't fluent in English.
The IG's office says it couldn't get a definitive number on how many Puerto Ricans made it on disability using this excuse, because the Social Security Administration "lacked sufficient management information" to provide it.
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http://www.usherald.com/maine-welfare-recipients-must-work-for-their-benefits/#.VSMk815brdk.facebook
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http://townhall.com/tipsheet/cortneyobrien/2015/04/12/cuomos-startup-ny-program-creates-a-whopping-76-jobs-costs-taxpayers-53-million-n1983086
Why can't we do more programs like these?
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Why Are Many Former Workers Not Even Applying for Job Openings?
Patrick Tyrrell / April 20, 2015 - The Heritage Foundation - Daily Signal.
There was good news this month: private-sector job openings rose slightly in February, according to data released by the Bureau of Labor Statistics.
Openings rose to 3.8 percent of all private-sector jobs and the job openings—the highest rate since January 2001. Other data for the month showed the unemployment rate for workers age 25-54 (often called prime age workers) ticked downward to 4.6 percent from 4.8 percent.
More people who want jobs are finding them, but there is something else going on as well. The labor force participation rate for prime age workers has continued to decline. Fewer of them are working or actively looking for work than before.
How can job openings stand at 14-year highs, but the labor force participation rate for prime age people hover around levels not seen since 1984?
University of Chicago economics professor Casey Mulligan suspects he knows why. As detailed in his 2012 book, and elaborated on more recently in his blog, and in The Wall Street Journal, Congress made major changes to anti-poverty subsidies and regulations during the Great Recession. All these changes provided more benefits that phase out as recipients earn more money.
For example, the federal Lifeline Assistance Program began to give free cell phones and free monthly cell phone usage to applicants if their income was low enough. Mortgage-assistance programs cut the mortgage payments of people if they were not working, but those with jobs still paid full price. The Obamacare health subsidies fall as earnings rise, which is a tax on labor activity.
Mulligan calculates that the marginal tax rate, that is the extra taxes paid, and government subsidies foregone on an extra dollar earned working if taking a job rose from 40 percent to 48 percent within two years of the onset of the Great Recession.
As the recession began, the labor force participation rate fell along with the job openings rate. But as job openings rebounded labor force participation remained stagnant.
People who had left the labor force did not come back. As Mulligan says, “Helping people is valuable but not free. The more you help low-income people, the more low-income people you’ll have. The more you help unemployed people, the more unemployed people you’ll have.”
Mulligan tells the story of a recruiter he met who had many people turn down jobs he offered them because “accepting a job would net them less than $2 per hour, so they would rather stay home.”
If people do not work for $2 per hour, that does not mean they are lazy. It means they are reasonable.
Unfortunately the decision to avoid work to avoid losing government benefits—while often rational in the short term—has terrible long-term effects. Skills atrophy the longer someone is out of work, and government benefits carry with them no chance for promotion or advancement.
To fix this, each existing government subsidy meant to help the poor and unemployed should be examined by lawmakers to determine whether it creates incentives to work or to stay on welfare. Work requirements should be strengthened on all means-tested assistance, and the tax system should be overhauled to ensure that it doesn’t penalize work. Moving people from welfare to the workforce is a win for individuals and a win for society as a whole. It’s time for the government to stop encouraging potential workers to stay home.
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Nice post Obj! University of Chicago professor Casey Mulligan quoted in the article is a great economist to follow. This is a good reminder to check his blog from time to time, "supply and demand (in that order)". http://caseymulligan.blogspot.com/ There is a lot more there.
"Mulligan calculates that the marginal tax rate, that is the extra taxes paid, and government subsidies foregone on an extra dollar earned working if taking a job rose from 40 percent to 48 percent within two years of the onset of the Great Recession."
40% marginal rate on a person needing a job is outrageous. To know that instead of fixing that it just got 20% worse is ... unbelievable. To know just a few of us even know or care about things like this yet keep voting for it is deplorable. We are keeping millions and millions of people from moving forward and achieving their dreams. Many of them are families with children.
Some people in the low income categories face marginal tax rates of over 100%. If they wanted to earn more and lift themselves up, they at some point would lose their food stamps, their section 8 voucher, their SSI support, their Obama free phone and now their Obamacare subsidy.
There aren't easy answers weaning able people off of support, but to continue supporting these programs without knowing or caring about the damage that they do is is the heart of what is wrong upside down economy. It is not only capital formation and high end earners that are hit by high marginal rates taxing away their economic opportunity!
Robert Mundell called high marginal tax rates "asphyxiating" back before Reagan. Looking at this, I would add 'criminal gross negligence' and 'crimes against humanity' to that charge.
Taking away the American Dream, piece by piece, is pretty close to treason. Imagine if an external enemy was doing that to us.
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Social Insecurity: The Looming Crisis
By Jim Harrington · May 13, 2015
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For years, actuaries, financial analysts and policy wonks have warned that Social Security is doomed to crash. Contrary to rosy predictions a decade ago that this popular government program has a funded lifetime of 33 more years and won’t sink into the red until 2017, Social Security actually went red in 2010 and will go broke in 2024.
In 1983, the Social Security trustees predicted that reforms would maintain the program’s solvency through 2048. Even they’ve changed their tune, though they won’t admit it’s as moribund as it actually is.
Since its inception, Social Security has promised each succeeding generation that there will be at least a minimum of money for them at retirement. All working people are taxed at the rate of 12.4% of each paycheck, with the promise of a return. (Yes, employers pay half, but they also pay employees less as a result. It still costs “X” to employ a person; whether 6.2% is earmarked for direct Social Security payments matters not.) But that money’s gone in an insolvent system.
When Franklin Roosevelt created Social Security, the ratio of taxpayers to beneficiaries was 42:1. Today that ratio has plummeted to numbers FDRs' “Brain Trust” never contemplated — it’s now a puny 3:1, and with 80 million Baby Boomers beginning to enter the system that ratio will only get worse. Social Security’s already running a $200 billion annual deficit with 60 million recipients, so it’s difficult to understand the trustees' optimism.
Researchers Gary King of Harvard and Samir Soneji and Konstantin Kashin of Dartmouth analyzed the Social Security Administration (SSA) trustees actuarial reports and conclude the program’s insolvency is near. Their research found little or no bias in the annual reporting between 1978 and 1999, but from 2000 onward the bias presenting the program positively has been increasing steadily.
King reports that the trustees use outdated modes in the analyses, comparing them to “steering by sextant and dead reckoning” rather than using “global-positioning-systems.” They “employ research methods that are antiquated and opaque compared with the statistics and open-source data analytics powering today’s successful scientific and business enterprises.”
Steve Goss, the chief actuary of the SSA, nevertheless enjoys widespread credibility. Supporters in the public, academic and private sectors use his analyses in their own work.
Barron’s Bill Alpert explains why: Goss says SSA actuaries “leave politics at the door when they prepare” reports, and argues that “forecast errors in the past decade might have resulted from the 2008 recession.” Besides political independence, Goss values consistency in the projections and looks askance at changing assumptions or methods.
Goss cites as a cautionary tale the trustees' continuing to project long-term gains while productivity dropped during the 1980s. Then in 1995, the economy began a sharp climb. “[We] learned a lesson,” Goss said. “[M]aybe we should look at the long-term averages, not flip back and forth a lot based on very, very brief periods of recent experience.” One problem with that approach is that the U.S. is not your granddaddy’s country.
And Alpert notes another big problem for Goss: “[A] surprising number of past panelists complain that Goss has ignored their advice. A case in point is the way the actuaries predict death rates. Along with birth rates and immigration, death rates are a crucial consideration in projecting the future populations that will be paying into Social Security and drawing benefits. Since 1999, outside demographers on Social Security’s technical panels have unsuccessfully urged the actuaries to change their approach for predicting death rates. Goss' crew makes judgments about future death rates within each age group and sex from five separate causes, like heart disease, cancer, and violence — a process that obliges the actuaries to come up with 150 different parameters in a way that outside experts have never been able to plumb.”
Faulty methods distort projections for solvency.
Problems are many, solutions, few. The system has already raised the full eligibility age to 66, and soon, 67. That’s not enough. One suggestion: raise taxes (naturally). To maintain the promised benefits, former Bill Clinton adviser Bill Galston argues the payroll tax would have to rise from 12.4% to 15.9%. A middle-income family (about $50,000) would pay another $900 annually. Adding this to all other taxes they pay is unconscionable.
Republicans have promoted privatizing part of Social Security for more than 20 years. Were taxpayers allowed to invest their Social Security money in 401k’s, even a modest return would allow middle-income earners to retire on six-figure incomes. Social Security’s “return,” by comparison, is an obscene joke. It actually results in a loss due to the constant inflation of the 20th and 21st centuries.
Social Security is a Pony Express program in a smart phone world. It makes changes grudgingly and only long after they are obviously needed. And because it is the greatest Ponzi scheme of all time, some Americans will be hurt very badly. Yet this oft-repeated warning has never been heeded because government employees have their own pension system, and citizens only want what was promised to them — a retirement income. Anybody aiming to fix that, in the view of too many Americans, is merely trying to steal from them. In short, it’s an entrenched problem that will almost surely receive nothing but token Band-Aids as long as politicians can hold out.
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http://www.nytimes.com/2015/05/31/nyregion/three-quarter-housing-a-choice-for-recovering-addicts-or-homelessness.html?emc=edit_na_20150530&nlid=49641193&_r=0
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http://www.washingtontimes.com/news/2015/jul/23/congress-headed-potential-shutdown/
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http://scottgrannis.blogspot.com/2015/08/budget-deficit-down-to-only-22-of-gdp.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
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http://scottgrannis.blogspot.com/2015/08/budget-deficit-down-to-only-22-of-gdp.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
Kind of ignores the catastrophic debt, eh?
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To a certain extent you are correct, yes it does.
Yet if the economy grows at 2% and the deficit is 2% at GDP, doesn't that imply a decline over time to the debt/GDP ratio?
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How is that in anyway meaningful for the brokest nation in human history?
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Forgive me the quibble with your hyperbole, but proportionally we are not even close to being the brokest nation in history. For example, doesn't Japan have a debt/GDP ratio of something like 245%?
Anyway, if my math is correct, current numbers mean a very slight decline in debt/GDP ratio.
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Forgive me the quibble with your hyperbole, but proportionally we are not even close to being the brokest nation in history. For example, doesn't Japan have a debt/GDP ratio of something like 245%?
Anyway, if my math is correct, current numbers mean a very slight decline in debt/GDP ratio.
http://money.cnn.com/2015/07/23/news/economy/japan-debt-imf/
Japan: Roughly 11 trillion in debt
http://www.washingtonexaminer.com/study-true-size-of-federal-government-debt-is-210-trillion/article/2565559
US: approximately 210 trillion.
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Forgive me the quibble with your hyperbole, but proportionally we are not even close to being the brokest nation in history. For example, doesn't Japan have a debt/GDP ratio of something like 245%?
Anyway, if my math is correct, current numbers mean a very slight decline in debt/GDP ratio.
http://money.cnn.com/2015/07/23/news/economy/japan-debt-imf/
Japan: Roughly 11 trillion in debt
http://www.washingtonexaminer.com/study-true-size-of-federal-government-debt-is-210-trillion/article/2565559
US: approximately 210 trillion.
http://simonthorpesideas.blogspot.com/2015/02/global-debt-is-now-25-times-total-money.html
http://m.youtube.com/watch?v=mwjUm8Lz7Y4
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LOL. "Everything is Awesome" should be Wesbury's and Grannis' theme song. :-D
Because everything truly IS awesome "when you're living in a dream!"
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GM:
The WE piece you post says "U.S. government debt stands at $210 trillion, not the official $13.1 trillion".
Ummm , , , aren't we at $18+T?
A strange error to make , , ,
Still, of course I get the point about unfunded liabilities-- and it is quite valid-- but without a proper grasp of the numbers it is hard to know how accurate they are.
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GM:
The WE piece you post says "U.S. government debt stands at $210 trillion, not the official $13.1 trillion".
Ummm , , , aren't we at $18+T?
A strange error to make , , ,
Still, of course I get the point about unfunded liabilities-- and it is quite valid-- but without a proper grasp of the numbers it is hard to know how accurate they are.
I doubt anyone has the real numbers at this point. The key element is how severe a situation we are facing.
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And only Chris Christie is talking about reigning in entitlements , , ,
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Yes, crazy discrepancy measuring 2 different things, the debt we owe today versus the fiscal gap projecting forward.
Debt at 18T is really only $13T owed to the public. Even that isn't owed to anyone in the sense of it ever being paid it back when the target is to always run permanent deficits. It's just an interest cost burden that could easily double or quadruple as interest rates go up, even without further deficits.
Where did GM's $210T number come from? A few sources below and this description:
"using the Congressional Budget Office’s July 2014 75-year Alternate Fiscal Scenario projection, Kotlikoff calculated that the U.S.’ “fiscal gap” –which he defines as “the difference between our government’s projected financial obligations and the present value of all projected future tax and other receipts”
http://teapartyeconomist.com/2015/03/12/washingtons-210-trillion-deficit/
http://www.brookings.edu/research/opinions/2015/04/08-federal-debt-worse-than-you-think-haskins
http://www.newsmax.com/Finance/StreetTalk/Kotlikoff-GDP-debt-deficit/2015/03/10/id/629314/
http://www.washingtonpost.com/blogs/fact-checker/wp/2015/05/13/ben-carsons-claim-that-the-u-s-owes-211-trillion-beyond-the-reported-federal-debt/
http://politics.stackexchange.com/questions/7986/is-the-210-trillion-fiscal-gap-measurement-valid-true-and-is-it-possible-to-fix
I have doubts about that methodology (75 years projections?) but the current problem is a hell of a lot bigger than amount currently owed.
More importantly to me is the growth figure. 2% growth is exaggerated. 2% now is after 0% over the winter and it doesn't even average 2%, and that isn't even breakeven growth.
The current revenue surge is temporary, and so is the narrowing deficit. Growth has nowhere to go but down under anti-growth policies and the deficit is already projected to double back up by the end of the decade.
Seems like an odd time to see a grown economists do an endzone dance.
The good news is that if we were to get our act together starting now, we could survive all our self-inflicted wounds. The bad new is that it seems like a physical impossibility that we can get our act together now.
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http://scottgrannis.blogspot.com/2015/09/budget-deficit-on-track-for-2-of-gdp.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
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http://www.capoliticalreview.com/capoliticalnewsandviews/anaheim-and-santa-ana-put-moratorium-on-constitutional-right-to-use-private-property/
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http://scottgrannis.blogspot.com/2015/09/budget-deficit-on-track-for-2-of-gdp.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
So how can such a smart guy like Grannis ignore the DEBT?
http://www.washingtontimes.com/news/2015/jun/16/government-debt-threatens-to-send-us-economy-into-/?page=all
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Monday Morning Outlook
________________________________________
A Shutdown Would Be Positive To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 9/28/2015
Sometimes, news really is important. The Pope’s visit to the U.S. was big, but the resignation of House Speaker John Boehner, effective October 30, was huge.
If you were worried about a government shutdown this fall, now it’s less likely. Boehner is free to work with Democrats, ignoring conservatives who want to defund Planned Parenthood, and pass a “continuing resolution.” This will keep the current budget fully funded through early December.
Just avoiding vetoes infuriates conservatives (and most of the GOP presidential field). They say the “establishment GOP” is ignoring Congress’s Constitutional power of the purse and capitulating to Democrats. The GOP leadership says it has to give in to “get something done.” It also says this will help elect a Republican president, who will then work in tandem with a Republican Congress to make drastic changes in fiscal policy.
The problem with this strategy is that the last time the GOP controlled the White House, it enacted No Child Left Behind, which federalized primary education, expanded Medicare, passed TARP (instead of changing mark-to-market accounting) and spent big during 2001-08. In other words, the GOP does not have a good track record on spending.
But Boehner’s resignation means a government shutdown is more likely in the longer-run. The GOP majority now has a chance to elect a speaker who will be more combative on spending and deficits. These budget battles will take place later this year, and if Republicans want to cut spending, they probably can’t avoid a government shutdown.
If Congress passes bills that cut spending, President Obama will veto them and a more combative Republican majority will get “blamed” by the media and Democrats for causing a fight that results in a government shutdown.
In that scenario, instead of trying to “avoid the blame,” conservatives should “take the credit” for any shutdown.
Yes, that’s right, take the credit. Shutdowns are not as scary as they’re portrayed. Money still flows into the Treasury Department and money still flows out, for Social Security or to make interest payments on the debt, for example. The military, border control, food inspections, air traffic, prisons, weather service, and post office, all keep running.
The downside is that if you need a passport or want to get into a national park, you are out of luck. Non-essential services stop and non-essential federal workers get furloughed. Meanwhile, the budget deficit drops.
Some say a shutdown will hurt the economy, but history doesn’t agree. The longest shutdown was from mid-December 1995 to early January 1996. Real GDP grew 2.7% in the year before the shutdown, and then at a 2.8% annualized rate in Q4-1995 and Q1-1996, in spite of the shutdown and a massive East Coast Blizzard. And after the shutdown, the U.S. passed welfare reform and moved to budget surpluses.
The government shut down in October 2013 and the economy grew at a 3.8% rate that quarter. Again, no problem.
The U.S. faces a future of trillion dollar annual deficits if we don’t cut spending. If shutting down the government helps alter that path, the U.S. economy will not only survive the short-term, but thrive in the longer term. So, if Boehner’s resignation finally makes that possible, a shutdown will be a positive for the U.S. economy.
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That is an odd approach. More simply, they could perform their constitutional responsibility according to direction given to them by the voters who elected them, and then refuse to let Obama escape blame for vetoing reasonable and generous funding bills.
The last one was a 17% partial shutdown for 16 days and cost us a net gain of 10 Senators. If both sides were resolute, it would last considerably longer.
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FWIW I think our efforts in this regard should be preceded by a HUGE educational/propaganda push explaining that Congress in general and the House of Reps in particular has control of the purse strings and why this is so.
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Already posted elsewhere but pasted here to for reasons of thread coherency:
I've been sympathetic to Ryan, but this is pretty awful.
http://www.breitbart.com/big-government/2015/12/16/paul-ryan-betrays-america-1-1-trillion-2000-plus-page-omnibus-bill-funds-fundamental-transformation-america/
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"but this is pretty awful."
That is an understatement. (So are the kind of people Krauthammer supports.)
From Breitbart: Jeff Sessions says basically FOUR people wrote this trillion dollar bill and once again no one is clear as to what is in it except for lobbyists.
Oh my God!
We are done for. I don't want empty platitudes. I want change. I want action. I don't want compromise. Every time the right compromises the left takes a step forward and then put their shoulders down and start driving us backwards again for the next fight. The right compromises and it happens again.
How can anyone be optimistic?
Unless your an illegal, Chinese national, or Russian national.
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Why is anyone surprised by what Ryan did? He was picked for that position so he could do just what he did.
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Here is more detail on the spending bill. The only thing I read that I like is allowing us to export oil. But that is coupled with more tax breaks for more favored green leftist projects. Probably all the liberals have family members invested in this stuff. More extended tax breaks for *lower earning income* families and for those with children and college students. (Don't they already get a bunch); Got to love these too:
"Other extended tax cuts include breaks for some teachers, commuters, timber investors, electric vehicle owners and makers of hard cider drinks.
(Why teachers? They don't make a ton but their benefits have been quite good and they only work a shortened year. This must be a payoff to their unions.) How about this:
People in the seven states without income taxes will be able to deduct local sales taxes on their federal returns." (Where did this come from?) If this ain't fair I don't know what is.
Hey if you go to a state without income tax (which itself is a big break) now you can write off your sales tax? If people in those states would rather live in a state where they pay income tax they can move there to get the deduction. But why fuck over the rest of us who pay state income and sales tax? (The answer is because they can - because it benefits their benefactors somehow)
Just simplify the Damn tax code!
Anyway before I explode see for yourselves:
Majority Whip Steve Scalise, R-La., right, walks to the chamber for final votes as the House and Senate rush to send President Barack Obama a budget package, at the Capitol in Washington, Friday, Dec. 18, 2015. The House easily passed a $1.14 trillion spending bill to fund the government through next September, capping a peaceful end to a yearlong struggle over the budget, taxes, and Republican demands of President Barack Obama. (AP Photo/J. Scott Applewhite)
WASHINGTON - Congress on Friday sent President Barack Obama a bipartisan but deficit draining year-end budget package that boosts federal agency spending and awards tax cuts to both families and a sweeping array of business interests.
A 65-33 Senate vote on the measure was the last act that shipped the measure, combining $1.14 trillion in new spending in 2016 and $680 billion in tax cuts over the coming decade, to Obama. It had earlier swept through the House on a pair of decisive votes on Thursday and Friday, marking a peaceful end to a yearlong struggle over the budget, taxes, and Republican efforts to derail his regulatory agenda.
Obama will sign the measure, which includes many of the spending increases he fought for all year and is largely cleansed of GOP attempts to block his moves on the environment, financial regulation, and consumer protection. Republicans won increases for the military and an end to a ban on exporting U.S. oil, as well as permanent tax cuts for business investment.
Republicans were evenly split with 27 of them voting in favour and 26 against the bill. Presidential contender Marco Rubio was absent. Only six Democrats and Independent Bernie Sanders, another presidential hopeful, voted against the measure.
With the votes, lawmakers wrapped up a surprisingly productive, bipartisan burst of late-session legislation in a divided Congress.
The measure received big bipartisan majorities in both House and Senate. It capped an impressive first few weeks for new Speaker Paul Ryan, R-Wis., who got the benefit of the doubt from most Republicans, who by a wide margin opposed earlier legislation that established the framework for the budget package. House Democratic leader Nancy Pelosi of California, a key negotiator, swung forcefully behind the measure after showing initial frustration over its lifting of an oil export ban and lack of action on helping Puerto Rico address its fiscal woes.
"They wanted big oil so much that they gave away the store," Pelosi said. But she cited successes in driving away most GOP policy proposals from the measure. Democratic also pushed through higher domestic budgets and tax breaks for working families and renewable energy.
"This bipartisan compromise secures meaningful wins for Republicans and the American people, such as the repeal of the outdated, anti-growth ban on oil exports," Ryan said, citing a large increase for the Pentagon and curbs on the activities of the Environmental Protection Agency and the IRS.
Some tea party lawmakers were dismayed by the burst of spending and a lack of wins for conservatives.
"There are so many things in this bill that will be surprising and shocking to the American people," said Rep. Walter Jones, R-N.C. "Maybe there is a Santa Claus. At least in the House."
The House voted on the spending portion of the measure on Friday, when it won support from House Republicans by a 150-95 margin. Democrats followed Pelosi's lead and backed the bill by a 166-18 margin. In a procedural quirk, the House passed most of the tax cuts — virtually all of them financed with deficit dollars — on Thursday.
The bill extends more than 50 expiring tax cuts, with more than 20 becoming permanent, including credits for companies' expenditures for research and equipment purchases and reductions for lower-earning families and households with children and college students.
The spending measure would fund the operations of every Cabinet agency. It awards increases of about 6 per cent, on average, above tight spending caps that were a relic of a 2011 budget and debt deal — and were opposed by both GOP defence hawks and Democrats seeking boosts in domestic spending.
The House vote bundled with the spending measure a tax bill that passed on Thursday.
The budget pact was the last major item in a late-session flurry of bipartisanship in Washington, including easy passage of long-stalled legislation funding highway programs and a rewrite of education programs.
Many on each side saw the budget deal as the best they could get under divided government. The need to win Obama's signature helped rid the measure of most of the controversial GOP provisions: killing federal money for Planned Parenthood, limiting the flow of Syrian refugees and undoing dozens of Obama actions on the environment, labour, financial regulation and relations with Cuba.
The measure contains large spending boosts for veterans and medical research, and funds a familiar roster of grants for transportation projects, first responders and community development.
It also clears away an almost $1 billion backlog of federal courthouse projects and sends hundreds of millions of dollars to the states and districts of a handful of powerful lawmakers such as Sen. Thad Cochran, R-Miss., and Rep. Harold Rogers, R-Ky., the chairmen of the Appropriations committees.
Also crammed into the two bills are provisions trimming some of the levies that help finance Obama's prized 2010 health care overhaul. The White House opposed the rollbacks, but Republicans and many Democrats savored them. A tax on medical devices would be suspended for two years, a levy on health insurers would stop for a year and, in a victory for unions, a tax on higher-cost insurance policies would be postponed two years until 2020.
In exchange for ending the oil export ban, Democrats won extensions of tax breaks for alternative power sources such as solar and wind energy.
Other extended tax cuts include breaks for some teachers, commuters, timber investors, electric vehicle owners and makers of hard cider drinks. People in the seven states without income taxes will be able to deduct local sales taxes on their federal returns.
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For the record, this budget is really Boner's parting gift.
That doesn't change what an utter traitorous fustercluck it is but to be fair the true test will come in January 2017.
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Yes and GM was right. Ryan was the pick to get Boehner's plan through. Only Republicans "can hold up the government". Nothing said about Democrats filibustering their way to control the Senate.
Not clear if we will have the Senate by then.
I could deal with Bernie Sanders populism more than Hillary's sleaze.
At least he seems to be honest. We need that. Not sleaze. Not from the right either - Boehner and McConnell.
Just too little of that in the world.
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Naturally Obama is emboldened to go after gun control with his summary win with the omnibus bill:
https://www.yahoo.com/finance/news/self-assured-obama-leave-field-100000228.html
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CD,
So let me get this straight...............Ryan had no ability to change or revise the Omnibus Bill? B.S.
Ryan could have made changes, allowed revisions, etc. Then it would have gone to reconciliation. Of course, there would have been a battle, and in the end if changes had been severe, Obama would veto it. But is that bad? Hell no!
Ryan wanted to be the Speaker so bad, he was willing to sell out the base of the party. This is just one more rollover and one more FU to the base from the GOPe.
and that is why I support Trump.
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I agree.
I suppose my point is simply that OTOH I do get that do we really want to distract from the presidential campaign with a shut down battle in this moment? It's a valid concern.
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"to be fair the true test will come in January 2017"
Terrible bill but I think Crafty has this right. This was already in motion. There already was a decision to do more of the same to ride out the Obama Presidency. They didn't have the votes or the backbone to showdown a President who has nothing to lose. I don't like it but this congress was not going to upstage the Presidential election a month before it starts.
I don't know why our side with the power of the purse fears the Obama veto and fails to exercise our power and responsibility, but the time for a showdown was on the first votes of 2011 and for the Senate on the first vote of 2015, and every vote after. The other side already knows our side doesn't have a backbone. You only pick the fight that you will win.
The point now is not to get angry but to show resolve. Some express it with support for Trump and I will express it by holding my candidate to a funding standard above what we have seen for a very long time. The top 3 right now are people that won't be pushed around IMHO if we win the Presidency. Christy probably too.
Pulling out the nuclear option over an issue you will lose on anyway doesn't make sense or accomplish anything. We can change policy through 'reconciliation' after the election - only if we win.
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"Why didn't Reps ever use the filibuster when the Dems controlled everything?"
I'm under they impression they did e.g. on Obamacare but the Dems did an evasionary end run via budget reconciliation.
The budget reconciliation was not done to avoid the filibuster. All spending bills are originated in the House and not in the Senate. The House was not going to put together what Obama wanted. So the Senate took a House Bill, stripped everything out of it, and put in the Obama Care regulations. Then they passed it and sent it to the House. And under reconciliation, 51% was all that was needed to pass it.
Pure manipulation. Same thing that was done with TPA and with TPP.
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http://www.daybydaycartoon.com/comic/the-farce-awakens/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DayByDayCartoon+%28Day+by+Day+Cartoon+by+Chris+Muir%29
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http://www.daybydaycartoon.com/comic/the-farce-awakens/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+DayByDayCartoon+%28Day+by+Day+Cartoon+by+Chris+Muir%29
It's one thing to get screwed by your enemies, another to get it from those that are supposed to be on your side.
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(https://westernrifleshooters.files.wordpress.com/2015/12/122015.jpg)
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The value of property that police departments seized through civil asset forfeiture — usually without accusing, let alone convicting, the property owners of a crime — exceeded the value of property stolen by private government burglars.
https://www.washingtonpost.com/news/wonk/wp/2015/11/23/cops-took-more-stuff-from-people-than-burglars-did-last-year/
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:-o :-o :-o :x :x :x
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We should needs test this country...
http://townhall.com/columnists/terryjeffrey/2016/01/27/federal-report-40-percent-qualify-for-needtested-benefits-n2110500?utm_source=thdaily&utm_medium=email&utm_campaign=nl&newsletterad=
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We know most of them ain't goin' to vote for Cruz Rubio or any other.
I certainly think we should all pay for college, single payer and Oscar voting rights for all. Vote Bernie
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We know most of them ain't goin' to vote for Cruz Rubio or any other.
I certainly think we should all pay for college, single payer and Oscar voting rights for all. Vote Bernie
A Prius in every garage, an Oscar on every mantle!
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We know most of them ain't goin' to vote for Cruz Rubio or any other.
...
True because you wrote most, not all. Now that I qualify for programs, O'care and FAFSA come to mind, I can tell you that designation makes me angry, not needy.
I 'spend' more on TAXES than on food, shelter, clothing, transportation combined, by far! And now I need 'help' from the government. Good grief.
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http://www.washingtonexaminer.com/va-to-reinstate-official-who-stole-130000-from-agency/article/2581840?custom_click=rss
Nice work, if you can get it.
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While Iowans were voting... National Debt hit $19 TRILLION
http://www.washingtonexaminer.com/national-debt-hits-19-trillion/article/2582097
The national debt hit $19 trillion for the first time ever on Friday, and came in at $19.012 trillion.
It took a little more than 13 months for the debt to climb by $1 trillion. The national debt hit $18 trillion on Dec. 15, 2014.
(http://s3.amazonaws.com/content.washingtonexaminer.biz/web-producers/020116%20debtCROP.png)
Obama is expected to leave office with a total national debt of nearly $20 trillion by the time he leaves office.
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Yes to me the debt is our biggest problem. Was this topic brought up in the last debate by either party? I didn't really see more than a few minutes of either debate or staged last minute Hillary show ("town hall" - from her pals at CNN).
Socialism Communism and the loss of freedom might be second
My third biggest concern is cyber attacks.
economy is up there.
immigration is up there
terrorism is lower down for me. Isis is a big threat but it isn't WW3
Climate "change" is in the basement.
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In DC it may become "Crime and Reward"
Libs just stop at nothing"
http://hosted.ap.org/dynamic/stories/U/US_CRIME_STIPENDS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2016-02-02-13-17-17
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Except in a big general way, we have not really been focused on the deficit and the national debt for a while. We all knew that the reduced deficits of recent years due to the Sequester also decimated our military. I suspect most of us favor substantial increases in military spending. We also all knew that the reduced deficits were temporary and that CBO and other projections had them starting to go up dramatically after Obama left office, especially as the illegally deferred lies of Obamacare finally come home to roost, spiced with a topping of the last Boener budget.
What brings these thoughts on is it would appear that we are now entering the era of increasing deficits in a big way.
Does someone have a good summary of where we are with all of this?
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Summary - me - no?
Yet I post just to point out it was brought up on cable a day or two ago that the ONLY candidate who even was talking about this stuff was Rand Paul .
Christie did speak about Soc Sec solvency but that was is as far as I know.
The implication is that :
Everyone thinks we can through capitalism grow our way out of this or/and the truth is political suicide.
Bill Gates who is annoying with his politics aka Buffett stated capitalism will not get us out of this mess (so what does?)
Amazing how no one is discussing this in debates town halls or campaign trail. The questions are not even being asked of the candidates!
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Except in a big general way, we have not really been focused on the deficit and the national debt for a while. We all knew that the reduced deficits of recent years due to the Sequester also decimated our military. I suspect most of us favor substantial increases in military spending. We also all knew that the reduced deficits were temporary and that CBO and other projections had them starting to go up dramatically after Obama left office, especially as the illegally deferred lies of Obamacare finally come home to roost, spiced with a topping of the last Boener budget.
What brings these thoughts on is it would appear that we are now entering the era of increasing deficits in a big way.
Does someone have a good summary of where we are with all of this?
The US military needs to be fundamentally restructured to deal with the new realities we are just beginning to see.
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CD: "... it would appear that we are now entering the era of increasing deficits in a big way."
G M: "The US military needs to be fundamentally restructured to deal with the new realities we are just beginning to see."
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I was wondering who might be best positioned to address this, I went through the faces on the stage and came back with the idea that maybe it is Paul Ryan. Isn't defense spending and thinking outside of old, established ways right in his wheelhouse? I am also looking for him to bring forward a consensus, conservative tax reform plan, taking the best components we are seeing and combining it with spending and entitlement reform (that can pass) and dynamic scoring(!) to address the debt concern that seems to only come up when Republicans want to rebuild the military or cut and simplify tax rates.
He has promised to come up with serious, specific proposals for the country. Defense is job one. We will see.
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US Needs Sensible Debt Financing To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 3/28/2016
Instead of imposing strict fiduciary rules on Wall Street, banks, investment houses, and financial advisors, the government should apply similar rules to the managers of the federal debt. This is particularly true because unlike the private sector – which faces tough market competition every day – the debt managers at the Treasury Department have a monopoly.
These federal debt managers have been flagrantly violating what should be their fiduciary responsibility to manage the debt in the best long-term interests of the US taxpayer.
Despite a roughly $19 trillion federal debt, the interest cost of the debt remains low relative to fundamentals. In Fiscal Year 2015, interest was 1.2% of GDP and 6.9% of federal revenue, both the lowest since the late 1960s. To put this in perspective, in 1991 debt service hit a post-World War II peak of 3.2% of GDP and 18.4% of federal revenue.
In other words, for the time being low interest rates have kept down the servicing cost of the debt even as the debt itself has soared.
You would think that in a situation like this, with federal debt set to continue to increase rapidly in the future, that the government’s debt managers would bend over backwards to lock-in current low interest rates for as long as possible.
But you would be wrong. The average maturity of outstanding marketable Treasury debt (which doesn’t include debt held in government Trust Funds, like Social Security) is only 5 years and 9 months. That’s certainly higher than the average maturity of 4 years and 1 month at the end of the Bush Administration, but still way too low given the level of interest rates.
The government’s debt managers have a built-in bias in favor of using short-term debt: because the yield curve normally slopes upward, the government can save a little bit of money each year by issuing shorter term debt. In turn, that means politicians get to show smaller budget deficits or get to shift spending to pet programs.
But this is short-sighted. The US government should instead lock-in relatively low interest rates for multiple decades, by issuing more 30-year bonds, and perhaps by introducing bonds the mature in 50 years or even longer.
At present, we find ourselves in the fortunate situation of being able to easily pay the interest on the federal debt. But this isn’t going to last forever. If the government locks-in low rates for an extended period it would give us time to catch our breath and fix our long-term fiscal problems, like Medicare, Medicaid, and Social Security.
There’s no reason this has to be a partisan issue. The government’s debt managers should just treat the debt like it’s their own. If the government is determined to hold many others to a stricter standard, it should lead by example.
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Another way of sensibly financing our debt might have been to keep the total amount of it within reason.
What would the cost of our debt be today at normal if not for our outrageous and counter-productive monetary policy?
Monetary policy failure enabled fiscal policy failure and now it is a federal government responsibility larger than providing for our common, national defense. I wonder if that is what the Founders intended...
I wonder if Congress having the power to pay our debts, Article I, section 8, implied the power to slough 20-30 trillion US$ off on the next generation, as if it was unimportant.
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TSA paid $1.4 million for Randomizer app that chooses left or right
http://www.geek.com/apps/tsa-paid-1-4-million-for-randomizer-app-that-chooses-left-or-right-1651337/
Or you could spend about $10 out on the free market.
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http://dailysignal.com/2016/05/05/house-republicans-to-move-forward-on-spending-without-a-budget-number/?utm_source=TDS_Email&utm_medium=email&utm_campaign=MorningBell&mkt_tok=eyJpIjoiWVRkaFpEZGpNMlUzTm1VMSIsInQiOiJsTjV4SlZWVUlcL2pRVm9TWnBsME0zYW1LRURkOGloSVZDTU1jOWhcL3ZlU2o2ZHZPMjIwYVpJVCtvbW5mbTVpMUdXYm1iSzNpdlFuUjljZ3VnMWVmdGRxbXl1eUFhY0VkVm4xaU5MU0FLd1drPSJ9
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https://www.conservativereview.com/commentary/2016/05/dc-insiders-checkmate-taxpayers-on-puerto-rico-bailout
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Federal spending went from $2 Trillion in 2002 to $4 Trillion today in just two Presidencies.
[Wish I could cut and paste the numbers in here, year by year.]
Amazingly, Republicans controlled the House of Representatives during 12 of those 16 years.
http://www.taxpolicycenter.org/statistics/federal-receipt-and-outlay-summary
https://en.wikipedia.org/wiki/2016_United_States_federal_budget
https://en.wikipedia.org/wiki/Party_divisions_of_United_States_Congresses
Are we nuts?!
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https://www.conservativereview.com/commentary/2016/08/fonda-and-redford-hollywoods-new-welfare-mooches
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https://patriotpost.us/posts/44479
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http://scottgrannis.blogspot.com/2016/09/federal-budget-outlook-deteriorates.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
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https://www.conservativereview.com/commentary/2016/09/why-this-millennial-woman-loathes-trumps-new-nanny-state-plan
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https://www.conservativereview.com/commentary/2016/09/why-this-millennial-woman-loathes-trumps-new-nanny-state-plan
Big government 'conservatism'. It gives Trump a shiny, soft object to point to. Hopefully a Republican House can stop it.
Reform and replace existing programs first.
Wouldn't a stay at home mom need a government support program more than a career, daycare mom. Where is her government paid 'maternity program'? You have to ne unmarried, unsupported to get it? Republicans playing on a Democrat playing field lose. Hillary has WAY bigger ideas than this. You can't afford all of her ideas!
The Clintons sold us family leave based on the idea it was unpaid, then immediately screamed how unfair it was to have people unpaid to not work.
If 6 weeks is good, isn't 8 weeks better, 20 weeks great, forever perfect?
Don't tell the government but women in my family were waterskiing in the last 6 weeks before birth. We could have used some government-paid boat gas.
Grow the economy stupid.
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http://scottgrannis.blogspot.com/2016/09/federal-budget-outlook-deteriorates.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29
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I don't get it. What is going on with all these relatives of politicians getting all this government money. First we hear of Manchin's daughter getting deal to supply epi pen to what 60000 school across the country and I saw this not to long as well as today:
http://www.newsmax.com/Newsfront/John-Kerry-Aware-State-Department-Daughter/2016/09/23/id/749860/
Who is watching this stuff?
this must be the tip of the iceberg
I assume Kerry's kid is getting a salary from this "nonprofit". All this stuff sounds just so well meaning but is it?
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I think Jeb also brought this up:
http://www.nationalreview.com/article/440848/donald-trump-fire-bureaucrats
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Associated Press WASHINGTON
"The government ran a $587 billion budget deficit for the just-completed fiscal year, a 34 percent spike over last year after significant improvement from the record deficits of President Barack Obama's first years in office."
"the government is borrowing 15 cents of every dollar it spends. Government spending went up almost 5 percent to $3.9 trillion in fiscal 2016, but revenues stayed flat at $3.3 trillion". (No they didn't; revenues went down a smidgen.)
http://www.mcclatchydc.com/news/politics-government/national-politics/article108285582.html#storylink=cpy
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Republican House. Republican Senate. No tax increases repealed. No programs de-funded. Not because they agree with Obama and his priorities but because they, the Republican establishment in Washington, wanted to make no waves in order to take back the White House in 2016. How is that strategy working out for them?
I wonder if the growth surge coming from government 'investments' in solar Solyndra, Cash for Clunkers and Shovel Ready Projects never materialized...
Can someone name the nations that created great prosperity by having the government eat up the private sector? Or the places around the world and throughout history that expanded prosperity by limiting personal economic freedom? Once again, who could have know this would backfire?
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"I wonder if the growth surge coming from government 'investments' in solar Solyndra, Cash for Clunkers and Shovel Ready Projects never materialized..."
Hill wants to make us a clean energy power house.
millions and millions of solar panels and windmills on every square meter of land "might" actually do it.
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"I wonder if the growth surge coming from government 'investments' in solar Solyndra, Cash for Clunkers and Shovel Ready Projects never materialized..."
Hill wants to make us a clean energy power house.
millions and millions of solar panels and windmills on every square meter of land "might" actually do it.
Paraphrasing Milton Friedman on government 'investments', investments that don't pay for themselves aren't worth making. If these ideas make economic sense they don't need public subsidy in a free economy.
Also, there is the duck curve, we need far more energy produced at some times as compared with others:
http://dogbrothers.com/phpBB2/index.php?topic=1096.msg97479#msg97479
http://dogbrothers.com/phpBB2/index.php?topic=1096.msg97507#msg97507
(http://i603.photobucket.com/albums/tt114/dougmacg/2d87f8bb-da85-4260-b6ca-fb6fe7f5a59e_zpstvi4lt8p.jpg)
Investing more in wind and solar provides more energy only during the times of the day and year when there is wind and solar, leaving even bigger gaps to fill during the other times.
It was fracking, a private sector program, that reduced our CO2 emissions. Natural gas is close to 40% cleaner with carbon than coal. Nuclear is the cleanest with carbon emissions at zero but scales up and down with the above demand curve the worst. No one has fully thought this through, which is surprising when the proposal is always to move to a centrally planned economy.
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I thought Presidential Libraries were all privately funded. Why would the National Archives fund this with the cat overseeing the hen house? We are paying for his cigar pad too?
https://www.yahoo.com/news/m/7cc0b8fb-ffa0-37be-8ccb-ec202757ad9b/ss_bill-clinton%E2%80%99s.html
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government unions holding the rest of the citizenry hostage:
http://www.nationalreview.com/corner
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Can anyone explain why so many government programs are "over budget".
If a company wins a bid to build something for a proposed amount then why are taxpayers forced to pick up the tab when they botch estimates?
If a company knows they can push the over budgets to the Gov then what is incentive to keep cost down?
I just don't understand the process.
https://www.washingtonpost.com/news/checkpoint/wp/2016/10/18/report-proposes-slashing-u-s-aircraft-carriers-investing-in-lasers-to-combat-russia-and-china/
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Bill Gate's net worth of 90 billion could help 8.5 million people immediately:
http://www.njspotlight.com/stories/14/08/11/explainer-why-state-s-unfunded-liability-for-retirees-is-90-billion-and-rising/
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Zero interest rate policies have hurt pension funds ability to earn a decent ROI.
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https://www.washingtonpost.com/news/wonk/wp/2016/09/16/this-chart-shows-how-trumps-penny-plan-would-add-up-to-huge-budget-cuts/
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Obama’s Fiscal Legacy
The President’s luck is about to run out—on his successor’s watch.
U.S. President Barack Obama ENLARGE
U.S. President Barack Obama Photo: Getty Images
Updated Nov. 9, 2016 12:04 a.m. ET
258 COMMENTS
Congratulations to the President-elect, whoever you are, because you’re going to need it. Our deadline arrived Tuesday before we knew the election outcome, but not before we can say with confidence that President Obama is leaving his successor a large and growing federal budget problem.
That’s the message in the Congressional Budget Office’s summary, released Monday, of the fiscal year that closed in September. Though the subject barely came up in the campaign—little policy substance did—the federal fisc is once again heading for trouble. There are some lessons in this for the next President, who will quickly realize that Mr. Obama’s fiscal luck has finally run out—on his successor’s watch.
One lesson is that the days of easy deficit reduction are over. The annual deficit in 2016 rose for the first time in three years—by $148 billion to $587 billion. That’s 3.2% of GDP, up sharply from 2.5% last year. Mr. Obama has been able to ride falling defense spending from reduced military deployments overseas, but Pentagon outlays were flat in 2016. Military spending will probably have to increase in future years, no matter who wins Tuesday, to meet the growing challenges from Russia, China and Iran.
Mr. Obama will also leave town having failed over eight years to do anything to slow the booming burden of Social Security, Medicare and Medicaid. Outlays for those three programs grew by $75 billion last year, or about 4.2%. They now account for 10% of the entire U.S. economy, the highest level ever, and rising.
The President’s main contribution has been to put Medicaid on hyperspeed by expanding its coverage through ObamaCare. CBO’s budget gnomes report that Medicaid spending has climbed by nearly 40% in a mere three years—to $368 billion in 2016. That doesn’t include what the states are obliged to chip in.
Another lesson is that faster economic growth is essential to a healthier fisc. One reason for the deficit rebound in 2016 is that federal revenues increased by a mere $18 billion or less than 1%. Individual income-tax receipts were flat, while corporate income taxes fell by $44 billion or 13% as business profits sagged. This is what happens when the economy sputters at about a 1% growth rate for most of a year.
Growth that slow couldn’t keep up with spending that increased 4.5% or $166 billion in 2016. Federal outlays were 20.9% of the economy for the year, up from 20.4% in 2014. A Republican Congress has kept that figure down from the heights of the Obama-Nancy Pelosi stimulus, but it is now set to take off again as more Baby Boomers start collecting Social Security and Medicare. (Millennials, get ready to pay even higher taxes throughout your working life.)
The tragedy is that Mr. Obama spent his political capital not on growing the economy but on growing entitlements and raising costs for business via regulation. The next President needs to make faster economic growth the policy default, or every other political priority will be hard or impossible to meet. The deficit burden will get worse faster.
The final major lesson is that the next President can’t count on the continuation of low interest rates. The Federal Reserve has been Mr. Obama’s best friend not named Chief Justice John Roberts as its monetary policies have helped finance a record debt blowout at lower cost. Mr. Obama issued more Treasurys than any President in history, and the Fed bought $1.7 trillion worth from 2009-2014. That helped guarantee there wouldn’t be a shortage of demand.
This era may be ending as a new President takes office. The Fed may raise rates in December, and bond yields have been rising. Outlays for net interest on the debt increased by $23 billion or 9% in 2016, largely due to faster inflation. But inflation is still tame. If it begins to rise, the debt-financing burden will explode with more than $14 trillion of Treasury debt outstanding, much of it short-term. In January CBO said that if interest rates are 100 basis points above their projections each year for the next decade, the Treasury will have to pay an average of more than $160 billion per year.
None of this adds up to an immediate crisis, but it does illustrate the degree of President Obama’s abdication. He has been the ultimate free-lunch politician, handing out new entitlements, exploiting the post-crisis era of low rates to grow the debt, and passing the bucks to the grandkids.
Mr. Obama once quipped in a meeting with Senators, only half seriously, that he couldn’t fix entitlements on his watch because he had to leave something for his successors. Too bad he’s done nothing except make the problem worse. It’s all yours, President-elect.
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Since the Smithsonian is afterall a National Federal museum I put in this thread:
http://cnsnews.com/news/article/penny-starr/smithsonians-response-lawmakers-criticism-clarence-thomas-museum-omission
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If Boeing or other contractor knows they can just add more costs along the way then what good is contracting a price at the start with them? Then anyone can make a low ball bid knowing full well they can tag the government for more later. I really don't get it. Why do we the taxpayers have to take this shit?
It takes 8 yrs to build an airforce one? The whole thing stinks.
https://www.yahoo.com/finance/news/trump-heads-back-road-thank-083638064.html
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Slash SS benefits for nearly everyone who has earned it , just not those who have not: :cry:
https://www.yahoo.com/finance/news/gop-introduces-plan-to-massively-cut-social-security-222200857.html
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If Boeing or other contractor knows they can just add more costs along the way then what good is contracting a price at the start with them? Then anyone can make a low ball bid knowing full well they can tag the government for more later. I really don't get it. Why do we the taxpayers have to take this shit?
It takes 8 yrs to build an airforce one? The whole thing stinks.
https://www.yahoo.com/finance/news/trump-heads-back-road-thank-083638064.html
I've worked in the industry for years. It gets worse when you realize that Boeing will fine suppliers MILLIONS of dollars for stopping their automated line. They build an aircraft in nine days.
Edit: I'll add, Airbus (which I have also worked with), is a POS.
https://www.wired.com/2016/09/boeing-builds-737-just-nine-days/
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Can anyone tell me why and how student loans are tied to social security?
Amazing how the colleges and universities are not on the hook for the money with all they make and bill us for. And then they have a huge cohort of these professors who turn around and bash this country.
https://www.yahoo.com/news/social-security-checks-being-reduced-001300347.html
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http://dailysignal.com/2016/02/08/maine-required-childless-adults-to-work-to-get-food-stamps-heres-what-happened/?utm_source=TDS_Email&utm_medium=email&utm_campaign=Top5&mkt_tok=eyJpIjoiTmpobE9EQXlNR013T0RCayIsInQiOiJjSVBRSE1mZDhJckxlWXZiNVR6MzB0dDJWd1wvaTEzQ002QVpvN2lSWUMwZmJCRm1CQk5nR29IeDVlWVwvV0czclNNb2p5bEMzNUhuVk1DbDdYRmdETjQzanpJZkJoc0lDTkZWdWpwMFwvUTJKekNOajdNOEo1akEyUElJQUNVc3E0WSJ9
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Watch the Spending To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 1/3/2017
President-elect Trump wants a Race Horse Economy, not a continuation of the Plow Horse we've had for the past several years.
Out of all of his proposals, the one that should help the economy the most is corporate tax reform, in particular a big cut in the tax rate on profits to 15% or 20% from 35% at present. Typically, corporate profits are subject to two layers of tax: first, when the company earns the money; second, when that same money flows to shareholders in the form of dividends or capital gains.
So, for example, a dollar of pre-tax profits is reduced to 65 cents at the corporate level and then 49.5 cents if the profits are distributed to high-earning taxpayers. (The 65 cents are taxed at a 23.8% rate, including the Obamacare-surcharge.) In effect, these earnings face an effective tax rate of just over 50% (not even considering state income taxes), likely on the wrong side of the Laffer Curve.
In addition, cutting the top tax rate on regular income should help spur economic growth, as many entrepreneurs and partnerships face very high tax rates as well. Lower tax rates will support a game-changing build-out of domestic energy infrastructure.
But tax policy isn't the only fiscal game in town. Investors need to watch government spending as well. Cutting taxes without getting control of government spending is not a recipe for long-term economic growth. Instead, reducing spending will help entrench expectations that lower tax rates would remain in place.
Every dollar the government spends ultimately has to be paid for by taxpayers, either through taxes today or debt, which simply obligates future taxpayers to make payments to bondholders. Either way, there's no free lunch.
Spending hit a 30+ year low in 2000 at 17.6% of GDP. Now federal spending is at 20.9% (and that doesn't include how Obamacare shifts public spending to private insurers, the true cost of student loans, but does include payments from Fannie Mae and Freddie Mac). We see the heavier load of government as the overweight jockey weighing down the private sector, preventing it from moving faster.
In the next year or so, we'll be looking for entitlement reforms that reduce long-term spending commitments in Obamacare and Medicaid as well as reductions in non-defense "discretionary" spending.
Back in the 1980s, President Reagan not only cut taxes but cut spending relative to GDP as well. President Clinton also cut spending. By contrast, spending went up during the presidencies of both Bushes and under President Obama as well.
So far, President-elect Trump has talked a good game on taxes but has been sending mixed signals on spending. Investors need to pay attention to both.
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A “Trumpian” Approach to Balancing the Budget
The following is adapted from my January 17th speech at the Heritage Foundation, which can be viewed in full here.
As a candidate, Donald Trump repeatedly stated that balancing the budget would be a goal of his administration.
Many so-called experts have dismissed the idea that he can actually achieve this goal as president. As usual, the experts have it wrong. In fact, President Trump’s focus on the fundamentals of the economy and the government will shrink the deficit and balance the budget.
To use a sports analogy, Bill Walsh, the former head coach of the San Francisco 49ers, never focused on the score of the game. His focus was always on getting his players to perfectly execute their plays. If every play was perfectly executed, he believed the score would reflect the team’s actions.
This same principle holds true for balancing the budget. If Trump’s policies are implemented, the result will be a balanced federal budget.
I say this with some authority. As Speaker of the House, we achieved four consecutive balanced budgets. In the four years before I became Speaker, the combined deficit was more than a trillion dollars! Starting in fiscal 1998, we achieved a surplus of $559 billion.
How did we balance the federal budget?
We balanced the budget by focusing on the fundamentals of the economy and the government.
We cut capital gains. Our capital gains tax cut was very successful, and people responded positively to it. This was key to accelerating investment and to expanding small businesses – leading to more tax revenue.
We reformed welfare. Welfare reform not only put millions of people back to work, it also led to the largest decline in child poverty in American history.
We also enacted major reforms to communications regulations which played a role in the explosion of the telecommunications industries, including mobile phone technology and e-commerce.
All of this strengthened the dollar and resulted in lower interest rates.
The combined impact of these and other policy changes led to reduced spending and more federal revenue. That is how we balanced the budget when I was Speaker, and this is how President Trump, working with Speaker Ryan and Leader McConnell can do it again.
Here is what a “Trumpian” approach to balancing the budget would look like.
• According to Jim Frogue in his book, Stop Paying the Crooks, if President-elect Trump’s team brought in American Express, Visa, and MasterCard to replace the Centers for Medicare & Medicaid Services (CMS) payment bureaucracy, the government could save $1 trillion in fraud over a decade.
• Applying this same principle to food stamps and disabilities, the government could save another $50 billion a year. If we apply this to the VA and TRICARE, the changes could be immense.
• We must insist on health information technology interoperability to save lives and reduce costs.
• We must create a public-private partnership for reaching Mars and the moon - we have to get into space faster for less. This will work if we redesign NASA and create public-private partnerships with entrepreneurs eager to make these exciting achievements happen.
• We must liberate federal lands for energy, mineral, and other development reflecting the original sense of America as a land of opportunity. We must protect our national parks and truly sensitive environments, but also recognize, for example, that the federal government owning 82% of Nevada deprives Americans of opportunities. These policy changes would generate more than $200 billion a year, or over a trillion a decade.
• Finally, we must bring American money back home. A five percent, one-time repatriation for the $2 trillion in profits locked up overseas could yield $100 billion in revenue and a substantial increase in investment in the U.S. The revenue from this growth would move us toward a balanced budget and create more jobs.
These are just a few examples. On almost every front, the current policies and bureaucracies are so inefficient and out of touch with 21st century capabilities that the potential is enormous for a less expensive federal government leading to a dramatically bigger American economy with far higher incomes.
This is the path to a Trumpian balanced budget. It will be a consequence of the right policies to spur economic growth and make our government operate more efficiently and effectively.
I will continue my‘Understanding Trump and Trumpism’ series this Thursday, January 19, 2017 at 8am ET. The speech will be streamed live on Facebook and transcript and video will be made available at Gingrich Productions and The Heritage Foundation following the presentation.
Your Friend,
Newt
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http://thehill.com/policy/finance/314991-trump-team-prepares-dramatic-cuts?utm_source=&utm_medium=email&utm_campaign=5779
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http://www.motherjones.com/environment/2017/01/obama-500m-green-climate-fund
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http://thehill.com/homenews/senate/315537-trump-gop-set-to-battle-on-spending-cuts
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http://thehill.com/homenews/administration/321605-trump-pitches-37-percent-cut-to-state-budget-reports
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http://www.dailywire.com/news/14454/7-times-congressional-budget-office-got-its-aaron-bandler?utm_source=dwemail&utm_medium=email&utm_content=031517-news&utm_campaign=position6
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https://www.bloomberg.com/graphics/2017-trump-budget/
Wow. My thought during the tea party rising was that tax cutting had been a good try at cutting government, but what all smaller govt advocates should be able to agree on is CUT SPENDING FIRST.
But Republicans never can from out of power then never do when in power.
And then along comes Trump.
Is this a negotiating ploy or is it a budget. Maybe we can pass it to find out what's in it.
They said no program has ever been cut or ended. That was before Obama. Now we have programs for the advancement of Muslims in NASA. Programs HAVE to be cut.
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"But Republicans never can from out of power then never do when in power."
Time will tell. But every time I hear anything from Ryan I get more and more disappointed.
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Obama's budgets went down with numbers like 98-0, 98-0, 97-1, etc. This one will be no different, though it does serve to make a dramatic point , , , which is being countered with "He's cutting Meals on Wheels for Seniors!"
Concerning which, it would appear that all is not as portrayed. How rare , , ,
http://www.dailywire.com/news/14515/fake-news-did-trump-just-kill-meals-wheels-not-ben-shapiro?utm_source=shapironewsletter&utm_medium=email&utm_content=070516-news-title&utm_campaign=lead
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Why government programs fail...
https://www.cato.org/policy-report/novemberdecember-2014/why-governments-fail-why-ideas-matter
By Donald J. Boudreaux
In a famous Sidney Harris cartoon, a senior professor reviews a long and complicated mathematical proof that a younger colleague has written on a chalkboard. Pointing calmly at part of the proof, the elder scholar tells the younger “I think you should be more explicit here in step two” — a step that appears on the chalkboard as “Then a miracle occurs.”
This witty depiction of an unscientific means of reaching a conclusion sadly describes an actual step in the reasoning of far too many people who call for government intervention. People identify a problem in reality and then demonstrate how that problem can be “solved” by government. But far too many such demonstrations feature a “then a miracle occurs” step. This step is the assumption that politicians and other government agents are superhuman — that when they are elected or appointed to political office, they are miraculously transformed into beings consistently more altruistic, knowledgeable, and wise than are business executives, consumers, and other people who operate only in the private sector.
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Obama’s Debt Interest Bomb
Rising interest payments are already showing up in the federal fisc.
Federal Reserve Chair Janet Yellen
Federal Reserve Chair Janet Yellen Photo: yuri gripas/Reuters
April 10, 2017 7:11 p.m. ET
413 COMMENTS
President Obama left his successor many time bombs—think chemical weapons in Syria and the collapsing Affordable Care Act. But a burning fuse that gets less attention showed its first signs of the explosion to come in Friday’s Congressional Budget Office budget review for March: Rising net interest payments on the national debt.
CBO reported that the federal budget deficit rose $63 billion in the first half of fiscal 2017 (October-March) to $522 billion from a year earlier. But here’s the especially bad omen: Net interest payments rose $7 billion, or 30%, in March from a year earlier.
The Fed's Budget BonusFederal Reserve remittances to theU.S. Treasury, 2007-2016, in billions ofdollarsSource: Federal ReserveNote: 2015 not including $19.3 billion payment from Fedcapital surplus mandated by the FAST Act.
2008’10’12’14’160255075100$1252014x$96.9
If that seems small, consider that interest payments rose $28 billion for the six months of fiscal 2017 to $152 billion. That’s a 22.2% increase, among the biggest in any single spending item highlighted by CBO. The increases reflect the growing debt but in particular the Federal Reserve’s decision to raise interest rates after years of near-zero rates.
While Mr. Obama was doubling the national debt over eight years, the Fed’s monetary policies spared him from the fiscal consequences. The Fed’s near-zero policy kept interest rates at historic lows that reduced net interest payments even as the overall debt increased. The Fed’s bond-buying programs also earned money that the Fed turned over to Treasury each year, reducing the size of the federal budget deficit by tens of billions of dollars.
This not-so-free Fed lunch is starting to end. CBO estimates that $160 billion more spending will be required each year over the next decade if interest rates are merely one percentage point higher than in its current projections. As interest rates rise, the Fed will also have to pay banks more to keep excess reserves parked at the central bank. After its latest rate increase in March, the Fed now pays banks 1% on reserve balances or about $20 billion a year, and that will go up.
Fed officials are also now hinting that this year they may finally stop buying new securities when the current bonds on its balance sheet come due. This is necessary and long overdue, but it will mean smaller Fed contributions to the federal budget than the more than $90 billion the Fed has turned over in recent years. (See the nearby chart.)
All of this is set to explode on President Trump’s watch, and it will complicate the task for Republicans as they try to reform the tax code within tighter budget constraints.
Mr. Obama didn’t expect a Republican to succeed him but we doubt he regrets this result. He was able to live off the eight years of accommodative Fed policy while seeding the federal fisc with ever-higher spending from interest payments and the Affordable Care Act after he leaves office. Mr. Trump is stuck with the bar tab. It’s one more mess Mr. Obama left others to clean up.
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https://ricochet.com/422290/problem-no-one-dc-wants-talk/
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OTOH the Dems have the HUGE advantage of 90% of the MSM on their side :
http://thehill.com/blogs/pundits-blog/economy-budget/330551-whos-in-charge-here-as-government-shutdown-looms-gop-bows
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This will cause riots in the streets and the airways will be going bonkers:
http://www.breitbart.com/big-government/2017/05/22/white-house-budget-cuts-entitlements-1-7-trillion-slashes-epa-30/
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Quote author=ccp
This will cause riots in the streets...
Younger generation motto: just do it.
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http://thehill.com/policy/finance/334662-trump-seeks-historic-cuts-to-government
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government spending in my lifetime:
https://www.conservativereview.com/articles/ben-sasse-were-not-telling-you-the-truth-about-entitlements
Wonder why we are broke. Start here.
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"merrily merrily merrily, cuts are but a dream"
Forget about cuts to entitlements. With regards to SS and Medicare it is not like they are totally free "entitlements". We are forced to pay into them for our entire working lives.
https://www.yahoo.com/news/icy-reception-trump-budget-fellow-republicans-172229864--politics.html
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A major point here is that these "cuts" are BASELINE CUTS, NOT CUTS AS RATIONAL LITERATE PEOPLE UNDERSTAND THE TERM.
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more proposed CHUMP change at some people's expense (not theirs) to buy votes from others:
http://www.newsmax.com/Politics/democrats-introduce-bill-increase/2017/05/25/id/792399/
Whether one makes 12 or 15 bucks an hour it ain't enough to get ahead.
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Good article on an important topic. The idea of reforming taxes and regulations barely makes the news but would change the world.
---------------------------------------
First, effective regulation must address incentives. Banks and financial firms want to avoid regulatory costs. Regulators tend toward what’s politically expedient. Good rules take this into account. For instance, using market-based measures of risk and capital alongside accounting measures would make regulatory arbitrage less likely.
Second, consumer protections should help people make informed choices instead of attempting to dictate choices with prohibitive rules.
Third, macroprudential policy should focus first and foremost on real-estate risk, especially where subsidized and promoted by the government. The primary threat to financial stability remains subsidized risk-taking in the mortgage market, which is growing once again to worrying levels.
Fourth, regulation should conform to the rule of law—which means ending the reliance on “guidance” and the delegation of excessive discretionary authority to politicized actors such as the FSOC and the CFPB. Financial rules and their enforcement must be transparent, so that regulators are accountable to the public.
...
Author: Charles Calomiris is a professor of finance at Columbia Business School, the author of “Reforming Financial Regulation After Dodd-Frank,” out last month from the Manhattan Institute.
https://www.wsj.com/articles/four-principles-for-replacing-dodd-frank-1497571869
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https://www.nytimes.com/2017/06/25/business/dealbook/virgin-islands-debt-payment-pensions.html?emc=edit_th_20170626&nl=todaysheadlines&nlid=49641193
So, if bankruptcy is an option-- what is the problem? Or are we supposed to bail out stupid lenders?
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https://www.nytimes.com/2017/06/25/business/dealbook/virgin-islands-debt-payment-pensions.html?emc=edit_th_20170626&nl=todaysheadlines&nlid=49641193
So, if bankruptcy is an option-- what is the problem? Or are we supposed to bail out stupid lenders?
And Puerto Rico, and Illinois and ....
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Different legal questions presented when the borrower is not one of the fifty states of the USA.
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Different legal questions presented when the borrower is not one of the fifty states of the USA.
Can we remove Illinois status as a state? Make it a federal territory?
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Sell it off in pieces to neighboring states.
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Crafty, [Illinois]: "Sell it off in pieces to neighboring states."
This is a great idea. It's a state, if you can keep it. The threat of splitting it up might be what they need to decide to fix it. The idea that free money repairs bankruptcy makes all budget gaps impossible to close.
Illinois already has the highest overall tax burden in the country, or in the top three depending on how you measure it. The problem is the spending stupid.
I would take rural and small town Illinois any day. Chicago will be harder to sell.
(http://www.chicagonow.com/chicago-muckrakers/files/2011/06/ILgov2010.jpg)
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Crafty, [Illinois]: "Sell it off in pieces to neighboring states."
This is a great idea. It's a state, if you can keep it. The threat of splitting it up might be what they need to decide to fix it. The idea that free money repairs bankruptcy makes all budget gaps impossible to close.
Illinois already has the highest overall tax burden in the country, or in the top three depending on how you measure it. The problem is the spending stupid.
I would take rural and small town Illinois any day. Chicago will be harder to sell.
(http://www.chicagonow.com/chicago-muckrakers/files/2011/06/ILgov2010.jpg)
Perhaps Chiraq could be walled off to protect the surrounding areas.
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http://www.wnd.com/2017/06/the-best-anti-poverty-program-is-just-17-words/
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Opinion Best of the Web
Could Trump Really Be Draining the Swamp?
The water appears to be receding at key Beltway bureaucracies.
President Donald Trump and Secretary of State Rex Tillerson in the Cabinet Room of the White House on Friday.
President Donald Trump and Secretary of State Rex Tillerson in the Cabinet Room of the White House on Friday. Photo: brendan smialowski/Agence France-Presse/Getty Images
By James Freeman
June 30, 2017 3:17 p.m. ET
1287 COMMENTS
The Senate still hasn’t voted on ObamaCare reform, U.S. workers are still waiting for tax cuts to drive economic growth and President of the United States Donald Trump is trading insults with the co-hosts of an MSNBC talk show. Yet Mr. Trump appears to be making progress in what might have seemed the most difficult task given to him by voters in 2016: reducing the power of Washington’s permanent bureaucracy.
Secretary of State Rex Tillerson wasn’t exactly dying to move to Washington to run a federal department, but he seems to have warmed to the task. Max Bergmann, a former Obama Administration official now at the leftist Center for American Progress, writes in Politico that the “deconstruction of the State Department is well underway.” Discounting for the usual Beltway hyperbole, this probably isn’t as good as it sounds.
All kidding aside, the State Department is one federal agency that was actually contemplated by America’s founders. Conducting foreign policy is an important and necessary task for our central government. But like so much of the Beltway bureaucracy State has been overfunded and undermanaged for years. Now, despite what you may have read about untouchable bureaucrats unaccountable to the public they are supposed to serve, Mr. Tillerson has found ways to clean house, at least according to Mr. Bergmann:
As I walked through the halls once stalked by diplomatic giants like Dean Acheson and James Baker, the deconstruction was literally visible. Furniture from now-closed offices crowded the hallways. Dropping in on one of my old offices, I expected to see a former colleague—a career senior foreign service officer—but was stunned to find out she had been abruptly forced into retirement and had departed the previous week. This office, once bustling, had just one person present, keeping on the lights.
The former Obama appointee is apparently so unnerved by the Trump-Tillerson era at State that he lets slip the fact that the career staff didn’t think much of the previous management either, and that the conservative critique of the department is at least partly true:
When Rex Tillerson was announced as secretary of state, there was a general feeling of excitement and relief in the department. After eight years of high-profile, jet-setting secretaries, the building was genuinely looking forward to having someone experienced in corporate management. Like all large, sprawling organizations, the State Department’s structure is in perpetual need of an organizational rethink. That was what was hoped for, but that is not what is happening. Tillerson is not reorganizing, he’s downsizing.
Do taxpayers dare to dream? As odd as this sounds for regular observers of the federal leviathan, the new boss seems to be imposing the kind of tough measures often seen at struggling companies, but almost never witnessed at government departments that have lost their way:
While the lack of senior political appointees has gotten a lot of attention, less attention has been paid to the hollowing out of the career workforce, who actually run the department day to day. Tillerson has canceled the incoming class of foreign service officers. This as if the Navy told all of its incoming Naval Academy officers they weren’t needed. Senior officers have been unceremoniously pushed out. Many saw the writing on the wall and just retired, and many others are now awaiting buyout offers. He has dismissed State’s equivalent of an officer reserve—retired FSOs, who are often called upon to fill State’s many short-term staffing gaps, have been sent home despite no one to replace them. Office managers are now told three people must depart before they can make one hire.
Perhaps the Tillerson method could work at other agencies too. Mr. Bergmann for his part seems to be disappointed that the un-elected career staff has not been able to impose its will on the duly-elected political leadership:
At the root of the problem is the inherent distrust of the State Department and career officers. I can sympathize with this—I, too, was once a naive political appointee, like many of the Trump people. During the 2000s, when I was in my 20s, I couldn’t imagine anyone working for George W. Bush. I often interpreted every action from the Bush administration in the most nefarious way possible. Almost immediately after entering government, I realized how foolish I had been.
For most of Foggy Bottom, the politics of Washington might as well have been the politics of Timbuktu—a distant concern, with little relevance to most people’s work.
Here’s to making the will of voters more than just a distant concern-- and highly relevant to the work of federal agencies.
Meanwhile over at the Environmental Protection Agency, new boss Scott Pruitt is not just draining the bureaucratic swamp in Washington, he’s taking away the agency’s power to oversee swamps nationwide. The Journal reported on Tuesday:
President Donald Trump’s administration is moving ahead with plans to dismantle another piece of the Obama administration’s environmental legacy, the rule that sought to protect clean drinking water by expanding Washington’s power to regulate major rivers and lakes as well as smaller streams and wetlands.
And now the Journal reports:
President Donald Trump declared a new age of “energy dominance” by the U.S. on Thursday as he outlined plans to roll back Obama era restrictions and regulations meant to protect the environment.
In a speech at the Energy Department, the president promised to expand the country’s nuclear-energy sector and open up more federal lands and offshore sites to oil and natural-gas drilling.
Mr. Trump also celebrated his decision earlier this month to withdraw the U.S. from the 195-country Paris climate accord and the Environmental Protection Agency’s rescindment this week of the Obama administration’s clean-water rules that farmers and business groups found onerous.
“We don’t want to let other countries take away our sovereignty and tell us what to do and how to do it,” Mr. Trump said.
Mr. Trump also issued a special permit authorizing the construction of a new pipeline between the U.S. and Mexico that would carry fuels across the border in Texas, the State Department said.
If Mr. Trump can finally reform the Washington bureaucracy and make the will of voters its primary concern, voters may decide he can tweet whatever he wants.
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Besides tax apathy, we can't seem to keep government spending on the front page here with all the excitement about shiny objects...
Please watch and share this video. A simple plan for prosperity.
https://www.youtube.com/watch?v=JZOwaIzW0xY
http://www.powerlineblog.com/archives/2017/07/the-case-for-spending-caps.php
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Newt Gingrich promised to reform the static and biased CBO, baseline budgeting and false tax and spending cut math. A quarter century we still battle the same dinosaurs that act to stop reform of both health care and taxes.
I shouldn't need a link to prove that point. Has CBO ever been right on ANYTHING?
https://www.cato.org/blog/how-revenue-neutrality-be-judged
https://www.cato.org/blog/cbo-projections-no-basis-claiming-tax-reform-loses-money
When you deny the positive, largely predictable effects of improving incentives in the economy, you are denying science.
The official policy of the US Government in 2017 is to deny science. Reform the swamp - or drain it.
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Newt Gingrich promised to reform the static and biased CBO, baseline budgeting and false tax and spending cut math. A quarter century we still battle the same dinosaurs that act to stop reform of both health care and taxes.
I shouldn't need a link to prove that point. Has CBO ever been right on ANYTHING?
https://www.cato.org/blog/how-revenue-neutrality-be-judged
https://www.cato.org/blog/cbo-projections-no-basis-claiming-tax-reform-loses-money
When you deny the positive, largely predictable effects of improving incentives in the economy, you are denying science.
The official policy of the US Government in 2017 is to deny science. Reform the swamp - or drain it.
Famous people caught reading the forum...
http://www.washingtonexaminer.com/sen-mike-lee-make-the-cbo-show-its-work/article/2630568
When Democrats passed Obamacare on a party-line vote in March 2010, the Congressional Budget Office estimated that by 2016, 21 million people would receive health insurance through the law's exchanges. In reality, just 10 million people did.
The CBO's model was off by more than 100 percent.
The same CBO estimate predicted that Medicaid would grow by 17 million enrollees to about 52 million. In reality, more than 34 million people have signed up for Medicaid since Obamacare became law, for a total of 74.5 million recipients today.
Again, the CBO's model was off by around 100 percent.
Now the CBO wants us to believe, based on the same models, that just repealing Obamacare's individual mandate, without a single dime's worth of cuts to Medicaid, would cause more than 7 million people to abandon their Medicaid coverage.
There are good reasons to be skeptical of the quality of healthcare that lower-income Americans receive through Medicaid, but why would 7 million voluntarily give up Medicaid coverage they receive for free? These CBO projections, and others like it, strain the boundaries of common sense.
When it comes to topics like the effectiveness of the individual mandate, there are sharp disagreements among experts. That's why, in the academic community, scholars have to "show their work" by publicly disclosing their data, estimates, and analysis to scholarly scrutiny, and most importantly, refinement and improvement.
Congress does need a scorekeeper to provide budgetary estimates for the policy changes it considers. But at a bare minimum, that scorekeeper should be forced to show how its models work. Currently the CBO doesn't have to do that. It's a "black box," a secret formula even Congress can't be allowed to see, yet which the House and Senate must treat as if they were handed down on stone tablets at Mt. Sinai.
It's an indefensible situation.
That is why I have introduced the CBO Show Your Work Act of 2017. This bill would require the CBO to publish its data, models, and all details of computation used in its cost analysis and scoring. CBO would keep its role as official scorekeeper of congressional budget proposals – but now the public and the economic community would be able to see what's going on in all those spreadsheets and algorithms.
That is, it would hold CBO to the same standard the American Economic Association's "Data Availability Policy" sets for all academic economists: requiring all paper authors to ensure their data "are readily available to any researcher for purposes of replication."
Consider again Obamacare's individual mandate. President Barack Obama opposed an individual mandate while campaigning in 2008, but saw the light later when the CBO started scoring Obamacare drafts.
A 2009 memo written by then-White House health adviser Nancy-Ann DeParle informed the president, "Based on our policy analysis, we believe that a weak requirement for all Americans to have insurance may come close to achieving the maximum coverage that can be achieved through aggressive outreach and auto-enrollment. Unfortunately, however, the Congressional Budget Office (CBO) will likely take the position that without an individual responsibility requirement, half of the uninsured will be left uncovered."
Following this memo, Obama chose to substitute the CBO's policy judgment for his own. The individual mandate became a pillar of the largest policy change in a generation.
Policymakers need data and data analysis to do their jobs. But to do their jobs well, they need the best analysis. And centuries of practical experience tell us that transparency and replicability are essential to the pursuit and acquisition of knowledge. There is simply no serious argument for insulating the most influential economic modelers in the United States from the academic standards that govern everyone from Nobel Prize-winning physicists to second graders "carrying the one" as they learn long addition.
We can do better as a Congress and a nation. We are never going to agree on what the best healthcare, tax, or energy policies should be. But when we make our arguments about the costs and benefits of our preferred policies, we should at least be willing to explain how and why our policies would work.
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http://thehill.com/homenews/senate/348342-gop-risks-spending-confrontation-with-trump
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https://www.cbsnews.com/news/national-debt-hits-historic-20-trillion-mark/
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https://economics21.org/html/fix-federal-spending-baseline-first-2559.html
Fix the Federal Spending Baseline First
Charles Blahous
SEPTEMBER 10, 2017 BUDGET
Of late there has been controversy among budget wonks as to whether lawmakers should use a “current law” or “current policy” baseline to score the effects of tax reform in the budget process. Though this is a prototypically arcane procedural fight, it bears enormous implications for federal finances. The Committee for a Responsible Federal Budget (CRFB) has sounded an alarm against the possible use of a current tax policy baseline, calling it a “gimmick” that would add enormously to federal debt. The competing argument is typified by a recent column from Manhattan’s own Brian Riedl, who finds that a current tax policy baseline is necessary for consistent treatment of taxes and spending.
I usually strive in my columns to provide a high ratio of factual information relative to interpretation and opinion. However, it is difficult to enter this dispute without resort to significant interpretation and value judgments, so I want to be especially transparent here about my own subjective views. In sum, I agree with CRFB that the use of current policy baselines is dangerously likely to lead to worse fiscal outcomes, for reasons I will detail later in this piece. On the other hand, Riedl is correct to observe that using a current policy baseline for taxes would be a step toward more consistent, balanced treatment of taxes and spending.
First, the factual background. As Riedl covers well in his piece, Congress’s scorekeeping rules (by which the Congressional Budget Office abides) exhibit significant inconsistencies. Many areas of legislation, most especially tax law, are scored against a literal current law baseline, even if that current law would produce a sudden policy change. So for example, if a particular existing tax provision is set to expire by a date certain, CBO assumes it will in fact do so, even if this would result in a sudden increase in tax assessments that most observers do not believe lawmakers will allow. Accordingly, pending bills to extend current tax policies are typically scored as adding to the federal deficit. This reflects the (in my opinion, reasonable) view that CBO should score current law as it is, and not make speculative judgments as to the actions legislators will take to change the law.
This approach is not taken, however, with many areas of federal spending. CBO assumes that discretionary appropriations will continue indefinitely even if under law they would expire at the end of the fiscal year. And in perhaps the single most significant departure from current-law baselining, CBO is instructed to assume that Social Security and Medicare will make full benefit and insurance payments far beyond the amounts the programs are permitted by law to spend from their limited trust fund resources. In other words, with respect to Social Security and Medicare, CBO is directed to assume that lawmakers will pass future legislation to effectuate large spending increases in those programs, far beyond what is authorized in current law. Thus, there is no procedural barrier to increasing spending as long as it doesn’t exceed the spending increase assumed in the baseline, in which case lawmakers are not charged with adding to the deficit.
I first wrote about this phenomenon when explaining the finances of the Affordable Care Act (ACA): that it would improve federal finances only relative to Congress’s scoring baseline (with its assumption of future Medicare spending increases) while it was unambiguously a fiscal worsening relative to previous law. At that time, my purpose was purely explanatory; I was agnostic as to whether the scorekeeping rules should change. Since then I have come to believe that they should. As Riedl explains, the rules are inconsistent and bias federal budget policy toward higher spending and higher taxes. They create a host of other problems as well, about which I have written before but will not repeat here. It was encouraging to see House Budget Committee then-Chairman Tom Price introduce legislation to address this problem before assuming the position of HHS Secretary.
Over the years various justifications have been offered for the scorekeeping baseline’s quirky treatment of Social Security and Medicare spending. One suggestion is that this treatment is necessary to provide lawmakers with appropriate positive incentives. Changing to literal current-law scoring for Social Security and Medicare would always show those programs being prevented from falling into the red, due to the curtailment of their spending authorities upon depletion of their trust funds. It is feared that incorporating this fail-safe assumption into the baseline would eliminate the credit lawmakers receive for legislating to align those programs’ benefit and tax schedules (because the baseline would already show them to remain in balance regardless). I was once receptive to this belief, but the empirical evidence has shown it to be incorrect.
The currently-used spending baseline actually doesn’t create an effective incentive for lawmakers to address Social Security and Medicare financing gaps. Instead of a stick (e.g., penalizing them for financing Social Security and Medicare shortfalls with debt) it offers a carrot (rewarding them for balancing program finances). The relative incentive of the carrot is no stronger than the stick would be and in any case, does not justify treating entitlement spending differently from taxes. The same rationale could be employed to argue that lawmakers should get a spendable scorekeeping credit simply for allowing current tax policies to expire, rather than being penalized for extending them.
Lawmakers respond much more to the negative incentive of being penalized for exacerbating deficits, than to the positive incentive of producing budget savings. For example, Congress’s budget procedures erect barriers to adding to the federal deficit; they do not provide significant rewards for net improvements to the fiscal outlook. The fiscal results are predictable, and were manifested most damagingly in the ACA. Lawmakers didn’t seek credit for improving the fiscal outlook via the ACA’s Medicare cost-containment provisions – instead they concurrently spent those illusory savings on a massive new health entitlement. This could not have happened if the budget rules had recognized lawmakers’ pre-existing statutory obligation to maintain balance in the Medicare HI trust fund, which would have accurately shown the ACA adding to federal deficits.
In fact, lawmakers are actually under great pressure to demonstrate that they are not balancing the budget on the backs of Social Security and Medicare. Thus, they do not reap political benefits from the current scorekeeping practice of crediting them with large budgetary savings simply for upholding pre-existing Social Security and Medicare law. Consequently, the advantaged treatment given to these programs in the budget rules is not an inducement for good fiscal behavior but rather an invitation to fiscal irresponsibility – an invitation that lawmakers have accepted in the past and almost certainly will again.
As CRFB correctly notes, the best fiscal behavior will occur if the budget baseline makes it harder, not easier, for lawmakers to add to the federal deficit. But to be both effective and fair, this principle needs to be applied with equal force on the spending side. It is fruitless to apply the principle only selectively – for example, by blocking the use of a current-policy baseline for taxes, while its equivalent on the spending side continues to permit the passage of large spending expansions such as the ACA.
With all this said, let’s examine the three scorekeeping alternatives on the table:
1) Continue current-law scorekeeping for taxes, but make the rules consistent by applying it also to entitlement spending.
2) Continue current-policy scorekeeping for entitlement spending, but make the rules consistent by applying it also to tax policy.
3) Continue to use current-law scorekeeping for taxes and current-policy scorekeeping for entitlement spending.
#3, where we are now, is clearly bad. It is inconsistent, incorrect and biases policy in the direction of higher spending and higher taxes, which is the essence of our budget problem. #1 is by contrast methodologically consistent and would produce the best fiscal outcomes.
Which of #2 or #3 is better/worse is a value judgment and a tough call. #2 opens the door wider to higher deficits, while #3 opens the door wider to higher taxes. Assuming spending policies are the same either way, this basically comes down to whether you are more concerned about higher taxes or higher debt. This is largely a function of whether you believe today’s or tomorrow’s taxpayers should be stuck with increased tax burdens. I have an opinion on that question but it’s just that -- an opinion, with which others could reasonably disagree. A true deficit hawk would favor choice #1 – consistently applying current-law scorekeeping to both the mandatory spending and tax sides, while strengthening safeguards against additional deficit spending.
Hence, choosing between options #2 and #3 for the tax baseline bypasses the central scorekeeping question, while not offering either side an unassailably correct position. Because of this, and given both legislative history and current projections, budget watchdogs should prioritize getting the spending baseline right first and foremost.
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Nothing will be done. Until it's far too late.
https://economics21.org/html/fix-federal-spending-baseline-first-2559.html
Fix the Federal Spending Baseline First
Charles Blahous
SEPTEMBER 10, 2017 BUDGET
Of late there has been controversy among budget wonks as to whether lawmakers should use a “current law” or “current policy” baseline to score the effects of tax reform in the budget process. Though this is a prototypically arcane procedural fight, it bears enormous implications for federal finances. The Committee for a Responsible Federal Budget (CRFB) has sounded an alarm against the possible use of a current tax policy baseline, calling it a “gimmick” that would add enormously to federal debt. The competing argument is typified by a recent column from Manhattan’s own Brian Riedl, who finds that a current tax policy baseline is necessary for consistent treatment of taxes and spending.
I usually strive in my columns to provide a high ratio of factual information relative to interpretation and opinion. However, it is difficult to enter this dispute without resort to significant interpretation and value judgments, so I want to be especially transparent here about my own subjective views. In sum, I agree with CRFB that the use of current policy baselines is dangerously likely to lead to worse fiscal outcomes, for reasons I will detail later in this piece. On the other hand, Riedl is correct to observe that using a current policy baseline for taxes would be a step toward more consistent, balanced treatment of taxes and spending.
First, the factual background. As Riedl covers well in his piece, Congress’s scorekeeping rules (by which the Congressional Budget Office abides) exhibit significant inconsistencies. Many areas of legislation, most especially tax law, are scored against a literal current law baseline, even if that current law would produce a sudden policy change. So for example, if a particular existing tax provision is set to expire by a date certain, CBO assumes it will in fact do so, even if this would result in a sudden increase in tax assessments that most observers do not believe lawmakers will allow. Accordingly, pending bills to extend current tax policies are typically scored as adding to the federal deficit. This reflects the (in my opinion, reasonable) view that CBO should score current law as it is, and not make speculative judgments as to the actions legislators will take to change the law.
This approach is not taken, however, with many areas of federal spending. CBO assumes that discretionary appropriations will continue indefinitely even if under law they would expire at the end of the fiscal year. And in perhaps the single most significant departure from current-law baselining, CBO is instructed to assume that Social Security and Medicare will make full benefit and insurance payments far beyond the amounts the programs are permitted by law to spend from their limited trust fund resources. In other words, with respect to Social Security and Medicare, CBO is directed to assume that lawmakers will pass future legislation to effectuate large spending increases in those programs, far beyond what is authorized in current law. Thus, there is no procedural barrier to increasing spending as long as it doesn’t exceed the spending increase assumed in the baseline, in which case lawmakers are not charged with adding to the deficit.
I first wrote about this phenomenon when explaining the finances of the Affordable Care Act (ACA): that it would improve federal finances only relative to Congress’s scoring baseline (with its assumption of future Medicare spending increases) while it was unambiguously a fiscal worsening relative to previous law. At that time, my purpose was purely explanatory; I was agnostic as to whether the scorekeeping rules should change. Since then I have come to believe that they should. As Riedl explains, the rules are inconsistent and bias federal budget policy toward higher spending and higher taxes. They create a host of other problems as well, about which I have written before but will not repeat here. It was encouraging to see House Budget Committee then-Chairman Tom Price introduce legislation to address this problem before assuming the position of HHS Secretary.
Over the years various justifications have been offered for the scorekeeping baseline’s quirky treatment of Social Security and Medicare spending. One suggestion is that this treatment is necessary to provide lawmakers with appropriate positive incentives. Changing to literal current-law scoring for Social Security and Medicare would always show those programs being prevented from falling into the red, due to the curtailment of their spending authorities upon depletion of their trust funds. It is feared that incorporating this fail-safe assumption into the baseline would eliminate the credit lawmakers receive for legislating to align those programs’ benefit and tax schedules (because the baseline would already show them to remain in balance regardless). I was once receptive to this belief, but the empirical evidence has shown it to be incorrect.
The currently-used spending baseline actually doesn’t create an effective incentive for lawmakers to address Social Security and Medicare financing gaps. Instead of a stick (e.g., penalizing them for financing Social Security and Medicare shortfalls with debt) it offers a carrot (rewarding them for balancing program finances). The relative incentive of the carrot is no stronger than the stick would be and in any case, does not justify treating entitlement spending differently from taxes. The same rationale could be employed to argue that lawmakers should get a spendable scorekeeping credit simply for allowing current tax policies to expire, rather than being penalized for extending them.
Lawmakers respond much more to the negative incentive of being penalized for exacerbating deficits, than to the positive incentive of producing budget savings. For example, Congress’s budget procedures erect barriers to adding to the federal deficit; they do not provide significant rewards for net improvements to the fiscal outlook. The fiscal results are predictable, and were manifested most damagingly in the ACA. Lawmakers didn’t seek credit for improving the fiscal outlook via the ACA’s Medicare cost-containment provisions – instead they concurrently spent those illusory savings on a massive new health entitlement. This could not have happened if the budget rules had recognized lawmakers’ pre-existing statutory obligation to maintain balance in the Medicare HI trust fund, which would have accurately shown the ACA adding to federal deficits.
In fact, lawmakers are actually under great pressure to demonstrate that they are not balancing the budget on the backs of Social Security and Medicare. Thus, they do not reap political benefits from the current scorekeeping practice of crediting them with large budgetary savings simply for upholding pre-existing Social Security and Medicare law. Consequently, the advantaged treatment given to these programs in the budget rules is not an inducement for good fiscal behavior but rather an invitation to fiscal irresponsibility – an invitation that lawmakers have accepted in the past and almost certainly will again.
As CRFB correctly notes, the best fiscal behavior will occur if the budget baseline makes it harder, not easier, for lawmakers to add to the federal deficit. But to be both effective and fair, this principle needs to be applied with equal force on the spending side. It is fruitless to apply the principle only selectively – for example, by blocking the use of a current-policy baseline for taxes, while its equivalent on the spending side continues to permit the passage of large spending expansions such as the ACA.
With all this said, let’s examine the three scorekeeping alternatives on the table:
1) Continue current-law scorekeeping for taxes, but make the rules consistent by applying it also to entitlement spending.
2) Continue current-policy scorekeeping for entitlement spending, but make the rules consistent by applying it also to tax policy.
3) Continue to use current-law scorekeeping for taxes and current-policy scorekeeping for entitlement spending.
#3, where we are now, is clearly bad. It is inconsistent, incorrect and biases policy in the direction of higher spending and higher taxes, which is the essence of our budget problem. #1 is by contrast methodologically consistent and would produce the best fiscal outcomes.
Which of #2 or #3 is better/worse is a value judgment and a tough call. #2 opens the door wider to higher deficits, while #3 opens the door wider to higher taxes. Assuming spending policies are the same either way, this basically comes down to whether you are more concerned about higher taxes or higher debt. This is largely a function of whether you believe today’s or tomorrow’s taxpayers should be stuck with increased tax burdens. I have an opinion on that question but it’s just that -- an opinion, with which others could reasonably disagree. A true deficit hawk would favor choice #1 – consistently applying current-law scorekeeping to both the mandatory spending and tax sides, while strengthening safeguards against additional deficit spending.
Hence, choosing between options #2 and #3 for the tax baseline bypasses the central scorekeeping question, while not offering either side an unassailably correct position. Because of this, and given both legislative history and current projections, budget watchdogs should prioritize getting the spending baseline right first and foremost.
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De-Fund the CBO and let them fund and publish their leftist drivel on their own dime. - Doug
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Published July 18, 2017
[I try to follow economist Alan Reynolds and notice what I believe is his impact as a member of the IBD Editorial Board.]
http://www.investors.com/politics/editorials/will-22-million-lose-coverage-under-the-senate-health-bill-not-even-close/
This is about the PREVIOUS bill, but the CBO nonsense remains the same.
Senate Health Bill Falls Victim To The CBO's Incredibly Bad Uninsured Math
7/18/2017
Numbers Game: The Senate Republican effort to repeal ObamaCare has faltered, making it the latest victim of a seriously flawed report saying it would have cost 22 million people their health insurance.
The Congressional Budget Office, which has become the official scorekeeper of the impact of health reform despite its miserable track record, said that the Senate repeal-and-replace bill would leave 22 million more people uninsured by 2027 than if ObamaCare remained in place. Before that, it said the much different House repeal-and-replace bill would leave 23 million more without insurance. Heck, the CBO said that simply repealing ObamaCare without putting anything else in its place would result in 23 million more uninsured.
If that seems odd, take a close look at how the CBO got to these numbers and see that they are pretty much worthless.
Overestimating the individual mandate. The CBO said that getting rid of ObamaCare's individual mandate will immediately cause 7 million to drop out of the individual insurance market.
But the CBO wildly exaggerated the effectiveness of the individual mandate, which by all accounts is too small and easily avoidable to be effective. Last year, for example, 6.5 million paid the penalty, which averaged just $470. Nearly twice as many — 12.7 million — claimed one of numerous exemptions from the individual mandate, according to the IRS.
What's more, the vast bulk of those who enroll through the exchanges are getting heavily subsidized coverage — 84% get premium subsidies and 60% get additional help to cover out-of-pocket costs. It's these huge subsidies — not the penalties — that are the main attraction for those enrolled in the ObamaCare exchanges.
What about those not eligible for subsidies? Given the huge cost of insurance compared with the relatively puny penalty, it's unlikely that they're buying coverage just to comply with the mandate. The average premium for a family plan is $12,252 a year, with a deductible of more than $8,000. In contrast, a family of four making $100,000 would pay a penalty of just $2,085 for not buying insurance, according to the Healthcare.gov penalty calculator.
The fact that ObamaCare has failed to get enough young and healthy to buy coverage — the very people for whom the mandate was designed — is evidence enough that the penalty is largely ineffective.
So the CBO's claim that 7 million would immediately drop coverage once the mandate goes away was highly dubious.
Unlikely employer coverage impact: The CBO also said that 4 million people will lose coverage at work in 2018 if ObamaCare is repealed. But the CBO previously said that 6 million people would lose coverage at work in 2018 because of ObamaCare.
So shouldn't repealing ObamaCare add 6 million to employer plans? The CBO didn't explain how both keeping and repealing ObamaCare leads to millions getting pushed off employer plans.
Faulty Medicaid forecast. The CBO also claimed that Medicaid enrollment will fall by 4 million in 2018. Not because of any changes to the program in the Senate bill — which does nothing to Medicaid for years — but again because of the individual mandate repeal.
The CBO figured that fewer people would sign up next year — for free insurance — absent the mandate. It's anyone guess whether the CBO was right about that, but it seems highly dubious.
So right off the bat, the 15 million the CBO claimed will lose coverage in 2018 was based on a lot of smoke and mirrors.
Counting phantom insured people. Worse, the CBO counted millions of people who don't have insurance now — and aren't likely get it in the next decade — as losing coverage under the Senate bill.
First, the CBO based its estimates on an old, and wildly inflated forecast of enrollment in the ObamaCare exchanges. To calculate the impact of the Senate bill, the CBO assumed that 18 million would sign up for coverage in the exchanges next year if ObamaCare remained in effect.
But the CBO knew this number was wrong, since its most current forecast has 2018 enrollment at just 11 million. In other words, the CBO counted millions of people as losing insurance under the Senate bill who never would have bought it in the first place.
The CBO also assumed that more states would expand Medicaid over the next decade if ObamaCare were left in place, and that 5 million people would gain coverage as a result. Since the Senate bill wouldn't let additional states expand Medicaid, the CBO counted those 5 million as losing coverage.
But states that already expanded Medicaid are now facing budget crunches as the cost of the expansion turns out to be far higher than anticipated. In fact, Ohio lawmakers just voted to freeze its Medicaid expansion. The idea that more states would expand Medicaid down the road is fanciful, at best.
So subtract another 5 million from the CBO's number.
In short, to get to the 22 million figure, the CBO vastly exaggerated the impact of the individual mandate, used wildly inflated ObamaCare enrollment numbers, and made highly unlikely assumptions about Medicaid.
Even for government work, that seems pretty shoddy, yet it still helped to derail ObamaCare's repeal.
It's a big win for the swamp, but a huge loss to anyone hurt as ObamaCare crumbles.
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http://www.nationalreview.com/article/451619/end-defense-budget-sequester-rebuild-american-military?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202017-09-22&utm_term=NR5PM%20Actives
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Claims he is cleaning house:
https://www.spartareport.com/2017/11/secretary-tillerson-is-to-democrat-state-department-careers-like-fire-is-to-wood/
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8-) 8-) 8-)
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https://www.conservativereview.com/articles/trump-tweet-shines-light-sad-state-us-postal-service/
all I can tell you is to totally eliminate the USPS would be a big mistake
I am stating again that UPS and Fedex mail is not protected as a Federal offense .
We still have someone going there our mails . The USPS uses UPS to deliver much of there stuff in the chain and at least some of our stuff seems to get opened and is always late if it is important - EVERY single time.
At least with the USPS there is some fear of knowing to tamper with the US mail is jail time.
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Where were you when the government shutdown? I don't want to trivialize the impact for those who are truly affected, but really, for most of us, other than that we have our freedom because of the US military, how were affected this weekend and this Monday with a $4 trillion government shutdown. None of that money goes to anything I do, use or need. The street was plowed on schedule this am, the garbage got picked up, city water is on, the county roads are open.
What if we only had the federal government today that was envisioned by the Founders?
``only have the size of government that it takes to get the votes to pass it, no more.
The problem with this shutdown is that Democrats support all the spending in it but don't vote for it.
The previous event was different. Dems were requiring Republicans to vote to fund for Obamacare that they were specifically elected into the majority to not fund.
What part of the government were Dems elected to not fund? Defense??
Republicans are normally presumed to be Republicans because they are perceived to be anti-government. But this is not true. Responsible Republicans are pro-government; they are just against all those things other than governing that government does. Free shit, social engineering, redistribution, gender reassignments, that kind of thing.
This was different. Democrats shut down to make to get their way on another issue, and to make Trump look like he couldn't govern.
As I post, a deal was made... ??
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"The problem with this shutdown is that Democrats support all the spending in it but don't vote for it. The previous event was different. Dems were requiring Republicans to vote to fund for Obamacare that they were specifically elected into the majority to not fund. What part of the government were Dems elected to not fund? Defense??"
Well articulated.
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I am disappointed the shutdown didn't last for months.
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Paychecks for military? Border Patrol? etc?
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Paychecks for military? Border Patrol? etc?
Pay for those deemed essential, which obviously includes the military and USBP. If deemed non-essential, then let them find actual work.
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I heard reports that military, Border Patrol were not getting paid , , ,
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I heard reports that military, Border Patrol were not getting paid , , ,
I am saying we could for the Dems to pay the military and other essential federal entities while leaving the non-essential employees on indefinite furlough.
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Welfare without controls or connections makes all social problems worse. Imagine this, what if people paid for their drugs instead of getting free sh*t to abuse as they choose.
Googling this connection the first thing I found was a Washington Post article debunking it, a contrary indicator making it a little more true. The second says correlation and causation are different. Okay. This crisis didn't get worse only in Medicaid expansion states, but there is some link.
The Senate report notes that those with a Medicaid card can get prescriptions for opioids, such as oxycodone, for as little as $1 for up to 240 pills. Those pills, however, can be sold on the street for up to $4,000. By vastly expanding Medicaid, ObamaCare contributed significantly to this problem, the Senate report found.
http://www.hsgac.senate.gov/download/majority-report-drugs-for-dollars-how-medicaid-has-helped-fuel-the-opioid-epidemic
https://www.kff.org/infographic/medicaids-role-in-addressing-opioid-epidemic/
https://www.investors.com/politics/editorials/opioid-epidemic-obamacare-medicaid-expansion/
https://www.usatoday.com/story/news/politics/2018/01/17/medicaid-fraud-helping-drive-opioid-crisis-new-congressional-report-concludes/1040695001/
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https://www.washingtonpost.com/news/wonk/wp/2018/02/03/the-u-s-government-is-set-to-borrow-nearly-1-trillion-this-year/?undefined=&utm_term=.501740a7831d&wpisrc=nl_most&wpmm=1
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https://www.washingtonpost.com/news/wonk/wp/2018/02/03/the-u-s-government-is-set-to-borrow-nearly-1-trillion-this-year/?undefined=&utm_term=.501740a7831d&wpisrc=nl_most&wpmm=1
People are irresponsibly keeping too much of their own hard earned money!
"In a report this week, the CBO said tax receipts are going to be lower because of the new tax law."
- CBO predicts 0.1/yr growth increase resulting from the new tax law. They are Deniers of Science, IMHO. More recently, Atlanta Fed predicts 5.4% Q1 2018 growth. Who are you going to believe? I would say neither. These are forecasts, not economic results. https://www.cnbc.com/2018/02/01/economy-to-grow-at-5-point-4-percent-rate-in-first-quarter-atlanta-fed-tracker-shows.html
"The latest borrowing figure — $955 billion — released this week was determined from a survey of bond market participants,"
- A survey of particpasnts?! How many months actual data since the tax law change went into effect are they citing? [Zero, obviously] All they are saying is that they think bringing the US business tax rate back to our global competitor's levels will have no measurable effect on growth.
"The latest example of largesse is the GOP tax bill. It's expected to add $1 trillion or more to the debt, "
- Besides wrong, that figure is over ten years, not mentioned, when everything else in the article is per year. By their wrong own numbers the tax law contributes one tenth of their projected deficit, but they would have their readers believe it is all of it. Hit job or sloppy reporting?
"Under Reagan, borrowing spiked because of a buildup in the military,"
- 1/4th of the spending increase under Reagan was from military spending so that statement is 3/4ths wrong. Must be true, they learned in liberal reporter school. It was a "buildup" only if you think the neglected military at the end of the Ford-Carter years was already at sufficient levels. Military spending increase was 800B and the Soviet Union fell. Total spending increase over 8 years was approx $3.2T, 4 times the military increase.
https://www.heritage.org/budget-and-spending/commentary/defending-the-reagan-deficits
http://www.taxpolicycenter.org/statistics/federal-receipt-and-outlay-summary
The Treasury needs to be prepared to borrow money to pay bills whether the economy grows or not. That does not mean they "expect" no new economic growth.
The $955 Billion number is not listed at the link cited in the article:
https://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Pages/Latest.aspx
We wasted $9 trillion in deficit and $4 trillion in quantitative expansion and over eight years, left this trend line in place as cited and no one batted an eye, but let's panic now - instead of reporting highest wage growth in a generation. What page was THAT on?
[Did the Washington Post used to be better before the Bezos era?]
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http://thehill.com/policy/finance/372992-budget-deal-is-brimming-with-special-tax-breaks?userid=188403
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The Trump Spending Binge
An unconventional presidency suddenly becomes very conventional.
President Donald Trump in the Oval Office on Friday.
President Donald Trump in the Oval Office on Friday. Photo: jim lo scalzo/epa-efe/rex/shutte/EPA/Shutterstock
By James Freeman
Feb. 9, 2018 3:28 p.m. ET
415 COMMENTS
The federal government briefly shut down in the early morning hours on Friday before the Congress passed and the President signed a new license to spend. The Journal reports:
The two-year budget deal will boost federal spending for both the military and domestic programs by almost $300 billion over two years, in addition to nearly $90 billion in disaster aid for areas recovering from last year’s destructive storms. It will also suspend the government’s borrowing limit through March 1, 2019.
After signing the bill on Friday morning, President Trump lamented the increase in domestic spending...
No doubt many Americans are lamenting it too. Even the brief overnight shutdown doesn’t seem to have saved taxpayers a nickel. This afternoon, the White House issued the following press release:
On Friday, February 9, 2018, the President signed into law:
H.R. 1301, the “Continuing Appropriations Amendments Act, 2018,” which authorizes the retroactive compensation of employees furloughed as a result of a lapse in appropriations that began on or about February 9, 2018.
What’s the fun of a shutdown if the President is unwilling to see even a single bureaucratic moment go uncompensated? The man who triggered the shutdown is Sen. Rand Paul (R. Ky). He explains why in an op-ed in Time magazine today and argues that the agreement will boost spending even more than the headline numbers:
The Senate was set to vote on a 700-page bill that added over $500 billion in new spending to our already out-of-control debt. It was a massive and destructive bargain struck by the leaders of both parties, where both got to blow up the spending “caps” they agreed to just a few short years ago.
I simply asked for one thing in this broken process: a 15-minute vote on whether those caps should or should not be broken. The furor this request set off among leadership, the wailing and screeching among Big Government advocates in Congress and in the media — well, you would think I had asked them to shut down forever.
Unfortunately Mr. Paul was just as successful in reducing the spending in the bill as House Minority Leader Nancy Pelosi was in forcing changes to immigration law. Both lawmakers did manage to annoy their colleagues, which should count for something. But the budget deal was enacted without immigration reform and without financial restraint.
The Trump spending blowout is particularly dangerous because, as stock investors have noticed lately, interest rates are headed north. Washington will spend about $300 billion this year in net interest payments on the federal debt. Last summer the Congressional Budget Office estimated that this annual burden will grow to more than $800 billion by 2027, when it is expected to be more expensive than the entire Medicaid program by some $163 billion per year. This depressing scenario assumes the average annual interest rate paid by Washington rises to just 3.5% by then, still relatively modest by historical standards.
Washington’s accounting generally ignores the costs of its unfunded liabilities--promises to provide entitlements into the future. But even the debt the government formally acknowledges has grown to $20.5 trillion, with nearly $15 trillion held by the public.
Mr Trump has in many ways been a refreshingly unconventional President, for example by ignoring Beltway custom and slashing the tax and regulatory burden on American business. But his new budget deal suggests that he may not care about spending restraint much more than his recent predecessors did.
Now along comes a debate on infrastructure, and David Harsanyi provides a timely reminder that Americans are already paying for a lot of it, whether via the federal gasoline tax or other mechanisms of government:
Perhaps because they’re constantly being told that America’s roads are on the verge of disintegrating into dust, some voters aren’t aware that federal, state and local governments spent $416 billion on transportation and water infrastructure in 2014—around the same 2.4 percent of gross domestic product they’ve been spending for decades. About $165 billion of that $416 billion, incidentally, was spent on highways. (This doesn’t count the bipartisan Fixing America’s Surface Transportation Act of 2015, which added another $305 billion over five years.)
Here’s hoping our negotiator-in-chief can artfully craft a deal to encourage private investors to build without taxpayer funding.
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AND 8 yrs of W increasing the deficit the GOP makes it worse again
Notice how the Demorats only cry about the ballooning budget when they are bashing Trump and the GOP about tax cuts
they seem to go silent on the spending side though they probably do whine a bit when it comes to the military and of course THE WALL which does not go unnoticed that it has NOT been funded. Most likely it never will be. :x
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Ok here is Leftist's rag article about the debt.
Trump mentioned first
then Reagan then HBush then Clinton under whose watch the debt rise was stalled..
Notice O "tax and spend" Bama's name is no where to be found in the article . Just an oversight of course.
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Ok here is Leftist's rag article about the debt.
Trump mentioned first
then Reagan then HBush then Clinton under whose watch the debt rise was stalled..
Notice O "tax and spend" Bama's name is no where to be found in the article . Just an oversight of course.
We have always been at war with eastasia.
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https://finance.yahoo.com/news/government-debt-exploding-heres-danger-203654548.html
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http://www.aei.org/publication/the-congressional-budget-process-a-brief-primer/?mkt_tok=eyJpIjoiTVRRek56VTBNREpoWkdNNSIsInQiOiJVTUxGNGdCVFFzbUlxZm81NlpoaGl6OTUzajZYS2lhaFRJQXljWW5xbUdlS2R6YjEzZXNYNG1yMEVMeE9TQnB3Z2VJUld6SnVhclo5VmZxTTRFRmNPZksyVkY3YVp0MnI5RUJmMVVDMldGMnRVVnl4eFFLYktIa3JZbmF3ZVwvMm0ifQ%3D%3D
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I like the "incentives to come in UNDER budget" part
don't expect that with the NE unions though.
They will rip taxpayers off if they are given a peep of daylight:
http://www.nationalreview.com/article/456388/american-infrastructure-not-crumbling
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https://www.bloomberg.com/news/articles/2018-03-12/u-s-posts-biggest-budget-deficit-since-2012-as-tax-income-falls
But note , , , "A combination of higher income tax refunds and a drop in the withholding of individual income and payroll taxes led to the reduction in receipts,"
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https://www.bloomberg.com/news/articles/2018-03-12/u-s-posts-biggest-budget-deficit-since-2012-as-tax-income-falls
But note , , , "A combination of higher income tax refunds and a drop in the withholding of individual income and payroll taxes led to the reduction in receipts,"
This is partly bad news and partly no news. We can't have the deficit explode and still have a message that the tax rate cuts were all good.
OTOH, look at a deficit chart. Feb of 2018 was going to be the biggest deficit month in a while BEFORE the tax rate cuts were passed or in place. The previously higher tax rates were also projected to lead to an expanding deficit. This reporting compares to last year's numbers with no mention of what would have been the results this year under old policies.
(https://www.usgovernmentdebt.us/include/usgs_chartDp01f.png)
The deficit resurgence actually coincides more closely with the implementation of Obamacare than it does with a tax rate cut.
Trump offered a budget that made serious cuts. Nothing happened on that. The people's representatives, even Republican (in name only) know the people prefer no spending cuts to deficit mitigation.
Other candidates talked about entitlement reform where the real spending is. That went nowhere.
Would we rather have a defense capability deficit in these dangerous times? Some spending is good.
This tax rate cut needs to expand GDP growth to break even. It is too early to see revenue growth from that but we certainly need evidence of that before the next election. As mentioned in the other thread, expansion of the workforce and the economy needs to be accompanied with reduced demand for programs. Real entitlement reform is the long term answer. Good luck with that.
I wonder what a 25% increase in steel costs will do for the budget of the world's largest construction company...
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"Feb of 2018 was going to be the biggest deficit month in a while BEFORE the tax rate cuts were passed or in place. The previously higher tax rates were also projected to lead to an expanding deficit. This reporting compares to last year's numbers with no mention of what would have been the results this year under old policies. , , , The deficit resurgence actually coincides more closely with the implementation of Obamacare than it does with a tax rate cut."
THIS.
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Treasury Report: True U.S. Government Shortfall Is $88.9 Trillion, an Average of $704K Per Household
https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/17frusg/02142018_FR%28Final%29.pdf
https://pjmedia.com/trending/treasury-report-true-u-s-government-shortfall-88-9-trillion-average-704k-per-household/
If the national debt were officially calculated the way assets for private companies are calculated — by tallying assets, debts, liabilities, and obligations — the official federal debt would be $88.9 trillion, or $704,000 per household.
[Doug: If you consider that only about half of America really pays in, your per household share is more like $1.4 million. Make sure your voting age children know this before they develop a big-government affinity.]
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In a related/unrelated story yesterday during Trump's visit to the wall prototypes in Calif, a person made a proposal that we let 'Mexico pay for the wall' by assessing 'illegal immigrants' $1000 each as payment for their path to citizenship. That is a little low. How about we assess their household in a binding agreement all of their $700,000 share of the obligation they wish to take on. Reality check, migrant farm worker wages won't get you there.
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The Treasury report revealed that the federal government currently owes $7.7 trillion in pensions and other benefits to federal employees and veterans. Paying these benefits would require an average of $61,000 from every household in the United States. These liabilities are not all reflected in the national debt.
The federal government had $9.2 trillion in liabilities such as federal employee retirement benefits, accounts payable, and environmental/disposal liabilities.
The lion's share of liabilities comes under the umbrella of entitlements. The federal government has $30.75 trillion in obligations for current Social Security participants above and beyond projected revenues from their payroll and benefit taxes, transfers from the U.S. Treasury, and assets of the Social Security trust fund.
Finally, the federal government has $34.6 trillion in obligations for current Medicare participants, above and beyond projected revenues from payroll taxes, benefit taxes, premium payments, and assets of the Medicare trust fund.
These projections for Social Security and Medicare come from calculating the "closed-group" unfunded obligation, the money needed to cover the shortfalls for all current taxpayers and beneficiaries in these programs.
According to JustFacts, the $88.9 trillion figure amounts to 92 percent of the nation's private wealth, including every American's assets in real estate, corporate stocks, small businesses, bonds, savings accounts, cash, and personal goods.
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If you live in Calif, your total unfunded liabilities per household might be a bit more...
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Treasury Report: True U.S. Government Shortfall Is $88.9 Trillion, an Average of $704K Per Household
https://www.fiscal.treasury.gov/fsreports/rpt/finrep/fr/17frusg/02142018_FR%28Final%29.pdf
https://pjmedia.com/trending/treasury-report-true-u-s-government-shortfall-88-9-trillion-average-704k-per-household/
If the national debt were officially calculated the way assets for private companies are calculated — by tallying assets, debts, liabilities, and obligations — the official federal debt would be $88.9 trillion, or $704,000 per household.
[Doug: If you consider that only about half of America really pays in, your per household share is more like $1.4 million. Make sure your voting age children know this before they develop a big-government affinity.]
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In a related/unrelated story yesterday during Trump's visit to the wall prototypes in Calif, a person made a proposal that we let 'Mexico pay for the wall' by assessing 'illegal immigrants' $1000 each as payment for their path to citizenship. That is a little low. How about we assess their household in a binding agreement all of their $700,000 share of the obligation they wish to take on. Reality check, migrant farm worker wages won't get you there.
------------------------
The Treasury report revealed that the federal government currently owes $7.7 trillion in pensions and other benefits to federal employees and veterans. Paying these benefits would require an average of $61,000 from every household in the United States. These liabilities are not all reflected in the national debt.
The federal government had $9.2 trillion in liabilities such as federal employee retirement benefits, accounts payable, and environmental/disposal liabilities.
The lion's share of liabilities comes under the umbrella of entitlements. The federal government has $30.75 trillion in obligations for current Social Security participants above and beyond projected revenues from their payroll and benefit taxes, transfers from the U.S. Treasury, and assets of the Social Security trust fund.
Finally, the federal government has $34.6 trillion in obligations for current Medicare participants, above and beyond projected revenues from payroll taxes, benefit taxes, premium payments, and assets of the Medicare trust fund.
These projections for Social Security and Medicare come from calculating the "closed-group" unfunded obligation, the money needed to cover the shortfalls for all current taxpayers and beneficiaries in these programs.
According to JustFacts, the $88.9 trillion figure amounts to 92 percent of the nation's private wealth, including every American's assets in real estate, corporate stocks, small businesses, bonds, savings accounts, cash, and personal goods.
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If you live in Calif, your total unfunded liabilities per household might be a bit more...
In time, it will fix it's self.
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Today President Trump called for ending the Filibuster and giving him line item veto to make for budgetary responsibility.
Didn't SCOTUS rule that line item veto was unC'l?
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IIRC for several years now the budget deficit was projected to start increasing around , , , 2018. If we let this go unremarked, then Trump, the tax cuts, and the Reps will take the fall 100% for the deficits were are running and will run when in point of fact the argument should be limited to the marginal increase.
CAN SOMEONE TRACK THIS DOWN PLEASE?
Also, note the relevant graph in Scott Grannis's blog, posted nearby, with a chart showing the both a Reagan deficit and the Clinton deficit were both a larger % of GDP than what we are running now.
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https://www.judicialwatch.org/blog/2018/03/nearly-200-busted-3-7-million-food-stamp-fraud-operation/?utm_source=deployer&utm_medium=email&utm_campaign=tipsheet&utm_term=members&utm_content=20180326224646
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https://www.washingtonpost.com/opinions/the-debt-crisis-is-on-our-doorstep/2018/03/27/fd28318c-27d3-11e8-bc72-077aa4dab9ef_story.html?utm_term=.81ca6445a924
A debt crisis is on the horizon
By Michael J. Boskin, John H. Cochrane, John F. Cogan, George P. Shultz and John B. Taylor March 27
The writers are senior fellows and economists at the Hoover Institution.
...a major obstacle stands squarely in the way of this promise: high and sharply rising government debt.
President Trump’s recently released budget is a wake-up call. It projects that this year, a year of relatively strong economic growth, low unemployment and continued historically low interest rates, the deficit will reach $870 billion, 30 percent greater than last year.
...
If interest rates were to rise to 5 percent, instead of the Trump administration’s prediction of just under 3.5 percent, the interest cost alone on the projected $20 trillion of public debt would total $1 trillion per year. More than half of all personal income taxes would be needed to pay bondholders.
...
our deficit and debt problems stem from sharply rising entitlement spending
...
Congress must reform and restrain the growth of entitlement programs and adopt further pro-growth tax and regulatory policies.
...
[Higher taxes alone] "would sharply reduce economic opportunity and growth, which in turn will make funding entitlements that much harder."
--------------------------------
Cut.Spending.Now.
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BEND THE ENTITLEMENT CURVE DOWN NOW.
Chris Christie's presidential campaign was exactly right on this. Lower the payments for those in the demographic pipeline who are young enough to have sufficient years to prepare for old age/retirement under the new rates e.g. those under 50? 45? etc.
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http://thehill.com/homenews/senate/381891-senate-gop-skeptical-of-trump-idea-to-cancel-spending?rnd=1523009345?userid=188403
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See my post #1042. This needs to be tracked down!
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See my post #1042. This needs to be tracked down!
Bringing this forward.
Posted by: Crafty_Dog
Insert Quote
IIRC for several years now the budget deficit was projected to start increasing around , , , 2018. If we let this go unremarked, then Trump, the tax cuts, and the Reps will take the fall 100% for the deficits were are running and will run when in point of fact the argument should be limited to the marginal increase.
CAN SOMEONE TRACK THIS DOWN PLEASE?
Also, note the relevant graph in Scott Grannis's blog, posted nearby, with a chart showing the both a Reagan deficit and the Clinton deficit were both a larger % of GDP than what we are running now.
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According to [President Obama] White House estimates, the budget's deficit for fiscal year 2013 would drop to $700 billion before jumping back up to $1 trillion in 2020, the furthest out that budgeters will predict.
February 01, 2010
http://www.foxnews.com/politics/2010/01/31/obama-offers-budget-deficits-far-number-crunchers.html
Even if all goes to plan, the budget still forecasts U.S. public debt rising above 71 percent of GDP by 2013, up from 53 percent in 2009, and almost 80 percent by 2020 — levels that could spook investors.
The economy is projected to expand by 2.7 percent in 2010, but then pull at an above-average 3.8 percent in 2011 and rise above 4 percent for the following 3 years. [We did not achieve anywhere near these levels of growth.]
https://www.reuters.com/article/us-obama-budget/obamas-2010-budget-deficit-soars-amid-job-spending-idUSTRE60U00220100201
(https://static01.nyt.com/packages/images/newsgraphics/2011/0926-fiscal-graphic/chart3.jpg)
https://archive.nytimes.com/www.nytimes.com/interactive/2011/09/25/us/obamas-plan-to-reduce-the-deficit.html
https://www.forbes.com/sites/paulroderickgregory/2012/12/25/president-obamas-legacy-20-trillion-in-deficits-for-2016-victor/#a2f8aae57983
Obama’s unfortunate successor must pay the piper and big time.
A twenty trillion dollar national debt will be Barack Obama’s legacy to the American people if he gets his way in the fiscal cliff negotiations.
A warning: The 2013-2017 budget deficits could be much higher. No one knows what the costs of Obama Care will be. By 2017, the federal government will be spending more on health care than on social security. The CBO projection assumes that the costs of Obama Care come in on target. If Obama Care cannot contain health care costs, we could easily see a five-year deficit well in excess of $5 trillion, for an annual deficit of more than a trillion dollars.
(https://www.cbo.gov/sites/default/files/49973-home-fig1.png)
1. Look at the last 10 years of this 2015 forecast, deficits were already forecasted to rise.
2. In percent of GDP, current deficits are lower than other times just as Crafty posted.
[March 2015, CBO] "...current laws will generally remain unchanged, the budget deficit is projected to decline in 2016, to $455 billion, or 2.4 percent of GDP, and then to hold roughly steady relative to the size of the economy through 2018. Beyond that time, however, the gap between spending and revenues is projected to grow faster than GDP"
https://www.cbo.gov/publication/49973
CBO Feb 2014:
(https://static.politico.com/dims4/default/ccbd038/2147483647/resize/1160x/quality/90/?url=http%3A%2F%2Fs3-origin-images.politico.com%2F2014%2F02%2F04%2Fdeficit-for-web.jpg)
https://static.politico.com/dims4/default/ccbd038/2147483647/resize/1160x/quality/90/?url=http%3A%2F%2Fs3-origin-images.politico.com%2F2014%2F02%2F04%2Fdeficit-for-web.jpg
https://www.politico.com/story/2014/02/budget-deficit-shrinks-103092
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Last chance to be the conservative party and govern.
On Sept. 30, five weeks before the election, there will be the need for a new spending bill to keep the government running.
Reverse that disastrous $1.3 trillion omnibus.
End the funding of Planned Parenthood.
Fund border security.
Deliver real personal tax cuts. What they came up with last year rewarded big business nicely while excusing nearly 50 percent of Americans from the responsibility of paying taxes altogether. Everyone else was given a small amount of relief. Those were your voters,
Last chance. Otherwise, why expect anything short of dismal turnout.
https://townhall.com/columnists/brentbozellandtimgraham/2018/04/27/the-cantdo-republicans-n2475097
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The power of a compounding growth rate - is the smallest force in the universe when growth is held back by government at essentially zero.
Moving the growth rate from 1.9% to 3% or greater is not a one percent increase, it is more than a 50% increase in growth and that fails to include the amazing mathematical power of compounding growth. This difference in growth cuts the burden of our debt by two thirds over time.
Here is an article I read recently and looked for to post but it was hidden on the internet by Google's search engine bias. Note that this is dated 2017 during the tax rate cut debate. Maybe we are on a better path now but the principles still apply.
Debt, CBO says, will be 150% of GDP in 30 years.
https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/52480-ltbo.pdf
Change the growth rate from Obama levels, the CBO projection of 1.9% to 3% growth, the average over the 50 years before the latest collapse and malaise, and the deficit to GDP ratio in 30 years drops from 150% to 50%.
That is a profound difference, a republic existential difference. Economic stagnation in our fiscal system mathematically leads to collapse.
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https://www.wsj.com/articles/growth-can-solve-the-debt-dilemma-1493160796
Growth Can Solve the Debt Dilemma
Hitting a 3% target would result in an economy that’s nearly $13 trillion larger in 30 years.
By Stephen Moore
April 26, 2017
The Congressional Budget Office’s latest report on the nation’s fiscal future is full of doom and gloom. The national debt will double in the next 30 years to 150% of gross domestic product—which is Greece territory. Interest payments may become the largest budget line, eclipsing national defense. Federal spending is expected to soar over 20 years from 22% of GDP to 28%. Never outside of wartime has Washington’s burden been so heavy on the economy.
But the report’s most troubling forecast, by far, is for decades of sluggish economic growth. The CBO projects that America will limp along at an average 1.9% annual growth over the next 30 years. This is a sharp downgrade from historical performance. Between 1974 and 2001, average growth was 3.3%. An extra percentage point makes a world of difference. If weak growth persists, there is almost no combination of plausible spending cuts and tax increases that will get Washington anywhere near a balanced budget.
But consider what happens to the CBO’s numbers assuming 3% annual growth. By 2040 the economy would expand not to $29.9 trillion, but to $38.3 trillion, according to an analysis by Research Affiliates, a California investment firm. That’s an additional output of $8.4 trillion—roughly the entire annual production today of every state west of the Mississippi River.
The Power of an Expanding Economy
By 2047, the economy would grow to $47.1 trillion, almost $13 trillion more than the CBO’s baseline estimate. That would spin off new tax revenue to Washington of about $2.5 trillion each year.That money ought to be more than enough to pay all the bills and cover most of the unfunded costs of Social Security and Medicare. The old saying is right: The most powerful force in the universe is compound interest.
Growth of 3% would stop the debt-to-GDP ratio from skyrocketing. Instead it would start to fall almost immediately, eventually to about 50%, because the economy would be so much larger. Congress and the White House ought to understand that what matters most for heading off a fiscal crisis is making sure that the economy grows faster than the government. No other debt-reduction policy—certainly not a tax increase—comes close to having the fiscal effect that sustained prosperity does.
A good example is the late 1990s, the only time in recent years that Washington balanced its budget. Surpluses were the result of good policy: A 16-year economic surge allowed revenues to catch up to expenditures. A booming stock market, aided by a cut in the capital-gains tax, brought in unexpected revenue. Spending was restrained under President Clinton and a Republican Congress.
Many blue-chip economists agree with the CBO that a growth rate of about 2% is the best that America can achieve. They believe that growth in productivity and the country’s workforce is too slow to recapture the glory days.
But the right policies can counter these trends. Productivity should surge with improvements in robotics, artificial intelligence and automation. Self-driving cars could cut transportation costs dramatically in coming years. Washington could facilitate this renaissance by giving companies an incentive to invest. The Tax Foundation predicted last year that the House Republican tax reform alone would raise wages by 8%, GDP by 9% and capital investment by 28%. If this is even close to being right, pass the tax cut now and stop obsessing about whether it is paid for within the short-term budget window.
The demographic problem is a greater challenge, with the baby boomers retiring. But according to my calculations at least seven million Americans in their prime working years—18 to 65—would be on the job today if labor-force participation had not dropped since 2000. A strong economy, paired with welfare reforms, could draw millions back to work. And immigration is America’s natural demographic safety valve. Letting in more legal immigrants—especially those with skills and special talents—may not happen under President Trump, but it can and should eventually.
This isn’t a call for budget complacency. Congress should cap spending and flatten the payout formulas for entitlement programs But there’s simply no way to fix the long-term fiscal problems with 1.9% growth, no matter how sharp the budget knife. What America needs is real and sustained growth.
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Debt burden is a catastrophic consequence of failing to address the GDP Gap documented by Scott Grannis and posted regularly in these threads.
The failure to re-energize growth of the private economy and to sustain that growth at historic levels or better puts upward pressure on spending as more people rely on government for financial security, and that worsens deficits, debt and debt burden. cf. President Obama's economic record: Obama ran up another $8 trillion debt under artificial zero interest rate conditions. The full burden of that debt will not be felt under zero interest conditions.
A thoughtful liberal friend asked me recently what I thought about deficits and debt. I mentioned concern about spending and he mentioned concern about 'tax cuts'. Most importantly, our concern should be with growth.
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Very timely Doug.
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Nothing new was learned. There is no free lunch. If you give people a little more money to spend, they have a little more money to spend. Who did they take the money from? Those will have a little less. Nothing new was produced, not even a new incentive to produce was produced. The test ended in Finland. Results to be published in 2019. Only in government programs is that good enough.
https://nordic.businessinsider.com/Finland-is-killing-its-world-famous-basic-income-experiment--/
Leftists in the US, Stockton California for example, want to try it.
https://www.cbsnews.com/news/testing-a-universal-basic-income-stockton-california-economic-security-project/
Pay people to do nothing in return. Not exactly a new concept in a welfare society.
California is home to some of the most amazing entrepreneurial successes in human history and yet is the nation's leader in Income inequality.
Why don't they have the successful teach entrepreneurial classes in poorer areas instead of tease them with tastes of someone else's fruit with no hint as to how it was produced?
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While I was typing, our friends at Investors published an editorial on the same subject:
https://www.investors.com/politics/editorials/finnish-failure-guaranteed-basic-income-punishes-work-subsidizes-sloth/
Finnish Failure: Guaranteed Basic Income Punishes Work, Subsidizes Sloth
[What could go wrong with that.]
"Finnish social planners have no more common sense than those in the U.S. Neither group seems to understand the economic truism: What you subsidize you get more of, and what you tax you get less of."
"In the 1970s, the (U.S.) government ran four random control experiments across six states to try the negative income tax, a similar policy proposal (to the basic income) that was popular at the time. In each test, the work disincentive effect was disastrous. For every $1,000 in added benefits to a family, there was an average reduction in $660 of wages from work."
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BTW, Scott Grannis endorses the Stephen Moore article.
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https://www.bloomberg.com/news/articles/2018-04-30/climate-linked-spending-set-to-rise-to-a-quarter-of-eu-budget
Climate-Linked Spending Set to Rise to a Quarter of EU Budget
Not only that but we will lose the beneficial earth effects of all that plant growing CO2.
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Please post that in the European Matters thread.
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https://pjmedia.com/news-and-politics/celebrities-applaud-trump-brand-karen-pence-ally-after-arts-funding-increase/
I am not sure with all the billions spent by private collectors why we need taxpayer money for this
unless it goes to the Smithsonian maybe
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Unexpected.
April was best month in history for U.S. budget, according to CBO figures.
https://www.washingtontimes.com/news/2018/may/7/cbo-says-april-was-best-month-history-us-budget/
Economic growth helps the budget?
So far, only the Washington Times covering it?
NYT, below the fold tomorrow? $40 B more than expected. Not news at all?
How come Obama never had a record surplus month? He raised taxes more than all of them.
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Federal Deficit to Top $1 Trillion in 2020, CBO Says
April 12, 2018
https://chicagotonight.wttw.com/2018/04/12/federal-deficit-top-1-trillion-2020-cbo-says
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We'll know soon enough, but they've never been right.
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https://patriotpost.us/articles/55908-tax-revenue-hits-record-high-dems-hardest-hit
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https://patriotpost.us/articles/55908-tax-revenue-hits-record-high-dems-hardest-hit
Anything good for America is bad for the dems. Funny how that works.
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quote author=G M: "Anything good for America is bad for the dems. Funny how that works.
"Isn't it strange how true that is? Between now and the next couple of elections, they need to hope for bad economic results - or they will continue to lose. That makes sense sadly, but look also at when they were in power. They pushed for anti-growth policies so they mostly wanted no growth results then too? The rationale for anti-growth policies was to fight income inequality. But that widened too. Tens of millions more on food stamps while the market of entrenched big corporations went up and up and up. To fight income inequality, they need to stomp out wealth, but their coalition combines the welfare poor with the elite rich, all the rich counties around DC, the college professors, Silicon Valley, Wall Street, trial lawyers, etc. High tax rates didn't hurt the already rich much because they can move their money around and protect what they already have. What it hurts most is the people who want to be the future rich, meaning all the rest of us. When the pie isn't expanding, all people can do is fight, like in the Middle East, over existing, fixed resources, and in that scenario, the already powerful always have the advantage. Lower tax rates lead to growth, innovation, disruption, and dynamism. That is 'risky' if you are already rich and already powerful.
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https://www.nationalreview.com/2018/06/republican-spending-dysfunction-promised-trillions-in-cuts/
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REpublicans may be able to make this a winning issue despite the obvious retort from Dems which will be yelling screaming jumping up and down and ranting and raving hands waving and flying obnoxious hollywood tweats about how repubs just want to cut YOUR benefits (while giving it all away to the 'rich')
https://pjmedia.com/news-and-politics/perdue-saving-social-security-and-medicare-can-lead-republicans-to-victory/
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eyJpIjoiWm1NNU4yRmlPVE5oTVdRMCIsInQiOiJiSll2bEloSEtLN2x5QVlXWUhtekYzZW0xQ1Z3eUFRUXhWWUxPMEZwb1BPcXRBcGw4WmdnUWF6Wm5cL0JIKzVXTHZvYTZJSUlhempxS0R0VDVudTZ5ek1cL1wvOEVzZXMzcjVqUWlDQ3YzZEZWbzB1dmdXSGNEZk1pNXBmZDhpakxueCJ9
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I trust our government to focus on what's important and protect us without failure:
https://viewfromthewing.boardingarea.com/2018/07/17/plutonium-stolen-from-the-parking-lot-of-the-marriott-san-antonio-northwest/
Plutonium Stolen From the Parking Lot of the Marriott San Antonio Northwest
by Gary Leff on July 17, 2018
On a mission to recover radioactive materials, two Department of Energy employees from the Idaho National Laboratory drove to San Antonio. Materials had been loaned to a private research lab, and their job was to get it back and transport it security to a government facility.
They brought with them specialized radiation detectors. And to calibrate the detectors they have to bring along some plutonium, too, and also cesium. These are the materials used in nuclear weapons or dirty bombs.
These security specialists stopped for the night at the San Antonio Marriott Northwest.
They left the materials in the back seat of their rented Ford Expedition and went to bed. The plutonium and cesium were stolen out of the Marriott parking lot.
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I trust our government to focus on what's important and protect us without failure:
https://viewfromthewing.boardingarea.com/2018/07/17/plutonium-stolen-from-the-parking-lot-of-the-marriott-san-antonio-northwest/
Plutonium Stolen From the Parking Lot of the Marriott San Antonio Northwest
by Gary Leff on July 17, 2018
On a mission to recover radioactive materials, two Department of Energy employees from the Idaho National Laboratory drove to San Antonio. Materials had been loaned to a private research lab, and their job was to get it back and transport it security to a government facility.
They brought with them specialized radiation detectors. And to calibrate the detectors they have to bring along some plutonium, too, and also cesium. These are the materials used in nuclear weapons or dirty bombs.
These security specialists stopped for the night at the San Antonio Marriott Northwest.
They left the materials in the back seat of their rented Ford Expedition and went to bed. The plutonium and cesium were stolen out of the Marriott parking lot.
We have our top men working on it!
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Here's what the freak-out over SNAP work requirements comes down to. CBO says that in 10 years there will be 1.2M fewer SNAP recipients due to WR (work requirement)--3.7% of recipients. Keep in mind, many will do better as a consequence. That percentage is low because of--wait for it--exemptions.
- Scott Winship, twitter https://twitter.com/alanreynoldsecn?lang=en
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http://thehill.com/policy/finance/397851-house-completes-first-half-of-2019-spending-bills?userid=188403
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http://thehill.com/policy/finance/397851-house-completes-first-half-of-2019-spending-bills?userid=188403
Once again, we lost the argument for limited government.
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Quelle surprise.
OTOH at least we may be returning to proper budgeting process instead of Continuing Resolutions. This is not a small thing.
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for some sort of "hyperlink" from Frisco to LA?:
https://nypost.com/2018/07/21/elon-musk-is-a-total-fraud/
Wasn't Jerry Brown once dubbed "moonbeam?"
or am I mixing my memory cells?
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https://www.conservativereview.com/news/republicans-dont-think-government-is-big-enough-now-they-want-ivankacare/
The debt is what 21 trillion now. That is 21 times apple's market cap!
And no it doesn't pay for itself. I think the Louisiana people may be right : Rubio just isn't that smart.
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https://www.nationalreview.com/2018/08/marco-rubios-paid-leave-plan-shows-how-conservatives-can-embrace-working-class-families/
I don't agree that this is what we should be doing.
It is another attempt to appease the LEFT in my opinion.
The if we don't do it on our terms the Left will do it on theirs.
In other words beat the LEFT to the punch and show the masses how compassionate conservative we are but make it sounds like it is conservative by taking from future SS payments to fund the present . If the LEFT does it they would offer these payments without deducting from SS.
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I agree with CCP. Big government conservatism is an oxymoron.
We should have a full debate about where Social Security is headed. That's not what this is. What a great thought it is that you should have more control and flexibility over your money tucked away for retirement, but simultaneously Social Security is turning into a welfare program. It's not your anymore if it ever was, it's your entitlement. It's often someone else's money and it's someone else's company that the government is trying to run.
This debate is about federal government control over private sector family leave. Believing that government can do good here without doing harm is always short-sighted.
It reminds me of the fair tax and the carbon tax. Republicans who think they can authorized more government power and it won't soon be expanded and abused are naive.
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https://www.vox.com/the-big-idea/2018/8/7/17658574/democratic-socialism-cost-medicare-college-sanders-deficits-taxes
Question for any Dem, what tax rate would pay for it all? When it requires an 87% tax rate or confiscation of all income and wealth over 90,000, would even that really bring it in? Do they really not admit that high tax rates change economic behavior?
There is no tax rate that will pay for free everything. Welcome to real-world socialism.
"Ocasio-Cortez and Senate Democrats also want to guarantee a job for anyone who wants one, at $15 per hour plus benefits."
"Total cost: $42.5 trillion in new proposals over the next decade, on top of the $12.4 trillion baseline deficit."
"Raising the final $34 trillion would require seizing roughly 100 percent of all corporate profits as well as 100 percent of all family wage income and pass-through business income above the thresholds of $90,000 (single) or $150,000 (married), and absurdly assuming they all continue working."
As John McEnroe used to say,
YOU.CAN'T.BE.SERIOUS!!
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https://www.bbc.co.uk/news/uk-45246939
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https://www.bbc.co.uk/news/uk-45246939
But it was freeeeeeEEEEEeeeeeeEEEEEEeeeee!
:roll:
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Lots of interesting data in here:
U.S. Government Deficit Grew 17% in Fiscal 2018
Tax-law changes led to flat revenue in fiscal 2018, U.S. Treasury says
Higher interest costs on the debt and increased funding for the military helped push the U.S. deficit higher in fiscal 2018.
By Kate Davidson
Oct. 15, 2018 2:03 p.m. ET
WASHINGTON--The federal deficit widened last year amid higher government spending—including rising interest costs on the debt and increased funding for the military—and flat revenues following last year’s tax cut.
The government ran a $779 billion deficit in the fiscal year that ended Sept. 30, the Treasury Department said Monday. That is the largest annual deficit in six years and 17% higher than the $666 billion deficit in fiscal 2017. As a share of gross domestic product, the deficit totaled 3.9%, up from 3.5% a year earlier and the third consecutive increase.
The deficit would have been even higher if not for shifts in the timing of certain payments, Treasury said.
Government receipts held steady at $3.3 trillion, despite strong economic growth and a robust labor market. The low unemployment rate, which hit 3.7% in September, coupled with rising wages would typically drive government tax revenue higher.
But individual withheld income taxes rose just 1% in fiscal 2018, and corporate tax receipts declined 31%—both reflecting changes implemented as part of the sweeping tax overhaul enacted in December.
Trump administration officials had argued last year the new tax law would generate enough economic growth to offset the costs of a tax cut. Treasury Secretary Steven Mnuchin went further, at times saying the changes would actually help reduce the deficit. Monday’s report showed that, so far, that is not happening.
More broadly, declining government revenues and long-term costs associated with an aging population, including higher Social Security and Medicare spending, are expected to continue pushing up deficits over the coming decades.
White House budget director Mick Mulvaney said Monday the growing economy will create increased government revenues, “an important step toward long-term fiscal sustainability,” he said.
“Going forward, President Trump and this administration will continue to work with Congress to make the difficult choices needed to bring fiscal restraint, which, when matched with increasing revenue, will reduce our deficit,” Mr. Mulvaney said.
Monday’s report showed, however, that government spending as a share of GDP actually declined in fiscal 2018, to 20.3% from 20.7% a year earlier. And tax revenue declined even more, to 16.5% of GDP from 17.2%.
After the tax law was enacted last year, companies became able to take advantage of a new, lower corporate tax rate and immediately deduct the full value of equipment purchases—changes that weighed on corporate tax receipts, the senior Treasury official said. Starting in February, employers started using new withholding tables under the law, reducing the share of income withheld from workers’ paychecks.
At the same time, government spending rose 3% last year, to $4.1 trillion. Increases in interest rates and the amount of total debt outstanding drove up interest costs 14% last year from fiscal 2017, or $65 billion. Spending on defense military programs also increased 6%, or $32 billion, and Social Security costs rose 4%, or $39 billion.
Mr. Mnuchin on Monday defended Mr. Trump’s push to increase military spending last year, culminating in a congressional budget agreement that would increase government spending by almost $300 billion over two years above limits set in a 2011 law.
Corrections & Amplifications
The U.S. government deficit grew 17% in fiscal 2018. A headline in an earlier version of this article incorrectly referred to “debt” instead of “deficit.” (Oct. 15)
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Fighters Downed by Hurricane
Why America’s best military aircraft couldn’t fly to escape a storm.
180 Comments
By The Editorial Board
Oct. 16, 2018 7:19 p.m. ET
An aircraft hangar damaged by Hurricane Michael is seen at Tyndall Air Force Base, Florida, Oct. 11.
An aircraft hangar damaged by Hurricane Michael is seen at Tyndall Air Force Base, Florida, Oct. 11. Photo: jonathan bachman/Reuters
Hurricane Michael did terrible damage in Florida last week, and that may include some of the world’s most capable military aircraft left in its path. But why can’t Air Force F-22 jet fighters, of all things, escape a storm? Answer: They lack the parts to be operational and so were stuck in hangars to take a beating.
Air Force Secretary Heather Wilson said Sunday that the damage to an unspecified number of F-22s on Tyndall Air Force Base was “less than we feared.” But maintenance professionals will have to conduct a detailed assessment before the Air Force can say with certainty that the planes will fly again. Press reports estimate that at least a dozen planes were left on the base due to maintenance and safety issues.
Foreign Edition Podcast
Bavarians Revolt; Beijing Represses
Welcome to a fighting force damaged by bad political decisions and misguided priorities. Of the Air Force’s 186 F-22s, only about 80 are “mission capable,” according to a July analysis from the Government Accountability Office. The average across the Air Force in 2017 was that about 7 in 10 planes were mission capable, which is still too low for meeting increasing demands.
Part of the F-22 problem is upkeep on a coating that helps the planes evade radar. Another issue is the supply chain for parts now that the U.S. no longer produces the airplane, and “some original manufacturers no longer make the parts or are completely out of business,” GAO notes. Air Force officials told GAO that a simple wiring harness requires a 30-week lead time for finding a new contractor and producing the part. Ripping out parts from planes that work, or “cannibalizing,” is now common practice in military aviation.
Then there’s scale, or lack thereof. The Air Force in the 1990s planned for about 650 F-22s, which were designed to replace the F-15. That number fell to about 380 over time, according to GAO, but in 2009 President Obama and Defense Secretary Bob Gates convinced Congress to shut down the production line.
At the time Messrs. Obama and Gates argued that the U.S. had to focus on defeating unconventional enemies (Islamic State), whereas the F-22 is designed for air dominance against conventional national forces, which could also be handled by the new F-35.
This now looks like a mistake, as Russia and China improve their military technology and the F-35 continues to have a cascade of problems. The Pentagon last week grounded the entire F-35 fleet for a fuel tube issue, though most were cleared to fly again as of Monday. Now the F-35 is the only fighter show in town. The Air Force looked at restarting the F-22 production line and predicted it’d cost billions to launch. That isn’t happening.
The larger mistake of the Obama years was cutting defense willy-nilly to pay for entitlements and other priorities, which meant military units in all branches were crunched for training, flight hours and maintenance. Budget uncertainty through “continuing resolutions” from Congress compounded the pain.
Republicans in Congress and the Trump Administration this year accepted Democratic demands to spend more on income transfers to get a bump in defense spending that included some $47 billion to get planes flying. But Democrats are promising to cut defense again if they win the House. They pretend that a vote for free health care is affordable, but damaged planes on the tarmac is one more lesson that more spending on entitlements eventually means too few planes that can fly.
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https://patriotpost.us/articles/58933-deficit-soars-even-as-income-tax-revenue-hits-record-high?mailing_id=3804&utm_medium=email&utm_source=pp.email.3804&utm_campaign=digest&utm_content=body
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https://www.politifact.com/texas/statements/2018/oct/19/ted-cruz/ted-cruz-said-gop-tax-cut-led-higher-revenues-did-/?fbclid=IwAR0DQ2ujBhDDDO7SpfEhDTsioh4gv8G_z89RTAUhyCpxvLblpgFbBk41AN4
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https://www.politifact.com/texas/statements/2018/oct/19/ted-cruz/ted-cruz-said-gop-tax-cut-led-higher-revenues-did-/?fbclid=IwAR0DQ2ujBhDDDO7SpfEhDTsioh4gv8G_z89RTAUhyCpxvLblpgFbBk41AN4
My take:
Tax rates were cut and revenues went up to new record highs. Exactly the opposite of what CBO and the fact checkers promised. So the"fact checkers" move the goal posts as needed to get to their desired result. Look at revenues in "real dollars" instead, a ratio of dollars to the inflation rate. Sorry but which dollar is the real dollar? Were the $10 trillion in deficits borrowed under Obama "real dollars"? Or are they smaller now? The interest on the extra $10 trillion is real as the Fed has more than doubled its discount rate since Trump's election.
Note the elephant in the room they are missing.
Tax Rate x Income = Tax Revenue.
If tax rates are significantly lowered and revenues remained constant, that is a big fcuking deal. It means NATIONAL INCOME SURGED WITH THE LOWERING OF TAX RATES! Who bleeping knew?! Certainly not Politi"Fact"!
Taxation is a necessity, a necessary evil. Isn't accomplishing it with less damage, minimal damage to the private economy and our incentives and disincentives to produce an amazing accomplishment? Not to them! This crucial point is totally lost on Leftist partisans masquerading as truth tellers.
Tax revenues are dollars used to pay expenses. Inflation, meaning the relative value of things over time, is another matter. The devaluing of our dollar is INTENTIONAL. The Fed has a goal of 2% inflation and they are hitting or surpassing it consistently. Inflation is the law of the land. If we/they don't like it, STOP DOING IT. It is not something that comes out of tax policy. Inflation is a separate issue from collecting tax revenue.
Incomes don't automatically keep up with inflation. Income keeping up with inflation is a goal, not a presumption. Ask Maduro about that. Or Jimmy Carter.
What about the basic macro economic principle that government spending needs go down when private economy incomes go up. John Maynard Keynes, 101. Tax revenue relative to the need for tax revenue would be a much more relevant ratio. Fewer people need food stamps. Fewer people are on unemployment, etc. More people get more money form the private sector instead of government. The need for tax revenue goes down with the expanding private economy. The budget deficit should be shrinking! But instead, spending went up - because previous Congresses bound future Congresses and the electorate to entitlement spending with increases designed to be impossible to reverse.
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I don't see 'politically neutral' Politi"Fact" apply this argument to long term capital gains taxation or any other skewed measure that doesn't turn the argument leftward for them. Did they fact check "real dollars" on the phony Warren Buffet vs. his secretary's tax rate argument? I have assets I have held for decades while the dollar devalued. I cannot sell the assets because of the tax on the inflationary gain, not on any real gain. But the government doesn't make that adjustment. Why don't I declare my income in "real dollars" and see where in tax jail that puts me.
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Note: Fails to mention the end of the Cold War and attendant decline of military spending.
====================
By Kate Davidson and
Daniel Kruger
Nov. 11, 2018 7:00 a.m. ET
In the past decade, U.S. debt held by the public has risen to $15.9 trillion from $5.1 trillion, but financing all of that debt hasn’t been a problem. Low inflation and strong global demand for safe U.S. Treasury bonds held the government’s interest costs down.
That’s in the process of changing.
Interest rates are rising as inflation normalizes around the Federal Reserve’s 2% target. That and the sheer scale of debt being accumulated by the federal government has put the U.S. on a path of rising interest costs that in the years to come could crowd out other government spending priorities and rattle markets.
In 2017, interest costs on federal debt of $263 billion accounted for 6.6% of all government spending and 1.4% of gross domestic product, well below averages of the previous 50 years. The Congressional Budget Office estimates interest spending will rise to $915 billion by 2028, or 13% of all outlays and 3.1% of gross domestic product.
Federal outlays, interest as a percentage ofGDPSource: Labor Department via St. Louis Fed;Congressional Budget Office
%Actual
Projected1940’60’802000’200.00.51.01.52.02.53.03.5
Along that path, the government is expected to pass the following milestones: It will spend more on interest than it spends on Medicaid in 2020; more in 2023 than it spends on national defense; and more in 2025 than it spends on all nondefense discretionary programs combined, from funding for national parks to scientific research, to health care and education, to the court system and infrastructure, according to the CBO.
From defense to Medicaid, in other words, it will become a bipartisan challenge. The early 1990s were the last time the government’s interest expenses were high and rising. Back then, Washington politicians routinely worried about “bond market vigilantes” on Wall Street who threatened higher costs on debt if deficits weren’t contained.
To confront the problem, President George H.W. Bush did a budget deal with Democrats that raised taxes on the wealthy, alienating Republicans and undermining his chances for a second term in office. President Bill Clinton abandoned campaign promises of a big fiscal stimulus program.
By next September a divided Congress will need to decide whether to extend a budget agreement which boosted federal spending by $300 billion for two years over limits enacted in a 2011 law. Beyond that lawmakers need to decide whether to extend President Trump’s individual income tax cuts, which are set to expire in 2025.
“The fact that interest is the fastest growing part of the budget and is on track to eclipse other important pieces of the budget—for instance, spending on children—is going to cause more hesitation just to charge every single item,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, a deficit watchdog group.
The Treasury Department said last month outlays for net interest on the public debt rose 20% in fiscal year 2018, one of the key drivers behind increased spending last year.
Debt as a share of gross domestic product is projected to climb over the next decade, from 78% at the end of this year—the highest it has been since the end of World War II—to 96.2% in 2028, according to CBO projections. As the overall size of our debt load grows, so too do the size of interest payments.
At the same time, the Federal Reserve is in the process of gradually raising short-term interest rates. It is doing that because inflation has moved up to 2% from near zero in 2015. With unemployment low it could go even higher. In the next five years about 70% of the federal debt will mature and need to be refinanced at these higher interest rates.
President Trump says the central bank and its Chairman Jerome Powell are raising rates too fast, unnecessarily constraining economic growth and making it more difficult to manage the government’s debt.
“I would like to see the rates be low and pay amortization, pay off debt,” Mr. Trump said in an interview with The Wall Street Journal last month. “And when he keeps raising interest rates, you can’t do that.”
Federal outlays/interest as a pct. of GDPSource: Congressional Budget OfficeNote: 2018 and 2028 numbers are projections
DefenseNondefenseNet interest
19681993201820280%2.557.510
Even if interest rates were falling, the government wouldn’t be anywhere near paying off debt. The U.S. Treasury is set to issue twice as much debt in 2018 as it did in 2017, according to Treasury Department borrowing estimates. That’s because budget deficits are rising, the result of slow revenue growth associated with tax cuts and this year’s deal between Republicans and Democrats to increase spending.
The deficit will rise even further in the event of a recession, as revenue slows and automatic spending for programs such as unemployment benefits and food stamps increases. That would lead the government to borrow even more, adding to interest expenses. The CBO’s projections don’t factor in a recession in the next decade, but it would be remarkable if one doesn’t occur. The expansion is already on track to become the longest in U.S. history next June.
Looking back on what happened in the 1990s, Dean Baker, the co-director of the Center for Economic and Policy Research, a left-leaning think tank, says, “we’ve been there before, and it’s worked out.”
Deficits back then turned to surpluses, thanks to tough budget choices by both parties and a long period of strong economic growth. Policy makers will have plenty of opportunities to confront deficits in the coming years, Mr. Baker said.
But the opportunity to ignore them could be passing.
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https://market-ticker.org/akcs-www?post=234584
Revolt Or Collapse: Pick One*
As usual the lie factory continues here -- and this is from someone who knows better.
Social Security, Medicare and Medicaid benefit millions of Americans, but are major drivers of our national debt, which has skyrocketed to more than $21 trillion. If every U.S. taxpayer was billed for an equal share of that debt, we would each be charged about $400,000.
The cause of our out-of-control national debt is rooted in current and long-term obligations of these three big entitlement programs, due in large part to rapidly rising costs and an aging population.
Again, let me reference this Ticker, just one of dozens I've written over the years, that points out the truth: There is no crisis in Social Security. There is a problem which can be addressed, but the problem was caused directly by tampering with interest rates within The Fed and Congress along with allowing millions of able-bodied people to claim "disability" -- and some of them have been documented to have run marathons while allegedly "disabled."
Nonetheless Social Security is fixable without a large amount of pain. Why? Because it is a progressive tax-based system (you get more back in benefit for the first dollar you pay in via taxes than later ones), it holds a relatively large body of bonds which by design were constructed to allow "pig-in-python" style bursts of baby creation (ala The Boomers) as the designers anticipated that happening (along with "busts" at other times) and the tax rate is, in relative terms, high. (12.4% of all wages earned up to the cap -- you only "see" half of it as a payroll deduction -- unless you're self-employed!) Further the boomer pig in the python will start to recede in ten years -- 2028 -- as boomers start dying and so will their outsized proportion of the "draw" on said system.
In other words the conflation of Social Security, Medicare and Medicaid is an intentional lie that is repeated for political purposes and any politician or other policy "wonk" who does so deserves to be destroyed as his or her intent is to wreck this nation on a permanent fiscal basis by generating enough screaming among seniors to guarantee the actual problem is not addressed.
The entire problem with our budget lies in Medicare and Medicaid. The reason is multi-fold but is focused in the following places:
The Medicare tax rate is 2.9%, (1.45% each for employer and employee), or less than one quarter of that for Social Security. Yet last fiscal year Social Security spent $1.03 trillion while Medicare and Medicaid spent $1.46 trillion with approximately $1.15 trillion being Medicare. In other words Medicare assesses taxes at less than 1/4 the rate of Social Security yet pays out more money.
Medical spending as a percentage of the national economy has increased by a factor of five since Medicare was put into place. Medical spending was approximately 4% of GDP in the 1960s; at 4% of GDP Medicare was sustainable indefinitely as its tax receipt projections were approximately correct in covering expected expenditures. Medical spending is almost 20% of GDP today, or five times as high in percentage terms. Yet the Medicare tax rate has not advanced at all. It would have to be five times what it is today, and advance at the rate of medical spending generally indefinitely into the future, to be solvent.
If is not possible to "catch up" now even if you immediately made the Medicare tax 15%, which would be higher than Social Security, because those who are retired now didn't pay the higher rate and the bonds were not bought with their funds. As such it is flatly impossible to fix this on a prospective basis through higher taxes. IT CANNOT BE DONE BECAUSE TOO MUCH TIME HAS PASSED WITHOUT DOING IT OVER THE LAST 30 YEARS.
Medicaid is even worse because there no tax assessed to cover it. That is, Medicaid is a "pure" entitlement and last year spent approximately $400 billion. You get it because you're low-income, not because you paid into it while working and now need it. For this reason you cannot fix Medicaid with any sort of targeted, employment-based tax because there isn't one and the regressive nature of such taxes means people will leave the workforce to avoid paying same and then collect it. In fact that has happened now and continues to this day.
By 2040, Medicare, which funds health care for people 65 and older, will cover 88 million enrollees and the cost per enrollee by then is estimated to more than triple. Medicare’s hospital insurance program, known as Part A, can only pay full benefits through 2024, according to the program’s trustees.
Why will it triple on a per-person basis?
Simple -- we have an out-of-control medical racketeering set of enterprises in the United States, all of which are illegal under more than 100 year old law. Years ago I wrote an article on Lilies explaining how exponents invariably screw anyone who relies on them for a long-term "growth" plan. It's mathematics, not politics and mathematics cannot be evaded. But far worse when you only think you see the tiniest bit of the problem coming you're nearly dead -- every time -- because of how exponential math works. As such the la-la-la-la-la nonsense out of politicians on this and all related subjects has only one rational, society-preserving response: REVOLT.
Let's make this clear right up front: Neither the left's "Medicare for all" or the right's "Repeal and replace" mantras will do a damn thing about this, and 2024 is not far away. I will also remind you that markets never let you actually hit the wall just as they did not in 2000 and 2007.
Once they suss out that the politicians will not fix it because the people are sticking their fingers in their ears and chanting for people like Trump and Occasional Cortex the market will dive. Not a little, a lot. This will force the naked swimmers in the pool above water level for their ugliness to be seen by all.
Again -- there is no tax change that can fix this. The only means to fix it is to dramatically cut medical spending in the economy as a whole -- not cost-shift it, not make someone else pay, stop paying entirely right now, not in the future, not via some claimed "cost curve" bend in the future that never comes.
Medical spending as a percentage of the economy must collapse back to about 4% of the economy, or approximately one fifth of what it is now, and it must do so today.
This is not impossible, contrary to those who say it is. As just one example we can take as much as $400 billion out of federal health spending per year right now, today, forevermore by simply addressing one self-inflicted, very damaging and expensive set of disease treatments: Diabetes.
To those who claim that sort of action would be "cruel" I reply that it is the very opposite of cruel because not only does it take a huge whack out of the federal budget (and state pension expenses) it also will dramatically improve the life of those who suffer from this condition, including in many cases reversing it entirely!
Please explain how that is "cruel". I'm waiting......
When it comes to surgeries (Hospital Part "A" stuff) may I point to The Surgery Center of Oklahoma which routinely, even when it has to buy supplies and drugs at monopolist prices which are 100-500% or more of a market price, manages to undercut the local hospital in your town by that very same 80% I cited as necessary? Were they able to buy supplies and drugs at market prices it would likely be 90%. Oh, and you're one twentieth as likely to acquire an infection in said surgery center as your local hospital because they can't bill you for the cost of fixing their own mistakes and as a result they're far more-careful than your local hospital is.
Incidentally those "mistakes" (negligence, mostly) kill 200,000 Americans a year and maim millions which does even more economic damage since a dead (or maimed) person either produces nothing or far less than they otherwise could.
In 2011, in my book Leverage, I laid out a means to fix this. Through the years since I've fleshed it out a bit more, but the basic premise remains:
Enforce the damned law against all the medical providers, require them to post prices and charge everyone the same price for the same thing, thereby allowing competition into the game.
Make illegal any sort of cost-hiding (such as the current practice of not being quoted a charge and then having your insurance company play the "explanation of benefits" game.) This is illegal everywhere else in the economy with damn good reason -- it is, in every case, a criminal conspiracy as it intentionally screws some people who have no opportunity to shop or say no. In other words you must get a bill and submit it to the insurance company yourself so you see the entire bill, and you must agree in advance to the charges. When that's physically impossible (e.g. you're on your back having a heart attack) you cannot be charged more than someone who is conscious and able to give consent for the same procedure.
Medicaid can be rendered unnecessary in its entirety by these changes (no, this doesn't mean poor people get no medical care -- see the text of the bill. They in fact get superior care to what they get now.)
Forbid drug companies from differentially-pricing across national boundaries -- either directly by law or by dropping the law that currently forbids me from getting on a plane, filling my suitcase with drug "X" in said nation and flying back to resell it in the United States.
Forbid government (or care invoiced to the government on behalf of a citizen) from paying anything for medical care where a lifestyle change will provide substantially equivalent or superior outcomes.
Force alleged "insurance" to actually be insurance. What we now call "health insurance" is not insurance; it is a scam, a fraud under the law and a felony criminal offense in every single instance. Actual insurance by the definition of the word is a group of people who pay a small amount of money into a pool in anticipation of a possible but not certain loss, and from which losses are then paid to those who suffer them. By definition with insurance once you have a loss you no longer pay anything; the company pays you, and it is criminal fraud to buy an alleged "insurance" policy against either a certain or already existing loss.
Congress would have to act to put into place much of this. But not all. The President is the head of the Executive, which is in charge of law enforcement. Myriad existing parts of the health system are breaking existing, in many cases 100+ year old, laws -- specifically related to anti-trust. In the specific case of anti-trust these violations are not civil offenses they are criminal felonies. As a result right here and now, today, the President could direct the US Attorney General to bring said charges tomorrow as could any State Attorney General, since every state legal code I'm examined has similar statutes to 15 USC Chapter 1.
The people of this nation have the ability to put a stop to what is otherwise going to be a certain collapse -- not just in asset markets but of the government itself. This is not going to happen in 2024 when Medicare cannot pay it will happen before that date because in the history of the world markets have never allowed an actual end date to be reached before they throw up all over the impending disaster. To expect otherwise is to claim that literally everyone in the world is stupid beyond words.
May I point out that when Medicare's funds are exhausted that $1.1 trillion dollar expenditure (and rising) from last year will be immediately reduced by 75%? That's right -- they took in just $260 billion last fiscal year in Medicare taxes but spent four times that amount. If you think the government can immediately add $800 billion to the deficit without interest rates spiking to 10% or more overnight -- which instantly crashes the markets and government both -- you have rocks in your head.
Exactly when the markets will blow up is not determinable in advance but that it will happen is an absolute certainty. Once it happens there will be no orderly path available to the government or anyone else to stop or mitigate the damage since the entire problem with the market throwing up on such an event is that confidence in the ability and desire of government to address the issue will have been irretrievably lost.
I will remind you that in 2008 the housing sector and frauds in a small part of it, centered in a few "hot" markets such as Florida and California, caused the Stock Market to lose well over half of its value. This was due to scams in perhaps 3% of the US Economy.
This blowup will be not in 3% of the economy but rather nearly 20% of it and thus will be six times as bad.
The market will not lose 50% of its value, it will lose 90% or more of its value.
GDP will not decline a few percent, it will decline 20% or more.
We will not lose a few million jobs, we will lose 20% or more of the jobs in our economy.
There will not be a couple of investment banks that fail; all of the money-center banks will fail as will all businesses that have any sort of material debt exposure. That's every large bank, the majority of regional banks and more than half of the publicly traded firms in the United States.
There will not be a few people who lose everything -- homes, jobs, savings and retirement -- up to a third of Americans, or perhaps as much as 100 million people, will lose everything.
The odds that some sizable percentage of that 100 million people will turn to extreme and uncoordinated violence is very high. A third of the nation may well end up hungry and homeless. If you think the government will be able to control or put that down think again; the number of angry, willing-to-do-it individuals will be several times the size of the military and police forces combined while federal, state and local government ability to pay said forces will have collapsed. How many cops will show up for work when their paychecks bounce and they know going to work means their family is defenseless? How many members of the military will suddenly decide that the Constitution means something and orders be damned? There's no way to know the answers to those questions in advance, but I assure you -- you're not going to like the answers.
You think this can't happen here? Oh yes it can. It has in many other nations, some with ridiculous amounts of very valuable natural resource -- such as oil. Venezuela anyone?
If you think this is not serious enough to get off your ass now and demand resolving the problem with something as immediate and forceful as this law, backing up that demand with whatever is necessary to make it happen, and yes, I do mean whatever is necessary, then you are through your inaction giving consent to an all-on collapse of our society and government within the next six years.
The market's determination that you're un-serious and don't give a crap, at which point the option to address this problem peacefully and politically will expire, could come at any time including today -- and it is certain on the present path that the hard end-point will arrive before the end of Trump's second term when Medicare runs out of money.
This is no longer an abstract issue that is at some point "far off" in the future.
It must be addressed now.
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Please post in Health Care Politics thread as well.
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The Green New Deal costs 3600 times more - to gain what, a hundredth of a degree less warming?
On a smaller scale of care with spending, he feds spend $613,634 to boost “intimacy and trust” of transgender women and their male partners.
The list linked at Drudge:
https://news.grabien.com/story-things-democrats-have-funded-cost-more-border-wall
“Rural Utility Service.” This program costs taxpayers $8.2 billion/year and has no actual purpose after its original intent — bringing electricity to rural communities — was long ago achieved. It’s now being used to bring broadband access to small communities (usually with populations of less than 20,000). However there’s no indication the “beneficiaries” of this expensive government agency actually appreciate the program, and the majority of its projects are not completed on time or within budget.
Sugar Subsidies. America, as Democrats frequently intone, faces a health crisis. What they don’t tell us is that it’s largely of their own making, as Congress subsidizes the production of unhealthy foods like sugar and high-fructose corn syrup. Eliminating sugar subsidies alone would save $6 billion, enough to fund the border wall; it would also have the added benefit of helping curb the nation’s obesity epidemic.
Community Development Grants. These grants were created in the 70s to revitalize failing American cities. The program has almost always been plagued with dysfunction, with grants going to wealthy communities and other recipients failing to produce “accountability and results.” Citizens Against Government Waste reports that even President Obama called for reining in the program. It’s elimination would save $15 billion over 5 years.
The United Nations. As the United Nation’s largest contributor, the U.S. in 2016 donated $10 billion to the U.N. As CAGW notes, reducing these contributions just 25 percent would create a savings of $12.5 billion over 10 years. Of the money Congress appropriates for the United Nations, $5 million taxpayer dollars are itemized for abortions in foreign countries.
Amtrak. Congress could sell Amtrak to the private sector where it would almost certainly be operated more efficiently, but instead it’s showered in billions of dollars of taxpayer subsidies. Over the next five years, these subsidies will cost $9.7 billion.
Unused Real Estate. Congress appropriates money to maintain federal real estate that’s not actually being used. Per CAGW, an October 31, 2017, CRS report found that, “In FY2016, federal agencies owned 3,120 buildings that were vacant (unutilized), and another 7,859 that were partially empty (underutilized).” Current laws require the government to undergo a series of steps before considering a sale of these buildings. Were selling this unused property prioritized, the 5-year savings are estimated at $15 billion. Simply maintaining the unused buildings annually costs $1.7 billion.
Foreign Aid. American taxpayers currently spend more than $50 billion a year helping develop foreign countries. Many of the recipients are not known for being America’s closest allies — such as Egypt, South Sudan, Uganda, South Africa, Russia, the Congo, Sudan, and Zambia — which raises the question of what Americans are receiving in exchange for all of this aid. Cutting these donations back just 10 percent would be enough to fund the wall.
Waste, Fraud, and Abuse. The Government Accountability Office estimates taxpayers are spending more than $137 billion annually on “payment errors,” which covers all manner of waste, fraud, and abuse within Social Security, Medicare, and Medicaid. The feds could implement the same kind of fraud protections credit card companies used to ensure against abuse, but don’t. In fact, Congress has gone in the opposite direction, winding down the program intended to police fraud within Medicare, the so-called Recovery Audit Contractor. In other words, Congress is knowingly funding tens of billions of dollars of fraud annually.
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This poll is not bad.
Most work in government for the security so the fact their paychecks are delayed - no surprise about that but then most of us would not be happy with it.
Only 54 % blame Trump - that is a surprise:
https://www.yahoo.com/news/poll-shows-federal-workers-dont-prefer-border-wall-getting-paid-155101845.html
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Speaking of Leftist misnomers, "net neutrality" always meant government control of the internet.
https://www.investors.com/politics/editorials/net-neutrality-ajit-pai-internet/
[Also https://www.bostonglobe.com/opinion/2018/12/28/year-after-net-neutrality-repeal-internet-alive-and-well-and-faster-than-ever/AoVm2iZI9Jxs0ZzZFXsOfM/story.html]
EDITORIALS
One Year Later, 'Net Neutrality' Zealots Proved Dead Wrong
FacebookTwitterLinkedInShare Licensing
1/04/2019
Deregulation: A year ago, "net neutrality" zealots warned that its repeal would spell doom for a "free and open" internet. They could not have been more wrong.
Net neutrality mania was so intense that one year ago FCC Chairman Ajit Pai had to cancel his appearance at the Consumer Electronics Show because of death threats he'd received. That was the same day the FCC published its final rule repealing "net neutrality."
So-called experts predicted that removing this cumbersome Obama-era regulatory scheme — which granted the FCC virtually unchecked power over internet providers — would lead to the demise of the internet.
Horror Stories
Repealing "net neutrality" regulations "would be the final pillow in (the internet's) face," said The New York Times. The ACLU said it "risks erosion of the biggest free-speech platform the world has ever known." CNET declared that "net neutrality repeal means your internet may never be the same. CNN labeled repeal the "end of the internet as we know it."
[I can't believe CNN got it wrong!]
One of the Democratic commissioners on the FCC claimed that repealing "net neutrality" would "green light to our nation's largest broadband providers to engage in anti-consumer practices, including blocking, slowing down traffic, and paid prioritization of online applications and services."
There were protests and lawsuits. The biggest companies on the internet mounted online campaigns. Democrats vowed to make "net neutrality" a major campaign issue.
What Actually Happened
A year later, none of the horror stories came true. In fact, average internet speeds climbed by roughly a third last year. The number of homes with access to fiber internet jumped 23% last year, according to the Fiber Broadband Association.
Oh, and "net neutrality" was a nonissue in the Democratic midterm campaigns. One party official said that Dems didn't campaign on it because: "It's not something that people bring up in their top list of concerns."
In a statement last week, Pai said that, "the FCC's light-touch approach is working."
Meanwhile, at this year's CES, the industry will highlight the promise of 5G internet, which allows speeds 100 times faster than the current wireless networks. D-Link plans to showcase a 5G router that will let homeowners cut the cord and still get speeds 40 times faster.
Promise of 5G
Not only will speed climb exponentially, but 5G will inject still more competition in the ISP market. Even "net neutrality" advocates should be willing to admit that there's no need for a massive federal regulatory system in a highly competitive market, since no internet provider would dare throttle or block sites for fear of losing customers.
What we did learn over the past year is that the real threats to a "free and open" internet aren't the ISPs, but the self-appointed internet censors at Google, Facebook and Twitter.
The only question that remains is whether those "net neutrality" zealots will apologize to the public for repeatedly crying wolf.
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https://www.bloomberg.com/news/articles/2019-01-28/another-year-another-1-trillion-in-new-debt-for-u-s-to-raise?utm_campaign=socialflow-organic&utm_content=business&utm_source=facebook&utm_medium=social&cmpid=socialflow-facebook-business&fbclid=IwAR2cIJ1g7GM69YU-YdR4xaeaHajkpLVkhpjn9Pn93r52-FlLHZ2gNKB-Bsw
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I loved the speech overall but they have to be kidding with this.
When we are 22 + trillion in debt :
https://www.cnbc.com/2019/02/06/americans-are-wary-of-paying-for-trumps-family-leave-proposal.html
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I know, I know. Seriously Donald?
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Suddenly announced.
Why should not this be done by private charitable donations?
https://townhall.com/tipsheet/bethbaumann/2019/02/09/ca-survivors-of-las-vegas-shooting-to-receive-multimillion-grant-from-doj-n2541117
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The applicable legislation is already on the books.
Bad political juju to fuk with it here.
Some days you eat the bear, and some days the bear eats you.
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https://fee.org/articles/how-government-guaranteed-student-loans-killed-the-american-dream-for-millions/?fbclid=IwAR193K_7zFyNSIbEbqbT2qJdRqzkezfRBOiBLnkWb--znRulg4oK1RX4Uhw
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I am pleased to know tax dollars are being used to promote Mexican culture in the Fernando Valley so the illegals can have fun:
https://www.judicialwatch.org/blog/2019/03/wasteful-spending-in-midst-of-22-trillion-national-debt-mariachi-training-soviet-wine-study/
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http://fortune.com/2019/04/10/the-deficit-is-growing-far-faster-than-predicted/?fbclid=IwAR272qhedUxjHwiPk6pYh9dj6GrIURfJZ0Qz9S4v0IWf07QzDzgpcYgWhck
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It's hard to find good charts on spending. The black line labeled "Current Law" is what I assume CBO uses. Percentage of GDP is one way to look at it.
(http://www.crfb.org/sites/default/files/fig%203%2075%20year.JPG)
Hard to believe no one wants to get a handle on this.
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"Hard to believe no one wants to get a handle on this",
like trillions on "infrastructure"
you mean like medicare for all
free tuition
I got a kick out of the Wall Street today somewhere saying we should not increase taxes to pay for college but take from the the endowments of these colleges.
Everyone all for it as long as someone else pays . - anyone but the people going to school.
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https://freebeacon.com/politics/expert-doubling-income-taxes-wont-even-cover-medicare-for-all-costs/
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One reason doubling the income tax rate won't pay for it is because it wouldn't hardly bring in any more money.
Double the top 40% rate? To 80%?? Sounds like what France did and abandoned it because it didn't work.
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“The lessons of history, confirmed by the evidence immediately before me, show conclusively that continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit. It is inimical to the dictates of sound policy. It is in violation of the traditions of America.”
- FDR 1935
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Trillions to infrastructure or trillions to redistribution. Choose one.
We can't agree on how to close the deficit much less pay off the debt. Liberals supported trillion dollar deficits under Obama and criticize smaller deficits under Trump. Obama thought Bush deficits were un-American, unpatriotic. He was probably right, then he doubled them. Since taking the House, Democrats have had no plan to narrow the deficit, just proposals to end the surge in growth, our only path out of it. Republicans spent like drunk sailors under Bush and have made no effort to reform entitlements or hold the line on spending under Trump.
Common economic sense tells us that full employment and healthy economy is, at a minimum, no time to run bigger deficits than we already are. That means that from here forward we have to make choices. For each new big government proposal, free college for all for example, we need to ask the simple question, 'instead of what'?
The Left loves the Trump idea of two trillion in new infrastructure spending. Now ask the budget question, instead of what?
You want more money for bridges, highways, airports and storm sewers? Instead of what?
72.2% of federal spending (2017) is payments to individuals.
https://www.concordcoalition.org/issue-brief/troubling-trend-federal-investment-spending
You aren't making something a priority if you are just proposing to do it in addition to increases in everything else.
Want free health care? Instead of what, instead of social security? Try proposing that. Want free college? Instead of what, all safety net programs? Want a massive federal infrastructure superstructure? Fine, instead of what, instead of all redistribution programs? Want it all? You're going to have to grow the economy like we've never seen before which means, ironically, even lower tax rates and lower burden of government.
It's a contradiction. The more public sector you want, the smaller you'll have to make the burden of the public sector on the private economy.
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"Governments generally get in trouble because they can’t resist over-spending when the economy is doing well and generating lots of tax revenue.
The way you solve this problem is not with a balanced budget requirement (which often serves as the justification for tax hikes), but some sort of spending limitation rule."
- Dan Mitchell
https://danieljmitchell.wordpress.com/2015/05/28/proven-reforms-to-restrain-leviathan-government/
See spending caps in Hong Kong and Switzerland. The US should have federal spending caps. Too bad nobody gives a rip about fiscal responsibility. Millenials should care the most about spending, long term debt and the burdens on future generations but instead we tell them the world is going to end in 9.75 years.
(https://i2.wp.com/freedomandprosperity.org/wp-content/uploads/2019/05/May-25-19-Debt-Financed.jpg?zoom=2)
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67% of the federal budget is transfer payments to individuals, not governing.
https://slate.com/news-and-politics/2019/06/george-will-conservatism-trump-warren.html
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Law of holes, if you find yourself in one, stop digging.
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67% of the federal budget is transfer payments to individuals, not governing.
https://slate.com/news-and-politics/2019/06/george-will-conservatism-trump-warren.html
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Law of holes, if you find yourself in one, stop digging.
We won't, until we hit lava.
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I do wish Trump would at least mention the debt.
I don't think I have ever heard him even mention it - not once .
OTOH it wouldn't make any difference if he did .
The Left would just blame it all the military rebuilding
and then make it about a too expensive wall etc
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Revenues up 2%. WHO KNEW??!!
Spending up 9%.
Deficit up 39%. (19% if not for some calendar/timing changes.)
The first eight months of fiscal 2019, which started Oct. 1.
[It's the spending stupid.]
https://www.wsj.com/articles/u-s-budget-deficit-grew-39-in-first-eight-months-of-fiscal-year-11560362539
Posted previously, 67% of federal spending is transfer payments to individuals, not governing or defense. No one (including Trump) is addressing the problem.
Both parties are to blame but Democrats taking the House made things worse in several ways.
WHY DOESN'T SPENDING GO DOWN WHEN EMPLOYMENT AND WAGES ARE UP?
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Revenues up 2%. WHO KNEW??!!
Spending up 9%.
Deficit up 39%. (19% if not for some calendar/timing changes.)
The first eight months of fiscal 2019, which started Oct. 1.
[It's the spending stupid.]
https://www.wsj.com/articles/u-s-budget-deficit-grew-39-in-first-eight-months-of-fiscal-year-11560362539
Posted previously, 67% of federal spending is transfer payments to individuals, not governing or defense. No one (including Trump) is addressing the problem.
Both parties are to blame but Democrats taking the House made things worse in several ways.
WHY DOESN'T SPENDING GO DOWN WHEN EMPLOYMENT AND WAGES ARE UP?
Because we have become a feckless and irresponsible people, and future generations will rightfully curse us for it.
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GM wrote :
"Because we have become a feckless and irresponsible people, and future generations will rightfully curse us for it."
Don't worry , "Genius" George Will has it all figured out:
We need open borders as such and take in as many immigrants as we can "absorb" to pay for my Social Security .
Hey genius did it occur to you these immigrants are costing more than they pay in - medical care , food stamps , medicaid , free schools,
though they keep our supply of drugs high though I would have no idea if that relates to cheaper prices to keep the dirtball drug addicts happy.
Excuse me, I mean those suffering from their disease of brain addiction and need for social approval........
I wouldn't read Will's book if it were free.
LIke I asked , where in the Constitution is it we need to power the US forward on a Ponzy scheme?
Which reminds me I want to get to the local Barnes and Noble to buy "Unfreedom of the Press" this weekend.
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https://www.westernjournal.com/dick-morris-deficit-matters-little/?utm_source=facebook&utm_medium=deepsix
I guess we should ignore unfunded liabilities too:
https://www.realclearpolitics.com/articles/2019/01/10/unfunded_govt_liabilities_--_our_ticking_time_bomb.html
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https://www.conservativereview.com/news/indistinguishable-from-democrats-daniel-horowitz-tells-mark-levin-whats-behind-republicans-debt-exploding-budget-deal/
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https://www.stamfordadvocate.com/business/article/President-Trump-tells-aides-to-look-for-big-14109681.php
OTOH
can Trump win with rational budget cuts against a Party hell bent on spending increases and claiming they will only tax the "rich" promising everything for "free".
Hard to win when the crats always put together enough victims promising to give them other people's money etc.....
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But of course and why doesn't every President think of this, we'll cut the budget later.
He avoids all the political pain of cutting the budget, then runs on spending cut promise. He is doing what he does best, stealing the tactics of the Left and using against them. Only he actually could cut spending if he won decisive majorities - and why wouldn't he.
Trump could not make substantial cuts the first two years with R majorities - because of the weal economy that Obama left him, record no. people on food stamps for example. He couldn't cut spending these two years because of the Pelosi / Resist House. Paraphrasing Obama to Medevedev, he will have more leverage to do that after his reelection.
Could be true.
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Speaking of the Dem candidates who wish to replace Trump, how many will blame Trump and blame "tax cuts" for the deficit and how many will look at real data and offer real solutions. You already know the answers are all and none. If not for the Democrat House, a result of the fake Russia collusion story, Democrats could blame Trump for this and have it stick.
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https://issuesinsights.com/2019/08/13/its-the-spending-stupid/
The current federal budget fiscal year still has two months to go, but the deficit is already bigger now than it was for all of last year, and heading to more than $1 trillion. Naturally, the Trump tax cuts are getting the lion’s share of the blame.
But the latest data on spending and revenues from the Treasury Dept. make it abundantly clear that it is out-of-control spending, not tax cuts, that are driving the deficit upward. Unfortunately, no one in Washington seems to care.
From October last year through July this year, total revenues climbed 3.4%. That’s faster than overall GDP growth, which means revenue growth is now outpacing the economy.
Corporate taxes climbed 3% [Doug: How is this possible?], payroll taxes are up by more than 7%. Both are signs of a healthy economy and a strong labor force – which is exactly what backers of the tax cuts predicted would happen.
True, customs duties are up sharply as well, thanks to President Donald Trump’s tariffs, but they account for a relatively small portion of federal revenues.
Now take a look at the spending side.
Federal outlays have rocketed up 8% so far this fiscal year, compared with the same months last year. That means spending is climbing at about six times the rate of inflation.
A chunk of this is from the increase in Defense spending, which is up by close to 10% compared with last year.
But two-thirds of the entire increase in spending is due to just other three items in the budget: health care spending (Medicare, Medicaid, and Obamacare), Social Security, and interest payments on the debt.
In other words, it’s entitlement spending – and more specifically, health care spending – that is driving up the deficit, not tax cuts.
What’s the response to this among our esteemed leaders in Washington? Nothing. No, worse than nothing. Another spending spree.
The latest bipartisan budget deal, which Trump signed earlier this year, hikes spending above its already projected growth levels by $320 billion over the next years. Defense spending got a boost, but only in exchange for an even bigger hike in domestic spending.
Meanwhile, every Democrat running for president is busy trying to find new ways to double or triple the size of the federal government, while pretending that it all can be paid for simply by making the rich pay their “fair share.”
The truth is that getting the deficit under control is not hard. It doesn’t require tax hikes, just a modicum of spending restraint.
As we noted in this space not long ago, there were two times in recent years when Congress managed to control its spending urges, and both times saw dramatic drops in the deficit. The first was after Republicans took control of Congress under President Bill Clinton. The second was when Republicans took control of the House under President Barack Obama. The numbers tell the story:
Overall spending growth averaged just 3% from 1994 to 1999. The economy boomed, and the budget went from a $255 billion deficit to a $236 billion surplus in just six years.
When Republicans regained the House in 2011, they again hit the brakes on spending, to the point where outlays were lower in 2014 than they were in 2011. The deficit collapsed from $1.3 trillion to $441 billion in four years.
Unfortunately, in every other year, neither party could control its urge to splurge.
Trump has promised to get tough on spending next year. That’s how it always works in Washington. Spend like a drunken sailor today, and promise to sober up tomorrow.
The problem is that with the national debt now topping $22 trillion, and scheduled to go up another $13 trillion in just a few years, tomorrow will be too late.
Note to Readers: Issues & Insights is a new site launched by the seasoned journalists behind the legendary IBD Editorials page.
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[Doug] Spending should be LOWEST during times of full employment - even under the Left's Keynesian rules. When you are a trillion dollars in deficit before heading into slower economic times you have removed the ability to add fiscal stimulus as a policy tool when the business cycle inevitably changes.
Oh well. We warned them, over and over and over again on these pages.
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Potential Two Liner of the Day:
“How ’bout a demonstration of government regulation working?
You guys successfully ban telemarketers and then we’ll talk.”
Hat tip Powerlineblog,com
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Big story yesterday, did not come up in the debate - except to hear 10 people's ideas on how to expand it.
https://www.wsj.com/articles/u-s-deficit-tops-1-trillion-in-first-11-months-of-fiscal-year-treasury-says-11568311201?mod=hp_lista_pos5
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Strange to concede Trump will be the only candidate to address the budget deficit (in his 2nd term).
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And if Dems do discuss it
it is ALWAYS we need to tax more to pay for the deficit
NEVER spending cuts
Some Dem last night made some comment how Trump "exploded the debt"
( implying the tax cuts - as though this money was rightfully the politicians all along)
when we all know the real problem with the debts locally and nationally are entitlement programs.
Wangs money lottery give away with what? his personal money , campaign money (illegal likely).
If he would do this prior to being elected than one can only imagine what this guy plans to do by taxing us.
he probably has a plan to tax 49 % of the population so he can use that money to buy the other 51% .
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ccp: "And if Dems do discuss it
it is ALWAYS, we need to tax more to pay for the deficit"
...
"tax 49 % of the population so he can use that money to buy the other 51% ".
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Right, raise SOMEONE ELSE'S taxes. Someone else, the evil productive people will easily pay more and you will receive more and more free stuff.
Isn't that exactly what you would promise if you were a smake oil salesman, Bernie Madoff, et al.
Not to mention that putting higher rates on the higher incomes DOES NOT BRING IN MORE REVENUE. We have proven that over and over and over. Why do they keep denying math, science and history?
Putting a higher tax on everyone, SKIN IN THE GAME, is the only way you actually call the question of whether or not we want bigger and bigger government and smaller and smaller personal incomes. Otherwise it is, cut and cap the spending stupid.
Any slimeball scam artist [Chavez, Castro] can promise free shit from others to take power. The question is, who can see through it.
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Monday Morning Outlook
________________________________________
Fear the Spending, Not the Debt To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 9/23/2019
Never underestimate the ability of politicians to mess up a good thing. They're certainly trying in Washington, D.C.
Unfortunately, many people are concerned about the wrong thing. Nice even numbers fascinate people, and through the first eleven months of this fiscal year (October 2018 through August 2019), the U.S. budget deficit was over $1 trillion ($1.067 trillion to be exact), up 19% versus the same eleven months the year before. The government usually runs a surplus in September, so the budget deficit for full Fiscal Year 2019 should come in at roughly $950 billion – that's close enough to $1 trillion for government work.
Meanwhile, the public debt is at a record high $22.5 trillion, and the Congressional Budget Office projects roughly $1 trillion annual deficits as far as the eye can see. So, it's easy to understand why so many are concerned. Some even think the US is headed for bankruptcy. And, unlike with Greece, there's no one big enough to bail-out the US.
Here's what they're missing: in spite of record debt, the net interest on the debt should finish the year at 1.8% of GDP. For perspective, that's lower than it ever was from 1980 through 2001, during which it averaged 2.7% of GDP – and some of those years saw budget surpluses.
Moreover, net interest relative to GDP is unlikely to rise dramatically anytime soon. Imagine we wake up tomorrow morning and Treasury yields are miraculously at 4.0% across the entire yield curve, from short-term securities to long. That would be well above the 2.5% average interest rate taxpayers already pay on all marketable Treasury debt outstanding, including the securities issued many years ago.
Moving from 2.5% to 4.0% is a 60% increase in interest costs, which also means that, once we roll-over enough debt, the interest burden relative to GDP would rise by 60%, as well. But a 60% increase from 1.8% of GDP, would put us at 2.9%, very close to the long-term average in the 1980s and 1990s. And, interest rates aren't going to 4% in the real world anytime soon, plus it takes time for the debt to rollover.
The Treasury Department could use the current era of low long-term interest rates to lengthen the maturity of the debt. The best idea we've seen is for the Treasury to issue perpetual inflation-indexed debt and then step aside and let the private sector slice and dice these instruments into bespoke securities. The market could create everything from plain vanilla 10-year Treasury notes, to 50-year zero-coupon debt, to debt instruments that don't pay interest for the first twelve and a half years and then pay every six months after that.
But here's another reason not to fear the current debt of $22.5 trillion: the assets of all US households combined are $129.7 trillion. Yes, they have debts worth $16.2 trillion, but that still leaves a net worth of $113.5 trillion.
Now let's imagine households paid off not only their own debts but the federal government's, as well. That would have left them with $91.4 trillion in mid-2019. That's about 4.3 times GDP. From the early 1950s through the mid-1990s, this ratio – the net worth households would have after paying off their debt and the national debt – hovered between 2.8 and 3.3 times GDP. Now it's near a record high.
None of this means US fiscal policy is in a good place; it's just that the debt is manageable, we're not going bankrupt. The real fiscal problem is the level of spending and the need to fix entitlements: Social Security, Medicare, Medicaid, and "Obamacare." If we don't fix these programs, then in the next few decades the federal government will be spending relative to GDP in a normal year as much as it was spending at the peak of the crisis after the last recession. And when all we hear about is the deficit, it takes away the focus on spending and lets politicians sell the idea that it's all excessively low taxes that cause it, even though tax collections are at an all-time high.
The problem is that out of control spending gradually erodes the character of the American people. It pushes citizens toward dependence on government checks for their income, rather than their own efforts. In a democracy, we want our fellow citizens to know the value of hard work, shrewd investment, and entrepreneurship. Having too many people living off taxpayers is no way to conserve those traits.
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"out of control spending gradually erodes the character of the American people. It pushes citizens toward dependence on government checks for their income, rather than their own efforts. In a democracy, we want our fellow citizens to know the value of hard work, shrewd investment, and entrepreneurship. Having too many people living off taxpayers is no way to conserve those traits."
--------------------------------
Wesbury is right to focus on the spending that is destroying us and not the debt that is manageable. But the problems are related. People see no limit on spending when they don't have to (directly) pay for it.
People in some 'blue' areas used to have a pride that we have (relatively) high taxes but we have great schools, roads, parks and quality of life. We are so far past that now. The Leftist argument (replacing Democrat blue) is that you can have everything free and someone else (or no one) will pay for it. Now we have entire sections of the cities and neighborhoods that are outside of the productive sectors of the economy.
"tax collections are at an all-time high" - Who Knew?!
People have to know the facts before they can make the right choices. We already tax the rich and the corporations as far as we can without them shifting behavior and leaving. We learned that (again) during the Obama years. From here we can increase public spending by having everyone pay more which means raising taxes dramatically on the middle class and on the poor. Notice that Democrats in the debates (the deniers of math) are not proposing that - while they propose tens and tens of trillions of new spending.
On the debt and the interest rates, Wesbury is only right about the short term. This debt is permanent and growing rapidly. The idea that interests can't go WAY up again seems greatly short sighted.
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https://www.yahoo.com/finance/news/why-president-trump-is-falling-short-on-eliminating-us-deficits-120027260.html
Of course the leftist rant:
"President Donald Trump’s “theory is that lowering taxes without lowering government spending will help to create growth,” Edelman says. “The growth will result in more tax revenue which will pay for the costs of running the government.”
no mention of Democrats wanting to increase taxes and only reduce spending on military while expanding government everywhere else.
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The spending increases in great part are due to the President being forced to agree to domestic spending increases in order to get necessary military increases.
The point about the deficit of essentially $1T while we have the economy running full tilt is a vital one!!!
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https://www.yahoo.com/finance/news/why-president-trump-is-falling-short-on-eliminating-us-deficits-120027260.html
Of course the leftist rant:
"President Donald Trump’s “theory is that lowering taxes without lowering government spending will help to create growth,” Edelman says. “The growth will result in more tax revenue which will pay for the costs of running the government.”
no mention of Democrats wanting to increase taxes and only reduce spending on military while expanding government everywhere else.
Crafty is right, the compromises on spending in a divided government are, best case, increases on everything and widening deficits.
My take:
Balancing the budget requires economic growth and spending restraint. The economy gets back on track, more than anything factor, when the trade issues get resolved. Our only chance at spending restraint starts with a widely won conservative victory in 2020. If we have divided government or RINO control, the status quo just gets worse.
In the first year of Trump we saw deregulation strengthen the economy. In year two tax reform further strengthened the economy. With those in place, the trade offensive was launched. Trump had success with Canada and Mexico and some success with Europe. The fight is now mostly with China.
The above steps strengthened our position in the trade showdown and the tariffs are designed to be temporary, a necessary detour along a long term path. They hurt US growth for now and have five times the hurt on China. China will settle if the US doesn't cave first. We can judge results now, stalled growth and deficits getting worse, but the end result of this is not in.
On the other side we have, let's say, $50 Trillion in new spending on top of an out of balance $4 trillion budget. They offset government paid everything with tax hikes that already proved to bring in no new revenue. The first step is to defeat these ideas in the public debate and at the ballot box. The second step is to get Republicans with new power to govern responsibly. The betting odds are steep but this is our only shot, IMHO.
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The Bipartisan Spending Party
Congress ends its year with a blowout for everyone but taxpayers.
By The WSJ Editorial Board
Dec. 22, 2019 5:23 pm ET
The U.S. Capitol in Washington, D.C. PHOTO: JULIO CORTEZ/ASSOCIATED PRESS
Congress has left town for the year but alas not before another bipartisan spending party that has typified the Trump Presidency. The numbers deserve notice because they are likely to have more long-term impact than impeachment.
Lawmakers whooped through $1.4 trillion in discretionary spending for the rest of the fiscal year with little debate or objection. A bipartisan deal on the budget outlines in August was supposed to give Congress time to negotiate 12 individual spending bills, but as usual they couldn’t agree so they piled it all into two bills totalling more than 2,300 pages on Monday. A day later they added a list of tax subsidies, and by Friday it was law. Congress can act fast when it is greasing its own wheels.
The political secret to this bipartisan blowout is that the Republicans get more for defense in return for giving Democrats more for social welfare. An $860 billion national security bill gave President Trump $1.375 billion for his border wall—despite Democratic vows that he’d get none—and modest flexibility in where the wall can be built. The White House also won $738 billion for defense, $22 billion more than last year, and funding to create Mr. Trump’s Space Force.
Democrats cashed in with $555 billion for domestic priorities. They scored $25 million for “gun violence research,” $425 million in election security grants, and more money for Head Start and early childhood education. They increased funding for the Environmental Protection Agency and Medicaid for Puerto Rico.
Farm state Members added $1.5 billion in disaster relief, on top of the $3 billion Congress passed earlier this year. GOP Senator Chuck Grassley delivered a big tax break for Iowa’s biodiesel blenders, and the tax bill also showers largesse on distilleries, race-horse and Nascar owners, short-line railroads, and renewable energy. In return, Republican tax writers were able to pass a small list of “corrections” to their 2017 tax reform.
The only good tax news was agreement to repeal, permanently, three tax increases that Democrats had passed to make the phony ObamaCare numbers look real in 2010. Democrats were keen to repeal the so-called Cadillac tax on high-cost health plans. Unions have negotiated rich benefits and don’t want to be taxed on them. Republicans in turn were able to repeal permanently the taxes on medical devices and health insurance.
The Export-Import Bank was reauthorized for seven years, while the egregious federal flood insurance program was extended again through September without reform. West Virginia Senator Joe Manchin landed his bill requiring taxpayers to underwrite the pensions and health care of retired coal miners.
Senator Lisa Murkowski was able to protect Alaskan salmon from competition. Speaker Nancy Pelosi included an earmark for the Presidio Trust, which maintains a San Francisco park. Senate Majority Leader Mitch McConnell raised the minimum age to buy tobacco to 21.
The Club for Growth notes that the bills increase discretionary outlays by more than $175 billion over last year, and budget watchdogs estimate the higher spending caps Congress agreed to this summer will add $1.7 trillion to the national debt over 10 years. Debt held by the public as a share of GDP is close to 80% and rising, 10 years into an economic expansion.
The budget problem isn’t a shortage of revenue. CBO says tax receipts grew 4% last fiscal year, through September, and 3% in the first two months this year. Economic growth is feeding the Treasury. But spending is growing much faster: 8% last fiscal year, more than four times the inflation rate, and 6% in October and November this year.
In addition to the latest discretionary bills, spending on Social Security (6%), Medicare (6.1%) and Medicaid (9.2%) continue to soar this year. Neither party shows any inclination to do anything about those programs, except expand them. Mr. Trump may yet join Barack Obama in the spending record books.
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https://www.washingtontimes.com/news/2020/feb/9/trump-budget-cuts-44-trillion-medicare-discretiona/
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Key to making this argument is the baseline budgeting point: Slowing future increases is NOT a cut!!!
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Key to making this argument is the baseline budgeting point: Slowing future increases is NOT a cut!!!
That's right, but you'll never convince the other party of it. Trump's opponents are talking about new programs in the tens of trillions along with tax rate increases that would kill growth and bring in no new revenue. Our only chance of containing the spending is to reelect this big spending President and hope his current words mean more than his actions so far.
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"Key to making this argument is the baseline budgeting point: Slowing future increases is NOT a cut!!!"
"That's right, but you'll never convince the other party of it."
Of course, but it is the voters whom we must persuade! It may take a while, but we MUST persist and overcome!
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Key to making this argument is the baseline budgeting point: Slowing future increases is NOT a cut!!!
Famous people caught reading the Forum, Dan Mitchell of Cato / Heritage background follows up on Crafty's post:
https://danieljmitchell.wordpress.com/2020/02/10/the-medias-pervasively-dishonest-coverage-of-trumps-new-budget/
"Here are the three things you need to know.
1. The politicians created a system that automatically assumes big increases in annual spending, called a baseline.
2. When there’s a proposal to have spending grow slower than the baseline, the gap between the proposal and the baseline is called a cut.
3. It’s like being on a diet and claiming progress because you’re gaining two pounds each month rather than five pounds."
Please read the whole thing. This probably won't be re-printed in the NYT / Wash Post.
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Tomas Sowell: "Back in my teaching days, many years ago, one of the things I liked to ask the class to consider was this: Imagine a government agency with only two tasks: (1) building statues of Benedict Arnold and (2) providing life-saving medications to children. If this agency’s budget were cut, what would it do? The answer, of course, is that it would cut back on the medications for children. Why? Because that would be what was most likely to get the budget cuts restored. If they cut back on building statues of Benedict Arnold, people might ask why they were building statues of Benedict Arnold in the first place."
https://townhall.com/columnists/thomassowell/2013/03/05/budget-politics-n1525553
Dan Mitchell:
The “fireman first principle” – Describes how local government bodies (often coordinating with local politicians) will claim that firemen will have to be laid off and/or firehouses will have to close if there is any budgetary discipline. You can replace firefighters with cops or teachers if you want. The key point is to divert attention from the countless ways that local governments waste money by focusing on the few things that voters actually care about.
The “Washington Monument syndrome” – Based on a real-world example during the 1970s of the National Park Service claiming it would have to shut down tourist access to popular Washington-area sites if it was subject to fiscal restraint, the modern-day equivalent is President Obama scaring people with hysterical assertions about threats to food safety and airline operations.
https://danieljmitchell.wordpress.com/2013/03/05/thomas-sowell-exposes-dishonest-budgetary-scare-tactics-and-cartoonists-mock-obamas-hysteria/
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Federal revenues "are up 6%" and "expected to be 16.7% of GDP, not far off the 17.2% before the tax cut. The problem is that outlays are rising faster—to 21.6% of GDP this fiscal year, the most since 2012 and well above the Bush and late Clinton years." - WSJ 2-11-2020
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https://www.cnbc.com/2020/03/16/fed-says-it-will-offer-an-additional-500-billion-in-overnight-repo-funding-markets.html
At this rate the National Debt will heading towards 30 trillion
there could be no point of return
What the hell is Donald et all doing ?
And of course the Dems promising the free stuff crowd and anyone would vote for them more free "crises " benefits paid for by yours truly and other working Americans
I bought the new book :
https://www.cnbc.com/2020/03/16/fed-says-it-will-offer-an-additional-500-billion-in-overnight-repo-funding-markets.html
haven't read it yet
Read Arthur Crosby book around 1991 but this one is supposed to be an update
will read after I finish the bubonic plague book I am reading
one interesting fact from that book is the latest theory is that it was not yersinia pestis or plague but anthrax that jumped from cattle to the peasants in the rural areas that caused a lot of the death and destruction at the same time.
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The debt is much worse than that.
https://www.cnbc.com/2020/03/16/fed-says-it-will-offer-an-additional-500-billion-in-overnight-repo-funding-markets.html
At this rate the National Debt will heading towards 30 trillion
there could be no point of return
What the hell is Donald et all doing ?
And of course the Dems promising the free stuff crowd and anyone would vote for them more free "crises " benefits paid for by yours truly and other working Americans
I bought the new book :
https://www.cnbc.com/2020/03/16/fed-says-it-will-offer-an-additional-500-billion-in-overnight-repo-funding-markets.html
haven't read it yet
Read Arthur Crosby book around 1991 but this one is supposed to be an update
will read after I finish the bubonic plague book I am reading
one interesting fact from that book is the latest theory is that it was not yersinia pestis or plague but anthrax that jumped from cattle to the peasants in the rural areas that caused a lot of the death and destruction at the same time.
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(https://i2.wp.com/wilderwealthywise.com/wp-content/uploads/2020/03/COLLAPSE.jpg?w=500&ssl=1)
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For the record, the Fed money is loans.
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Buckle your seat belt for the trillion of new spending coming.
Which party was it again that was worried about deficits?
I propose a trust but verify with penalties, true need-based financial help program. You submit your true needs with rules and restrictions. Must be based on direct losses from the immediate crisis. If we find out later it is false or you had not disclosed or exhausted all other possible resources before turning to the federal government emergency fund for help, you must pay back all or double or triple damages depending on the circumstances of your case.
We need a commitment to reduce spending and reliance on government once the crisis passes. A trade of emergency funding now for fiscal responsibilibty later would cost us nothing. Any chance of that happening? No.
Pres. Obama's "emergency" spending of a trillion a year became permanent. It's still costing us in Trump's deficits.
I can't believe they lied to us. Right when they promised they had our best interests in mind.
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"Pres. Obama's "emergency" spending of a trillion a year became permanent"
I am thinking this all began with Katrina
Evey disaster now has to be met with massive cash
and Federal aid
programs
and the rest
Everything is flood the market with monopoly money we really don't have to help "working families"
and to avoid the political humiliation and pain CNN will inflict with a hot poker iron .
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https://www.breitbart.com/politics/2020/03/26/exclusive-sen-lindsey-graham-calls-on-governors-nationwide-to-develop-plan-to-fix-coronavirus-unemployment-loophole/
that the ticket...
let the Feds pay unemployment to people that is higher than they were making when they worked
what a swell deal
what idiot would bother to go back to work though most ill and get pain under the table when they can.
God only knows what other goodies are in here.
sorry but this whole thing is nuts.
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Normally I would be pissed off, but at this point it does not matter.
https://www.breitbart.com/politics/2020/03/26/exclusive-sen-lindsey-graham-calls-on-governors-nationwide-to-develop-plan-to-fix-coronavirus-unemployment-loophole/
that the ticket...
let the Feds pay unemployment to people that is higher than they were making when they worked
what a swell deal
what idiot would bother to go back to work though most ill and get pain under the table when they can.
God only knows what other goodies are in here.
sorry but this whole thing is nuts.
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Tele46 minutes ago
Warren Buffett, "I could end the deficit in 5 minutes," he told CNBC. "You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election. The 26th amendment (granting the right to vote for 18 year-olds) took only 3 months & 8 days to be ratified! Why? Simple! The people demanded it. That was in 1971...before computers, e-mail, cell phones, etc. Of the 27 amendments to the Constitution, seven (7) took 1 year or less to become the law of the land...all because of public pressure.
I am asking each addressee to forward this email to a minimum of twenty people on their address list; in turn ask each of those to do likewise. In three days, most people in The United States of America will have the message. This is one idea that really should be passed around.
*Congressional Reform Act of 2019*
1. No Tenure / No Pension. A Congressman collects a salary while in office and receives no pay when they are out of office.
2. Congress (past, present & future) participates in Social Security. All funds in the Congressional retirement fund move to the Social Security system immediately. All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.
3. Congress can purchase their own retirement plan, just as all Americans do.
4. Congress will no longer vote themselves a pay raise. Congressional pay will rise by the lower of CPI or 3%.
5. Congress loses their current health care system and participates in the same health care system as the American people.
6. Congress must equally abide by all laws they impose on the American people.
7. All contracts with past and present Congressmen are void effective 7/1/19. The American people did not make this contract with Congressmen. Congressmen made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term's), then go home and back to work.
If each person contacts a minimum of twenty people then it will only take three days for most people (in the U.S.) to receive the message. Maybe it is time.
THIS IS HOW YOU FIX CONGRESS!!!!! If you agree with the above, pass it on.
Less
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posted on my FB page (5,000 FB friends)
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I get it. They had to do something. It was going to be big. Real big. But it also needed to be surgically targeted and squeaky clean. This is neither.
It also needed to come with a commitment that if we spend a fortune on a temporary emergency spending now, it will have an ending and be followed with real restraint at the end of the tunnel.
As details emerge, much of this spending is hideous.
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The public at large doesn’t care. It’s magic money from Uncle Sugar. Utterly divorced from anything real.
I get it. They had to do something. It was going to be big. Real big. But it also needed to be surgically targeted and squeaky clean. This is neither.
It also needed to come with a commitment that if we spend a fortune on a temporary emergency spending now, it will have an ending and be followed with real restraint at the end of the tunnel.
As details emerge, much of this spending is hideous.
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https://www.wethegoverned.com/the-top-6-games-government-bureaucrats-play-when-faced-with-budget-cuts/
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https://www.dailymail.co.uk/news/article-8211291/U-S-government-gave-3-7million-grant-Wuhan-lab-experimented-coronavirus-source-bats.html
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Why would we do this?
what is the rest of the story
Do Chinese government give grants to us?
very weird.
did we expect cooperation?
did we get it? :x
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https://www.yahoo.com/news/trump-reportedly-said-reject-bailout-193313887.html
as someone who has organized crime go through packages whether it be fedex ups or usps
to me this is a big mistake
the only protection i have is the threat of serious jail time if anyone tampers with the US mail
no such threat if some ups hands off a box to the neighbor down the street to inspect first before it gets to me.
and No, I am not imagining this.
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"Free money". The self employed are having their businesses and incomes shut down and disrupted too. This is run by the states, but a lot of people qualify and are able to get 600 per week for 4 months as I understand it. Here is a link to the story in Calif:
https://sacramento.cbslocal.com/2020/03/24/umemployment-help-self-employed/
Enter Disaster Unemployment Assistance, which according to this fact sheet from the state, “is generally available to any unemployed worker or self-employed individual who lived, worked, or was scheduled to work in the disaster area at the time of the disaster.” [all 50 states]
https://edd.ca.gov/unemployment/disaster_unemployment_assistance.htm
https://edd.ca.gov/pdf_pub_ctr/de8714dua.pdf
Enter your honest information. The response may say your estimated benefit is zero. Then money starts appearing in your direct deposit account.
[We'll discuss how to pay for all this later.]
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https://www.newsmax.com/politics/pete-king-mcconnell-state-bailout-marie-antoinette/2020/04/23/id/964263/
no end
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https://www.newsmax.com/politics/pete-king-mcconnell-state-bailout-marie-antoinette/2020/04/23/id/964263/
no end
And bail out unfunded liabilities that were incurred long before the crisis.
Unfortunately, there is an end to $2 trillion a month deficits. G M already told us. Economic collapse.
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now we are up to 25 trill. (yea yea these are "loans" blah blah blah or we can go thirld world and government take stakes in the private sector)
we will never be able to pay all this back
like GM forewarned as well as the economist on mark levin , can't recall his name
the US will eventually default
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The 'loans' are not loans.
We will just go on with much higher debt than what was too high before, like a giant anchor or load pulling against us.
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https://www.westernjournal.com/employees-furious-owner-keeps-paying-made-unemployment/
should have met Steve Munchin at a hotel to get more
what a joke
-
Leftists have talked about "smart growth for at least a couple of decades while their adherents took over our schools, our cities, our governments, our metros, our healthcare and our transportation systems.
Roads and bridges deteriorated while kleptocrats diverted highway tax money over to mass transit, light rail, bike lanes and 'green spaces'.
Good for them. They transformed where we live and where we work, but now their model has failed. We can't all give up our cars and ride only on buses and government trains as they wished. If we do, we all die of a virus or get grounded indefinitely and locked in our homes every time a bat vomits on a lab worker on the other side of the world.
Factories will never again fully rely on 'just in time' manufacturing practices again, and government, if it was smart, would reverse its transportation policy. Raise the prices and tax the mass transit system to subsidize the much safer private automobiles. Encourage x-urb development where people are spread out and safer, and begin shut down core inner cities like NYC that pose unacceptable public health risks.
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"The FDA has been more of a hindrance than a help. It put the battle weeks behind by blocking the development of private‐sector virus tests, and its regulations have slowed production of hand sanitizer and facemasks."
https://www.cato.org/blog/fda-bureaucracy-grows-79-2007
---------------
The more the bureaucracy grows, the more problems they can block you from solving.
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https://dnyuz.com/2020/04/30/food-lines-a-mile-long-in-americas-second-wealthiest-state/
so I know I will be getting the tab for all this.
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https://www.yahoo.com/finance/news/new-bill-would-give-essential-workers-25-k-for-tuition-student-loans-175100129.html
pols falling all over themselves to dream up ways to get voters to vote for them
with other people's money
if you work at a grocery store here is 25K for a few months trouble
just no end to this.
just wait till a dem win power
taxes will go up thru the roof
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How Are We Going To Pay For All This? To view this article, Click Here
Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 5/18/2020
The largest federal budget deficit since World War II came back in 2009, as slower growth and increased government spending during the subprime-mortgage financial panic pushed the deficit to 9.8% of GDP. This year's the budget deficit will, quite simply, blow that record out of the water.
The Congressional Budget Office recently totaled up all the legislative measures taken so far - as well as the effects of a weaker economy (payments for unemployment benefits would be going up even with the recent law) - and they estimated this year's budget deficit at $3.7 trillion, which they forecast would represent about 18% of GDP.
As if that weren't enough, the House of Representatives just passed a bill that would add another $3 trillion to the debt. Although a detailed year-by-year cost estimate isn't yet available on the spending provisions, and the bill is dead-on-arrival in the Senate, which isn't going to rubber stamp that proposal, it's likely Congress and President Trump will end up compromising on some sort of additional measures that drive the deficit even higher. As a result, we're guessing the budget gap for the current fiscal year ends up closer to $4 trillion, or about 20% of GDP, the highest since 1943-45.
Given the economic crater generated by the Coronavirus and related shutdowns, as well as the heavy-handed legislative response, budget deficits will be enormous in the years ahead, too.
In spite of these sky-high numbers, it's important to recognize that the US government is not about to go bankrupt. The debt, while large (and growing), remains manageable. Before the present crisis, the average interest rate on all outstanding Treasury debt, including the securities issued multiple decades ago, was 2.4%. Now, our calculations suggest newly issued debt is going for about 0.25%, on average, which applies to both the recent increase in debt as well as portions of pre-existing debt coming due and getting rolled over at lower interest rates.
When debt that costs 2.4% gets rolled over at around 0.25%, that's a great deal for future US taxpayers. The problem is, the Treasury Department has been decidedly stubborn about not issuing longer-dated securities – think 50 and 100-year bonds – that would allow taxpayers to lock-in these low interest rates for longer, making it easier to spread out the cost of the extra debt incurred throughout the crisis.
As a result, if (or more like when) interest rates go back up, the interest burden generated by the national debt could go up substantially.
The best move the Treasury Department could make would be to use the recent surge in debt to overhaul the kinds of securities it issues. One idea that deserves exploring is replacing all securities with a maturity of over, say, 2 years, with "perpetual" or "interest-only debt." No principal would ever have to be paid on these instruments; they'd just pay the same nominal amount of interest twice per year. If we want to mix it up a bit, some debt could pay interest with gradual adjustments for inflation, just like TIPS.
This is not a new idea. The British issued perpetual bonds starting in the 1750s, and the last ones were retired in 2015. And although they're called "perpetual" bonds, and they're not callable, the Treasury Department could always buy them back at market prices to retire them.
Liquidity should not be an issue. Every time the government needs to issue longer-dated securities, it could simply re-open that very same security. Then the private sector could slice and dice them, on demand. If someone needs a 10-year zero-coupon Treasury note, just take the interest payment due in ten years and package that into a stand-alone security. Want something like a traditional 30-year? An investment firm can package a stream of interest payments over the next 30 years and tie it to a big package of payments due in exactly thirty years.
But it's not only the debt generated by recent fiscal measures that will burden future generations. Overly generous unemployment benefits are disincentivizing many unemployed workers from re-joining the labor force, which slows the process of accumulating skills. Widespread government-mandated closures also hinder skill-formation, as well as risk destroying some (or all) of the know-how embedded in business's operations.
Yes, the debt is a burden on future taxpayers. In this way, the fiscal response magnifies the effects of other responses to the Coronavirus. So far, the age of the typical person who has died with the virus has been about 80 years old. Right or wrong, our government - and society in general - has taken enormous measures to contain the virus to save the lives of our elderly population, and these moves have imposed enormous costs disproportionately borne by the younger generations who are out of jobs, school, and business opportunities. The very same group who will be paying the costs well into the future.
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50% of total GDPhttps://townhall.com/columnists/stephenmoore/2020/06/23/stop-the-madness-of-congressional-spending-n2571099
Dems : let the rich pay.
Trump : gotta get re elected
Republicans : not cool , but what we gonna do about it?
Vote Republican and you risk having them govern like Democrats. Vote Democrat and face the certainty of moving the country toward a Chavez, Maduro, CHAZ/CHOP, democratic violent socialism model. This is not an imaginary scare tactic of politics anymore.
The Left model has become anarchy combined with redistribution extortion "reparations" in place of level playing field governing.
We just just saw an already out of control spending and deficit problem explode with private shutdowns and public payments making up roughly none of the shortfall. The only chance of surviving this is 100% commitment back to free enterprise and economic growth for a very long and sustained period.
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you mean zero democrat affiliated entities got any bailout /loan money? none
if you read this article one would think this.
that said who could in any ones mind have seen this (sarcasm out loud):
https://news.yahoo.com/fresh-outrage-well-connected-firms-nab-us-loans-153140732.html
we are so screwed
the list keeps piling up.
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Thomas Sowell
@ThomasSowell
·
Aug 21 2020
If politicians stopped meddling with things they don't understand, there would be a more drastic reduction in the size of government than anyone in either party advocates.
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"Let’s fact-check some claims, shall we?"
https://gen.medium.com/stop-panicking-about-the-post-office-8bcd689b9601
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Good find.
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"US budget deficit hits record $3 trillion."
https://www.cbo.gov/system/files/2020-09/56552-MBR.pdf
Speaking to every voter, candidate and office holder...
WHAT'S THE MATTER WITH YOU PEOPLE!!??
Why do you pretend to take economics and policy making seriously - and then do THIS?
We spend more when we take in less. And we spend more yet when the economy is good. I can't even joke, what could go wrong?!
Default on our debt? Default to whom?? Then what?
They used to say in Venezuela 20 years ago, wealthiest nation in Latin America, "it can't happen here".
Yes it can.
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Doug,
don't worry be happy
the rich will pay for all this................. :-P
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I still don't understand why the special treatment is needed
and the endless spending
but I suppose if this can peel off 5 % of minority vote away from the communists then I guess I am for it all things considered:
https://www.conservativereview.com/trump-proposes-500-billion-plan-for-black-americans-promises-to-create-3-million-jobs-and-designate-the-kkk-and-antifa-as-terrorist-organizations-2647828428.html
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The 4th Turning has as one feature a Total Debt Reset. Whether by Default or some other reason. This time, it will be much more severe than ever before. But that is the nature of a 4th Turning.
Personally, after talking with people who worked in the FDIC many years ago, the Debt Reset one the dollar is likely to be "changing the color of the ink." Blueback instead of Greenback. But with everything else going on over the next decade, it will be just one more "crisis" thrown into the bucket.
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Pelosi is literally kicking DJTs ass
Repubs started at 500 bill to 1 trill
and Pelosi demanding 2.2 trillion (don't worry on the rich will pay)
DJT. is now up to 1.8 trillion
and caving all the way
wants to have checks go out with his signature on it.
I am not impressed
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Pelosi is literally kicking DJTs ass
Repubs started at 500 bill to 1 trill
and Pelosi demanding 2.2 trillion (don't worry on the rich will pay)
DJT. is now up to 1.8 trillion
and caving all the way
wants to have checks go out with his signature on it.
I am not impressed
The 'stimulus' is about politics, not economics. I think Trump is playing art of the deal here. While they try to cut their ad with the clarity that they want to send you free money and he doesn't, he circles them saying he wants larger checks than they do. Meanwhile it costs nothing because they are still hung up on funding their pet projects agenda. So off it goes to the voters while the urgency is dissipates.
-
"pet projects agenda."
I have read this too
but no details explaining what these are
found
-
choose a group
to regulate
for a giant bureaucracy
to regulate them
and m*make* them pay for it:
https://pjmedia.com/news-and-politics/rick-moran/2020/11/18/report-bidens-gun-tax-plan-would-cost-gun-owners-34-billion-n1156441
damn liberal politicians and bureaucrats and smug academics who dream this stuff up.
-
think this has to do with election ?
https://www.yahoo.com/money/democratic-leaders-back-bipartisan-coronavirus-stimulus-proposal-201334073.html
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https://www.zerohedge.com/markets/feds-admit-23-trillion-improper-payments?utm_campaign=&utm_content=Zerohedge%3A+The+Durden+Dispatch&utm_medium=email&utm_source=zh_newsletter
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https://www.zerohedge.com/markets/feds-admit-23-trillion-improper-payments?utm_campaign=&utm_content=Zerohedge%3A+The+Durden+Dispatch&utm_medium=email&utm_source=zh_newsletter
Also Feds: The vaccine is safe and effective!
-
https://www.wsj.com/articles/bidens-fast-track-to-reregulation-11608926882?mod=opinion_lead_pos1
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https://gab.com/system/media_attachments/files/061/064/380/original/c4fb058243fde11c.png
(https://gab.com/system/media_attachments/files/061/064/380/original/c4fb058243fde11c.png)
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https://gab.com/system/media_attachments/files/061/064/380/original/c4fb058243fde11c.png
(https://gab.com/system/media_attachments/files/061/064/380/original/c4fb058243fde11c.png)
Un-bleeping believable.
Does anyone remember the Sen Proxmire Golden Fleece awards? That was a Democrat (D-WI) who cared ewnough about wasteful spending to highlight the most egregious examples.
https://hill.house.gov/news/email/show.aspx?ID=2ILP7W3NXUU5E#:~:text=For%20those%20who%20don't,uses%20of%20hardworking%20taxpayers'%20dollars.
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unless these big corporations help democrats:
https://www.yahoo.com/entertainment/bernie-sanders-mcconnells-additions-covid-relief-bill-deal-breaker-070914715.html
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unless these big corporations help democrats:
https://www.yahoo.com/entertainment/bernie-sanders-mcconnells-additions-covid-relief-bill-deal-breaker-070914715.html
Good catch ccp. How about that. Bernie the populist purist supports special breaks for giant corporations who provide the financial support his political causes. Just like he accuses his opponents. What filth!
We can give legal protection to google, facebook, twitter, to propagate the Leftist messaging (but we can't give legal protection to nuclear power to provide safe, carbon free energy to save the planet).
https://www.cnbc.com/2020/10/27/twitter-google-facebook-ceos-prepared-statements-defend-section-230.html
Facebook, Google, Twitter CEOs to tell senators changing liability law will destroy how we communicate online.
Umm, they are the ones destroying how we communicate online.
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Companies step up to make sanitizer for the republic. Now the government imposes tens of thousands of 'fees' on them.
https://reason.com/2020/12/30/when-there-wasnt-enough-hand-sanitizer-distilleries-stepped-up-now-theyre-facing-14060-fda-fees/
You can't make this stuff up.
If you don't distrust and hate the government, perhaps you aren't paying attention.
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https://www.usatoday.com/in-depth/news/investigations/2020/12/30/unemployment-fraud-how-international-scammers-took-36-b-us/3960263001/
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It truly is remarkable
the courage these brave righteous politicians have in confiscation money from some to distribute to others of their choice
I wonder if all the drunks schizoids drug addicts who do not look for a job let alone keep one
will have the cognitive ability to show up to the Andrew Yang distributions centers to pick up their checks
they won't need IDs
only need be willing to sign voting election ballots for the '22.
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In Maryland 95% of claims investigated as potentially fraudulent (though does not say how many were actually fraudulent)
https://populist.press/prisoner-scammers-and-rapper-nuke-bizzle-7-crazy-examples-of-covid-unemployment-fraud/
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Democrats Support $4 Trillion Deficit
https://mailchi.mp/2ab53dbdfae4/unleash-prosperity-hotline-859834?e=17d44a0477
Unleash Prosperity Hotline
2/2/2021
House Democrats Endorse a $4 Trillion Deficit
The House Democratic budget resolution which sets the legal parameters for how much money Pelosi and Schumer can spend this year calls for a $6,100,000,000,000 budget. The deficit would be just shy of $4 trillion
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Can Utah throw this guy into the garbage heap already?
of course, he was governor of Mass.
to think I voted for this guy!
https://www.yahoo.com/huffpost/mitt-romney-child-allowance-150107102.html
I have no children
why do I need to support other peoples kids?
what about those with grown children
what about those who don't qualify for hand outs?
this will only increase the flood of illegals
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for Dems
https://www.yahoo.com/news/u-senate-passes-budget-plan-110133801.html
presumably Koomala has shit eating grin on her face during the vote
unity
compromise
work across the aisle
we are all Americans
no red blue just states
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They think we can't do math - and they are mostly right.
$1.9 trillion stimulus in a country of 330 million is $5700 cash for every man, woman and child.
$22,800 for a family of four.
Did you get yours? Where did the rest go??
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Should we subsidize private jets too?
https://www.realclearpolicy.com/articles/2021/02/03/feds_subsidize_airport_at_marthas_vineyard_for_429_million_659080.html
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"$1.9 trillion stimulus in a country of 330 million is $5700 cash for every man, woman and child.
$22,800 for a family of four.
Did you get yours? Where did the rest go??"
no , and I never will, just more forced confiscation
NJ state income tax up again as of Jan 1
thanks to our second GoldMAN Sachs governor ( as if one was not enough) who knows what is best for the little people
I don't remember where I saw the numbers but recently it was posted the national debt would cost every American (not sure if the 20 million illegals included). $88,000
and if we just include only those who pay taxes we are talking somewhere in range of 250,000
but the new economic theory is - debt is meaningless
World had plenty of cash nothing to see here ignore
just in time for Biden and the Obama communists to spend us into the Mariana trench
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Cloward-Piven/Great reset
"$1.9 trillion stimulus in a country of 330 million is $5700 cash for every man, woman and child.
$22,800 for a family of four.
Did you get yours? Where did the rest go??"
no , and I never will, just more forced confiscation
NJ state income tax up again as of Jan 1
thanks to our second GoldMAN Sachs governor ( as if one was not enough) who knows what is best for the little people
I don't remember where I saw the numbers but recently it was posted the national debt would cost every American (not sure if the 20 million illegals included). $88,000
and if we just include only those who pay taxes we are talking somewhere in range of 250,000
but the new economic theory is - debt is meaningless
World had plenty of cash nothing to see here ignore
just in time for Biden and the Obama communists to spend us into the Mariana trench
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https://www.breitbart.com/politics/2021/02/18/biden-plans-second-coronavirus-package-3-trillion-more-build-back-better-spending/
As Krugman says
just keep printing
no biggee
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I’m as anti government spending as any one. But to be fair, the interest burden of federal debt is very low by historical standards. Less than 3% of GDP. It’s been much higher before. The government is actually doing exactly what a savvy investor should do when his borrowing cost is negative in real terms. The people who will be screwed the most are the buyers of the debt.
-Scott Grannis
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3% !????
what
where does he come up with that
no where else I read gives such a low number
https://www.usdebtclock.org/
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He is referring to the interest payments on the debt as a % of GDP.
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Why do we use the GDP as the denominator?
I get if we get growth in GDP tax revenues goes up
so does Scott agree with MMT theory -I guess he does
https://www.thebalance.com/interest-on-the-national-debt-4119024
furthermore when Paul Krugman says the world is "awash in money " so no need to be concerned
it is almost like he is saying the global economy should be in the denominator.
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I keep doing google searches and cannot find the actual vote counts
to post here
but yesterday on CSPAN was listed the number of Repubs who voted against and i think it was 192
none voted yes but something like 19 or 20 did NOT vote one way or the other or abstain
cowards I guess
it was roughly the opposite for Dems
bill passed 219 to 212
in other words the Republicans could have voted this down along with ~ enough Democrats who also did not vote yes or no
I don't know why this is NOT in the news
Why could not Kevin McCarthy get 100% republicans vote NO?
something about they were afraid to lest the districts they come from will hold such a vote against them
I think he failed
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Here is final vote
Republicans DID stick together
https://www.newscentermaine.com/article/news/politics/maine-politics/maine-rep-jared-golden-one-of-two-democrats-to-vote-against-19-trillion-covid-19-relief-bill/97-4294d005-c9e1-418e-af4e-e0e183e6bdb5
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https://www.heritage.org/budget-and-spending/commentary/8-things-you-must-know-about-deeply-flawed-covid-19-package
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https://video.search.yahoo.com/search/video?fr=yfp-t&ei=UTF-8&p=harris+breaks+tie+video#id=1&vid=2caa06e6b03d16c5479a959da751187a&action=click
what a slap in the face to people who pay taxes and work hard
and are not reparationists.
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i misunderstood
it is not the 1.9 trill bill
it is for something else
:-o :-o
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https://issuesinsights.com/2021/03/04/the-1-9-trillion-biden-spending-plan-is-even-worse-than-you-think/
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Why, how much was your check?
https://www.heartland.org/news-opinion/news/maximum-facts-about-the-minimum-wage
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"proponents of raising the minimum wage to $15/hour often claim that any economic harm from this would be minimal compared to the law’s benefit of “lifting nearly a million people out of poverty.” That stylized statistic—which is derived from a recent Congressional Budget Office (CBO) analysis—is grossly misleading because CBO has estimated that the law would raise the average total income of families below the poverty line by about $589 a year or merely 1%. This increase is about half of what they spend on sweetened drinks, desserts and candy"
how dose more than doubling a persons hourly wage from 7.25 go 15 $ per hr
only increase the yearly pay by $589 ?
yearly wage (assuming an 8 hr per day fo 260 days ) will increase yearly wage from $15,080 to 31,200
.
how could doubling salary increase yearly pay by 589 bucks
even if we are speaking one wage earner with spouse and 3 children (famiy) is 3224 per person, not 589.
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"proponents of raising the minimum wage to $15/hour often claim that any economic harm from this would be minimal compared to the law’s benefit of “lifting nearly a million people out of poverty.” That stylized statistic—which is derived from a recent Congressional Budget Office (CBO) analysis—is grossly misleading because CBO has estimated that the law would raise the average total income of families below the poverty line by about $589 a year or merely 1%. This increase is about half of what they spend on sweetened drinks, desserts and candy"
how dose more than doubling a persons hourly wage from 7.25 go 15 $ per hr
only increase the yearly pay by $589 ?
yearly wage (assuming an 8 hr per day fo 260 days ) will increase yearly wage from $15,080 to 31,200
.
how could doubling salary increase yearly pay by 589 bucks
even if we are speaking one wage earner with spouse and 3 children (famiy) is 3224 per person, not 589.
They write of families below poverty line, not individuals working minimum wage. My understanding is that relatively few families below the poverty line have a primary income based on minimum wage.
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Not sure what
they are measuring
poverty lines:
Persons in family/household Poverty guideline
1 $12,880
2 $17,420
3 $21,960
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Not sure what
they are measuring
poverty lines:
Persons in family/household Poverty guideline
1 $12,880
2 $17,420
3 $21,960
I'm not sure what they are measuring either. They may not count transfer payments and they likely don't count non-cash payments such as housing programs, food stamps, free health care, transportation and Obama phone - and they count the money you make on the side, but otherwise is counts everything. :wink:
Here's a government math question for you. If a person made 2-4 million /yr, 9 of the last 10 years, has 20 million in the bank, but lost 200,000 last year, is he or she below the poverty line right now?
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https://legalinsurrection.com/2021/03/more-than-half-of-bidens-infrastructure-bill-does-not-go-towards-infrastructure/
Excuse me, but building homes for people is not infrastructure. More for 'transit' than for highways.
Electrifying local school buses is now a federal program? 500,000 EV chargers? Ever heard of a private sector, let those coal powered vehicles compete with gas on a level playing field.
Promoting air travel, is THAT the government's business. Where is that wind powered 747?
Building schools is federal? R&D on climate change is infrastructure? Not in my dictionary.
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https://www.theepochtimes.com/mkt_morningbrief/overview-of-all-proposed-spending-in-bidens-infrastructure-plan_3762567.html?utm_source=morningbrief&utm_medium=email&utm_campaign=mb-2021-04-06&mktids=adf353c013f1e9bcd74d71992f71c872
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all this money just being laid out there
just begging to be spent
for what for whom for how much
questions without answers
what a gold rush for some
what a joke on the rest
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https://www.breitbart.com/clips/2021/04/08/buttigieg-eldercare-is-infrastructure-that-makes-americans-thrive/
Dems are always promoting things as for the "children"
Their new heart tug pitch :
for our "elderly"
NEVER for taxpaying citizens
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https://fee.org/articles/biden-infrastructure-plan-would-hurt-economy-in-3-ways-over-long-run-ivy-league-analysis-finds/
Analysts at the Wharton Business School at the University of Pennsylvania weighed the potential benefits the proposed spending would have against the costs incurred by higher government debt and higher business tax rates. They find that while sending piles of cash flying out the door might seem stimulative at first, the long-term effects would all be net negative.
By 2031, Wharton projects that the size of the economy’s total output will have shrunk by 0.9 percent as a result of the “jobs plan.” The analysts also predict a 3 percent decrease in the “capital stock,” a measure of the nation’s productive resources such as machinery, buildings, etc.
Why will the massive government spending reduce the capital stock? Because the proposal is financed by raising corporate taxes, which directly reduces private sector investment, and because it involves incurring massive amounts of government debt, which “crowds out” private sector investment.
Why the ‘Jobs Plan’ is Bad News for Workers
Here’s where things get ugly for workers under this “jobs plan.”
Reduced capital, aka productive tools, means lower worker productivity. Investments in improved machinery, for example, allow assembly-line workers to produce more in output per hour worked. And productivity is inextricably linked to worker wages.
“More investment of capital means: to give to the laborer more efficient tools,” Austrian economist Ludwig von Mises lucidly explained. “With the aid of better tools and machines, the quantity of the products increases and their quality improves. As the employer consequently will be in a position to obtain from the consumers more for what the employee has produced in one hour of work, he is able—and, by the competition of other employers, forced—to pay a higher price for the man’s work.”
Of course, if capital—and hence productivity—is decreased, the opposite effect occurs and workers earn less over time. So, it’s not surprising that Wharton concluded the massive multi-trillion “jobs plan” will, by 2031, actually lead to a 0.7 percent decrease in average hourly wages. The analysts also note that there will be almost no increase in employment, as measured by total hours worked.
Long-Term Harms, Not Benefits
Similar negative effects play out over an even longer time frame, Wharton projects, with net negative results from the “jobs plan” in 2040 and 2050.
Image Credit: Wharton School, University of Pennsylvania
The Takeaway: Rhetoric and Promises Don’t Guarantee Results
President Biden’s sweeping “infrastructure” proposal is just the latest example in a long history of ambitious political rhetoric masking mediocre results. Politicians often point to the proposed benefits of their policies, often tangible and easy to see, and make their case for big government spending based on the benefits alone.
But while rhetoric can be rosy, real-life involves trade-offs; the weighing of benefits and costs. And when we do this honestly for Biden’s infrastructure proposal, the results are grim indeed.3 G
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There is more money in the bill for electric cars than there is for highways. US Senator Marsha Blackburn
https://www.youtube.com/watch?v=DCiWxEM83s4
[Video is mostly about the Georgia vote integrity law.]
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of the 2008 mortgage disaster (along with Dodd)
(he has never taken the blame or admited fault !)
No one should ever listen to this guy again :
https://www.newsmax.com/newsmax-tv/barneyfrank-biden-infrastructure-plan/2021/05/06/id/1020435/
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I can't believe they would lie to us.
https://fee.org/articles/johns-hopkins-economist-explains-why-true-cost-of-biden-s-spending-plans-could-be-171-trillion-3x-higher-than-advertised/
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https://www.yahoo.com/money/taxpayers-could-get-an-additional-tax-refund-for-unemployment-203121855.html
Wasn't it Nero who from a high balcony threw coins down to the plebes early on so as to win their favor?
Only to burn the place down, later with his extravagance ..........
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https://www.foxnews.com/opinion/biden-inflation-crisis-spending-control-dr-ben-carson
One voice of reason.
Who knew that spending trillions beyond our means has a consequence.
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https://www.heritage.org/budget-and-spending/report/president-bidens-tax-and-spend-plan-expands-federal-power-not-jobs
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wants 2 to 3 billion of our taxpayer money
the guy who is worth close to 200 billion
watch the crats give it to him:
https://www.foxbusiness.com/politics/bezos-blue-origin-second-shot-nasa-dollars-bailout-amendment
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https://issuesinsights.com/2021/05/28/bidens-wild-spending-binge-its-socialism-not-stimulus/
Deficits above $1.3 trillion every year for the next 10 years are the plan, the feature, not a bug.
Plan for such a bad economy that it always needs such a gigantic deficit?
Deficits, it turns out, are not stimulative. They shift resources from the productive private sector to the non-productive public sector.
Wrong as Keynes was, this is NOT what he had in mind.
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Cloward-Piven, not Keynes.
https://issuesinsights.com/2021/05/28/bidens-wild-spending-binge-its-socialism-not-stimulus/
Deficits above $1.3 trillion every year for the next 10 years are the plan, the feature, not a bug.
Plan for such a bad economy that it always needs such a gigantic deficit?
Deficits, it turns out, are not stimulative. They shift resources from the productive private sector to the non-productive public sector.
Wrong as Keynes was, this is NOT what he had in mind.
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https://www.breitbart.com/economy/2021/06/10/report-half-pandemics-unemployment-money-could-stolen/
well probably half of people who claim disability are not truly disabled
so this does not surprise me
all so depressing how much money is wasted
while debt soars
endless spending and payoffs for votes
and I can't get a tax break
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quote author=ccp
"probably half of people who claim disability are not truly disabled"
To bring forward a prior conversation, I see a subset of the people who use and mis-use the disability system as a landlord and ccp sees questionable cases as a doctor. In both cases, we see a private financial aspect not visible to the public. I see through rental applications who is on disability, then in some cases I see them move in heavy televisions and stereos. They, in some cases, can't mow a small lawn or land their garbage in the can but are able to do a lot of other activities that take equal or more energy. Withdrawing from the workforce and signing a contract with the federal government to stay poor and keep your income off the books in exchange for a SSI disability payment every month for life has immeasurable negative effects on their life when it occurs in a situation where it may not have been needed.
A friend with a real, partial disability had that program (SSI) overlap with buying and using a season ski pass and unlimited golf pass without violating any rules of the program. It would be silly to stay he couldn't do any work, and they do let you do some work and earn some money on the program.
Republicans know a large part of it is a scam. Democrats in power know that too. cf. Barack Obama. In the aftermath of financial collapse of 2008 in the slow growth, no growth years of the Obama administration we had an epidemic of new SSI disability program recipients. For those to jump suddenly by millions, one might think something happened in the drinking water or maybe a virus from China was causing it. A commission could have been formed to study be headed by the nation's Surgeon General - but EVERYONE KNEW IT WAS AN ECONOMIC PHENOMENON, not a medical or health issue. The reaction of the far Left Democrat Obama administration was: Ho hum. We wanted more people dependent on government programs and we got it. They have secret internal polling data telling them lifetime recipients of government programs tend to vote Democrat in greater proportions than entrepreneurs and working tradesmen and women.
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". The reaction of the far Left Democrat Obama administration was: Ho hum. We wanted more people dependent on government programs and we got it. They have secret internal polling data telling them lifetime recipients of government programs tend to vote Democrat in greater proportions than entrepreneurs and working tradesmen and women."
and raise out taxes to keep paying for this stuff
it ain't the military that is rising the debt it is by far all these government programs
including SSI and Medicare and the rest
they should have put the money for these things under lock box and key but of course they steal it to spend buying other votes
and just jack up the taxes
SSI deductions keep going up every yr
a stealth tax )
the great snake's approach to it all is damaging to our country;
yet like a great narcissist he thinks he is wise.
:-(
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"and raise our taxes to keep paying for this stuff"
- Yes and worse yet, they raise tax rates spitefully but don't even pretend to pay for their spending.
The economic phenomenon [with disability programs] for those who can work is: free money offered; free money accepted, just have to jump through a couple of hoops.
Further: Robbing Peter to Pay Paul and Mary in a democracy doesn't require consent of the robbed, but in a constitutional republic (like ours), that action on its face violates equal protection under the law. They get around that with the con game of writing program requirements that target the robbed and the recipients.
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What is the matter with these people"
https://www.powerlineblog.com/archives/2021/05/what-homelessness-and-climate-change-have-in-common.php
https://www.npr.org/2021/05/25/999969718/high-cost-of-los-angeles-homeless-camp-raises-eyebrows-and-questions
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What is the matter with these people"
https://www.powerlineblog.com/archives/2021/05/what-homelessness-and-climate-change-have-in-common.php
https://www.npr.org/2021/05/25/999969718/high-cost-of-los-angeles-homeless-camp-raises-eyebrows-and-questions
Delusion+Graft=Dem governance
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The GOP’s Infrastructure Gamble
Will a bipartisan deal slow the radical Biden agenda, or accelerate it?
By The Editorial Board
June 15, 2021 6:35 pm ET
Bipartisanship for the good of the country is sometimes necessary in a democracy. But bipartisanship for its own sake, or to assist progressives in their attempt to remake America, is destructive. Senate Republicans moving toward an infrastructure compromise have to calculate which kind of deal they’re embracing.
A group of 10 Senators—five Democrats and five Republicans—last week announced they’ve agreed on the “framework” for such a deal. Details are scant, but leaks suggest the proposal would cost $1.2 trillion over eight years and include $579 billion in new spending. The deal is geared toward core infrastructure such as roads, bridges and broadband, though it would also include some of President Biden’s green-energy demands.
The Senators said in a statement that the deal would be “fully paid for and not include tax increases.” They are still haggling over “pay-fors”—with ideas that include indexing the gasoline tax to inflation, imposing electric-vehicle user fees, or creating a new federal infrastructure bank.
The country could use some infrastructure investment, and a focused bill that repurposes unspent Covid funds is the best option. The problem is what comes next. Republicans are uneasy about the size of the package. But they might be convinced to go along if they knew this compromise was the end of the Democratic spending plans. The White House would get its big infrastructure win, and Republicans would stop more left-wing damage.
But Mr. Biden has proposed trillions of dollars in additional spending, and progressives are already vowing to stuff anything that doesn’t make the infrastructure cut into a separate bill that could pass with only 50 Senate votes (plus the Vice President’s tie-breaker). Politico reports that Senate Budget Chairman Bernie Sanders isn’t “sweating” the bipartisan talks, because he’s already rallying support for his follow-on bonanza.
If an infrastructure compromise serves primarily to grease the skids for this phase two blowout, it will do far more harm than good. Two of the Democratic negotiators, West Virginia’s Joe Manchin and Arizona’s Kyrsten Sinema, continue to insist on bipartisan infrastructure talks, but they haven’t said what they’ll do on phase two.
The danger is that an infrastructure deal might make it easier to pass phase two. Democratic leaders face the prospect of selling a reconciliation bill that encompasses infrastructure, climate subsidies, and Mr. Biden’s “American Families Plan”—and could easily have a price tag north of $4 trillion. Carving off a trillion dollars or so with an initial infrastructure compromise would reduce that sticker shock, and arguably make it easier for swing-state Democrats to get on board.
This second bill would be the killer. Infrastructure spending may be wasteful or special-interest pork, but most of it will be a one-time event. Mr. Biden’s “families plan” is a cradle-to-grave expansion of entitlements that would rewrite the social contract: universal preschool, free community college, and new federal programs for child care and paid family leave. No work required. The entitlements would start small but become giant spending wedges in the future. The history of entitlements is that they are impossible to reform, much less kill.
GOP Senators have to decide if an infrastructure deal is worth the huge risk that it will pave the way for a phase two bill that expands the government by 4% as a share of GDP on a permanent basis. They also risk putting their fingerprints on a green-energy subsidy program that could become as politically embarrassing as Barack Obama’s 2009 stimulus and its Solyndra scandals. The examples of crony socialism will be exquisite.
Republicans might not have to make this fateful choice, given that progressives are mobilizing to tank the deal. Democrats would need every member of their Senate caucus to join with 10 Republicans to overcome the 60-vote filibuster rule, but a half-dozen Senate liberals this week derided the bipartisan infrastructure framework as inadequate.
Perhaps that ought to be the GOP’s warning that Democrats intend to see their infrastructure compromise, and raise them a reconciliation spending free-for-all for the ages.
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Robin Brooks
@RobinBrooksIIF
The US is a monetary sovereign, i.e. it can use Fed QE (blue) to anchor yields in the face of big fiscal deficits (black). What the US can't do is make foreigners buy its debt. In net terms, foreign buying stopped years ago (pink), very different from the post-2008 recovery
(https://pbs.twimg.com/media/E1hJPlZWQAo4BuY?format=png&name=small)
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President Clinton asked us in 1994 to chair the Bipartisan Commission on Entitlement and Tax Reform to study the future of Social Security, Medicare and Medicaid and recommend measures to assure their long-term viability. Reforms of these popular programs were so politically fraught that finding consensus on solutions proved impossible during our tenure in the Senate.
But there was near unanimity within the commission on the scale of the problem. Entitlements were on an unsustainable trajectory. They consumed an ever-growing share of federal spending. In 1994 the budget deficit was $203 billion (2.8% of gross domestic product), and the national debt was $3.4 trillion (47.8% of GDP).
The crisis we identified 27 years ago seems negligible given where the debt stands today. The nonpartisan Congressional Budget Office estimated in January 2020 that annual budget deficits will exceed $1 trillion, and that the debt—then hovering at $17.2 trillion—would more than double as a share of the economy over the next 30 years. These numbers don’t take into account $65 trillion of unfunded liabilities for Social Security and Medicare. The CBO now projects that, under current law, the deficit will reach $1.9 trillion in 10 years and the debt will skyrocket from 102% to 202% of GDP within 30 years.
The words “current law” are critical as the CBO forecasts only what will happen should government make no changes in spending and tax policies. But President Biden has already proposed $5 trillion in additional spending over the next 10 years, much of it for new or expanded entitlements, labeled “infrastructure” and “investment.”
Beyond the numbers, the biggest difference between then and now is that in 1994 both parties worried about deficits and debt. Today, neither Democrats nor Republicans seem to care. Under President Trump, the national debt grew from 76% of GDP to 100%. Under Mr. Biden’s first budget proposal, the debt is expected to reach 117% of GDP by 2031.
While politicians in both parties toss fiscal restraint to the winds, the good news is that a hefty proportion of voters are still concerned about the debt. An Ipsos poll conducted April 23-26 found that 75% of respondents believe too much debt can hurt the economy.
Current figures suggest that the federal government is digging America into a hole. According to CBO’s baseline projections—which don’t account for Mr. Biden’s proposals—interest costs will surpass spending for Social Security by 2045 and will consume nearly half of federal revenue in 2051.
Despite the urgency of the problem, nearly every elected official in Washington is an original co-sponsor of the “do nothing” plan. While today’s hyperpartisan political environment makes it unlikely that our fiscal crisis will be resolved anytime soon, elected officials would do well to take at least some action to address the issue.
One promising approach, the Trust Act, has been proposed by bipartisan co-sponsors in the House and Senate, including Reps. Mike Gallagher and Ed Case and Sens. Mitt Romney and Joe Manchin. The bill aims to create a process for avoiding insolvency of the major federal trust funds, including those covering Medicare hospital insurance, Social Security and highways.
The Trust Act would also establish a “rescue committee” for each fund with six members from each party. These committees would have bipartisan co-chairmen and would be charged with developing legislation to save the trust funds. At least two committee members of each party would have to agree to advance proposals by a majority vote. Once submitted, the proposals would receive expedited consideration in the House and Senate. This approach would be fair and practical and would focus on the most pressing issues that have identifiable deadlines rather than try to solve all the country’s fiscal challenges at once.
It’s become all too clear that America can’t build a sound economy on a foundation of unsustainable debt. The longer lawmakers wait to act, the more difficult the solutions will be—and the greater the risks for future generations. The Trust Act offers a sensible way to get started.
Mr. Kerrey, a Nebraska Democrat, and Mr. Danforth, a Missouri Republican, are former U.S. senators and co-chairmen of the Concord Coalition.
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https://www.realclearpolitics.com/articles/2021/06/24/why_bidens_child_allowance_will_harm_the_economy.html
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https://www.nationalreview.com/news/biden-announces-we-have-a-deal-on-bipartisan-infrastructure-package/?utm_source=email&utm_medium=breaking&utm_campaign=newstrack&utm_term=24254982
Senate Minority Leader Chuck Schumer and House Speaker Nancy Pelosi told Biden Wednesday that they are on board with the plan. However, they stipulated that the Democrats will simultaneously pursue a separate package for “human infrastructure” including provisions on elder and child care, climate change, education, etc. through the unconventional reconciliation process, through which a bill only requires a simple majority rather than 60 votes to advance.
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typical Crats
make a deal gaining concessions
then IMMEDIATELY press for more
for eternity
Why do WE ALWAYS CAVE
romney portman murkowski to the wolves
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https://townhall.com/columnists/johnstossel/2021/07/07/big-business-loves-big-government-n2592125
I would also add most of the lawyers who run the country also love big government
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quote author=ccp
https://townhall.com/columnists/johnstossel/2021/07/07/big-business-loves-big-government-n2592125
"Regulation doesn't just kill existing businesses. It keeps new businesses from ever entering."
- So many things relating to economics and government policy are counter-intuitive.
Big oil companies also thrive off of regulation.
[ccp] I would add most of the lawyers who run the country also love big government.
- Also true. Strange to me that so many of our smartest minds are so wrong on economics. Lawyers enjoy big wealth while supporting the politics of big government. But big government policies block new wealth creation that would bring in new clients.
Small minded sums the politics of people who can't or won't do second level thinking.
Beware, as Stossel points out, Facebook is begging for regulation, and he points out the reason why. Their aim to to make today's monopoly permanent. Our aim is to make sure it isn't.
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perhaps he pushed back on the prima donnas, so Biden of course, the good Dem he is fired him:
https://dailycaller.com/2021/07/09/andrew-saul-fired-joe-biden-lawsuit/
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Philadelphia’s Proterra Fleet in Complete Shambles. “More than two dozen electric Proterra buses first unveiled by the city of Philadelphia in 2016 are already out of operation, according to a WHYY investigation. The entire fleet of Proterra buses was removed from the roads by SEPTA, the city’s transit authority, in February 2020 due to both structural and logistical problems—the weight of the powerful battery was cracking the vehicles’ chassis, and the battery life was insufficient for the city’s bus routes. . . . The city paid $24 million for the 25 new Proterra buses, subsidized in part by a $2.6 million federal grant. Philadelphia defended the investment with claims that the electric buses would require less maintenance than standard combustion engine counterparts.”
https://freebeacon.com/biden-administration/report-philadelphias-proterra-fleet-in-complete-shambles/
-------------------------------------------------------
I wonder if there was any way to see this coming? The charge didn't work. The batteries were too heavy. 25 million bought 25 buses, are you kidding?? Cities like Philly need their empty buses to run all day long.
Do you want your ambulance to run on batteries, no matter how many trips he has already made that day? How about a fighter jet? How come they don't run on golf cart batteries?
Would you throw out a 4 year old vehicle?
First level thinking: Wouldn't it be great if... instead of asking, what is the range, what is the cost, how are they affected by weather, what is the cost if the charge runs out in the middle of a run, how long have they been on the market, who stands behind them if something goes wrong?
The people I know with a Tesla have another vehicle in the garage, the kind without the government subsidy.
How do I not end every post about the left with 'f......g morons'?
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https://www.nationalreview.com/2021/07/were-not-going-to-fix-our-spending-crisis/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202021-07-26&utm_term=NRDaily-Smart
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https://www.nationalreview.com/2021/07/were-not-going-to-fix-our-spending-crisis/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202021-07-26&utm_term=NRDaily-Smart
Plan accordingly.
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https://www.nationalreview.com/2021/07/were-not-going-to-fix-our-spending-crisis/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202021-07-26&utm_term=NRDaily-Smart
Plan accordingly.
https://www.thegatewaypundit.com/2021/07/argentina-bolivia-venezuela-zimbabwe-model-economic-growth-economist-steve-moore-agrees-democrats-forcing-country-financial-armageddon/
Cloward-Piven
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Steven Moore is worthy, but given Steve Bannon's recent apparent grifting along with his , , , uneven , , , history with Trump I'm not sure he is a forum that I would want to cite elsewhere.
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https://www.theepochtimes.com/mkt_morningbrief/its-time-to-balance-the-budget_3918689.html?utm_source=Morningbrief&utm_medium=email&utm_campaign=mb-2021-07-27&mktids=a51020e17a5a4209835beaa3e12a0f0c&est=h8vh5Bj%2FZNCYCNGzivAB6IRo%2BWHNbmrOkSRz0oG%2F4sJ0yfMcKwTIlOWMMy3QUtMfv03O
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https://www.theepochtimes.com/mkt_morningbrief/its-time-to-balance-the-budget_3918689.html?utm_source=Morningbrief&utm_medium=email&utm_campaign=mb-2021-07-27&mktids=a51020e17a5a4209835beaa3e12a0f0c&est=h8vh5Bj%2FZNCYCNGzivAB6IRo%2BWHNbmrOkSRz0oG%2F4sJ0yfMcKwTIlOWMMy3QUtMfv03O
Newt is right but is that an electable agenda?
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"Newt is right but is that an electable agenda?"
not until it is too late.
like someone wise pointed out recently ,
there is no voting electorate who will vote solely on the spending / debt problems
so it never gets the attention
it deserves
until it is too late.... then it will
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Cloward-Piven is the plan. The spending will end when the collapse comes.
Plan accordingly.
"Newt is right but is that an electable agenda?"
not until it is too late.
like someone wise pointed out recently ,
there is no voting electorate who will vote solely on the spending / debt problems
so it never gets the attention
it deserves
until it is too late.... then it will
We used to call that the root canal wing of the Republican Party. Of course we should cut spending, but growth is sexier.
I used to argue that if we would just start now with control of the deficit, we could still fix this.
Current deficits are running at 3 trillion per year and the people in power want to increase that.
Imagine we win all close elections in the foreseeable future and gradually get a handle on spending, well interest rates return to normal. What would our debt be and what would our debt service be on the economy?
How would you tax enough to pay for the debt,
and defense and basic governing expenses and still believe we can unleash new growth?
OTOH, how do you sell spending cuts if it will solve nothing?
A bit of a conundrum.
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ccp,: "not until it is too late."
We used to call the cut spending agenda the root canal wing of the Republican Party. Of course we should cut spending, but growing future incomes to catch up with current spending had more chance of being elected and implemented.
I used to argue that if we would just start now with control of the deficit, we could still fix this. But spending has run wild since then.
Last best chance was a trump second term with majorities in House and Senate and none of that happened, and it still was a long shot that they would take action.
Current deficits are running at 3 trillion per year and the people in power want to increase that.
Imagine we win all close elections in the foreseeable future and gradually get a handle on spending, while interest rates return to normal. What would our debt be and what would our debt service be on the economy?
How would you tax enough to pay for the debt, and defense and basic governing expenses and still believe we can unleash new growth?
OTOH, how do you sell spending cuts if it will solve nothing?
A bit of a conundrum.
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There is no voting your way out of this.
ccp,: "not until it is too late."
We used to call the cut spending agenda the root canal wing of the Republican Party. Of course we should cut spending, but growing future incomes to catch up with current spending had more chance of being elected and implemented.
I used to argue that if we would just start now with control of the deficit, we could still fix this. But spending has run wild since then.
Last best chance was a trump second term with majorities in House and Senate and none of that happened, and it still was a long shot that they would take action.
Current deficits are running at 3 trillion per year and the people in power want to increase that.
Imagine we win all close elections in the foreseeable future and gradually get a handle on spending, while interest rates return to normal. What would our debt be and what would our debt service be on the economy?
How would you tax enough to pay for the debt, and defense and basic governing expenses and still believe we can unleash new growth?
OTOH, how do you sell spending cuts if it will solve nothing?
A bit of a conundrum.
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Steven Moore is worthy, but given Steve Bannon's recent apparent grifting along with his , , , uneven , , , history with Trump I'm not sure he is a forum that I would want to cite elsewhere.
Steve Moore publishes a regular email through he has Unleashed Prosperity movement.
https://mailchi.mp/ac3c33f455b2/unleash-prosperity-hotline-865828?e=17d44a0477
Bannon's standing with me has gone from negative to neutral lately.
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"Bannon's standing with me has gone from negative to neutral lately."
I have a hard time citing a grifter exploiting the gullibility of wall supporters who was esconced on a Chinese billionaire's yacht.
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https://www.foxbusiness.com/politics/unspent-covid-federal-funds-gao?fbclid=IwAR2bvy2oV3Tf9bfCtTJHf6hZ4aZKNHWEjjckMPZsZdnpjIwJ_EfnZt5JE0w
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https://dailycaller.com/2021/08/02/treasury-department-janet-yellen-debt-ceiling-congress/?utm_source=piano&utm_medium=email&utm_campaign=2680&pnespid=lftpqaECWhWN3ok6fwuxJCfDcFHEQJUW_fVa_Oz7
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https://dailycaller.com/2021/08/02/treasury-department-janet-yellen-debt-ceiling-congress/?utm_source=piano&utm_medium=email&utm_campaign=2680&pnespid=lftpqaECWhWN3ok6fwuxJCfDcFHEQJUW_fVa_Oz7
I thought we rid ourselves of Janet Yellen and now she's Treasury Secretary.
From the article:
Treasury Secretary Janet Yellen warned House Speaker Nancy Pelosi in a letter July 23 that the Treasury would invoke the “extraordinary measures” if Congress didn’t raise the debt ceiling.
Crazy idea: What if they used ordinary measures to balance the budget? Work more. Spend less.
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Democrats/ War on Poverty: Keeping poor people poor since 1964.
40 million in poverty in America the day before the 'war on poverty'.
Think of what has happened since then, productivity and wealth gains worldwide, man on the moon,
Projected cost approaching $40Trillion.
https://www.heritage.org/poverty-and-inequality/report/the-war-poverty-after-50-years
Result: 40 million in poverty today. Not one person lifted out of poverty with $1 million per p0erson spent.
Dim Dem response: Double down on government dependency. MORE of the same - because it's not working!
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"40 million in poverty today. Not on person lifted out of poverty with $1 million per p0erson spent."
right
all this spending sustains poverty it seems
but did it does apparently do a good job buying votes by stealing other people's money
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"not one person lifted out of poverty"
Of course some people used the system as designed, got through a bad stretch and got back on their feet and are doing great, but...
The total 'gain' is net zero in almost 60 years. Tens, twenties, going on thirties of TRILLIONS of dollars spent to gain nothing. Program recipients learn dependency and program rules. As the programs get more numerous and more generous and more secure than work, it gets really expensive and unnecessarily risky for your family to get off the programs and into work.
In addition, lots and lots of people are on programs but not in poverty. Obamacare for example was designed to 'help' people with incomes 4 times the poverty level. 4 times! What did that do? Drive up the cost of healthcare so they are committed to the assistance and committed to keeping their (reported) incomes within the guidelines, a perverse and powerful incentive to never climb the economic ladder. Our response to that is to expand the programs doing the harm.
What else did they learn? Government took the place of fathers, especially in troubled areas, who used to mostly be the primary bread winner of the family. The birth out of wedlock rate for black children was 24% in 1964 and is 80% today. Someone other than a lesbian parent couple tell me how a child is better off without a father in the home. The statistics, math and science, don't bear that out. Children without fathers in the home are more likely to fall into every measurable bad outcome, crime, prison, poverty, cutting their education short, etc.
And so we do more of it...
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https://www.theepochtimes.com/mkt_morningbrief/officials-agree-social-security-medicare-are-in-deep-trouble-but-solutions-mean-tough-choices_3977140.html?utm_source=Morningbrief&utm_medium=email&utm_campaign=mb-2021-09-02&mktids=103e4a8a3568d4bc6067c7183d607118&est=uO2gSz0OxaC55b1D9S8wAI2w1a49yCarVMu5LZu7h6uF8tGo8tdgizu5%2BFhLyVYDCqtO
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Why I Won’t Support Spending Another $3.5 Trillion
Amid inflation, debt and the inevitability of future crises, Congress needs to take a strategic pause.
By Joe Manchin
Sept. 2, 2021 3:10 pm ET
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The nation faces an unprecedented array of challenges and will inevitably encounter additional crises in the future. Yet some in Congress have a strange belief there is an infinite supply of money to deal with any current or future crisis, and that spending trillions upon trillions will have no negative consequence for the future. I disagree.
An overheating economy has imposed a costly “inflation tax” on every middle- and working-class American. At $28.7 trillion and growing, the nation’s debt has reached record levels. Over the past 18 months, we’ve spent more than $5 trillion responding to the coronavirus pandemic. Now Democratic congressional leaders propose to pass the largest single spending bill in history with no regard to rising inflation, crippling debt or the inevitability of future crises. Ignoring the fiscal consequences of our policy choices will create a disastrous future for the next generation of Americans.
Those who believe such concerns are overstated should ask themselves: What do we do if the pandemic gets worse under the next viral mutation? What do we do if there is a financial crisis like the one that led to the Great Recession? What if we face a terrorist attack or major international conflict? How will America respond to such crises if we needlessly spend trillions of dollars today?
Instead of rushing to spend trillions on new government programs and additional stimulus funding, Congress should hit a strategic pause on the budget-reconciliation legislation. A pause is warranted because it will provide more clarity on the trajectory of the pandemic, and it will allow us to determine whether inflation is transitory or not. While some have suggested this reconciliation legislation must be passed now, I believe that making budgetary decisions under artificial political deadlines never leads to good policy or sound decisions. I have always said if I can’t explain it, I can’t vote for it, and I can’t explain why my Democratic colleagues are rushing to spend $3.5 trillion.
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Another reason to pause: We must allow for a complete reporting and analysis of the implications a multitrillion-dollar bill will have for this generation and the next. Such a strategic pause will allow every member of Congress to use the transparent committee process to debate: What should we fund, and what can we simply not afford?
I, for one, won’t support a $3.5 trillion bill, or anywhere near that level of additional spending, without greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on existing government programs. This is even more important now as the Social Security and Medicare Trustees have sounded the alarm that these life-saving programs will be insolvent and benefits could start to be reduced as soon as 2026 for Medicare and 2033, a year earlier than previously projected, for Social Security.
Establishing an artificial $3.5 trillion spending number and then reverse-engineering the partisan social priorities that should be funded isn’t how you make good policy. Undoubtedly some will argue that bold social-policy action must be taken now. While I share the belief that we should help those who need it the most, we must also be honest about the present economic reality.
Inflation continues to rise and is bleeding the value of Americans’ wages and income. More than 10.1 million jobs remain open. Our economy, as the Biden administration has correctly pointed out, has reached record levels of quarterly growth. This positive economic reality makes clear that the purpose of the proposed $3.5 trillion in new spending isn’t to solve urgent problems, but to re-envision America’s social policies. While my fellow Democrats will disagree, I believe that spending trillions more dollars not only ignores present economic reality, but makes it certain that America will be fiscally weakened when it faces a future recession or national emergency.
In 2017, my Republican friends used the privileged legislative procedure of budget reconciliation to rush through a partisan tax bill that added more than $1 trillion to the national debt and put investors ahead of workers. Then, Democrats rightfully criticized this budgetary tactic. Now, my Democratic friends want to use this same budgetary tactic to push through sweeping legislation to make “historic investments.” Respectfully, it was wrong when the Republicans did it, and it is wrong now. If we want to invest in America, a goal I support, then let’s take the time to get it right and determine what is absolutely necessary.
Many in Washington have convinced themselves we can add trillions of dollars more to our nearly $29 trillion national debt with no repercussions. Regardless of political party, elected leaders are sent to Washington to make tough decisions and not simply go along to get along.
For those who will dismiss my unwillingness to support a $3.5 trillion bill as political posturing, I hope they heed the powerful words of Adm. Mike Mullen, a former chairman of the Joint Chiefs of Staff, who called debt the biggest threat to national security. His comments echoed the fear and concern I’ve heard from many economic experts I’ve personally met with.
At a time of intense political and policy divisions, it would serve us well to remember that members of Congress swear allegiance to this nation and fidelity to its Constitution, not to a political party. By placing a strategic pause on this budgetary proposal, by significantly reducing the size of any possible reconciliation bill to only what America can afford and needs to spend, we can and will build a better and stronger nation for all our families.
Mr. Manchin, a Democrat, is a U.S. senator from West Virginia.
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"Americans are looking more than ever to their government for help on issues from health to security"
- Bloomberg opinion
https://www.bloombergquint.com/gadfly/apple-amazon-microsoft-and-google-play-nice-with-biden-in-the-post-snowden-era
We are so far behind fighting against government "programs" as if they are individual, misguided spending programs when they are doing is a totalitarian takeover of EVERYTHING. Cradle to grave doesn't begin to describe it.
Tech giants in bed with government. Combine what they know about you with what government knows and can do... if that doesn't scare you in 2021, nothing will.
What is happening in Red China right now is not a scare or a threat to them; it is a blueprint.
"The Aug. 25 summit between the tech giants and the U.S. government was like a reunion between high school sweethearts years after a horrible breakup. They’re both older and wiser. One has an eye-wateringly high salary. And now they need to make the relationship work. The phrase “public-private partnership” has been making the rounds. One chief executive who attended the meeting told the Wall Street Journal that discussions had focused more on “partnerships” than regulations[/b].
GOD HELP US.
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https://fiscaldata.treasury.gov/
US$ 28.4 Trillion
Funny that a government measure called debt to the penny rounds to the nearest $.1 Trillion. Oops, it just went up again.
Add current proposals 1.2 and 3.5 T to it, Ask people which number is better for debt owing, 28.4 or 33.1 trillion. The only way that doesn't matter is if you wish harm on the country or if you already gave up on it.
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I cannot find this
seems to be secret
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From another thread: G M: "Arizona is the only state I see trying to clean up elections right now. Nevada, like California is now Mail in fraud only. Think Nevada will ever go republican again?"
---------------------------------------------------------------------------------------------------------------------------
There may be a hundred good reasons to close the Postal Service. Let's just pick climate change as the reason. Sending a federal truck to every US address six days a week, while the planet is suffering a fever, are you kidding, we have to stop it. There are so many better alternatives.
One consequence of closing the USPS would be the end of mail in voting. We could have an 'election day' instead. Have people come out of their homes, go to a polling place like city hall, it's already paid for, make eye contact with their neighbors and an election judge or two, and fill out one ballot only?
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Sen Sinema: “I'm not mysterious. It's not that I can't make up my mind. I communicated it to the White House in detail. They just don’t like what they’re hearing.”
(Stephen Moore) What the White House especially dislikes is that Democratic Senator Joe Manchin and Sinema often oppose different parts of the Biden bill. Manchin, who hails from coal-producing West Virginia, taxes on carbon pollution, while Sinema favors them. Manchin is also more willing to raise corporate and individual income taxes than Sinema.
Sounds to us as if the stalemate between the two Senate holdouts and progressives is very real – but you never know with politicians.
- Committee to Unleash Prosperity 10/14/2021
https://mailchi.mp/807eddac5204/unleash-prosperity-hotline-866080?e=17d44a0477
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"Sounds to us as if the stalemate between the two Senate holdouts and progressives is very real – but you never know with politicians."
If I recall Manchin always folds in the end.
guess bill to wind up 2.5 T
and still devastating to the Right.
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Remember the job his wife was given , , ,
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Dem donors made lots of money from these boondoggles, money taken from Americans alive and yet unborn at government gunpoint.
The graft was the success. Meanwhile the useful idiots applaud and say “he meant well” and view it as a success for that reason.
One of the benchmark portions of the stimulus was the $25 billion devoted to
creating green jobs. Professor Obama imagined a world of greener buildings and green
jobs miraculously sprouting all across the fruited plains. So, he dumped $25 billion
into painting shingles white and whatever else it is they do to 'green' buildings.
The result? Zero jobs. Just another government 'success' story. READ
http://hotair.com/archives/2009/11/09/25-billion-stimulus-program-produces-0-jobs/
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A Lazarus Medal for this man!!!
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A Lazarus Medal for this man!!!
The song remains the same, just with more zeros on the price tag.
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"If I recall Manchin always folds in the end."
Yes, but the concessions they need to give Joe lose Sinema and the concessions they need to give Sinema lose Manchin for them, according to the reporting.
This is not Collins and Murkowski.
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https://www.nationalreview.com/2021/10/cbo-blows-up-democrats-spin-on-taxes/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202021-10-14&utm_term=NRDaily-Smart
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https://www.nationalreview.com/2021/10/cbo-blows-up-democrats-spin-on-taxes/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202021-10-14&utm_term=NRDaily-Smart
You think they don't know this?
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A goodly percentage of them, no.
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A goodly percentage of them, no.
This is Cloward-Piven in action. It’s the deliberate destruction of the US.
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Never answered,
If the spending costs zero, why raise the debt limit?
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Never answered,
If the spending costs zero, why raise the debt limit?
We have about 50% of the FUSA that is utterly detached from reality.
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Someone please tell me this story is false.
https://nypost.com/2021/10/24/lawmakers-slam-anthony-fauci-for-alleged-puppy-experiments/
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I'm watching for this one to play out.
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Someone please tell me this story is false.
https://nypost.com/2021/10/24/lawmakers-slam-anthony-fauci-for-alleged-puppy-experiments/
(https://i.pinimg.com/originals/1f/96/5f/1f965f01801982379dd1e839d9f192c7.jpg)
"It's a Faucist world, Charlie Brown"!
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Fauci Hopes His Experiments On Puppies Will Distract Everyone From Experiments He Performed On Humanity For Past 18 Months
Someone please tell me this story is false.
https://nypost.com/2021/10/24/lawmakers-slam-anthony-fauci-for-alleged-puppy-experiments/
(https://i.pinimg.com/originals/1f/96/5f/1f965f01801982379dd1e839d9f192c7.jpg)
"It's a Faucist world, Charlie Brown"!
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when asked can Republicans take credit for holding the price down
Steve's response :
if you think half a bad thing then the total bad thing - yes
[correction : if you think half a bad thing is better then a whole total bad thing - yes]
https://www.newsmax.com/newsmax-tv/steve-forbes-socialism-democrats-tax-and-spend/2021/11/06/id/1043573/
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how many millimeters does it take to go around the world
a mm looks like ~ this: -
40 billion and 75 million of these and you circumvent the globe
that is 1/30 of the $ 1.2 trillion latest spending bill
no one could hope to oversee where all this money goes
like the corona spending bills
just money thrown into the sea
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https://pjmedia.com/news-and-politics/ari-j-kaufman/2021/11/16/cbo-proves-the-biden-administration-is-lying-on-multiple-fronts-n1533544
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I guess we knew that when they said trillions won't cost a cent.
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https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
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from his show yesterday he lists some of the spending in the bill the House just Passed.
Go to my dear kenoshans and to the 20 minute 25 second mark and start there to listen to the some of the spending plans in the bill:
https://wabcradio.com/episode/my-dear-kenoshans-11-19-2021/
BTW he is quite a good radio host in his own right .
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The Real Cost of Biden’s Spending Plan
CBO comes clean on the price tag if the programs are made permanent.
By The Editorial Board
Follow
Dec. 12, 2021 5:34 pm ET
President Biden’s tax and entitlement plan received what should be a pair of knockout punches late last week. The report of surging inflation has been well covered. But the media have largely ignored the second blow—the real cost of the plan if honestly scored. Allow us to complete the record.
We’ve been telling you for months that the plan’s advertised cost of $1.75 trillion over 10 years includes multiple budget gimmicks that disguise the real cost. The Penn Wharton Budget Model has scored the 10-year cost at about $4.6 trillion, but the White House keeps claiming against all evidence that the cost is “zero.”
Now comes the Congressional Budget Office to report that the claim of zero cost is a Big Con. CBO, a political outfit beholden to Congress, can’t be so blunt. It is constrained by budget conventions imposed by Congress. But even under those conventions, CBO has said the bill would add $200 billion to the deficit over 10 years.
Enter Sens. Lindsey Graham and John Cornyn, who asked CBO director Phillip Swagel to add up the cost of the bill that recently passed the House if all of its programs were made permanent. This is a more honest accounting because Democrats admit both that they want to make the spending permanent and that they’ve adjusted programs to make them fit under the Senate budget rules so they can pass with a mere 51 votes (including Vice President Kamala Harris ).
Mr. Swagel’s response, sent on Friday, is a torpedo speeding toward the hull of Build Back Better. The dishonesty in the $1.75 trillion spending total is astonishing even by Congressional standards.
Take the child allowance, which Democrats say will cost only $185 billion because it ends after one year. No one believes they won’t extend it next year, and the year after that, ad infinitum. CBO says the real cost over 10 years is $1.597 trillion. Democrats also peg their earned-income tax credit expansion at a cost of $13 billion because it too ends after one year. CBO says the real cost is $135 billion over 10 years.
An honest accounting of those two programs alone consumes $1.732 trillion, or nearly all of the $1.75 trillion that Sen. Joe Manchin has said is the most total new spending he’ll support over 10 years.
But there’s so much more. Democrats phase out the child-care and pre-K entitlements after 2027 with a total cost of $381 billion. CBO says the real cost over 10 years is $752 billion if made permanent. They also underestimate the cost of expanded healthcare subsidies at $74 billion by phasing them out in 2025 or 2026. CBO says the real cost is $220 billion.
And don’t forget the spending after 10 years once the subsidies for all of these new programs become embedded in American behavior. This is the main purpose of making these programs into entitlements—to make people more dependent on government from cradle to grave.
One of the bill’s biggest tricks is its restoration of the state and local tax deduction to $80,000 up from $10,000. Democrats pretend that this will raise $15 billion over 10 years because the current $10,000 limit is set to expire after 2025. CBO says the real cost of this Democratic tax deduction for the rich without that gimmick would be $245 billion.
We could go on, and we recommend people look at Mr. Swagel’s letter on the CBO’s website. The 18 programs that Mr. Swagel itemizes in a table with his letter contribute $3.477 trillion over 10 years to the total cost of the House bill—compared with the $889 billion that Democrats claim those same programs cost under their gimmicky rules.
Overall, Mr. Swagel says in his letter, CBO and the Joint Committee on Taxation project that the House bill would increase the deficit by $3 trillion over 10 years without the budget gimmicks and phony phase-outs.
Democratic leaders Nancy Pelosi and Chuck Schumer reacted furiously to this news, falling back on their claims that the Build Back Better Act is “fully paid for.” Mrs. Pelosi says CBO has scored Mr. Graham’s “imaginary bill.” But her bill is the real fiscal fantasy and “fully paid for” is the lie of the year.
All of this gives Mr. Manchin, and other Democrats hiding behind his skepticism, ample ammunition to call the whole thing off. If this bill passes, they’ll own all of the deficits, debt and inflation that result.
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https://washingtontimes-dc.newsmemory.com/?token=cd9e368406fe4f7f6ab4c85d8ce990ee_61b8b7b7_6d25b5f&selDate=20211214
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https://washingtontimes-dc.newsmemory.com/?token=cd9e368406fe4f7f6ab4c85d8ce990ee_61b8b7b7_6d25b5f&selDate=20211214
No one can fathom what 5 trillion made out of thin air fully means. You don't have to earn it, or tax por even orrow it; it's just invented, manufactured, like magic!
Besides the former USA (FUSA), we now can refer to the FUSD, former US$.
All Dem House members and at least 45-49 Dem Senators are ready to vote for this no matter the cost. In fact, for them, the bigger the price tag, the more historic their accomplishment - in the small minds of these first level thinkers.
To the cost analysts, if this is the straw that brings down the whole country or world economy, the cost was not 5 trillion dollars.
I wonder what any of them think the basic economic phrase means: "There is no free "lunch!"
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If you don't believe this, ask the two Dem Senators from Georgia, among the red states where they cut hospital aid.
https://www1.cbn.com/cbnnews/politics/2021/december/build-back-bill-adds-87-000-irs-agents-cuts-money-for-hospitals-in-red-states-its-evil-its-mean-spirited
"Georgia is one of the states that would be affected and last month, Democratic Sens. Raphael Warnock and Jon Ossoff, along with a group of state lawmakers, wrote a letter to House leadership asking for the cuts to hospitals be dropped from the bill, according to Fox."
https://www.foxbusiness.com/politics/biden-spending-bills-cuts-hospital-funding-scrutiny?test=7f4ce372b96d173594c79d866e14f82b
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https://www.yahoo.com/news/joe-manchin-kills-build-back-151234208.html
for now;
a year is a very long time to pray this does not change,
till we win the houses back........
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says the shysters:
https://www.yahoo.com/news/manchin-killing-build-back-better-is-devastating-to-climate-change-action-experts-say-194208325.html
:roll:
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says the shysters:
https://www.yahoo.com/news/manchin-killing-build-back-better-is-devastating-to-climate-change-action-experts-say-194208325.html
Yes. Only a denier would buy on Martha's Vineyard. It's going under.
https://nypost.com/article/inside-obamas-marthas-vineyard-estate/
Coldest year EVER at the South Pole:
https://www.washingtonpost.com/weather/2021/10/01/south-pole-coldest-winter-record/ Who knew?
Which change were they talking about?
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Steve Moore, Committee to Unleash Prosperity :
Uncle Sam Spent Nearly $7 Trillion In 2021!
The Congressional Budget Office has now released its final tallies for spending, debt and taxes in Joe Biden’s first year in office. The numbers aren’t pretty. In fact they are dismal.
Start with the expenditures: $6.8 trillion. That’s $2.4 trillion more than the government spent in 2019 before the pandemic. The feds have spent close to $4 trillion in two years to contain Covid – which hasn’t been contained. FOUR TRILLION DOLLARS! Gee, that’s been money well spent!
Could things with the virus be any worse if the government had spent nothing and there had been no shutdowns? This might be the most epic failure of big government in world history.
Then there is the revenue side of the equation. For the first time in American history, Americans paid $4 trillion in total taxes. This was 18% of our GDP which is right at the recent historical average.
We do NOT have a revenue problem in Washington. We have an OVERSPENDING crisis. Republicans should call for a two year FREEZE on federal spending. Read Steve Moore’s new book Govzilla which documents the obscene spending blowout in Washington for the last several decades
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Spent $7 Trillion last year.
Took in $4 Trillion.
= usual 18% of GDP.
Rocket science conclusion:
Limit spending to 18% of GDP.
Tell the Left spending is unlimited.
Just grow GDP.
They ask how?
Elect more Republicans!
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"Just grow GDP.
They ask how?
Elect more Republicans!"
and I would add, close tax loopholes only certain groups can take advantage of,
and lower taxes for all so the tax revenues will grow even more. + reduce spending !
[I know, good luck with that ]
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"Just grow GDP.
They ask how?
Elect more Republicans!"
and I would add, close tax loopholes only certain groups can take advantage of,
and lower taxes for all so the tax revenues will grow even more. + reduce spending !
[I know, good luck with that ]
Yes. Close the loopholes. Lower the rates. Do what we KNOW grows the economy. But they won't so they must be defeated.
I had an email exchange with a friend, teacher, who is quite far left during the Trump years. One response to what I sent him about growth policies was this: 'It might surprise you but I was actually for lowering the corporate tax rate, to something like 25%' not the 21%' that Republicans lowered it to. The rates in the US were the highest in the world. We were losing companies by the thousands, and they were never going to do anything about it, because ... they can only move in one direction. the wrong one. Doing otherwise would require admitting Republicans were right about something and they were wrong? It was not ever going to happen even though the smarter and more honest among them knew it had to.
And now they are all wrong on everything economically, but can't change course for the same reasons. They would rather lose all power to Republicans than do what is right. Strange behavior for a group all consumed about keeping their own power. Instead they wish they cold break the centuries old filibuster to do what? Grow the economy? No. Prohibit election security. Good grief.
Go back to 1981, 82, 83. Reagan had a worse start economically. BIG unemployment and he lost the midterms. What was different? He had implemented pro-growth polici9es and big time growth was coming, and it came in 1984 in time for him to win 49 states including New York, California and Massachusetts, all of the west and east coasts and heartland, all but DC and MN. He didn't have to change course. He had faith that what he was doing was right and he enacted those policies by winning over the country and by compromising enough to win votes from the other side for his agenda. This guy Biden and handlers can't compromise enough to win his own side. Reagan was following the economic science, not denying it like the autocrats of today.
Will Biden look at Reagan's model of success? Absolutely not. Biden and team are incapable of it. Thrown out on their asses is the only way they learn and still they will blame it on, what? Suppression of the black and Hispanic vote - that is becoming more and more Republican??
-
"Thrown out on their asses is the only way they learn and still they will blame it on, what? Suppression of the black and Hispanic vote - that is becoming more and more Republican??"
right - > RACISM!!!!!!!!!!!!
WHITE SUPREMACY!!!!!!!!!!
THREAT TO DEMOCRACY!!!!!!!!!
and of course :
TRUMP!!!!!!!!!!!!!!
with these words screamed out loud they way Tucker does when he mocks them
:-D :roll: :wink:
-
There is zero interest or political will to swerve away from the inevitable.
Plan accordingly.
-
https://www.nationalreview.com/2022/01/the-bipartisan-blue-state-bridge-bailout/
and funds mostly all to blue states (who could have thought - Republicans go along with it for likely scraps)
Let me guess most funds will go for social hand outs , pensions , and more dole money
:roll:
-
One of the benchmark portions of the stimulus was the $25 billion devoted to
creating green jobs. Professor Obama imagined a world of greener buildings and green
jobs miraculously sprouting all across the fruited plains. So, he dumped $25 billion
into painting shingles white and whatever else it is they do to 'green' buildings.
The result? Zero jobs. Just another government 'success' story. READ
http://hotair.com/archives/2009/11/09/25-billion-stimulus-program-produces-0-jobs/
How many dem insiders pocketed serious money from the green boondoggles?
That was the success of the government programs.
-
https://nypost.com/2022/01/20/fraudsters-cash-in-as-dems-shovel-out-billions-and-billions-in-covid-relief/
-
https://www.yahoo.com/autos/buttigieg-announces-strategy-turn-tide-155700592.html
this could only mean more regulations more government control. :wink:
plus also shift away from supply problems.... :roll:
Butti taking the bull by the horns :roll: don't you feel better now knowing this?
-
https://www.nationalreview.com/2022/02/the-perfect-storm-is-coming/
thanks
democrats !
-
https://www.washingtontimes.com/news/2022/feb/9/covid-19-funding-spends-little-to-fight-actual-vir/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=newsalert&utm_content=newsalert&utm_term=newsalert&bt_ee=PCjegulUw8pmy08RqYtLkdve23lcyouEPRqvzPqiXvqnBMDOfp8SsEENWJqpQCkA&bt_ts=1644404767405
-
Democrat party success:
https://www.newsmax.com/finance/streettalk/oil-and-gas-industry-consumer-energy-prices/2022/02/09/id/1056193/
-
we taxpayers should give the Fed employees a cost of living raise
while we get squeezed :
https://www.yahoo.com/finance/news/biden-propose-4-6-percent-110634675.html
-
https://www.forbes.com/sites/andrewtisch/2022/02/15/how-magical-thinking-led-america-to-30-trillion-in-debt/?sh=414247546118
who is going to string up from lamp posts
krugman , et al?
for the destruction of our nation?
can include democrat politicians too
and some spendthrift republicans
-
All part of the plan. Cloward-Piven.
https://www.forbes.com/sites/andrewtisch/2022/02/15/how-magical-thinking-led-america-to-30-trillion-in-debt/?sh=414247546118
who is going to string up from lamp posts
krugman , et al?
for the destruction of our nation?
can include democrat politicians too
and some spendthrift republicans
-
every election cycle we here how money will be saved and the debt decreased by eliminating fraud and abuse
and every government spending program continues to have massive fraud and abuse:
https://www.msn.com/en-us/news/us/immense-fraud-creates-immense-task-for-washington-as-it-tries-to-tighten-scrutiny-of-6-trillion-in-emergency-coronavirus-spending/ar-AATZ0cF
-
https://www.newsmax.com/newsfront/money-covid-19-congress-electrical-grid/2022/03/03/id/1059423/
did we not spend ~ 6 trillion on corona?
this proposed under the cloak of aid to Ukraine..... :x
-
https://www.newsmax.com/newsfront/money-covid-19-congress-electrical-grid/2022/03/03/id/1059423/
did we not spend ~ 6 trillion on corona?
this proposed under the cloak of aid to Ukraine..... :x
From the article: "Senate Republicans have indicated they might oppose new COVID spending until the administration accounts for previous funding. They say the Biden administration has not fully accounted for the $1.9 trillion package adopted last year."
- What?! Previous spending wasn't fully accounted for??!!
-
https://www.foxbusiness.com/politics/manchin-stands-firm-disagreements-biden-policies
I love the part just under 10 minutes in where he states well 17 Nobel Laureates are wrong (when they told Biden in a letter spending and printing money will not lead to inflation
he mostly sounds like a Republican .....
of course Economist Shysters like Krugman would probably blame the Ukraine situation
and how he could not have predicted inflation .... :roll:
-
https://populistpress.com/1-5-trillion-spending-bill/
my response this is total horse duty
No "WE" do not have a war going on in Ukraine;
Russian and Ukraine does
Omnibus bill:
https://en.wikipedia.org/wiki/Omnibus_bill
bribes to Maduro ( :x):
I notice CNN tells us what is in the bill
but of course it is CNN
https://www.cnn.com/2022/03/09/politics/government-omnibus-spending-bill-2022/index.html
Most important sleaze buried in the bill "earmarks":
https://www.cnn.com/2022/03/09/politics/ominbus-spending-bill-congress-earmarks/index.html
If the DEM controlled House passes the bill it could not possibly be good for Republicans .
https://www.foxnews.com/politics/omnibus-spending-bill-allocates-40-million-democracy-programs-venezuela
-
" As for the national debt, servicing it now costs $550 billion/yr, but relative to GDP the burden of the debt (interest costs divided by nominal GDP) is very close to an all-time low (0.0226%). Regardless, the government is making out like a bandit with the combo of low interest rates and high inflation."
-
" As for the national debt, servicing it now costs $550 billion/yr, but relative to GDP the burden of the debt (interest costs divided by nominal GDP) is very close to an all-time low (0.0226%). Regardless, the government is making out like a bandit with the combo of low interest rates and high inflation."
When debt hits 40T, and interest rates10%, debt service eats up all tax revenue. Add a balanced budget amendment to that and you can close the courts, no military, no EPA, no border protection, oops that one's already gone, etc.
"government is making out like a bandit with the combo of low interest rates and high inflation"
- The parasite (govt) is killing the host (private sector). Besides the tragic outcome for the host, that is a suicide strategy for the parasite.
Best strategy for big government liberalism is supply side economics. Maximize the growth of the private sector and you maximize the ability to fund programs that help people truly in need.
-
" As for the national debt, servicing it now costs $550 billion/yr, but relative to GDP the burden of the debt (interest costs divided by nominal GDP) is very close to an all-time low (0.0226%). Regardless, the government is making out like a bandit with the combo of low interest rates and high inflation."
I don't buy this play on statistics
the total national debt is above GDP
so the interest on it is a small fraction - so what
we will never be able to pay down the debt
look at it another way in 10 yrs the interest will cost 5 trillion alone
sorry
sounds like a Democrat play on numbers to make is sound so trivial
-
" As for the national debt, servicing it now costs $550 billion/yr, but relative to GDP the burden of the debt (interest costs divided by nominal GDP) is very close to an all-time low (0.0226%). Regardless, the government is making out like a bandit with the combo of low interest rates and high inflation."
I don't buy this play on statistics
the total national debt is above GDP
so the interest on it is a small fraction - so what
we will never be able to pay down the debt
look at it another way in 10 yrs the interest will cost 5 trillion alone
sorry
sounds like a Democrat play on numbers to make is sound so trivial
THIS!
-
https://www.fool.com/the-ascent/personal-finance/articles/stimulus-update-heres-who-can-expect-to-receive-the-proposed-100-monthly-gas-stimulus-payment/?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article
:roll: :x
-
Guess the party of the President who said this.
"The federal government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures."
- JFK, December 14, 1962, Address to the Economic Club of NY
Again:
"The federal government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures."
-
https://www.yahoo.com/finance/news/student-loan-forgiveness-biden-pressley-141234731.html
I thought Congress controls purse strings?
-
and of course this
tacked on:
https://news.yahoo.com/white-house-considering-excluding-high-145537767.html
I do not understand how this is constitutional to consistently
to tax some and not others
or to edict burdens only on some but not others
for obvious political gain
-
https://www.yahoo.com/finance/news/student-loan-forgiveness-biden-pressley-141234731.html
I thought Congress controls purse strings?
According to what? The constitution?
:roll:
-
more information coming in:
https://en.wikipedia.org/wiki/Nina_Jankowicz#:~:text=Nina%20Jankowicz%20(born%201988%2F1989,Disinformation%20Governance%20Board%20Executive%20Director
notice we do not know how old she is .
majored in Russia and political science and was in Russia and Ukraine
where better to learn propaganda
me : oh no =>
***Jankowicz has not, however, stated whether or not she is Jewish. Meanwhile, her Twitter account claims that her ancestor emigrated to the United States from a Warsaw ghetto. In the ghetto, her grandparents were just ordinary Jews. She also stated that she lived and worked in Ukraine and is of Ukrainian descent.***
I don't get it
why do so many Jews working with the LEFT when the propaganda is mostly from the RIGHT?
they have their heads on backwards
even a liberal jew like Bill Maher admits at least this much
( I give him partial credit for this)
the rest are just crazy democrats ....
Elie Wiesel was a Trump fan - I really miss him. I loved the guy.
Jackie Mason too
and my uncle who was a WW2 vet and according to one cousin was a Trump fan
-
One of the benchmark portions of the stimulus was the $25 billion devoted to
creating green jobs. Professor Obama imagined a world of greener buildings and green
jobs miraculously sprouting all across the fruited plains. So, he dumped $25 billion
into painting shingles white and whatever else it is they do to 'green' buildings.
The result? Zero jobs. Just another government 'success' story. READ
http://hotair.com/archives/2009/11/09/25-billion-stimulus-program-produces-0-jobs/
Make no mistake, lots of well connected Dems got very rich off of the various green boondoggles. That is how they measured it as a success.
-
https://foxillinois.com/news/nation-world/government-will-pay-down-national-debt-for-1st-time-in-years-biden-to-highlight-plan-job-growth-in-united-states-how-in-debt-is-the-us-whats-a-budget-deficit-economic-health-in-america
new propaganda
Joe is fiscally responsible :roll:
I don't trust this .
Mr Kudlow : what say you?
-
tell us the gas reserves will be released (which will hardly do anything for few days)
then fill back the gas reserves at sky high prices
with tax dollars
and then boast about what extensive efforts you have made to help consumers and ease their pain at the pump
:roll:
-
https://www.yahoo.com/finance/news/white-house-says-20-internet-companies-will-provide-effectively-free-internet-to-millions-of-americans-094812381.html
-
Three things Congress can do to get serious on tackling inflation C
onsumer prices rose 8.6% last year, the highest inflation since 1981. What can Congress do?
First, stop the federal spending spree. Spending soared from $4.76 trillion in 2019 to $6.79 trillion in 2020 and $7.02 trillion in 2021. The Federal Reserve has enabled much of this surge by printing dollars like crazy. In just two years, the Fed has used these newly minted bills to buy more than $3 trillion of government bonds, as well as trillions more of other financial assets such as corporate bonds and mortgage securities. In printing money to cover these “purchases” while holding interest rates at near-zero, the Fed has spurred an expansion of the money supply by nearly 50% in just two years.
Using money created out of thin air to finance government spending comes at a cost: today’s soaring prices and a decline in real incomes. Congress
needs to curb the spending. Fast.
Second, stop subsidizing the housing market.
Congress subsidizes the mortgage markets through government-sponsored enterprises, specifically Fannie Mae, Freddie Mac and Ginnie Mae. The GSEs issue more than 90% of all residential mortgagebacked securities. By underwriting artificially low rates, Fannie, Freddie and Ginnie induce and enable borrowers to take out bigger loans, feeding the rise in housing prices and pricing out new buyers, especially young families.
The Fed has helped throw gas on this inflationary fire by purchasing $1.2 trillion of MBSs from the GSEs since March 2020. It now owns $2.7 trillion of these securities — an increase of 125% than it held in March 2020.
As a consequence, from the start of the pandemic through February 2022, home prices soared 33%. They are up 19.5% in just the last 12 months, dwarfing the prior 12-month jump of 7.1%. Adjusted for inflation, residential property prices now exceed the alltime record levels of the 2006 housing bubble. Home prices are now rising far faster than family income.
The home-price-to-medianincome ratio stands exceeds 7.2, eclipsing the 7.03 peak in late 2005. Compare that to a ratio of well under 5.0 from 1980 to 2000. In less than 18 months, mortgage payments based on median home prices have increased nearly 50% due to the rise in prices combined with a near doubling of mortgage rates. The mortgage-payment- to-income ratio hit 34.9%
in February — the bleakest affordability levels since 2008.
Congress should require the Federal Reserve to stop buying new mortgage-backed securities and start unwinding its MBS portfolio. Lawmakers should also sever the special status given to the GSEs, narrow their focus to financing primary home purchases, gradually reduce the “conforming loan” limits so they don’t subsidize mansions, and forbid the GSEs from offering amortization options beyond the traditional 30-year repayment term.
Third, Congress should stop the war on work and energy.
The flow of unemployment bonuses, stimulus checks and other assorted benefits — combined with a threatened OSHA vaccine mandate — disincentivized a return to work even as localities reopened after lockdowns. Now, Congress threatens to enact restrictions on gig workers who compete with unions and to advance forced unionization. Congress should abandon this labor-suppressing agenda so nonunion workers, who make up 90% of America’s workers, can get a job.
Congress also should refuse to support the Biden administration’s war on affordable, abundant fossil fuels. In part because of policies and threatening rhetoric designed to discourage new domestic production, oil prices nearly doubled over the past year and U.S. production remains more than 10% below pre-pandemic levels.
As far-left environmental groups block natural gas pipeline projects, parts of the Northeast continue to pay electricity prices several times higher than what customers elsewhere pay. Congress possesses the power to clarify or rewrite regulations that inhibit our access to affordable energy.
If Congress stops the federal spending spree, stops subsidizing the housing market, and stops the war against workers and energy, inflationary pressures will ease significantly. ⦁
Joel Griffith is a research fellow in The Heritage Foundation’s Institute for Economic Freedom and Opportunity.
-
3 things the Biden administration denied as recently as yesterday have anything to do with inflation.
Therefore this will get worse before it gets better.
What about Treasury Secretary abortionist Yellen. Doesn't she have Any background in economic science?
I guess she wasn't hired to tell Leftists in charge the truth.
Unfortunately, more money and fewer goods and serviced PRODUCED, definition of inflation, IS the elected policy of the country.
-
due to the traffic death crises
https://www.yahoo.com/news/buttigieg-sends-5b-cities-safety-094405060.html
:roll:
-
Funny how they fail to explain why traffic deaths have spiked in recent times.
due to the traffic death crises
https://www.yahoo.com/news/buttigieg-sends-5b-cities-safety-094405060.html
:roll:
-
https://www.conservativereview.com/the-clownish-disinfo-czar-got-the-boot-but-bidens-ministry-of-truth-hired-monster-replacements-2657354306.html
Chertoff's father was my families rabbi for decades
I called his office some yrs back for assistance and was blown off
I am no longer a fan
and of course for cash is happy to work for Myorkas ......
I suppose one could hope he is to protect conservatives but then again he worked for Bush......
-
Just another Deep State operative.
https://www.conservativereview.com/the-clownish-disinfo-czar-got-the-boot-but-bidens-ministry-of-truth-hired-monster-replacements-2657354306.html
Chertoff's father was my families rabbi for decades
I called his office some yrs back for assistance and was blown off
I am no longer a fan
and of course for cash is happy to work for Myorkas ......
I suppose one could hope he is to protect conservatives but then again he worked for Bush......
-
"Just another Deep State operative."
just another deep state
Harvard law grad who joined the DC club
-
need to stimulate the Dem vote count...
just in time for 11/22
https://www.yahoo.com/lifestyle/plans-forgive-10-000-student-154500391.html
-
Only 38% of young voters favor canceling all student debt
https://thehill.com/homenews/administration/3560018-white-house-faces-disaster-with-young-voters/
-
https://www.bloomberg.com/opinion/articles/2022-08-01/chips-and-science-act-could-become-a-280-billion-boondoggle
-
https://www.nationalreview.com/corner/cbo-over-90-of-promised-deficit-reduction-in-manchin-schumer-would-come-after-2026/
-
diligently working to get back in the good graces of the Democrat cocktail pool party set :
https://finance.yahoo.com/news/top-economist-larry-summers-recommends-002940722.html
[if cannot cheat to increase votes enough to win
why not bribe a block of voters to do it.]
-
diligently working to get back in the good graces of the Democrat cocktail pool party set :
https://finance.yahoo.com/news/top-economist-larry-summers-recommends-002940722.html
[if cannot cheat to increase votes enough to win
why not bribe a block of voters to do it.]
Abuse of our bankruptcy laws is not the answer to high educational costs. Getting the government money out is.
Student debt has to do with future earnings. Bankruptcy has to do with present balance sheet. Run up the debt. Wipe out the debt. Then start earning. What a scam.
What is wrong, if your student debt is out of control, is that these colleges are not producing enough value for the money they charge. The recourse should be against the failed educational institution, not the taxpayer who tried to help.
Have the colleges co-sign the loans. They choose who gets in and what is taught. Hold them accountable.
This college has $40 Billion tucked away:
https://www.cnbc.com/2019/10/28/harvards-endowment-is-worth-40-billionheres-how-its-spent.html
Is a person with three advanced degrees in gender studies more valuable on our economy than software engineer with only a four year degree or a plumber or electrician with no student debt? If so, more valuable to whom? Let them pay.
-
"Here are some facts: Only 37% of Americans have a 4-yr college degree, only 13% have graduate degrees, and a full 56% of student loan debt is held by people who went to grad school.
Biden's plan to cancel it would be like taking money from a plumber to pay the debt of a lawyer."
https://twitchy.com/samj-3930/2022/08/23/takes-money-from-a-plumber-to-pay-the-debt-of-a-lawyer-brutal-thread-takes-bidens-plan-to-cancel-student-loan-debt-apart/
"Simply cancelling debt puts a band aid on the actual problem, which is colleges raising their tuitions every year while the government foots the bill, convincing young kids that taking out thousands of dollars in debt is a good idea. Solve the problem by going after the system."
-------
[Doug] When did we decide $125k per person per year is hardship income?
And when did we decide four times the poverty line is the new poverty line (Obamacare)?_
Debt is not debt. There is nothing they won't redefine - if we don't stop them.
-
"According to a Penn Wharton Budget Model, a one-time maximum debt forgiveness of $10,000 for borrowers who make less than $125,000 will cost around $300 billion for taxpayers."
https://www.foxnews.com/politics/biden-announces-student-loan-handout-national-debt-soars
https://www.foxbusiness.com/economy/student-loan-deal-could-cost-900b-favor-wealthy-americans-analysis-shows
---------------------------------------
[Doug] Is not $300 Billion spent for no goods produced whatsoever inflationary?
Paying people to think of the US$ as play money, these are the policies of the world's (former?) reserve currency.
Question for our constitutional scholars:
I thought a "bill" (specially a spending bill) originates in the House, goes through the Senate for deliberations, then if successful in both those chambers goes to the President to be signed. This is a $300 billion spending bill. What the hell happened here? WHY IS THIS CONSTITUTIONAL?
-
Doug, ask any leftist, the constitution is like gender. It means whatever.
"According to a Penn Wharton Budget Model, a one-time maximum debt forgiveness of $10,000 for borrowers who make less than $125,000 will cost around $300 billion for taxpayers."
https://www.foxnews.com/politics/biden-announces-student-loan-handout-national-debt-soars
https://www.foxbusiness.com/economy/student-loan-deal-could-cost-900b-favor-wealthy-americans-analysis-shows
---------------------------------------
[Doug] Is not $300 Billion spent for no goods produced whatsoever inflationary?
Paying people to think of the US$ as play money, these are the policies of the world's (former?) reserve currency.
Question for our constitutional scholars:
I thought a "bill" (specially a spending bill) originates in the House, goes through the Senate for deliberations, then if successful in both those chambers goes to the President to be signed. This is a $300 billion spending bill. What the hell happened here? WHY IS THIS CONSTITUTIONAL?
-
"Question for our constitutional scholars:
I thought a "bill" (specially a spending bill) originates in the House, goes through the Senate for deliberations, then if successful in both those chambers goes to the President to be signed. This is a $300 billion spending bill. What the hell happened here? WHY IS THIS CONSTITUTIONAL?"
Dunno if I quality as a scholar, but as best as I can tell it is not.
What is the basis for this assertion of power?!?
-
https://www.city-journal.org/biden-cancellation-of-student-debt-indefensible
-
"Question for our constitutional scholars:
I thought a "bill" (specially a spending bill) originates in the House, goes through the Senate for deliberations, then if successful in both those chambers goes to the President to be signed. This is a $300 billion spending bill. What the hell happened here? WHY IS THIS CONSTITUTIONAL?"
Dunno if I quality as a scholar, but as best as I can tell it is not.
What is the basis for this assertion of power?!?
Emergency Covid powers.
-
Clearly, that is BS.
So, who has standing to contest it?
Separately, I am seeing something about the purported basis being "The Hero Act"?
-
https://www.congress.gov/bill/116th-congress/house-bill/6800
Includes student loans but refers to fiscal year 2020.
-
https://www.nationalreview.com/2022/08/can-anyone-sue-over-bidens-student-loan-lawlessness/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202022-08-25&utm_term=NRDaily-Smart
-
Doesn't everyone know and agree that the cause of the current inflation is overspending requiring quantitative expansion and also Biden's energy policies.
Yet in the past week Democrats managed to spend a trillion dollars more - in the name of "Inflation reduction".
This fools half the people? For how long?
The 'solution' they actually have in mind for what they think is excess demand is economic contraction / recession.
Unbeknownst to them, the real problem is supply / production, known as "GDP", and the and the real solution is supply side economics, and they would rather lose elections than try it.
-
https://www.nationalreview.com/2022/08/can-anyone-sue-over-bidens-student-loan-lawlessness/?utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202022-08-25&utm_term=NRDaily-Smart
https://media.gab.com/cdn-cgi/image/width=1050,quality=100,fit=scale-down/system/media_attachments/files/114/289/590/original/b5cf2c0aa4b0d04e.png
(https://media.gab.com/cdn-cgi/image/width=1050,quality=100,fit=scale-down/system/media_attachments/files/114/289/590/original/b5cf2c0aa4b0d04e.png)
-
Our side gets one thing wrong on college debt forgiveness.
I keep hearing, "and everyone else will pay for it", the plumbers and tradespeople and so on.
It's not "everyone else" who pays for it. It's EVERYONE who pays for it, including the recipients of the money.
They will pay with higher taxes, higher inflation and higher public debt held over them.
And they will start paying sooner than they think:
Debt forgiveness is taxable. Add that to their 124k / 249k incomes and see how much they really gained, while paying for it and governance like that for the rest of their lives.
Assuming you didn't figure this into your withholding, you've got some checks to write.
Hope you didn't spend the 10 or 20 grand you never received all in one place.
-
At this point, what difference does it make?
This is just the standard looting of the treasury as the nation collapses.
Our side gets one thing wrong on college debt forgiveness.
I keep hearing, "and everyone else will pay for it", the plumbers and tradespeople and so on.
It's not "everyone else" who pays for it. It's EVERYONE who pays for it, including the recipients of the money.
They will pay with higher taxes, higher inflation and higher public debt held over them.
And they will start paying sooner than they think:
Debt forgiveness is taxable. Add that to their 124k / 249k incomes and see how much they really gained, while paying for it and governance like that for the rest of their lives.
-
"just the standard looting of the treasury"
---------------------------------------------
I know what you mean but the new spending of the covid era and aftermath is a bit more than "standard looting".
These people don't believe in the collapse, and they are receiving bonuses that their more responsible peers are not. If you are a Democrat, it's a bad idea to split the young college educated vote, right while you're winning it.
Most of all, selective programs like this BLATANTLY violate the principle of equal treatment under the law, the exact rationale they use to prosecute Trump. They just became the elites they despise.
Sort of like vote fraud, how much hypocrisy is too much for them?
-
There is NO limit.
Power is all that matters.
"just the standard looting of the treasury"
---------------------------------------------
I know what you mean but the new spending of the covid era and aftermath is a bit more than "standard looting".
These people don't believe in the collapse, and they are receiving bonuses that their more responsible peers are not. If you are a Democrat, it's a bad idea to split the young college educated vote, right while you're winning it.
Most of all, selective programs like this BLATANTLY violate the principle of equal treatment under the law, the exact rationale they use to prosecute Trump. They just became the elites they despise.
Sort of like vote fraud, how much hypocrisy is too much for them?
-
https://www.dailymail.co.uk/news/article-11149973/Bidens-student-loan-bailout-cost-U-S-1-TRILLION-new-model-shows.html?fbclid=IwAR1280ijBqgptStd0BBFOAFVNVEPKCyBjhAXi4s4ycFWVUr__4c3DAuL4ws
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https://www.dailymail.co.uk/news/article-11149973/Bidens-student-loan-bailout-cost-U-S-1-TRILLION-new-model-shows.html?fbclid=IwAR1280ijBqgptStd0BBFOAFVNVEPKCyBjhAXi4s4ycFWVUr__4c3DAuL4ws
"The White House did not calculate the estimated cost of the plan before announcing it publicly"
- That's how they do it now, separate the information from the news story when the facts undermine the policies and the decisions, which is so often the case.
Same strategy as separating the affidavit from the raid then blacking it out when released, but leaking tidbits that appear to support the decision.
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".Same strategy as separating the affidavit from the raid then blacking it out when released, but leaking tidbits that appear to support the decision."
and the DNC - MSM complex all too anxious to blanket all available means to get the selected tidbits out and in everyone's face 24/7.
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https://www.powerlineblog.com/archives/2022/08/king-of-the-wild-frontier.php
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https://www.washingtontimes.com/news/2022/aug/31/joe-biden-student-debt-bailout-expected-cost-each-/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=newsalert&utm_content=newsalert&utm_term=newsalert&bt_ee=xDTtjl3pHr3jSJJRuneExBAeoUMbDrOve7WfEQsU9IKgEFO%2FzNu%2FeeA8eDF2mGuL&bt_ts=1661982452087
" , , ,The president extended the COVID-19 pause on federal student loan payments through December. He also lowered monthly payments on outstanding undergraduate loans from 10% to 5% of discretionary income. The plan will forgive loan balances after 10 years of payments instead of 20 years for original loan balances of $12,000 or less.
"The approximately $400 billion top-line cost of the program estimated by the foundation is in line with other outside estimates.
"The nonpartisan Committee for a Responsible Federal Budget estimates that Mr. Biden‘s plan will cost the U.S. Treasury $440 billion to $600 billion. A separate analysis projected that the plan would boost inflation by 0.15% to 0.27% over the next year.
"A Penn-Wharton Budget Model estimates that the plan will cost up to $605 billion and could balloon to more than $1 trillion when accounting for potential behavioral changes."
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NEXT YEAR
but better let the plebes know BEFORE this election !!!
and cost is allegedly due to an alzheimers drug - that does not work and was approved by the FDA against a 9 to 0 advisory panel that voted against it.
once again Democrats keep outspending the financial burdens they keep inflicting on Americans
spend spend
buy votes
bribe the dupes
https://www.yahoo.com/finance/news/millions-americans-save-medicare-fees-183012571.html
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NEXT YEAR
but better let the plebes know BEFORE this election !!!
and cost is allegedly due to an alzheimers drug - that does not work and was approved by the FDA against a 9 to 0 advisory panel that voted against it.
once again Democrats keep outspending the financial burdens they keep inflicting on Americans
spend spend
buy votes
bribe the dupes
https://www.yahoo.com/finance/news/millions-americans-save-medicare-fees-183012571.html
And thus, the new IRS army!
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NEXT YEAR
but better let the plebes know BEFORE this election !!!
and cost is allegedly due to an alzheimers drug - that does not work and was approved by the FDA against a 9 to 0 advisory panel that voted against it.
once again Democrats keep outspending the financial burdens they keep inflicting on Americans
spend spend
buy votes
bribe the dupes
https://www.yahoo.com/finance/news/millions-americans-save-medicare-fees-183012571.html
And thus, the new IRS army!
https://www.zerohedge.com/political/janet-yellen-disturbingly-serious-about-tax-hikes
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Quote author=G M
https://www.zerohedge.com/political/janet-yellen-disturbingly-serious-about-tax-hikes
----------
Janet Yellen is as dumb on this as the 16 year old climate girl is banning flights while flying to Fiji.
Everything they (Biden/Dem economic team) say or touch causes either more money created or fewer goods produced. Higher taxes hinders production, the crucial P in GDP, meaning fewer goods produced, meaning greater inflationary pressure across the economy.
Is that what they want, right while they're losing the midterm over inflation, or are they just incredibly stupid?
The right answer is the exact opposite.
I don't remember her education but it was either at Harvard or Yale and she probably got lots of degrees. Her background includes being Chairman of the Federal Reserve, a pretty good resume for getting her job. But this isn't any more complicated than the law of gravity and she can't seem to grasp it. What the hell went wrong?
-
Quote author=G M
https://www.zerohedge.com/political/janet-yellen-disturbingly-serious-about-tax-hikes
----------
Janet Yellen is as dumb on this as the 16 year old climate girl banning flights while flying to Fiji.
Everything they (Biden/Dem economic team) say or touch is either more money or fewer goods. Higher taxes hinders production, the magical P in GDP, meaning fewer goods, meaning greater inflationary pressure across the economy.
Is that what they want, right while they're losing the midterm over inflation, or are they just incredibly stupid?
I don't remember her education but it's either Harvard or Yale and probably lots of degrees. Her background includes being Chairman of the Federal Reserve. This isn't any more complicated than the law of gravity. What the hell went wrong?
It's almost like they aren't afraid of losing the midterms for some reason...
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https://www.zerohedge.com/political/prices-must-come-down-germany-redeploys-covid-cash-fight-inflation
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"Janet Yellen is as dumb on this as the 16 year old climate girl banning flights while flying to Fiji."
are you talking about that cutie Greta? :
she is 19!
https://en.wikipedia.org/wiki/Greta_Thunberg
don't know if she has boyfriend yet
maybe she could use a grandfather - me :)
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https://summit.news/2022/09/28/climate-activists-rank-hypocrisy-exposed-in-hilarious-radio-interview/
"Janet Yellen is as dumb on this as the 16 year old climate girl banning flights while flying to Fiji."
are you talking about that cutie Greta? :
she is 19!
https://en.wikipedia.org/wiki/Greta_Thunberg
don't know if she has boyfriend yet
maybe she could use a grandfather - me :)
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https://www.zerohedge.com/political/prices-must-come-down-germany-redeploys-covid-cash-fight-inflation
https://mobile.twitter.com/Schuldensuehner/status/1575456427157716995
What happened last time?
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Too little too late to help this winter perhaps, but England, Sweden and Italy just seemed to take right turns in leadership.
I don't know the current politics of Germany but a pro-heat party is likely to be gaining ground..
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I know it is how everyone is talking now, but in point of fact much of that 10+% is a price increase due to supply contraction, not inflation due to printing money.
The failure to make this distinction means the wrong tool (too much in the way of higher interest rates) will be applied instead of the right tool-- measures to increase supply, particularly of natural gas and oil.
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The programs are SO BIG and no one is accountable.
Wouldn't the (Dem) Governor want to visit the places that are feeding THOUSANDS of hungry children?
How about our (non-existent) watchdog media?
What are they covering that's more important that feeding thousands of hungry children?
Where are these "Minnesotans" now?
"Mekfira Hussein was arrested after allegedly booking a one-way flight to Ethiopia."
https://www.kare11.com/article/news/crime/only-7-of-48-feeding-our-future-meal-fraud-suspects-are-jailed/89-fa5f9c76-3a6b-40df-a775-e56fab9c95fe
Good grief.
------------------------------
NYT via Instapundit:
Department of Justice exposes biggest COVID stimulus fraud scheme yet.
The Justice Department recently announced the largest fraud claim uncovered in any Covid-19 relief program, accusing 44 people in Minnesota of allegedly committing fraud against anti-hunger programs during the pandemic, stealing $240 million.
The group billed the government for meals “they did not serve to children who did not exist,” The New York Times reported.
The brazen fraud stands out among the many instances of federal pandemic aid theft.
Prosecutors in the North Star State said one accused conspirator told the government he had fed 5,000 children a day in a second-story apartment, The Times reported.
The alleged criminals didn’t bother to try to hide their fraud, knowing that little attention would be paid to the details while the government was overwhelmed with applications and intent to get as much money out the door as possible.
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https://factreal.wordpress.com/2022/10/19/list-these-democrat-spending-bills-fueled-inflation/
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TREASURY DEPARTMENT
Federal deficit cut in half, ends year at $1.4 trillion in the red
BY STEPHEN DINAN THE WASHINGTON TIMES
The good news is that the federal budget deficit was substantially trimmed in half over the last year. The bad news is that it was still $1.4 trillion.
The Treasury Department announced final numbers Friday for the fiscal year 2022, which closed out on Sept. 30. The data showed significant improvement as pandemic spending waned and the economy hummed.
Uncle Sam collected nearly $4.9 trillion in revenue, up from $4 trillion in 2021. And spending dipped, from $6.8 trillion last year to $6.3 trillion this year.
But the resulting $1.4 trillion gap between spending and income is still the fourth worst on record, behind the pandemic-besotted 2020 and 2021, and the Wall Street collapse year of 2009.
The 2022 deficit would have been even lower but for President Biden’s new student loan debt forgiveness, which the Congressional Budget Office said punched a $426 billion hole in September’s figures as the full multiyear cost was recorded upfront on a present-value basis.
Other than that, CBO said government spending was lower than it had projected for the year, while income was higher.
“Revenues in all major categories, but notably individual income taxes, were greater than they were in fiscal year 2021. Spending related to the coronavirus pandemic declined, particularly for the recovery rebates (also known as economic impact payments); unemployment compensation; programs of the Small Business Administration (SBA); and transfers to state, local, tribal, and territorial governments,” CBO said in its year-end analysis.
The government’s big social safety net programs continue to grow, with Social Security spending up $83 billion or 7% and Medicaid spending up $72 billion or 14% in 2022.
And interest payments on the public debt rose by $121 billion or 29% as higher inflation forced Uncle Sam to pony up more
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https://www.fiscal.treasury.gov/files/reports-statements/mts/mts0922.pdf
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Can't open.
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https://www.wsj.com/articles/federal-deficit-widened-to-a-record-249-billion-last-month-11670871622
"The Treasury spent 53% more on borrowing costs this November than it did last November."
:-o :-o :-o
"During the Trump era, Republicans largely let go of their concerns about government spending and reached multiple agreements with Democrats to raise the borrowing limit without imposing deep spending cuts."
The way I remember this "the sequester" left Trump in a tough spot if he wanted to get an increase in military spending. IIRC at the time I did not fault him on what he did, nor do I now.
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Govt programs state, local and federal, "light rail" MN:. They have trouble finding the billions in cost overruns, so what did they find? Federal COVID funds!
Oddly, mass transit makes pandemics worse, exponentially, while private autos are far better in that regard.
From the article:
"That’s $190 million a mile. You can build a lot of roads with that kind of money. A typical lane of highway costs $1-2 million a mile. And would carry a lot more people."
https://hotair.com/david-strom/2022/12/14/everything-is-a-scam-covid-light-rail-edition-n517483
Of course the shenanigans are needed because this would never pass a vote of the people.
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or is big gov just going to shove this down our throats?
https://republicbrief.com/we-are-about-to-witness-a-major-move-toward-a-cashless-society/
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WHY? :cry:
https://www.breitbart.com/clips/2022/12/17/donalds-shelby-is-selling-everybody-out-and-removing-border-leverage-with-omnibus-to-take-all-this-money-out-the-door/
are that afraid that the Dems will play the "shut down the government card?"
if not that then this has to be corruption.
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21 Republican Senators vote with Dems on budget
Including Tom Cotton.
I don't get the point of voting for one dollar you don't approve of - unless you got something significant in return. What could that possibly be?
Republicans voting for it gives Dems cover, makes those opposed to multi-trillion increased in multi-tens of trillions of debt look to be the extremists.
Rand Paul pictured with the bill. Safe to say, no one has read it, and the people who wrote it were not elected.
https://mobile.twitter.com/randpaul/status/1605288779660812289
These Republicans support every item in it?
They are afraid of being blamed for a shutdown?
Shut down what, border protection?
Good grief.
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"Including Tom Cotton"
I had hoped for better from him , , ,
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The usual ones
McConnell
Murkoswki
Collins
and Romney
I am thinking that at least Graham will be the only one with the courage who will
AT LEAST COME ON TO THE NETWORKS TO EXPLAIN TO US WHY HE/THEY WOULD VOTE FOR THIS!
Romney/Murkowski/McConnell will be in hiding/
Collins will show up and ABC or PBS to explain why this was a "smart move"
is my guess
Mitch McConnell of Kentucky
Susan Collins of Maine
Mitt Romney of Utah
Lindsey Graham of South Carolina
Lisa Murkowski of Alaska
John Cornyn of Texas
John Thune of South Dakota
Tom Cotton of Arkansas
Todd Young of Indiana
Shelley Moore Capito of West Virginia
John Boozman of Arkansas
Jerry Moran of Kansas
Mike Rounds of South Dakota
Roger Wicker of Mississippi
And here are the four who voted for it and are retiring:
Roy Blunt of Missouri
Jim Inhofe of Oklahoma
Rob Portman of Ohio
Richard Shelby of Alabama
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this has got to stop
https://www.breitbart.com/sports/2022/12/22/american-taxpayers-stuck-paying-billions-to-build-renovate-nfl-stadiums/
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My post from yesterday :
"I am thinking that at least Graham will be the only one with the courage who will
AT LEAST COME ON TO THE NETWORKS TO EXPLAIN TO US WHY HE/THEY WOULD VOTE FOR THIS!"
And true to form:
https://www.youtube.com/watch?v=oiHAqqcbkkI
I don't recall EVER seeing McConnell on Newsmax or Fox - ever
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https://www.based-politics.com/2022/12/21/congresss-latest-budget-the-5-most-absurd-things-slipped-in/
https://tomknighton.substack.com/p/your-tax-dollars-at-work
"we’re funding the development of software that will hunt down “microaggressions” on social media.
The Biden administration is set to dole out more than $550,000 in grants to develop an artificial intelligence model that can automatically detect and suppress microaggressions on social media, government spending records show.
The award, funded through President Joe Biden’s $1.9 trillion American Rescue Plan, was granted to researchers at the University of Washington in March to develop technologies that could be used to protect online users from discriminatory language. The researchers have already received $132,000 and expect total government funding to reach $550,436 over the next five years.
The researchers are developing machine-learning models that can analyze social media posts to detect implicit bias and microaggressions, commonly defined as slights that cause offense to members of marginalized groups. It’s a broad category, but past research conducted by the lead researcher on the University of Washington project suggests something as tame as praising meritocracy could be considered a microaggression."
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https://thefederalist.com/2022/12/21/gop-cant-be-successful-until-mitch-mcconnell-is-gone/
Greg Price
@greg_price11
·
Follow
McConnell: "I'm pretty proud of the fact that with a Democratic president, Democratic House, and Democratic Senate, we were able to achieve through this Omnibus spending bill essentially all of our priorities."
3:47 PM · Dec 20, 2022
----------------
OK MITCH. SINCE YOU ARE SO PROUD "WE" WERE ABLE TO ACHIEVE SUCH SUCCESS HOW ABOUT YOU COME ON NEWSMAX OR FOX AND EXPLAIN 'YOUR VICTORY ' TO THE PEOPLE WHO ARE CONSERVATIVE !!
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on twitter
well at least he did not show up on NBC ABC CNN....
https://pjmedia.com/news-and-politics/lincolnbrown/2022/12/27/utahs-most-famous-rino-may-fall-off-the-fence-n1656588
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Why Illinois Is Going Broke
Here's an eye-opening report from our friends at Open The Books: Illinois has 132,188 state or local government employees who make over $100K per year, at an annual cost of $17 billion.
These wages and salaries are typically 30% more than is earned by comparably skilled private sector workers whose taxes pay for these munificent government salaries. This report doesn’t even include the fact that most government employees in the Land of Lincoln have virtual lifetime tenure. They seldom get fired no matter how bad their performance. And it may be set to get worse. The report concludes:
This year, Pritzker is pushing Amendment 1 – which would enshrine long-term employment contracts for government workers, multi-year salary increases, constitutional backed lifetime pensions, the power to strike, and much more.
It would essentially make Illinois “unreformable.”
https://openthebooks.substack.com/p/why-illinois-is-in-trouble-132188
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sounds like Illinois government workers are turned into the "elites"any
any why government workers are nearly all in the tank for Democrats
according to Pew "unfunded" liabilities according to personal income averaging 6.8.
but what about the money that went into fund these ?
the money that was there also came from taxpayers
https://www.pewtrusts.org/en/research-and-analysis/articles/2022/07/07/states-unfunded-pension-liabilities-persist-as-major-long-term-challenge
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https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2021/09/the-state-pension-funding-gap-plans-have-stabilized-in-wake-of-pandemic
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Doug:
We are so fuct , , ,
-
Doug:
We are so fuct , , ,
Right. And it isn't just that 132, 000 people (in one state) make more than 100k in state and local government jobs, they make that every year for life. They make that not to produce a single private sector product or service but to hinder that. They will never in their life have an entrepreneurial thought, nor will anyone in their family or circle. As ccp suggests, these numbers don't include pensions and benefits and those go on for life.
I don't live in illinois. I live in a state that is worse. On the state and local side of it, both of these states and in most states, the outstate people are ruled by the leftist majority of the metro. Consensual government applies only to the majority, I'm sorry to say. So they consent to trillions in excess spending, inflation that goes on forever, automatic raises for them, declining workforce participation rates, intentional increases in the costs of everything, and central control of everything , including your choice of what car to buy and drive and what news can come to your television and Internet.
If we get angry about it, they put the FBI on IRS on us.
Our worst possible nightmare is almost fully in place.
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"Our worst possible nightmare is almost fully in place."
and if Republicans hold up spending bills that come at thousands of pages in the last days of the session
the MSM goes full rampage telling the universe how Republicans are shutting the government down.....
and thus we have the McConnells "reaching across the aisle" for a few concessions....
I am tired of hearing how Americans are tired of the DC political fighting they just want to get things done.
Already I heard some obnoxious Democrat pundit complaining how Republican bickering is preventing the government from "dealing with things people care about like inflation " :roll:
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"how Republican bickering is preventing the government from "dealing with things people care about like inflation "
- Right. How could inflation be anything other than a government created problem.
The only government solution for it is less spending, less money creation, less production hindering, less government.
Unfortunately that's not what they go to Washington to do.
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"When it comes to the deficit, voters’ actions speak louder than their words."
https://www.powerlineblog.com/archives/2023/01/do-americans-hate-deficits.php
Voters say they care and vote the opposite. We will never solve it that way.
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right
politicians know spending cuts are the kiss of death
because the opposite party will label them a threat to Medicare Soc Sec
and the entire welfare state will rise up in indignation
and yell - "tax the rich more " to pay for the mess
we know the MSM will go bonkers screaming all these things the millisecond Repubs go in the direction of spending cuts
along with tax cuts for the "rich"
if only we had an honest MSM media
which feeds in to the hysteria over this contributing to the debt
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"the opposite party will label them a threat to Medicare Soc Sec"
- Isn't the demise of the Republic an even bigger threat to Medicare, social security etc. than a little spending restraint?
"and yell - "tax the rich more " to pay for the mess"
- Yet higher tax rates on the 'rich' keep bringing in no new revenue. We already have an extremely progressive tax code. You can't tax the rich more without taxing the economy more, which slows production, growth and tax revenues, ironically.
We used to talk about finding the next Reagan. Wow, is the table set nicely for a new leader, a real leader, to emerge.
The borders are a joke, national finances are in catastrophic disarray, government has gotten into everything it shouldn't and can't govern and our enemies and rivals around the world are running circles around us.
Not 'make America great again', but simply, 'let's fix this mess'.
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https://populistpress.com/biden-considering-insane-nationwide-ban-thats-never-been-done-before/
note Richard Trumka Jr.
is related and son to THAT Richard Trumka:
the Union strong man boss and of course ass kisser to the DNC:
https://en.wikipedia.org/wiki/Richard_Trumka
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The largest 'gas stoves' in the country are the ones they use to power the grid for the more than 50% of the time that the subsidized solar and wind farms are not producing electricity, like overnight for example when people are charging their subsidized or mandated electric vehicles.
Like a broken record, if you want people to rely on the grid instead of gas, build nuclear now, big time. The more we invest and rely on solar and wind, the more natural gas (and coal) we consume to fill the massive gaps left by these on and off sources.
I have a hard time with politicians who are quick to do the ridiculous but refuse to do the obvious.
The good part about leftists banning gas stoves is that it will upset the most important constituency in America, the suburban female vote. In my experience, women decide which stove to buy, and send men out to cook on the gas grill.
Chef's prefer gas:
https://www.mountainhighappliance.com/blog/do-professional-chefs-use-gas-or-electric-stoves
Ok, let's say we switch everything gas over to electric. Besides all the other costs, where are you going to get all the copper? By recycling?? Major appliances like stoves and especially furnaces aren't powered with thin extension cords; they need thick gauge wire to be safe, and they need professional installation. (The tradesman that liberals think are uneducated.) A small roll of 8 gauge wire already costs $500.
https://www.homedepot.com/p/Southwire-125-ft-8-3-Stranded-Romex-SIMpull-CU-NM-B-W-G-Wire-63949202/202316278
How much will it cost when everyone is mandated to switch over at once? Plus the 100 or 200 amp service to your house will be quickly overloaded when you start powering your car with it and your heating and so on. Copper will become the gold of our era. Then what other prices go crazy when copper is unaffordable? And how does that help the poor and the middle class?
Our ruling leftist visionaries can't seem to see past the nose on their face.
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https://www.nationalreview.com/2023/01/congress-should-prepare-for-a-historic-showdown/?bypass_key=VzZZRndZVE9pOW5aWTJtWG94K0NvQT09OjpkbmhXYjJWMlMwZ3ZibTVJYjFsdWNXaFFkMUpsUVQwOQ%3D%3D&utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202023-01-12&utm_term=NRDaily-Smart
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https://www.nationalreview.com/2023/01/congress-should-prepare-for-a-historic-showdown/?bypass_key=VzZZRndZVE9pOW5aWTJtWG94K0NvQT09OjpkbmhXYjJWMlMwZ3ZibTVJYjFsdWNXaFFkMUpsUVQwOQ%3D%3D&utm_source=Sailthru&utm_medium=email&utm_campaign=NR%20Daily%20Monday%20through%20Friday%202023-01-12&utm_term=NRDaily-Smart
He's right.
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must start immediately fighting back the DNC - media echo chamber
on this :
https://justthenews.com/government/congress/its-time-again-debt-limit-showdown-less-week-deadline
same old Dem propaganda
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https://justthenews.com/nation/states/center-square/feds-borrowed-4-billion-day-2022-totaling-10k-household
Feds borrowed $10,000 per household in one year, now every year not counting interest forever.
Managed like this, why wouldn't the economy tank?
Like representative Jim Clyburn (D-SC) said, "we all knew". We all knew this spending would lead to this inflation. Did they also all know the damage that that kind of get an inflation causes?
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https://www.theblaze.com/news/pentagon-can-t-account-for-220-billion-in-gov-t-property-fails-fifth-audit?fbclid=IwAR3pVUMh9Hr4LYo8Zxwj0DHZKAAyZLy8mBVqjFqgp-KuTwug9zhag3Ng5zc
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Kevin Hassett’s idea: $3 of spending cuts for every $1 of raising the debt ceiling.
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"Kevin Hassett’s idea: $3 of spending cuts for every $1 of raising the debt ceiling."
good idea but the usual conundrum for us Repubs who only control maybe 10 % of media outlets and leaders who cannot adequately express themselves on media
while the Vast overwhelming media DNC academic lawyer complex
knee jerk reply
"CUTTING MEDICARE SOCIAL SECURITY NO GOVERNMENT SERVICES PEOPLE WILL STARVE THROWN OUT ON STREETS" and "must raise taxes , cut defense " etc
We have to try as best we can though
versus we go into the garbage can.........
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Congress Once Constrained Government Debt
In 1920, lawmakers curbed spending by putting a single committee in charge of the overall budget.
By John F. Cogan
Jan. 23, 2023 2:03 pm ET
The U.S. Treasury began taking steps last week to avoid default on the nation’s $31.4 trillion national debt. The government has been here before, and it will keep arriving here until Congress finds a way to control its voracious appetite for spending. The political will to cut spending is hard to muster. Congressional history shows that the budget process itself creates incentives for excessive spending and budget deficits.
Entitlement programs have accounted for all the growth in federal spending relative to gross domestic product in the past 60 years, causing the persistent budget deficits during that period. Entitlement expenditures are determined differently from so-called discretionary programs. Spending on the latter programs is set by fixed appropriations of money. Entitlement expenditures aren’t fixed in advance but determined by the program’s level of benefits, its eligibility rules and economic factors.
Jurisdiction for entitlement legislation is dispersed among more than a dozen committees in each congressional chamber. In the House, the Agriculture Committee has jurisdiction over farm-support payments and food stamps, the Education and Workforce Committee over student loans and grants, the Ways and Means Committee over Social Security, Medicare hospital insurance and welfare programs, the Energy and Commerce Committee over Medicaid (sharing responsibility for ObamaCare and Medicare Part B with Ways and Means).
In this system, no committee is accountable for total spending. Each committee has a reason to expand its programs and resist attempts to restrain them, but none have an incentive to keep overall spending down.
It’s analogous to the classic tragedy of the commons. Imagine a situation in which many fishermen have access to a commonly owned body of water. Each fisherman has an incentive to catch as many fish as possible, and no fisherman has a reason to restrain his catch. The area is eventually depleted of fish. But there’s one notable difference: Unlike the fisherman, once Congress has exhausted its supply of tax revenue, it can borrow from the future.
Earlier Congresses saw the consequences of dispersed spending authority and used expert committees with specialized knowledge (called authorizing committees) to create programs and their rules of operation. For most of the 19th century, a single committee in each chamber determined the total annual budget. The use of a single committee provided accountability and made possible the necessary funding trade-offs among programs. Except during wars and recessions, annual budgets were balanced with a suitable allowance.
But in the late 1870s to the mid-1880s, the House began dispersing spending authority. Former Speaker Samuel Randall delivered a prophetic warning in 1885: “If you undertake to divide all these appropriations and have many committees where there ought to be but one, you will enter upon a path of extravagance that you cannot foresee the length of or the depth of, until we find the treasury of the country bankrupt.”
The House dismissed these warnings and dispersed appropriations jurisdiction to eight committees. The Senate later followed suit. The new incentives caused expenditures to grow rapidly. From the 1890s to World War I, budget deficits were more frequent and larger than ever before in U.S. peacetime history.
After World War I, Congress recognized the source of its budget problem and solved it. A House select committee, established to create a new process in which the president would submit his own comprehensive budget request to Congress, recommended that the chamber consolidate all appropriation authority into a single committee. The remarkable resolution stripped seven House committees of their spending authority. Citing past support from some of its most respected former members, including Appropriations Committee Chairman James Garfield (1871-75) and Speaker Joseph Cannon (1903-11), the select committee urged members to “submerge personal ambition for the public good.” The House did so and consolidated appropriations in 1920. Two years later, the Senate changed its rules to match.
That restored budget accountability and eliminated the pre-existing system’s incentives for higher spending. From 1921 to 1930, when the Great Depression hit, federal spending was restrained and the annual budget was balanced.
Starting in the 1930s, however, Congress began creating entitlement programs for people other than those who had performed some government service related to defense. (The only previous entitlements were pensions for servicemen.) The consequence is the return of dispersed committee jurisdiction in which entitlements now account for two-thirds of federal program spending.
Since the 1970s, Congress has made several failed attempts to change the budget process, most notably the 1974 Budget and Impoundment Control Act and discretionary appropriations caps and pay-go rules under the 1990 Budget Enforcement Act and subsequent laws. None of these reforms have overcome the powerful spending incentives created by the current system.
Many other ideas have been floated by individual lawmakers. In June 1979, Sen. Joe Biden urged that almost all spending be subject to annual approval by the Appropriations Committee. Mr. Biden said in a floor speech that his bill would make “new and existing entitlements subject to the appropriation of funds, thus effectively ending their entitlement status,” with exceptions only for then-existing Social Security and Medicare benefits.
In the current arrangement, the House and Senate Budget Committees may appear to provide accountability, but they have no independent authority to change entitlements. Similarly, the omnibus appropriations laws of recent years may give the appearance that the congressional leadership is in charge. But these bloated bills fund only discretionary spending and represent a failure of the appropriations process.
In 1917, President Woodrow Wilson advised Congress that “it will be impossible to deal in any but a very wasteful and extravagant fashion with the enormous appropriation of public moneys . . . unless the House will consent to return to its former practice of initiating and preparing all appropriations bills through a single committee.” The same is true more than a century later. Consolidating appropriations will be difficult for Congress, but no more difficult than it was in 1920. Lawmakers should again “submerge personal ambition for the public good.”
Mr. Cogan is author of “The High Cost of Good Intentions” and a senior fellow at Stanford University’s Hoover Institution
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https://confoundedinterest.net/2023/01/28/us-paid-853-billion-in-interest-on-its-31-trillion-debt-in-2022-more-than-the-us-defense-budget/
Speaking of morons, what's wrong with the people who run our country, and our voters?
What's the answer? More spending, more borrowing, more debt, more interest, higher interest rates? They are trying to make irrelevant the people who want to fix it.
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:-o :-o :-o :-o :-o :-o :-o :-o :-o
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https://confoundedinterest.net/2023/01/28/us-paid-853-billion-in-interest-on-its-31-trillion-debt-in-2022-more-than-the-us-defense-budget/
Speaking of morons, what's wrong with the people who run our country, and our voters?
What's the answer? More spending, more borrowing, more debt, more interest, higher interest rates? They are trying to make irrelevant the people who want to fix it.
This is the "Loot the treasury" phase of imperial collapse.
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A very plausible assessment , , , :x :x :x :x :x :x :x :x :x
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https://www.aier.org/article/apres-biden-le-deluge-when-the-republican-party-gives-up-entitlement-reform/
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lets see how this goes over in France
as we are forced to do the same here:
https://www.breitbart.com/europe/2023/03/06/unions-vow-total-shutdown-of-french-economy-as-macron-move-to-increase-retirement-age/
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IMHO if we do not raise the retirement age here we are fuct for sure. DeSantis agrees. Trump opposes.
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1) allow Medicare to negotiate drug prices
2) and the other is what Democrats always do
and both will do little:
https://finance.yahoo.com/news/heres-what-biden-wants-to-do-to-shore-up-medicare-135302609.html
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The Biden-Trump Plan to Cut Social Security
Doing nothing won’t protect beneficiaries. It’ll subject them to automatic 23% cuts in 10 years.
By David McIntosh
Updated April 13, 2023 5:34 pm ET
WSJ
Joe Biden and Donald Trump agree on one thing. “I guarantee you I will protect Social Security and Medicare without any change. Guaranteed,” Mr. Biden said in March. Mr. Trump has said: “I will do everything within my power not to touch Social Security, to leave it the way it is.” A pro-Trump super PAC launched an ad attacking Florida Gov. Ron DeSantis for his efforts as a member of Congress to restructure benefits.
The Biden-Trump position may sound like a pledge to protect Social Security, but it isn’t. The law “without any change” requires a huge benefit cut in 10 years.
According to the latest annual report from the Social Security and Medicare Boards of Trustees, the Old Age and Survivors Insurance Trust Fund, from which the current levels of Social Security benefits are drawn, will be able to issue payments to retirees only until 2034. But the trustees might have been overly optimistic. They projected much lower inflation levels—4.5% in 2022 and 2.3% in 2023—instead of the record high rates that occurred. Since Social Security benefits are automatically increased for inflation, the trust fund will run out of money sooner.
The current law also says all payments must come from within the program. That means once the trust fund reserve is depleted, beneficiary payouts will be limited to whatever funds come in from Social Security payroll taxes. “Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare,” the trustees warn.
Thus consequences of leaving Social Security “without any changes,” as promised by Biden-Trump, are dire. Ten years from now, benefit cuts of 23% will be triggered if there is no change to Social Security, according to one analysis.
Elected officials have several options from which to choose, none politically palatable. Payroll taxes could be increased, as has been done in the past. Some have advocated transforming Social Security into a system of privatized pension accounts. The eligibility age could be raised again.
House Speaker Kevin McCarthy recently said that the GOP has ruled out cuts to Social Security and Medicare as part of this year’s budget battle. Former Vice President Mike Pence said: “While I respect the speaker’s commitment to take Social Security and Medicare off the table for the debt-ceiling negotiations, we’ve got to put them on the table in the long term.”
Meanwhile, the Biden-Trump strategy has been to play “beat the clock,” leaving their successors to deal with the crisis.
Candidates with a record of entitlement reform like Messrs. Pence and DeSantis would do well to point out that doing nothing is the worst Social Security cut.
Mr. McIntosh is president of the Club for Growth. He served as a Republican U.S. representative from Indiana, 1995-2001.
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Kevin McCarthy’s Debt-Ceiling Marker
The Speaker can only win a showdown if the House GOP stays united.
By The Editorial BoardFollow
April 17, 2023 6:46 pm ET
Addressing the NYSE, House Speaker Kevin McCarthy rejected President Biden's push for further debt, outlining a 3-point fiscal path that 'limits, saves and grows.' Images: Bloomberg News Composite: Mark Kelly
Washington is cruising toward another showdown over the federal debt ceiling, and Americans can be forgiven for turning the channel. But House Speaker Kevin McCarthy laid out the House Republican offer on Monday, and it might even succeed if the GOP can stay united.
“Debt limit negotiations are an opportunity to examine our nation’s finances,” Rep. McCarthy said in a speech at the New York Stock Exchange, and the picture isn’t pretty. U.S. debt held by the public is more than $25 trillion. Spending as a share of the economy is 23.7%, the Congressional Budget Office reported in February, and rising to 24.9% by 2033, a level reached only twice since 1946—in 2020 and 2021 when Congress shoveled money into the pandemic emergency.
President Biden and Democrats in Congress ladled $6 trillion more onto the national debt in a mere two years on everything from electric car subsidies to an IRS blowout. America will spend $10.5 trillion in the next decade on interest payments alone, Mr. McCarthy noted.
Amid this grim scene, Mr. McCarthy has a fair opening offer for President Biden. One: “Defaulting on our debt is not an option.” Two: House Republicans won’t pass an increase in the federal debt without reforms or spending restraint. “A no-strings-attached debt limit increase cannot pass,” he said, in a red line amid all the red ink.
The Speaker’s requests are hardly radical. Republicans want to return the federal government to the spending levels of the bad old days in . . . fiscal 2022. They then want to cap the growth of spending at 1% annually over 10 years for domestic discretionary accounts. These are reasonable limits after the spending sprees of recent years.
The negotiating weakness is that Mr. McCarthy didn’t distinguish between defense and social-welfare priorities, which suggests that defense could take a hit. A plurality of his caucus won’t abide cutting the Pentagon budget when China is building a menacing military and U.S. defense spending is only 3% of the economy, a historical low.
The Speaker was also at pains to say Social Security and Medicare won’t be touched. This is a concession to the political reality of controlling only one half of one branch of government, though there’s no path to long-term fiscal sanity without reforming entitlements.
The other GOP priorities are energy and permitting reforms that passed the House recently with four Democratic votes, and a work requirement for able-bodied adults between 18 and 59 in return for food stamps or Medicaid. They also want to claw back Covid emergency money that hasn’t been spent now that the pandemic is over.
The challenge for the Speaker is that President Biden refuses to negotiate and has refused even to talk since they last met 75 days ago. Mr. Biden wants to run out the clock until the debt limit is reached, then predict a cataclysm, and assume the GOP majority will panic and pass an increase without any reform. He knows most of Wall Street and the press will be on his side, never mind the financial merits.
In other words, Mr. Biden wants to come close to a debt crisis without triggering one. This is a risky game, and Mr. McCarthy warned that Mr. Biden could “bumble into the first default in our nation’s history.”
The trillion-dollar question is whether Mr. McCarthy can keep his narrow majority together against this combined assault. If he can pass a debt-ceiling increase with reforms, he’ll be in a stronger negotiating position. If he fails, he’ll bring a rubber knife to an alley fight.
***
Default shouldn’t even be on the table because the debt ceiling is in many respects a fake cliff. More than enough revenue will continue to flow into the Treasury to pay interest on the debt and priorities like Social Security. The Treasury Secretary can prioritize those payments, and some legal observers say she has a legal obligation to do so under the 14th Amendment. Other parts of the government might operate at reduced capacity for a time, but that has happened before.
It shouldn’t come to that. Mr. McCarthy says he wants a “reasonable negotiation,” and a reasonable President would meet him part way. The Speaker will have to keep his nervous caucus together to pass a debt-ceiling bill, and then to accept that it won’t get everything it wants. But winning even one or two of his debt-ceiling proposals would be a big victory. If Republicans can’t stick together, they’ll lose in a rout.
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President Biden meets Tuesday with Congressional leaders at the White House to discuss the federal debt limit, and GOP leaders Kevin McCarthy and Mitch McConnell could do worse than point to Monday’s Congressional Budget Office budget review for April. It shows that federal outlays continue to soar even as tax revenue declines.
April is typically the best month for the federal fisc because it’s the tax payment deadline for the previous year. But this year the April budget surplus fell by $135 billion from a year earlier. Including adjustments for timing shifts in federal outlays, the decline was $274 billion, or 73% from April 2022.
That portends bigger budget deficits for the rest of the fiscal year. The deficit for the first seven months is already $928 billion, or 236% higher than in 2022 with timing adjustments. Keep in mind that this is happening when the economy is still growing and the unemployment rate is still low.
The big culprit is spending, which is up 12% in the first seven months or nearly $400 billion, including timing adjustments. Entitlements are up 11% and education spending owing to student-loan changes is up 56%. Chalk this up to the spending pipeline enacted by the last Congress that has years to go unless it’s pared back by this Congress.
And get this: Interest on the national debt rose 40%, or $107 billion, and is already $374 billion for the first seven months. That’s what happens when interest rates rise 500 basis points in a year to fight the inflation that runaway federal spending helped to ignite.
Revenue fell 10%, as the economy slowed, and individual income taxes fell 18%. CBO says it’s too early to know for sure, but it suspects one reason “could be lower-than-expected realizations of capital gains last year.” That happens when the stock market declines, as California in particular is discovering. You can’t soak the rich when they’re not making money.
All of this screams for the urgent need to slow the growth of federal spending, as House Republicans did as part of their debt-ceiling increase bill. Your move, Mr. Biden.
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second
Biden’s Ridiculous Line in the Sand
Just because the president’s debt ceiling position is political and absurd doesn’t mean it’s not dangerous.
James Freeman hedcutBy James FreemanFollow
May 9, 2023 11:58 am ET
One of the dangers when someone begins his first executive job at age 78 is that he may struggle to develop good managerial judgment. The danger is compounded when he spent a career as a legislator and may not comprehend that political posturing is not the solution to every problem. American voters may also be thinking that in hindsight filling the world’s most important management position with a rookie wasn’t optimal. Let’s hope that our now 80-year-old president has benefited from a couple years of seasoning. But it’s hard to be optimistic while watching him draw an arbitrary and unreasonable line in the sand over federal borrowing authority.
By all accounts the president is still clinging to his monthslong refusal to negotiate over the debt limit even as he prepares to welcome congressional leaders to the White House on Tuesday afternoon.
Those not accustomed to studying the absurdities of Washington may wonder why Biden administration staff are discussing increasingly kooky ways to evade federal law rather than simply accepting the constitutional reality that Congress has a say in federal spending and debt decisions. Perhaps due to Mr. Biden’s career as a political posturer, he doesn’t even appear to be embarrassed as he pretends that he’s standing on principle in rejecting negotiation to secure more borrowing authority. Naturally our posturer-in-chief had the opposite position as a senator and as vice president, when he served as a negotiator.
Now, apparently disappointed that he didn’t cut a better deal on behalf of President Obama in 2011, Mr. Biden suddenly pretends that negotiation is unnecessary and the White House can simply order Congress to pass a higher debt limit.
Yet much of the press portrays Mr. Biden as someone who is trying to solve a problem. “Biden meets with congressional leaders in urgent bid to avoid default,” claims a Washington Post headline. But his bid is obviously not urgent if he’s still unwilling to negotiate on the subject.
The White House in recent days has emphasized that Biden is willing to discuss spending cuts as long as they are not tied to the debt ceiling increase, a message he is expected to repeat at Tuesday’s meeting.
So he’s conceded that a president must negotiate such things with Congress, except at the moment when negotiations are most needed? This is absurd. But it won’t be funny if the government can’t pay its bills.
There doesn’t appear to be a deep state at the White House thwarting the president’s bizarre policy. Unnamed staff are staking out the same odd position that, sure, spending restraints need to happen, but not when they would be helpful in averting a debt crisis. The Post account continues:
McCarthy’s bill to raise the debt limit, passed by the House last month, would cut federal spending by $4.8 trillion over 10 years. The White House has rejected that proposal, but Biden aides have recognized that they need to reach an agreement with House Republicans on government spending levels, regardless of the resolution to the debt limit.
The White House position gets even weirder. So determined is Team Biden to vindicate Mr. Biden’s anti-bargaining stance that it may try to pretend it has suddenly discovered a vast new presidential power. The Journal’s Andrew Restuccia and Natalie Andrews report:
In a sign of the intractability of the negotiations, the Biden administration has begun weighing whether it can unilaterally issue debt by invoking the 14th Amendment if Congress fails to raise the debt ceiling, according to people familiar with the matter. The amendment states that the validity of U.S. debt authorized by law “shall not be questioned.” Administration officials are reluctant to take that path, raising concerns about the legality of the move and the potential market reaction, the people said.
Here’s another idea: Endorse the position of Sen. Biden and Vice President Biden and the U.S. Constitution and work with Congress to decide the appropriate levels of federal spending and debt.
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https://thehill.com/homenews/administration/3998574-biden-uses-14th-amendment-as-leverage-in-debt-talks/
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Joe Biden’s 14th Amendment Folly
By THE EDITORS
May 15, 2023 6:30 AM
Joe Biden is musing aloud about violating his oath of office and seizing powers not granted him by the Constitution in order to avoid negotiating with the House of Representatives. This is a shameful way for the president of a constitutional republic to act.
The so-called 14th Amendment option — to have the president issue debt not approved by Congress — doesn’t actually exist. Until 2023, nobody in the executive branch has ever pretended that it does. “I have talked to my lawyers,” Barack Obama said in 2011, and “they are not persuaded that that is a winning argument.” Left-leaning legal scholars such as Laurence Tribe once agreed. Nothing has changed but the intensity of partisanship.
The Constitution is quite explicit: Congress, and only Congress, has the power “to borrow Money on the credit of the United States.” Congress, and only Congress, has the power to raise revenue, and all bills to do so must start in the House. The Framers were quite open in designing this system to give Congress the power of the purse so that it could bring the executive to heel.
Section Four of the 14th Amendment, designed to ensure the repayment of Civil War debts even over Southern objections, barred the federal government from repudiating its existing debts. But it did not, explicitly or implicitly, change the allocation of power to issue new debt. At the time, new issuances of debt were approved one at a time by Congress. The so-called debt ceiling instituted during the World War I is not a limit but a congressional grant of power to the Treasury to issue a certain amount of new debt, with discretion over time and terms. But once that new debt is exhausted, there is simply no authority in the executive branch to borrow more.
Why is the president openly mulling seizing power from Congress? Because Biden has, as usual, let the progressives who dominate his party box him into a corner from which the only exit is to flout the law.
It has long been the practice of presidents and Congresses of both parties to negotiate conditions before Congress raises the debt ceiling. But after the showdown between congressional Republicans and President Obama in 2011, progressives decided that their party should henceforth refuse to negotiate and instead insist on principle on “clean” debt-ceiling raises, with no fallback position. The 2013 debt-ceiling fight reinforced their view that this was a workable strategy. Biden and Democratic leaders in Congress have thus talked themselves into Stalingrad-style “not one step backward” pronouncements against making even a penny of concessions.
Republicans have proven more flexible, passing a debt-ceiling increase through the House with enough attached that there is ample room to negotiate. Kevin McCarthy hasn’t publicly indicated what his bottom line is, but he plainly can’t get his caucus to sign a deal in which Republicans are supposed to get nothing and like it.
This can end only with one side blinking — either the Democrats will make concessions or the Republicans will fold — or with the government going into default for the first time in American history. Nobody wants that. Biden insists that a default would somehow be the fault of Republicans, but he could avoid it by signing the package they passed. He could propose his own counteroffer, but he hasn’t. The president is the one who hasn’t offered anything and is claiming he never will.
Both sides are playing a game of chicken with default, but Biden is the only one who is also threatening the constitutional order to get what he wants. If he goes down that road, it will have poisonous consequences, which Chip Roy has described to us as “open warfare” between the president and the House of Representatives.
When the Constitution and the 14th Amendment were written, if Congress refused to borrow more money, the government would just have to stop spending for a while until it could raise revenue. To the extent that the inability to borrow more money threatens an immediate default today, it is only because our system of budgeting, entitlement spending, debt, and deficits has been hopelessly broken by liberal spending policies. If even Democrats are now howling about fiscal Armageddon and threatening the Constitution over the consequences, perhaps it is time to start addressing the disease instead of just treating the symptoms.
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https://www.zerohedge.com/markets/hard-pass-heres-whats-debt-ceiling-deal-republicans-are-about-nuke?utm_source=&utm_medium=email&utm_campaign=1520
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I was wondering if some of the Democrats complaining the deal is not good
is a ploy because it is good for them and want the Republicans to think they are mad when indeed this deal is better for them
big deal we got a 20 hr week Medicaid work requirement only for able bodied single men up to age 54 and who have no dependents
https://www.kff.org/medicaid/state-indicator/medicaid-enrollment-by-gender/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
https://www.medicaid.gov/state-overviews/scorecard/who-enrolls-medicaid-chip/index.html
------
95 million enrolled in Medicaid [ :-o :-o :-o]
https://www.kff.org/coronavirus-covid-19/issue-brief/analysis-of-recent-national-trends-in-medicaid-and-chip-enrollment/
https://www.prb.org/resources/majority-of-people-covered-by-medicaid-and-similar-programs-are-children-older-adults-or-disabled/
~ 82 % are disabled, elderly , children{<18yo)
institutionalized or already work part time or full time
so maybe ~ 16 to 18 % are single adults ?
and some of those are female who are not asked to work.
Why are single women exempt from work requirement?
THIS IS SMALL POTATOES AS FAR AS A 'WIN' FOR REPUBLICANS
MORE SMOKE AND MIRRORS
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"THE END TO CHILD POVERTY ACT"
who could be against that ?
https://www.yahoo.com/finance/news/stimulus-proposal-could-americans-monthly-163115730.html
if the NATIONAL DEBT WAS A STOCK I WOULD PUT ALL MY MONEY INTO IT.
it only goes up.
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Who knew?
https://justthenews.com/nation/states/center-square/report-finds-pandemic-spending-difficult-track-even-experts
I remember honest (liberal) business owner friends talking to each other about how to get the PPP money.
Our real world seems like a fictional caricature of what could go wrong with all Leftist governance. We aren't really just throwing around more and more trillions trillions like it's play money when we already "owe" more than we can imagine, are we?
FYI to the young people wanting "debt forgiveness", your share of the total debt just went up by WAY MORE than the ten grand of 'free money's you thought you were getting.
And now we find out the extended shutdowns did no good for public health. Trillions wasted and hundreds of billions of that were lost in invited fraud.
15 days to stop the spread might be the worst joke of the century. "15 days" lasted years, cost trillions, literally and didn't stop the spread.
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Good thing Manchin and Sinema joined the Reps to block the $5T Build Back Better!!!!!!!!!!!!
A point which should be made when Magoo claims credit for bringing inflation down.
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https://www.breitbart.com/politics/2023/07/17/the-senate-is-coming-for-your-credit-card/
sounds corrupt to me.......
what else is new ?
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Is there anything wrong in this country where you can't say, Biden made it worse?
https://www.washingtonexaminer.com/opinion/editorials/president-bidens-deficits-threaten-economic-doom
I wonder when, maybe 15 years ago, I was posting that if we would just act responsibility now we could grow our way out of this, even 10 trillion, maybe 20 trillion of debt with enough sustained, long term growth. At 30 trillion with no end in sight, what can you say? When do we want to start acting responsibly?
43 million among us are on food stamps, SNAP, free food. Majority want even more people dependant on food stamps.
https://www.newsnationnow.com/the-hill/majority-of-voters-want-snap-increased-not-cut-poll/
What percentage are on government health care now, 100?
To paraphrase a great leader of past times, this isn't the way.
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Ford loses $5 Billion on EVs trying to please the benevolent totalitarian regimes and now gets a zillion dollar "loan" from same government, right as the line between free money and loan gets blurred.
Crony governmentism is a form of fascism, would someone please tell the voters these crooks work for that it's wrong.
https://www.msn.com/en-us/autos/news/ford-just-got-a-loan-bigger-than-anything-seen-since-the-advent-of-the-auto-industry-here-s-what-the-company-is-spending-it-on/ar-AA1edjqC?ocid=msedgntp&cvid=92ed5726a8fd4b1f81a416a90acb3bc5&ei=13
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https://www.cbsnews.com/news/fitch-downgrades-us-debt-citing-political-deterioration/
The reason being Bidenomics.
More, tax revenues collapse:
https://confoundedinterest.net/2023/08/03/bidenomics-us-treasury-rates-rise-as-us-fiscal-deficit-back-to-financial-crisis-levels-as-tax-revenues-collapse/
Right when everything was going swimmingly.
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https://www.washingtontimes.com/news/2023/aug/8/cbo-says-federal-deficit-will-reach-17-trillion-ye/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=evening&utm_term=evening&utm_content=evening&bt_ee=Xt8ABrQzbiXpPjRCfGEug9IVA3Yr5kUU5q3BIa9RHoV%2BYz0ZXefU5htyvOsWpNlR&bt_ts=1691530834000
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https://www.washingtontimes.com/news/2023/aug/8/cbo-says-federal-deficit-will-reach-17-trillion-ye/?utm_source=Boomtrain&utm_medium=subscriber&utm_campaign=evening&utm_term=evening&utm_content=evening&bt_ee=Xt8ABrQzbiXpPjRCfGEug9IVA3Yr5kUU5q3BIa9RHoV%2BYz0ZXefU5htyvOsWpNlR&bt_ts=1691530834000
And this:
https://www.foxbusiness.com/economy/credit-card-debt-hits-1-trillion-first-time-ever
It's like no one cares.
To state the obvious math on all the debt:
More debt means less net worth. We are trillions poorer because of the debt. IN ONE YEAR. And the runup in credit card debt is directly a result of the inflation from the trillions in excess government spending, still overspending by almost two trillon per year. It's insanity. More specifically, it's a form of mental illness like a cutter. Inflicting injury, self harm on yourself. It isn't even the next generation anymore. The damage is now.
https://www.npr.org/2010/02/10/123529829/cutting-elevated-from-symptom-to-mental-disorder
We know better but on it goes. Hundreds of billions of dollars a month - in addition to all the taxes paid.
https://www.usdebtclock.org/
Almost no one cares.
Oh no, there's more:
https://www.cnn.com/2023/08/08/economy/401k-hardship-withdrawals/index.html
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I could swear I saw somewhere that interest on the debt is now 15% of revenues?!?
Can we lay hands on any citation about this?
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I could swear I saw somewhere that interest on the debt is now 15% of revenues?!?
Can we lay hands on any citation about this?
I can't find that. The government doesn't publish it that way. I like that you have it as a percentage of revenues rather than a percentage of spending. One site says interest is 11% of budget. We are overspending our revenues by about 30%. That makes your number of 15% about right, but it is going to go up rapidly as we stagnate the economy, continue the massive deficits, and watch interest rates go up and up on new debt.
Scary stuff. I know of about two people who care, you and me. ccp too I'm sure, but that's still only makes three.
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".ccp too I'm sure, but that's still only makes three."
Agree !
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"One site says interest is 11% of budget."
Link?
"We are overspending our revenues by about 30%."
Link?
"That makes your number of 15% about right"
IIRC the piece that I saw but did not have the time to capture also noted that only quite recently this number was quite a bit smaller.
I was under the impression that most of our debt was long term? Thus, a rapid increase in interest payments as a result of the recent Fed action (in constant dollars interest rates still are essentially zero, yes?) caught me by surprise.
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"Three-quarters of Treasurys must be rolled over within five years."
- Monday WSJ
https://www.wsj.com/articles/the-scary-math-behind-the-worlds-safest-assets-a22069f9
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UH OH , , ,
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Coming back with links for recent posts.
Interest costs represented about 8 percent of total federal outlays in 2022. By 2033, that share will rise to 14 percent and will exceed programs such as defense and Medicaid. At that point, interest payments would be twice the amount the federal government spends on income security programs.
https://www.pgpf.org/blog/2023/02/interest-costs-on-the-national-debt-are-on-track-to-reach-a-record-high#:~:text=Interest%20costs%20represented%20about%208,spends%20on%20income%20security%20programs.
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so what Scott Grannis says no big deal
:roll:
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usdebtclock.org
GDP = 27.5 T
Federal debt = 33 T
debt per taxpayer is more than a quarter million dollars.
Interest expense now = 658 Billion
* 20% of debt is owned by government. How you analyze net debt is up to you, but it is money taken from the private sector and financing more government, trillions and trillions not available for private investment.
Federal revenues = 4.6 T
(This is the budget. Everything else is over budget.)
Federal spending = 6.45 T
Deficits = 1.85 T
We are overspending an amount 40% over revenues!!
(Can't tax more. We are at a point where higher tax rates DON'T bring in more money, proven by both Obama and Biden.)
Interest expense now is 14.3% of revenues. $658 billion / 4.6 trillion.
Link: usdebtclock.org
Poised to triple.
Total government spending, federal, state and local is 37% of the economy. The private sector is just 63% of the economy.
(Doug) With rounding and out of control governance, interest expense is potentially on target to triple in 5 years. Interest rates on Treasuries as recently as the Trump years rounded to 1%. Now they are above 4% headed to at least 5% and worse. 3/4ths of existing debt will be rolled over in the next 5 years, plus we are adding new debt at a rate that easily rounds to 2 trillion per year, 10 trillion more in 5 years. 658 Billion interest expense at present becomes 2.2 Trillion dollars interest expense per year in 5 years in this scenario. That is roughly half of current tax revenues.
All of this is happening in what some call relatively good economic times, low unemployment rate for example. What happens if things turn downward?
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so what Scott Grannis says no big deal
:roll:
Scott uses 'net debt', so we only owe 80% of 33 trillion. (What's the emoji for that?)
As recently as 2016 or even 2020 pre-covid I argued that if we got our act together now we could grow our way out of this.
Interest rates going from 1.5% to 4.5% is not a 3% move it's a three-fold move; the same amount of debt cost three times as much to service. But we don't have the same amount of debt. We are hell-bent on adding 10 trillion every 5 years or is that rate going to increase? Meanwhile our growth rate approaches zero, and our political discussions are about jailing the challenger rather than reforming the system.
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Scott grannis also talks about the 'area under the curve', speaking of calculus.
If you chart a line projecting out the long-term growth rate of the US economy and then draw the line where the economy underperforms under the policies of these jackasses, you can see the trillions and trillions of dollars of economic activity that never occurred and never got taxed on.
They pass thousands of burdensome regulations and hundreds of taxes and stagnate our economy and then tell us that economic growth isn't really possible anymore. Well why isn't it?
If you wanted to get the debt under control and not have it take over our entire budget and entire economy you would have to do a couple of simple things. Quit deficit spending and grow the economy.
But no. Nobody gives a bleep.
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Not really fair to describe Scott as saying "No big deal". My understanding is that he consistently looks at debt as part of a ratio.
Let me see if I can get him to comment , , ,
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A talking head on FOX today (WSJ Report show?) cited as fact that next year interest payments would be greater than military budget
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A talking head on FOX today (WSJ Report show?) cited as fact that next year interest payments would be greater than military budget
Yes. Soon after that, twice the military budget. Of course, depending on the cost of the world wars to come. After that, interest costs will be more than total revenues, on this trend. Then , what? Where does this end? It ends, of course, with the largest financial collapse since humans have roamed the planet. I get the math, I just don't get why no one (besides us) gives a rip.
The deficit is 40% above revenues. I've been telling that to people who will listen.. The reaction I get is no more than a look that says, interesting trivia, not a hint of okay outrage.
It's like there is a hurricane coming and there is a switch where you could just turn it off before it comes but everyone is too busy or not interested.
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"The deficit is 40% above revenues."
Just want to double check here:
Is it the DEFICIT or SPENDING that is 40% above revenues?
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"The deficit is 40% above revenues."
Just want to double check here:
Is it the DEFICIT or SPENDING that is 40% above revenues?
Yes, it has to be worded correctly to be true. Deficit IS the excess of spending over revenues.
Deficit is (currently running at) 1.85 T
Revenues are 4.6 T
1.85 T / 4.6 T equals 40.22%
Source US debt clock.org
Yes we are spending 40% more than we take in.
40% is the ratio of current deficit to current revenues (unless someone else has better numbers).
Revenue is the correct baseline (denominator), not spending. Total revenue is the amount we can spend at zero deficit.
Interestingly, revenues won't increase when we raise tax rates further, and they didn't decrease when we lowered them (1926, 1963, 1983, 1996, 2005, 2018).
Must spend less.
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My personal FWIW biggest threats to the US
Tied for #1 - China and debt and the entitlement programs such as Medicare Soc Sec not being financially sound
economists can keep stating how it is of no big concern, but it keeps increasing
we do not have any real reserve to tap if we are faced with another crises such as 2008, corona , war, etc.
#3 - Democrat party policies
# 4 - Orwellian tech
notice Climate Change is not on the list
it is in IMHO something we do need to pay attention to while gradually migrate to alternate souces of energy (fussion , nuclear quantum) but not an emergency
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https://dailyhodl.com/2023/08/25/us-debt-jumps-97000000000-in-one-week-as-finance-expert-says-jaw-dropping-spending-will-fuel-era-of-financial-repression/
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https://www.washingtonpost.com/business/2023/09/03/us-debt-deficit-rises-interest-rate/
No f*cking clue what's causing it.
You might look at the money and politics of the owner and the paper and find the problem.
IT'S THE SPENDING STUPID.
We have HOW LONG to turn this around?
Zero days and zero minutes. Maybe somebody could put some urgency on this.
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can't read it but can assume
author plays dumb to the spending.
did he recommend we confiscate all the shares of Amazon Bezos owns to pay down the debt by 1/50 th of one percent?
the rich need to pay their fair share - :wink:
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I don't go past the paywall either. Just showing it's a 'mainstream' source reporting it. As they did reporting the coldest winter in recorded history in Antarctica last year. But they don't read their own reporting when it comes to changing the narrative. It is said once, then back to the agenda.
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I used a different browser.
Here it is:
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U.S. deficit explodes even as economy grows
A strong economy usually reduces the deficit. Not this time.
By Jeff Stein
September 3, 2023 at 6:00 a.m. EDT
Morning light inside the Capitol Rotunda. Congress will return soon to try to come to an agreement on federal spending for the next fiscal year, but rising deficits could complicate lawmakers' work. (Matt McClain/The Washington Post)
The federal deficit is projected to roughly double this year, as bigger interest payments and lower tax receipts widen the nation’s spending imbalance despite robust overall economic growth.
After the government’s record spending in 2020 and 2021 to combat the impact of covid-19, the deficit dropped by the greatest amount ever in 2022, falling from close to $3 trillion to roughly $1 trillion. But rather than continue to fall to its pre-pandemic levels, the deficit then shot upward. Budget experts now project that it will probably rise to about $2 trillion for the fiscal year that ends Sept. 30, according to the Committee for a Responsible Federal Budget, a nonpartisan group that advocates for lower deficits. (These numbers ignore President Biden’s $400 billion student debt cancellation policy, which was struck down by the Supreme Court this year and never took effect.)
The unexpected deficit surge, which comes amid signs of strong growth in the economy overall, is likely to shape a fierce debate on Capitol Hill about the nation’s fiscal policies as lawmakers face a potential government shutdown this fall and choices over trillions of dollars in expiring tax cuts. The Senate will return this week from August recess, and the House will be back the following week. Biden and House Speaker Kevin McCarthy (R-Calif.) approved a deal in June to raise the nation’s borrowing limit, but it did little to alter the long-term debt trajectory.
The higher deficit may undermine Biden’s attempts to take credit for reining in the budget ahead of the 2024 presidential election. And it could pose a challenge to Republican lawmakers, who — despite their calls for fiscal responsibility — are pushing to extend more than $3 trillion in tax cuts they approved in 2017.
“The deficit will basically double from 2022 to 2023,” said Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget. “This should prompt a serious evaluation of federal policy going forward, though I worry it won’t.”
The surge in red ink has confounded many economists’ expectations. Typically, deficits contract when the economy grows, because businesses and consumers owe more in taxes and the government does not need to spend as much to protect those who have lost their job. Then deficits normally expand again in downturns, as those factors go into reverse. And yet the current surge in the deficit is coinciding with a period of unusually strong economic growth, amid historic lows in unemployment and robust corporate profits.
Jason Furman, who served as a top economist in the Obama administration and is now an economics professor at Harvard, said the current jump in the deficit is only surpassed by “major crises,” such as World War II, the 2008 financial meltdown or the coronavirus pandemic. Only during these national catastrophes did the United States see deficit numbers this large as a share of the economy or this substantial an increase in the deficit, Furman said. The U.S. economy is expected to grow at a steady 2.1 percent this year.
“To see this in an economy with low unemployment is truly stunning. There’s never been anything like it,” Furman said. “A good and strong economy, with no new emergency spending — and yet a deficit like this. The fact that it is so big in one year makes you think it must be some weird freakish thing going on.”
From August 2022 to this July, the federal government spent roughly $6.7 trillion while bringing in roughly $4.5 trillion. That represents a total increase in spending of 16 percent relative to last year and a 7 percent decrease in revenue, according to the Committee for a Responsible Federal Budget.
The deficit fell dramatically the year before in large part because of the expiration of trillions in emergency covid aid approved during the Trump and Biden administrations. But even as covid spending continued to fall this year, other factors pushed overall spending up.
Think you can tame the national debt? Play our budget game.
The Treasury Department is also on track to take in substantially less in new revenue this year, in part because of the stock market’s slump last year. In 2021, amid a cryptocurrency bubble and an explosion in housing prices driven by rock-bottom interest rates, investors recorded huge gains that led them to pay capital gains taxes at record levels. But then the bubble burst, leading to a sharp drop in capital gains tax revenue. Automatic adjustments to the tax brackets to account for inflation also reduced tax obligations for many Americans, resulting in less incoming revenue relative to last year.
Then a number of other spending increases contributed to the rising deficit — Social Security payments increased because they are indexed to inflation; the government spent more on education, veterans benefits and health care; and the bipartisan infrastructure law, as well as the 2022 Inflation Reduction Act, started sending billions of dollars out from the government’s accounts.
Experts are fiercely divided on the extent to which the higher deficit amounts to a pressing problem for the economy.
The federal government can still issue more debt even as interest payments rise, with demand for the dollar remaining strong. That isn’t always the case: In Argentina, soaring debt levels have forced the government to impose limits to prevent citizens from taking money outside the country. Other government debt crises have been marked by catastrophic drops in the exchange rate, amid investor concerns that the currency will be devalued. These signs of distress have not materialized in the United States.
Fears of a debt crisis during the Obama administration also consistently failed to materialize, emboldening those who regarded the warnings of fiscal conservatives demanding budget cuts as overblown and ideologically motivated.
See how the national debt grew to $31 trillion
“If you think of places that have actually had problems of real fiscal sustainability which have gotten to the point of crisis — we know what those places look like, and this doesn’t look anything look like that,” said Matthew C. Klein, publisher of the Overshoot, a subscription research service focused on the global economy. “You can argue about whether you want it or not, but this is really not a crisis.”
And yet other economists remain highly concerned about the long-run fiscal picture. Larger government deficits lead to higher interest rates, which can distort private investment and drive up the cost of loans, like home mortgages. Brian Riedl, an economist at the Manhattan Institute, a libertarian-leaning think tank, said the United States appears on track for annual deficits that could rise to close to $3 trillion by the early 2030s.
“A debt growing much faster than the economy will drive up interest rates, reduce economic investment, and over time make interest payments the largest federal expenditure — risking a federal debt crisis,” Riedl said.
Other experts pointed out that the perception of higher deficits could make it harder for policymakers to approve spending to fight the next economic downturn, even if the United States does in fact have additional room to spend.
“If there is a perception that the deficit is too high, it will become ‘too high’ as it becomes self-limiting — the government will begin to drastically limit spending to influence how the deficit is perceived,” said Kyla Scanlon, a financial analyst who founded Bread, which produces financial education.
The shift could also have more immediate political consequences. Biden has routinely touted the decline in the deficit from 2021 to 2022, claiming to have restored fiscal responsibility to the White House after Donald Trump added more than $7 trillion to the national debt.
“Unlike House Republicans, President Biden takes reducing the deficit seriously — and he will continue calling out Republicans for their hypocrisy on the debt,” White House spokesman Michael Kikukawa said in a statement. The statement also emphasized that Biden’s budget proposals would reduce the deficit by trillions of dollars through higher taxes on the rich and corporations.
Still, Republicans are likely to also continue insisting that they are more responsible fiscal stewards. But GOP leaders are pushing to extend roughly $3.3 trillion in tax cuts, including breaks for large businesses and a reduction in the estate tax paid only by a small minority of wealthy families.
By Jeff Stein
Jeff Stein is the White House economics reporter for The Washington Post.
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Washington Post, deficit doubled in one year story:
1. "The unexpected deficit surge..."
(Doug) Excuse me but in the exact words of Rep Jim Clyburn "All of us knew..."
https://freebeacon.com/democrats/all-of-us-knew-biden-ally-says-democrats-knew-inflation-was-coming-after-spending-bill/
"Let me make it very clear. All of us are concerned about these rising costs, and all of us knew this would be the case when we put in place this recovery program," Clyburn said on MSNBC after host José Díaz-Balart asked about Americans' struggles with surging food and energy prices. "Any time you put more money into the economy, prices tend to rise."
(Doug). Of course it was all inflationary. Of course it was going to explode the deficit. Of course it was going to kill the private economy. Who couldn't see that coming? They all knew. Like the release from the strategic petroleum reserve, it bought them a midterm.
2. (Paraphrase) 'We are different than Argentina because we can still issue more debt'.
(Doug). That's reassuring - NOT!
3. Capital gains taxes are at the center of it:
"investors recorded huge gains that led them to pay capital gains taxes at record levels. But then the bubble burst, leading to a sharp drop in capital gains tax revenue."
(Doug) In other words , the asset price runup (aka inflation?) was a Ponzi scheme (bigger fool theory) with the government laughing to the bank with their cut. When the music stopped, investors caught holding the bag were screwed and locked in place with the higher interest rates, can't get out without taking a huge tax hit so the transactions stop and the government gets nothing on asset sales that don't happen. Nothing to learn there??
4. Note the previous post in the topic, "Republican" Sen. Mitt Romney promising to do NOTHING about out of control spending (entitlements). Well, Democrats matched and raised him, they promised to do more than nothing; they promised to make everything worse - and delivered on their promise!
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The Republican house is where spending bills originate, right? But Republicans have only a four-seat majority. If the house freedom caucus exerts any backbone, the speaker will have to side with Democrats in order to pass anything.
In the senate, the Democrats only have a two-seat majority, similar problem. If two or three defect, they have nothing. In the oval office they have the slurring stumbling lame duck with the bully pulpit.
The advantage goes to the side that controls media and big tech.
Luckily it doesn't matter because neither party cares.
https://www.powerlineblog.com/archives/2023/09/budget-showdown-ahead.php
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Also from Steve Moore, CTUP:
Republicans Always Lose Government Shutdown Fights
Biden and House Republicans look like they are on a collision course for a budget stalemate and a government shutdown as soon as next week.
This would be the 22nd government shutdown since 1978, as Congress and the White House spar over the budget.
Some shutdowns happened with a Republican president and a Democrat Congress. Some have happened with a Democratic president and a Republican running Congress.
But there has been one similarity of each shutdown: the media has blamed every government shutdown on the Republicans. And in most cases, voters have too.
We like the solution that Senator James Lankford of Oklahoma has proposed. If appropriations aren’t signed into law in time, programs are automatically funded at last year’s level until a funding bill is passed.
Lankford tells us that he has support from four Senate Democrats, plus Independent Krysten Sinema. He believes he can get enough Democrats to reach the 60 votes needed to force a floor vote on his amendment. The idea would then go to the GOP-controlled House.
“The Prevent Government Shutdowns Act would do exactly what the title suggests. It’s a simple bill that offers a reasonable solution to one form of recurring congressional gridlock.”
Lankford told the Hotline that under his bill, Congress would have powerful incentives to pass appropriations:
No taxpayer-funded travel allowances for official business
No use of campaign funds by congressional offices for travel
No motions to recess or adjourn in the House/Senate for a period of more than 23 hours
No other votes would be in order in the House and Senate unless they pertain to passage of appropriations.
Lankford says his bill would create a type of Detention Hall for Congress: “We should be forced as members to finish our homework or else stay after class.”
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https://www.kcbd.com/2023/09/22/arrington-proposes-trillions-spending-cuts-new-10-year-federal-budget/
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… remain unspent:
https://pjmedia.com/news-and-politics/rick-moran/2023/10/14/get-very-mad-the-350-billion-covid-bailout-of-states-was-entirely-unncessary-n1735077
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"why not"
Agree
We have to or else.
I still recall the great Rush explaining why it cannot get done by either party in 7 simple words:
Spending is the source of their power!
Stopping it is asking these politicians to give up power.
Good luck :x
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ccp: "I still recall the great Rush explaining why it cannot get done by either party in 7 simple words:
Spending is the source of their power!
Stopping it is asking these politicians to give up power."
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That's exactly how we got here.
It's hard to put words to this madness.
a) We spend 40% more than we take in.
usdebtclock.org
b) Interest rates on the public debt just tripled BECAUSE of this and because of the accumulation of said debt.
c). We got away with this, mostly, until now, as compared to say Argentina, because we are the world's reserve currency.
d) The loss of reserve currency status is happening as we speak largely because of the above.
e) Spending for defense and security is a constitutional and moral responsibility. Spending on Ukraine to stop Russian expansion can be argued good or bad either way but it is a .008 share of spending, one deck chair on a Titanic. Spending on Israel is way less.
f) Sending checks to ourselves is what ccp refers to, power to the elected Representatives, NOT HELPING EVEN THE PEOPLE RECEIVING IT MUCH LESS THE COUNTRY AS A WHOLE. And it is trillions and trillions and trillions. Wake up people.
g). The part we spend over what we take in, currently 1.9 Trillion per year, 40% over revenues, is play money - getting mixed in with the real money - at such a fast rate that soon all our money will be play money.
What are we going to do then?
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What are we going to do? Crash and burn, at some point.
I’d add an “h” and even an “i” to your list:
h) We spend money supposedly to address grave social concerns that somehow, by golly, never get solved. Should we even attempt to slow down the rate of growth of these programs the MSM squeal about “draconian cuts” and other nonsense. The net effect is the creation of a class of citizens that produce little, consume much, and reliably vote for “improvements” on the failed status quo.
i) Those unproductive programs need to be administered, creating a class of bureaucrats that also vote reliably, and also lobby, campaign, and provide well framed soundbites for their MSM friends.
As I understand it, we are $30 trillion or so, and have spent around $30 trillion on “Great Society” programs since LBJ enacted therm. A coincidence, no doubt, as is the fact if we eliminated h) and i) we’d be living well within our means. Too bad it’ll take a national catastrophe to get there, and even after that the two perspective likely to emerge are that the catastrophe was caused by ineffective spending or that the catastrophe was caused by people that sought to address all the ineffective spending. The latter perspective will have a much larger bought and paid for constituency than the latter, and the solution that constituency is likely to demand will be some sort of command economy as they cast all that oppose that “solution” as modern day kulaks.Those so cast had best keep their powder dry.
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BBG: "if we eliminated h) and i) we’d be living well within our means."
- Yes, interesting coincidence there, $30 T spent, 30T in debt, rough nos.
There of course are so many other boondoggles (cf PPP, EV etc) it's not limited to that.
If we eliminated paying people to not work it has a doubling effect on less debt incurred; those people start paying in. And a tripling effect, some would see the madness and start voting differently.
None of this is to say there aren't people in real need. The point of cleaning up the system is to be in a much stronger position to handle real need. But it is doubtful the Federal government is ever the best vehicle to help them.
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BBG: "if we eliminated h) and i) we’d be living well within our means."
- Yes, interesting coincidence there, $30 T spent, 30T in debt, rough nos.
There of course are so many other boondoggles (cf PPP, EV etc) it's not limited to that.
If we eliminated paying people to not work it has a doubling effect on less debt incurred; those people start paying in. And a tripling effect, some would see the madness and start voting differently.
None of this is to say there aren't people in real need. The point of cleaning up the system is to be in a much stronger position to handle real need. But it is doubtful the Federal government is ever the best vehicle to help them.
FWIW, I don't have an issue with supporting the deserving as they get their life on track and hence would not support a blanket end to all assistance programs. I would however have no problem dumping top heavy administration, perverse incentives, outcomes prolonging dependence rather than supporting independence, would privatize the snot out of whatever I could, and would demand ruthless metrics and accounting.
But yeah, there is plenty outside of Great Society programs that needs to be ripped out by its roots....
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Among the non-monetary reasons that debt burden and interest rates on the debt are exploding include:
Downgrade of our creditworthiness by the rating agencies
23% increase in the issuance of new debt
Source Wharton School
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The URL at the bottom of this takes you to the original post containing tables and other formatting that didn't reproduce here.
“The Path We’re on Is Unsustainable”
Powell Fiscal Path
•The Beacon by Craig Eyermann / October 24, 2023 at 03:17PM//keep unread//hide
When speaking to the New York Economics Club last week, Jerome Powell, the Chair of the Federal Reserve, did not mince words about the U.S. government’s fiscal situation. Barron’s Megan Cassella reported on his comments:
The overall level of the U.S.’s debt isn’t a problem in itself, the Federal Reserve’s Jerome Powell said Thursday. But when asked about the level of government borrowing relative to the past, the chairman suggested that rapidly rising debt levels could become a problem moving forward.
“The path we’re on is unsustainable, and we’ll have to get off that path sooner rather than later,” Powell said.
The next day, the Treasury Department released its final monthly treasury statement for the U.S. government’s 2023 fiscal year, which ended on September 30, 2023. The news, as reported by Reuters, was not good:
The U.S. government on Friday posted a $1.695 trillion budget deficit in fiscal 2023, a 23% jump from the prior year as revenues fell and outlays for Social Security, Medicare and record-high interest costs on the federal debt rose.
The Treasury Department said the deficit was the largest since a COVID-fueled $2.78 trillion gap in 2021. It marks a major return to ballooning deficits after back-to-back declines during President Joe Biden’s first two years in office.
The deficit comes as Biden is asking Congress for $100 billion in new foreign aid and security spending, including $60 billion for Ukraine and $14 billion for Israel, along with funding for U.S. border security and the Indo-Pacific region.
The big deficit, which exceeded all pre-COVID deficits, including those brought about by Republican tax cuts passed under Donald Trump and from the financial crisis years, is likely to enflame Biden’s fiscal battles with Republicans in the House of Representatives, whose demands for spending cuts pushed the U.S. to the brink of default in early June over the debt ceiling.
The chart below shows how the U.S. government’s spending and tax collections throughout its 2023 fiscal year compare with 2022:
Cumulative Monthly U.S. Government Spending and Revenue during Fiscal Years 2022 and 2023
Though U.S. government spending in FY 2023 ran ahead of FY 2022 in most of the year, spending significantly slowed in the final two months of the fiscal year. Total outlays for 2023 were $6.13 trillion, a slight reduction from 2022’s $6.27 trillion. Tax collections declined by a larger amount, falling from FY 2022’s record-high $4.90 trillion level to $4.44 trillion, the second-highest figure ever recorded.
An Unsustainable Fiscal Path
Spending might have fallen more if not for Social Security inflation adjustments and a much higher cost to service the U.S. national debt. Here’s Reuters again:
Social Security spending rose 10% to $1.416 trillion due to cost-of-living adjustments for inflation, and spending for the Medicare senior healthcare program rose 4% to $1.022 trillion.
Interest costs on the more than $33 trillion in federal debt also rose sharply, up 23% to $879 billion, a record. Net interest payments, excluding intragovernmental transfers to trust funds, rose 39% to $659 billion, also a record, according to a Treasury official....
Interest rates have soared over the last year and a half as the Federal Reserve jacked up borrowing costs to slow inflation. The average interest cost on the Treasury’s outstanding debt was 2.97% last fiscal year, up from 2.07% the year before.
Meanwhile, CBS MarketWatch reports on why the U.S. government’s revenues fell:
The Treasury said the sharp decrease in revenue was due to lower individual-income tax receipts as capital-gains realizations fell, and to rising interest rates that cut the amount of money the Federal Reserve deposited at the Treasury.
Both these problems result from the high inflation that characterizes President Biden’s tenure in office. Corporate profits fell in 2022 because inflation increased the cost of doing business, including the cost of borrowing from rising interest rates intended to fight inflation. These factors then led to reduced capital gains tax collections in 2023. You can see that consequence in the chart above as 2023’s tax collections deviate from 2022’s levels starting in April 2023. That month, capital gains taxes came due as Americans filed their 2022 income taxes.
All this is what an unsustainable fiscal path looks like. Powell is right in recognizing that “we’ll have to get off that path sooner rather than later.”
The post “The Path We’re on Is Unsustainable” appeared first on The Beacon.
https://blog.independent.org/2023/10/24/path-were-on-is-unsustainable/?utm_source=feedly&utm_medium=rss&utm_campaign=path-were-on-is-unsustainable
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"The path were on is unsustainable"?
Who woke him up so suddenly?
It's the Spending Stupid.
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On the revenues side:
"The Treasury said the sharp decrease in revenue was due to lower individual-income tax receipts as capital-gains realizations fell, "
I've been harping on this. People can't sell their assets because they would be taxed on the inflation. The federal rate might be a little lower for capital gains but 41 states tax capital gains including the inflationary gain as ordinary income.
I complain because it's killing me, but it's killing our country too.
Look at the absurd cost of housing. The capital gains tax (on inflation) keeps the old owner from selling and drives up the cost for the new buyers. (There are some exceptions for homestead but a lot of property is not homestead.)
On a retirement fund don't they put a 10% penalty on early withdrawal, and that keeps people from cashing in those assets early. In my case for a rental house, I can have all of an asset or I can sell it and have 2/3rds of the asset. You're taxed on the proceeds and then you're taxed on the investment you make with the proceeds, taking years or decades just to get back that loss you chose. Then they hire 87,000 new IRS agents to make sure you still have a piece of paper for every improvement you made.
Nobody wins. Everybody loses.
Simple answer: Index capital gains to inflation. It makes sense to tax a gain but inflation is not a gain.
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That could fit in the Tax thread as well.
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More redistribution
and, of course, I fall into the screwed category:
https://www.msn.com/en-us/money/retirement/social-security-on-life-support-dramatic-changes-coming-with-both-republican-and-democratic-support/ss-AA1j4YrN?ocid=msedgntp&pc=DCTS&cvid=1b0cae078fb9480bb614d80bd6f04c8b&ei=9#image=3
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… your daily dose of federal fiscal sleight of hand:
https://blog.independent.org/2023/10/30/the-smoke-and-mirrors-of-government-spending-in-2023/?utm_source=rss&utm_medium=rss&utm_campaign=the-smoke-and-mirrors-of-government-spending-in-2023
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https://www.cbsnews.com/news/house-gop-bill-israel-aid-irs-budget-cuts/
The House GOP released a $14.3 billion standalone measure on Monday that would pay for aid to Israel by cutting the same amount in funding that was allocated to the IRS under the (misnamed) Inflation Reduction Act
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… your daily dose of federal fiscal sleight of hand:
https://blog.independent.org/2023/10/30/the-smoke-and-mirrors-of-government-spending-in-2023/?utm_source=rss&utm_medium=rss&utm_campaign=the-smoke-and-mirrors-of-government-spending-in-2023
"Accounting quirk". They doubled the deficit and showed it as a decrease. The poor, misled, gullible public, Dem voters in particular.
There are simpler measures of deficit, how much new debt did you have to issue?
I use this site, seems to have accurate, up to date numbers: usdebtclock.org
It's what the deficit hawks pointed to when Republicans were in charge.
From that site:
Current actual running deficit: 1.86 Trillion
Federal Revenues: 4.425 Trillion
Overspending percentage: > 42%
We are spending 42% more than we take in.
I can't get anything but a blank stare out of anyone I tell that to. When I say both parties are to blame, then I can get a nod of agreement.
Round that to $2 trillion per year we are adding to our borrowings, and the interest rates on new debt and reissuances of old debt has more than tripled. At the link, the site shows current net interest cost per year at 675 Billion. That will pass $1 Trillion per year in VERY short order, nearly 20% of revenues, and never go down.
But it makes no difference. We aren't even trying to balance the budget anymore. It's play money. We aren't Venezuela or Argentina. The whole world has to use our currency. Oops, they don't anymore, and "it can't happen here" is EXACTLY what they said there.
The only response Democrat policy makers have is squeeze the private sector harder. Just what we need in a stagnating economy, less private sector investment. Good f'ing grief.
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https://www.cnbc.com/2023/10/30/treasury-to-borrow-776-billion-in-the-final-three-months-of-the-year.html
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… your daily dose of federal fiscal sleight of hand:
https://blog.independent.org/2023/10/30/the-smoke-and-mirrors-of-government-spending-in-2023/?utm_source=rss&utm_medium=rss&utm_campaign=the-smoke-and-mirrors-of-government-spending-in-2023
"Accounting quirk". They doubled the deficit and showed it as a decrease. The poor, misled, gullible public, Dem voters in particular.
There are simpler measures of deficit, how much new debt did you have to issue?
I use this site, seems to have accurate, up to date numbers: usdebtclock.org
It's what the deficit hawks pointed to when Republicans were in charge.
From that site:
Current actual running deficit: 1.86 Trillion
Federal Revenues: 4.425 Trillion
Overspending percentage: > 42%
We are spending 42% more than we take in.
I can't get anything but a blank stare out of anyone I tell that to. When I say both parties are to blame, then I can get a nod of agreement.
Round that to $2 trillion per year we are adding to our borrowings, and the interest rates on new debt and reissuances of old debt has more than tripled. At the link, the site shows current net interest cost per year at 675 Billion. That will pass $1 Trillion per year in VERY short order, nearly 20% of revenues, and never go down.
But it makes no difference. We aren't even trying to balance the budget anymore. It's play money. We aren't Venezuela or Argentina. The whole world has to use our currency. Oops, they don't anymore, and "it can't happen here" is EXACTLY what they said there.
The only response Democrat policy makers have is squeeze the private sector harder. Just what we need in a stagnating economy, less private sector investment. Good f'ing grief.
Sweet link Doug!
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" https://www.msn.com/en-us/sports/mlb/frank-howard-legendary-washington-senators-slugger-passes-away-at-87/ar-AA1j75cX?ocid=msedgntp&pc=DCTS&cvid=8dc059edc9a9481085967e9e7bd952e2&ei=10"
you noticed this too.
libs never agree that they are ( or mostly ) responsible but may occasionally agree if you include both just to cut the discussion off.
however the Repubs do share some blame here as noted in this case.
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https://www.stripes.com/theaters/us/2023-11-15/pentagon-failed-audit-shutdown-funding-12064619.html
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https://www.msn.com/en-us/news/politics/economist-paul-krugman-details-how-republicans-are-still-waging-war-on-social-security/ar-AA1kFSzb?ocid=msedgdhp&pc=DCTS&cvid=75fa767f0186418eb9c79e5debb3824c&ei=14
basically just needs more revenue :wink:
in other words "tax the rich"
and no problem.
This guy is so totally obnoxious
belongs right at the bottom of the keg along with Myorkas
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https://www.msn.com/en-us/news/politics/what-nikki-haley-has-said-about-cutting-social-security/ar-AA1kR3Bt?ocid=msedgntp&pc=DCTS&cvid=b0b678e2d19d4e82903530824dd9ba0d&ei=9
odd
I have been reading for yrs how Soc Sec would be in trouble by end of 2020's.
Now we have nothing to worry about till 2030's and even then it is no big. payouts would only drop to 80% of now .
So Soc Sec should not be threatened for '24 election
and put off any fix till the last minute . Dems can spend away and call for the rich to pay the whole time .
I am supposed to conclude that Haley is wrong and she is a threat to Soc Sec . So we all better vote for a DEm Biden or Newsome
At the same time the climate change calls for action NOW!
2 billion people are at risk of being under water.
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Uninformed Electorate, John Hinderaker, Why we are headed for bankruptcy:
https://www.powerlineblog.com/archives/2023/12/why-we-are-careening-toward-bankruptcy.php
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Your tax dollars inaction. Or something:
https://legalinsurrection.com/2023/12/long-after-covid-pandemic-ended-not-one-federal-agency-has-more-than-50-of-its-staff-at-office/?utm_source=rss
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(https://mcusercontent.com/dc8d30edd7976d2ddf9c2bf96/images/2ed33705-d088-8afc-dae4-3b065e897489.png)
https://mailchi.mp/33ef6f107d34/unleash-prosperity-hotline-886-weekend-edition-868592
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From border discussion, majority of illegals are on welfare:
ccp: "is this nuts or what?"
[Doug] It's so much worse than that, I don't have words for it.
The hearing backlog is 3 million meaning court date for pretend refugee status is never and nearly none show up for it anyway.
But the welfare part of it, are you kidding? If they're illegal, why are they eligible? Like a bank robber demanding they open an account in his name and fund it, and he can come back anytime without consequence. But we're so far past that because Leftists want this and Democrats all go along and they are the majority apparently.
But what money are we spending as we spend 40% more than we take in. Just funny money devaluing real money, making everyone poorer as we pretend to make ourselves richer by writing endless checks and funding EBT cards to people and we don't even know who they are.
33 Trillion debt and rising over 333 million people is already $100,000 owing for every man, woman and child. Average household size is 2.5. Every small household owes a quarter million before you go out and try to buy a house, and a not very fancy house costs a half million or more depending on where you are. Did I mention interest rates tripled, meaning debt costs tripled, rising in principle and interest every minute of every day.
Add to that math, half the people have no intention of ever paying in, and your share of the debt burden is more than double that.
This is WAY beyond nuts.
Decline is a choice.
Collapse is a choice.
Then what?
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Then what ?
I don't know.
China invasion?
https://www.businessinsider.com/reddit-fed-monopoly-money-image-2013-3
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I wonder if this should go under spending or vote fraud. Aren't these the same groups featured in 2000 mules? A half billion for "justice" to the "non-profits" in the name of "Environmental protection". I guess we're not low on money.
https://www.epa.gov/newsreleases/biden-harris-administration-announces-600m-11-grantmakers-fund-thousands-environmental
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" I wonder if this should go under spending or vote fraud. "
another darn DEI SCAM
using our money to bribe democrats to vote and be soldiers partisan soldiers
:x
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https://www.govexec.com/pay-benefits/2023/12/biden-signs-order-finalizing-52-pay-raise-feds-2024/392978/
Biden signs order finalizing 5.2% pay raise for feds in 2024
The measure confirms that the federal workforce will see its largest pay increase in more than 40 years.
(https://www.cato.org/sites/cato.org/files/styles/pubs_2x/public/2022-10/bea%20federal%20comp.png?itok=qCcTvnRR)
https://www.cato.org/blog/good-news-federal-worker-pay
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So, fed pay more than doubled in 23 years , , ,
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So, fed pay more than doubled in 23 years , , ,
Yes they are making increases 30% over and above the inflation rate year after year.
Why does this happen? Voter loyalty along with serious political contributions - all to one side.
Who's looking out for the taxpayer interest? No one.
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34T x 5% = 1.7T on interest alone, if recent rates become permanent. And what if interest rates double again while total debt keeps climbing? We might have ourselves a crisis, if we don't already.
https://citizenwatchreport.com/debt-crisis-escalates-34-trillion-u-s-federal-debt-raises-alarms-as-interest-expense-soars-to-unprecedented-levels/
"Debt crisis escalates: $34 trillion U.S. federal debt raises alarms as interest expense soars to unprecedented levels."
The most recent trillion of debt happened in 3 months.
Meanwhile, Biden and Democrats are letting the most recent tax rate cuts expire. That is the opposite of supply side economics. Faced with stagnation, we raise tax rates, cutting our future growth rate.
It's not an accident. They opposed the cuts then. They denied that they worked. And they want them to expire, they want the tax rates to return to their previous higher levels. As Obama told Charlie Gibson years ago, it's a matter of principle. The wrong principles, envy thy neighbor, etc.
Economic growth with spending restraint is the only way to survive this debt burden and the powers that be oppose both.
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!!!!!!!!!!!!!!!!
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"Meanwhile, Biden and Democrats are letting most recent tax rate cuts expire. That is the opposite of supply side economics. Faced with stagnation, we raise tax rates, cutting our future growth rate."
An exact example what Bobby Jindal was pointing out.
As soon as Trump left the WH we got communism right back.
1.7 trill just on the interest :-o
We are in never never land when a billion means nothing.
Even 100 billion is not even significant to the big spenders.
Dems - bid spenders - big shots. :x
https://video.search.yahoo.com/search/video?fr=mcafee&ei=UTF-8&p=hey+big+spender+song&type=E210US1494G0#id=1&vid=493edd10bec6de601307925f8546a700&action=click
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Speaker Johnson’s Spending Deal
House Republicans have a chance to show they can actually govern.
By
The Editorial Board
Follow
Jan. 8, 2024 6:25 pm ET
Can House Republicans govern in 2024—even a little—after the lost year of 2023? One modestly promising sign is the budget deal that House Speaker Mike Johnson struck with Democrats over the weekend on federal spending levels for fiscal 2024.
The agreement largely hews to the debt-ceiling deal of last spring, with a few additional fiscal benefits. Fiscal 2024 discretionary spending (through this September) will remain at $1.59 trillion, as specified by statute in the Fiscal Responsibility Act agreed to by former Speaker Kevin McCarthy and President Biden in May. That’s a minor victory by itself since Senate appropriators intended to bust that cap by adding another $14 billion.
Defense spending will total $886 billion, while non-defense discretionary comes in at $704 billion. The rub is that Mr. McCarthy and the White House negotiated several side deals that increased domestic spending by an additional $69 billion. While that number remains, Mr. Johnson managed to offset $16 billion with other cuts. Democrats agreed to surrender $10 billion more of their Internal Revenue Service fillip, bringing that total to $20 billion in fiscal 2024. Another $6.1 billion will come out of unspent Covid-era funds.
Overall, domestic discretionary spending remains essentially flat, while defense dollars increase by roughly 3%. That breaks the Democrats’ longtime demand for parity between defense and social-welfare spending. Mr. Johnson’s team also managed to kill several gimmicks that threatened to make emergency spending and changes to entitlement accounting part of the permanent budget baseline.
With the top line set, Congress can now move to pass the 12 appropriations bills to fund the government before the looming staggered deadlines of Jan. 19 and Feb. 2. After years of continuing resolutions and blowout omnibus bills, this would be progress for a GOP that promised to restore regular order.
The House has moved all 12 bills out of committee, and seven through the floor. The Senate has passed only three. A House-Senate conference committee on bills, once they pass each body, is crucial for giving Republicans leverage to end the Nancy-Pelosi-era policy riders that remain in effect.
House Freedom Caucus members are denouncing the deal as a sellout, but they always do. Could they do better with a three-seat margin in the House and Democrats in charge of the Senate and White House? There’s no evidence they have a plan beyond the futile gesture of shutting down the government.
Meeting the budget deadlines lets Republicans focus on Mr. Biden’s border mess, where a united GOP might extract real concession on security in return for weapons for Ukraine and Israel. The alternative is for the GOP to fracture over this spending deal, threaten a shutdown, and produce more headlines about GOP dysfunction. Could they be dumb enough to defenestrate another Speaker?
The cheapest trick in politics is to pound the table in outrage at everyone else’s failure without offering a constructive idea for doing better. This is part of the GOP’s current affliction, and the Speaker’s deal is an antidote.
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It frosts me to no end that the feds feel they are entitled to tell me how much water can flow through my toilet on a single flush among other bits of regulatory overreach they regularly embrace. As such it's refreshing to see such acts stymied, as they were here:
https://news.bloomberglaw.com/environment-and-energy/doe-blocked-from-undoing-trump-dishwasher-washing-machine-rules
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From American Thinker.
First time I recall seeing the differentiation here:
https://www.americanthinker.com/articles/2024/01/if_youre_a_hammer.html
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https://confoundedinterest.net/2024/01/16/debt-star-massive-money-printing-will-accelerate-as-debt-soars-34-trillion-in-current-federal-debt-and-212-trillion-in-promises-to-the-99-will-require-lots-of-money-printing/
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https://citizenwatchreport.com/debt-crisis-escalates-34-trillion-u-s-federal-debt-raises-alarms-as-interest-expense-soars-to-unprecedented-levels/
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Link from patriot post, John Stossel on Charles Murray, I pick out this one aspect for this thread.
https://patriotpost.us/opinion/103840-the-most-dangerous-conservative-2024-01-24
If $25 trillion spent doesn't make something better, actually worsens and perpetuates the problem, shoot the messenger.
(Charles Murray is more known for another book that does not conclude what critics say it does.)
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Charles Murray has done deep serious work for decades now.
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California's Silicon Valley response"
to be first state to have "loneliness minister" me: [you have got to be kidding]
https://abc7news.com/san-mateo-declares-loneliness-state-of-emergency-first-in-us-mental-health-depression/14373042/
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Here's the damnedest thing-- they ain't wrong about the problem , , ,
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but a government "minister"?
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Pasting this one by BBG here as well:
https://blog.independent.org/2024/02/05/total-interest-national-debt-1-trillion-year/?utm_source=rss&utm_medium=rss&utm_campaign=total-interest-national-debt-1-trillion-year
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Let's look at a few statistics. A stack of one billion dollars bills would be 67.9 miles high. A trillion dollar bills would reach 67,866 miles into space. A trillion dollar bills, laid end to end, would stretch 96,906,656 miles—further than the distance of the earth to the sun.
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We don't need no stinkin' austerity....
The CBO Budget and Economic Outlook: Debt Projected to Grow to Record Highs
CBO projects worsening fiscal outlook
•Cato @ Liberty by Romina Boccia / Feb 8, 2024 at 11:26 AM
Romina Boccia and Dominik Lett
The Congressional Budget Office (CBO) released its annual Budget and Economic Outlook, providing 11‐year fiscal projections for 2024 to 2034. The CBO’s new report arrives as Congress gears up for another budget fight with annual discretionary spending and a supplemental Ukraine‐border security deal hanging in the balance. While these issues capture headlines, the real drivers of the growth in federal spending that the CBO highlights are Social Security and Medicare, which neither Democrats nor Republicans are ready to address. As a result, the current fiscal situation is unsustainable. Excessive spending and rising interest costs will drive debt to record‐high levels within the decade, threatening America’s fiscal and economic security.
Last year, we witnessed the official end of the COVID-19 pandemic national emergency (one of the most expensive emergencies ever), the adoption of new discretionary spending limits that have yet to be enforced, and the downgrading of the US debt by a major credit rating agency for the second time in history (the first was in 2011 by S&P). In its press release, Fitch Ratings explained, “The rating downgrade of the United States reflects the expected fiscal deterioration over the next three years, a high and growing general government debt burden, and the erosion of governance.”
Not much has changed since Fitch’s acknowledgment of what fiscal experts, including yours truly, have been pointing out for some time now. The CBO’s latest report reinforces that the US fiscal health is worsening, and congressional budgetary mismanagement and an abdication of responsibility for automatic entitlement spending growth are at fault. Here are some key highlights:
Debt Grows to 116 Percent of GDP by 2034
Federal publicly held debt (debt borrowed from credit markets) is currently $27.1 trillion. Here are a few debt milestones the United States will hit:
2025: public debt exceeds the annual economic output of the entire country, measured by gross domestic product (GDP)
2028: public debt exceeds the World War II record high of 106 percent of GDP
2034: public debt rises to an unprecedented 116 percent of GDP
The fiscal picture becomes far more dire when extended beyond the traditional 10‐year budget window. The CBO projects that debt will reach a jaw‐dropping 172 percent of GDP by 2054 (see Figure 1). The long‐term debt trajectory is unsustainable, as CBO Director Phillip Swagel, Federal Reserve Chair Jerome Powell, and many others attest.
Debt is likely already harming the economy. Most economic literature suggests a debt‐to‐GDP ratio above 78 percent slows economic growth. As debt rises, it creates burdensome consequences, crowding out private investment, reducing incomes, and increasing interest rates. Without a course correction, the United States risks either a depressed economy below its full potential with recurring bouts of inflation that eat away at Americans’ savings and incomes or a sudden and severe fiscal crisis where bondholders lose confidence in the Treasury’s ability or willingness to service debt. One likely path: a depressed economy and excess inflation will eventually trigger said crisis, with that outcome becoming increasingly likely over the next 15–20 years.
Trillion‐Dollar Deficits Are Here to Stay
For fiscal year (FY) 2023, the budget deficit (how much spending exceeds revenues) was $1.7 trillion. That’s an increase of $320 billion, or 23 percent, over the FY 2022 deficit. If the CBO excludes “savings” from the Supreme Court’s strike down of President Biden’s proposed student loan forgiveness scheme, the FY 2023 deficit is $2 trillion. As a percentage of GDP, FY 2023’s deficit was 6.2 percent. That’s the largest deficit‐to‐GDP ratio observed in US history outside of major wars or severe recessions.
Over the next decade, excessive spending is the primary cause of elevated deficits. The CBO projects outlays growing from $6.5 trillion in 2024 to $10 trillion in 2034, a 54 percent increase. Meanwhile, revenues increase from $4.9 trillion in 2024 to $7.5 trillion in 2034, a 51 percent increase. The gap between spending and revenue becomes more apparent when comparing projections to historical averages (1974–2023). As shown in Figure 2, projected outlays are significantly higher than the 50‐year historical average.
These estimates are likely optimistic as the CBO isn’t in the business of making realistic fiscal assumptions that reflect political history. Rather, the CBO takes current policy and legislative deadlines as a given and simply extends these assumptions over time. As former CBO Director Doug Holtz‐Eakin points out:
“The CBO assumes that current law will evolve over the next 10 years exactly as it is currently written down. So, for example, nearly all provisions of the 2017 Tax Cuts and Jobs Act will sunset at the end of 2025, raising taxes by about $3 trillion over the next 10 years. From a budget perspective, this produces a sharp reduction in the deficit and a more favorable overall debt picture. From an economic perspective, this sharp tax increase will be a strong headwind to growth. There is, however, no way that this will happen, so both the budget and economic outlooks will be misleading. Interpret the CBO projections accordingly.”
Entitlements and Interest Costs Dominate the Long‐Term Fiscal Picture
Entitlements, including Social Security and health care programs, are the largest cause of spending‐driven deficit growth. Between 2024 and 2034, Social Security spending will grow from $1.5 trillion to $2.5 trillion. Over the same time frame, major health care programs, including Medicare and Medicaid, will grow from $1.6 trillion to $2.8 trillion. Combined, Social Security and major health care programs represent 63 percent of spending growth.
The two largest entitlement programs, Social Security and Medicare, are on the path to insolvency. Medicare’s hospital insurance trust fund will be exhausted by 2031. Social Security’s Old‐Age and Survivors Insurance Trust Fund will be exhausted by 2033. Without reform, beneficiaries will face indiscriminate cuts.
Interest costs are the other major driver of higher spending over the next decade. From 2024 to 2034, interest costs will increase from $870 billion to $1.6 trillion, an 87 percent increase. According to CBO’s projections, interest costs will exceed discretionary defense spending next year. As interest costs consume a larger share of tax revenues (22 percent by 2034), and as non‐interest spending continues to grow, the government will end up borrowing yet more money at an accelerating pace just to fund program spending that’s already on the books.
Over the long‐term 30‐year spending window, Social Security, health care programs, and interest costs boost federal spending to 30 percent of GDP. These three budget categories will grow by 8 percentage points of GDP from 2024 to 2054. Every other major budget category declines or stays flat as a percentage of the economy over the same period, under current policy. Figure 3 displays major budget categories as a share of GDP.
Cultivating a Culture of Fiscal Responsibility
As bleak as the US fiscal outlook is, there is some light at the end of the tunnel. The House Budget Committee recently passed the Fiscal Commission Act, which seeks to stabilize the debt over 15 years, educate the public on the nation’s deteriorating fiscal state, and improve the Medicare and Social Security’s trust funds’ solvency over a 75‐year window. A well‐designed fiscal commission, alongside other budget reforms, could put the United States on the right path. If Congress kicks the can down the road yet again, it will only make the necessary reforms more severe and invite economic deterioration. Let’s hope legislators will choose to work together to make the compromises needed for a sustainable fiscal future that enables this and the next generation to enjoy a freer, more vibrant, and stronger America.
https://www.cato.org/blog/cbo-budget-economic-outlook-debt-projected-grow-record-highs
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https://www.foxbusiness.com/economy/interest-costs-us-national-debt-set-exceed-defense-spending-year
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MSNBC discovers that the national debt rises $1 trillion every 100 days:
https://www.cnbc.com/2024/03/01/the-us-national-debt-is-rising-by-1-trillion-about-every-100-days.html?taid=65e207d3372ad400018dc669&utm_campaign=trueanthem&utm_medium=social&utm_source=twitter%7Cmain
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right
after we watched it balloon over 40 hrs yrs
I recall Dick Cheney saying something to the effect that national debt is meaningless.. or blowing it off totally basically.
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I recall Dick Cheney saying something to the effect that national debt is meaningless.. or blowing it off totally basically.
Sure thing, Dick, and once interest payments exceed GDP or whatever that will be meaningless too....
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https://archive.thinkprogress.org/six-years-after-cheney-said-deficits-dont-matter-the-national-debt-hits-a-50-year-high-40193bdadd2e/
A democrat who agreed with Cheney:
https://truthout.org/articles/cheney-was-right-about-one-thing-deficits-dont-matter/
" Fortunately, there is a more satisfactory solution. We can sit back, relax and concede that Cheney was right. Deficits aren't necessarily a bad thing! They don't matter, so long as they are at very low interest rates; and they can be kept at these very low rates either by maintaining our triple A credit rating or by borrowing from the Fed essentially interest-free. "
Famous last words now that our credit rating is downgraded and as BBG points out the debt in dollars is 4,000 x's the # of human beings on the planet.
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From the far-Left Thinkprogress link:
"Allegedly, Cheney replied by saying that “deficits don’t matter.”"
Then they link today's Wash Post front page as the source? Maybe it was a story that disappeared. Someone said someone said that.
I wasn't there but know the honesty of our journalism. That isn't what he said. If it was it means he was interrupted without finishing the context of that thought.
It was 2002. We were in the recession that followed the stock market crash triggered by Bill Clinton's justice department attacking the world's most successful company at the time, Microsoft. An example of stocks crashing was Lucent Technologies (Bell labs), the world's greatest research and development company falling from 160 to 2. In that recession, revenues were already falling. It was also the year following 9/11 and continued American economic weakness was not what we needed.
The context of the alleged quote, deficits don't matter, was a discussion of a policy that did not add to the deficit. Revenues bottomed out in the year the cuts were passed and grew at record rates from that point until Democrats took Congress.
It's obvious he was saying that CBO static economy estimates of deficits increasing if we cut tax rates don't matter because they're wrong. Dynamic scoring would show that, and what happened next did show that.
https://www.statista.com/statistics/200405/receipts-of-the-us-government-since-fiscal-year-2000/
"From 2005 to 2007, tax revenues grew faster than the economy. The ratio of receipts to GDP rose to 18.8 percent in 2007, above the 40-year average. Between 2004 and 2006, capital gains realizations grew by approximately 60 percent. Growth in corporate income tax receipts was especially strong in the President's second term, nearly doubling between 2004 and 2007 and contributing a full percentage point to the increase in the total federal receipts-to-GDP share."
https://georgewbush-whitehouse.archives.gov/infocus/bushrecord/factsheets/taxrelief.html
(Doug) Note the part I put in bold, the rate cut by the most yielded the highest increase in revenue. Who knew. Certainly not any Washington Post or New York Times reader. That's the rate that economic illiterate Barack Obama wanted to double.
Deficits are caused by government stifling the productive economy, and by excess spending. The under-taxed angle is left-wing bullsh*t.
Notice it's always the ones paying the highest rate that are "undertaxed", not the ones paying nothing.
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You are right here is a better context of what he meant:
https://www.youtube.com/watch?v=5D5ruUmFRmo
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You are right here is a better context of what he meant:
https://www.youtube.com/watch?v=5D5ruUmFRmo
He says he identifies with the Jack Kemp, Arthur Laffer part of economics in terms of supporting tax rate cuts to spur economic growth, but he doesn't shoot Jake Tapper down on the repeated accusation that tax cuts added to the deficit. They both acknowledge two wars and a prescription drug benefit, meaning new spending, played a role. Cheney hints he didn't favor more domestic spending, the new prescription drug benefit was a promise the President made before he came on board.
Spending on national security, which is how he sees the wars, is something you have to do. It costs too much at least partly because it was neglected through the Clinton years ("peace dividend") and our weakness was exploited. We didn't all know then these were going to be endless wars, winless wars.
At the end he says the wars were paid for, well at least they were appropriated. He is, after all, originally from the Gerald Ford wing of the party.
Others say of the W. Bush administration, he gave supply side economics a bad name - without ever trying it. In other words he cut tax rates but he didn't cut government spending. Government spending takes resources from private sector as much as taxes do.
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Many a truth bomb here. They will be ignored:
Washington’s worst-kept secret
The Hill News / by Rep. Andrew Clyde (R-Ga.) / Mar 4, 2024 at 6:20 PM
With a ballooning national debt, out-of-control deficit, and soaring interest payments, there is no denying that our nation’s economic outlook is in bad shape.
Despite alarming projections and dire warning signs, the federal government continues to steamroll its way to fiscal ruin — rapidly barreling toward an economic cliff that will devastate Americans for generations to come. Given Washington’s reckless spending habits, it’s plausible to assume that our nation’s leaders are blindfolded by blissful ignorance as the U.S. economy heads off the tracks.
But you would be mistaken. It’s not blissful ignorance, it’s willful negligence.
Washington’s worst-kept secret is that our national debt is the $34 trillion problem that nobody cares about.
For years, politicians on the campaign trail have insisted they’re champions of fiscal responsibility. Yet once arriving in Washington, few truly bear the voting record to substantiate their empty claims. Most lawmakers quickly accept that it’s far easier to rub shoulders with leadership and cozy up to K Street lobbyists than to unapologetically reject the Swamp’s status quo spending habits.
This foolish tendency, which runs deep in both chambers and across both parties, becomes most apparent when Congress considers “must-pass” legislation, such as government funding. When push comes to shove, most lawmakers abandon their alleged economic concerns, toe the line, and pat themselves on the back as they dig America deeper into debt.
Decades of these disastrous spending decisions have left us in an abyss of economic despair.
Since last June, the U.S. national debt has swelled by more than $2.4 trillion, setting an alarming pace of racking up roughly $1 trillion in debt every hundred days. Higher interest rates are only making matters worse. Not only are interest payments on the national debt projected to eclipse defense spending in the coming months, but almost $8 trillion of our national debt must be refinanced at higher rates this year. This spike in interest is largely to blame for the soaring deficit, which economists like E.J. Antoni of the Heritage Foundation are now predicting will jump to $3 trillion this fiscal year.
Unsustainable is an understatement.
The culpability transcends political parties; both sides of the aisle have prioritized pork projects over people, justified unnecessary expansions over commonsense cuts, and welcomed bigger budgets over dismal economic projections. Maintaining these selfish, reckless, and misguided habits will only exacerbate the United States’ economic woes.
But Congress has the power to avoid the impending, tumultuous train wreck.
Governing with a slim majority in a divided government isn’t easy. But House Republicans have the opportunity to fight for transformational change. After all, our constituents are counting on us to handle appropriations in a conservative and fiscally responsible manner, not to serve as a rubber stamp for President Biden and Senate Majority Leader Schumer’s (D-N.Y.) pricey, radical agenda.
This means lower spending levels and real policy wins — a challenging but imperative feat.
Our next best option is passing a year-long continuing resolution, which would trigger a 1 percent across-the-board cut, save Americans nearly $100 billion, and eliminate all the pork-barrel earmarks for the year. There is simply no reason to approve appropriations bills that advance President Biden’s destructive policies and spend more than Speaker Nancy Pelosi’s (D-Calif.) Fiscal Year 2023 funding levels.
Yet that’s exactly what congressional leaders agreed to behind closed doors, with rank-and-file members and appropriators alike kept in the dark.
I expect many of my colleagues will stick to their old ways when the first batch of spending bills comes before the House in the coming days. But for the sake of future generations, I hope more of my fellow House Republicans will refute Washington’s worst-kept secret. It’s time to unite behind the critical goal of getting our fiscal train back on track. Otherwise, we’ll continue hurtling toward fiscal calamity, and no amount of empty promises or phony anxieties will save us from falling off the cliff of perpetual debt.
Rep. Andrew Clyde represents Georgia’s 9th District and serves on the House Appropriations Committee.
https://thehill.com/opinion/congress-blog/4507676-washingtons-worst-kept-secret/
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"Unsustainable is an understatement."
- Maybe that's the bumper sticker we were looking for.
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"Unsustainable is an understatement."
- Maybe that's the bumper sticker we were looking for.
Mebbe we should set up a side hustle: Fire Hydrant branded goods. I've a contribution:
Think pompously, act parochially.
Alas, as with most my subversive humor those that need to hear it won't get it....
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2nd post. Back in my misspent, kitchen managing youth I'd get disgusted with the restaurant biz for a spell and so strike off in a new vocational direction occasionally, working as a third shift checker at a 24 hour grocery for a year, for one. We wee hour checkout staff had a friendly competition going: see who could glom onto a register receipt of the most ridiculous stuff paid for with food stamps.
In those days register systems were pretty rudimentary so it was hard to disqualify most food types, so program participants would do their shopping late nights where Joe citizen types wouldn't be standing behind them noting how many Twinkies their tax dollars were paying for. Grad school/college boho types were some of my favorites, purchasing tinned oysters, caviar, high end chocolates, and good cuts of meat while on the dole. Remember one couple earnestly shopping for a dinner party their thesis advisor had been invited to. IIRC one of my championship winning receipts was for ~$150 (in late '80s dollars) of crap, with some Hawaiian Punch being the closest thing to nutritious food in the cart.
Another fave were those in need of cigarettes or or a quart of Schlitz Malt Liquor coming in and asking for help finding candy or whatever eligible food item that cost $.51 cents, as $.49 was the most we were allowed to return as cash money to someone using food stamps. We were dicks, and proudly so, as we would not allow someone to stand there and purchase one $.51 item after another until they had enough in hand for their preferred vice, making them instead pass by the register once their transaction was completed and walk around to the checkout line again before making the next $.51 sale.
Many of those leeches were eating better than those of us on the night crew were. Well it appears as though the dole has gotten far better since then, particularly if you can figure out how to spell your name backwards:
https://howiecarrshow.com/from-the-frontline-of-massachusetts-descent-into-the-third-world/
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SEC proposed “climate change” self-reporting that some estimate would cost businesses $1 million or more each, with those self-reports providing fodder for endless “climate justice” or whatever litigation, with all the above running contrary to the SCOTUS ruling stating regulators can’t be de facto legislators. It’s just a coincidence, I’m sure, that constituencies like trial lawyers would see huge paydays off these regs, too.
https://the-pipeline.org/the-secs-full-employment-for-lawyers-gambit/?fbclid=IwAR3uBtvWKyo7Ky_gF8m4l9WcayHgJSvcSlIBhlOvXUF_1d1JpP2Tns12mE0
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more laws, more regulations more income for lawyers
I suppose that is why most are crats I am thinking
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Clarice lays it out, and perhaps provides reason to hope:
We Could Use a Man like Calvin Coolidge Again
By Clarice Feldman
A day after his pumped-up divisive State of the Union address, unsurprisingly headlined “fiery” by the copycat media lackeys, President Biden, speaking in Pennsylvania, reverted to his old befuddled self.
"Pennsylvania, I have a message for you: send me to Congress!"
"Last night [at] the U.S. Capitol -- the same building where our freedoms came under assault on July the 6th!"
"We added more to the national debt than any president in his term in all of history!"
Well, the last statement is true. I’ll give him that. And large budget deficits are a pattern in Democrat-run cities and states. Democrats pay off cronies and constituencies with government money and then raise your taxes because they’ve spent more than they were able to squeeze out of the economy.
Nearest to me, that pattern is evident in Maryland and Washington, D.C.: They look the other way at rising crime because they defunded the police and decriminalized conduct and then bemoan empty purses as people and businesses flee. They locked down their states and were surprised to learn that capped the revenue spigot. They made ridiculous, frivolous expenditures like bike lanes and street cars and painting BLM on a major street and then can’t pay for necessities like cops, road repairs, and schools.
Maryland’s budget problems worsened Thursday with tax receipts failing to hit estimates for the fifth consecutive time since the pandemic ended. The news quickly ratcheted up the rhetoric among Democrats, who are divided on whether now is the time to raise taxes.
Democrats, who have controlled the State House for decades and usually deploy a united front, are ensnared in a behind-the-scenes fight over how to pay for policies that are driving multibillion-dollar deficit projections not seen since the Great Recession.
The latest bad news comes from lackluster income tax receipts, which are now expected to bring in $255 million less than projected over the current and incoming fiscal years, state economic forecasters said Thursday. Tax collectors are seeing less money withheld from Maryland residents’ paychecks than anticipated over the past three quarters, despite record-low unemployment, which suggests a strong labor market.
D.C. is no better:
D.C. leaders are bracing for another tight budget -- and a possible tax increase -- for the next fiscal year, as the city continues to feel the effects of the pandemic on office vacancies and tax revenue.
D.C. Council Chairman Phil Mendelson (D) estimated that the deficit for the city’s fiscal 2025 budget could be in the
range of $600 million to $800 million, while Mayor Muriel E. Bowser (D) has told lawmakers to focus on core services and not as much on new spending. Chief Financial Officer Glen Lee recently released modest revenue growth projections for the city, but he also cautioned the council and the mayor about long-term economic risks as they begin drafting the budget while the commercial real estate market continues to face headwinds. [snip]
Combined with Lee’s relatively flat revenue projections, Mendelson said that other financial hurdles include leaders’ stated commitment to increase Metro funding by up to $200 million, to help stabilize the transit system and avoid extreme cuts; $300 million needed to replenish reserves; and the mayor’s request to increase the per-pupil funding formula for D.C. Public Schools by 12.4 percent, among other major expenses.
California also comes to mind.
SACRAMENTO — California faces a $54.3 billion deficit as the coronavirus pandemic hammers the economy, the state’s worst budget gap since the Great Recession, state finance officials said Thursday.
The shortfall is almost 37 percent of the current $147.8 billion general fund budget and foretells widespread program cuts absent a federal bailout. K-12 schools and community colleges stand to lose $18 billion alone and are clamoring for money to adapt campuses to a new social distancing reality.
The Department of Finance released its projections in a rare fiscal update a week before Gov. Gavin Newsom is expected to roll out his May budget revision, his first post-coronavirus spending plan. The deficit projection extends to the remainder of this fiscal year and through the 2020-21 period that starts July 1.
Newsom said Wednesday that he expects a prolonged economic downturn. The Finance document suggests that income losses will be far deeper than during the Great Recession more than a decade ago...
“We’ve never experienced anything like this in our lifetime,” he said, adding that the national unemployment rate will soar to “Depression-era numbers.”
The bulk of the deficit comes from a projected $41.2 billion revenue decline over the next 14 months, a drop from the ebullient outlook the state had just four months earlier, according to the Department of Finance. Forecasters believe the state’s big three tax sources -- personal income, sales and corporations -- will plunge about 25 percent.
The deficit grows as businesses abandon the state, but the cornucopia of largess never dries up as California now intends to extend health insurance to the large number of illegal aliens flooding the state. In some states, voters seem to be catching on to this scam. Believe it or not, Washington State is one of them:
Washington state lawmakers pulled off a hat trick Monday, approving three initiatives that push back the progressive policy tide in the state. The new laws will ban a state income tax, make it easier for police to chase suspects, and enshrine a bill of rights for parents whose children attend public school.
That’s good news for residents who have experienced the harmful side effects of progressive policies. In 2021 lawmakers restricted police officers’ ability to pursue suspects in vehicles on grounds that car theft is merely a property crime. Motor vehicle theft in the state increased 73% between 2019 and 2022, according to Washington state House Republicans.
The Washington state constitution forbids a graduated income tax, but last year Democrats in the Legislature approved a tax on capital-gains income, claiming it’s an excise tax. The state Supreme Court upheld the tax, 7-2, and this week’s initiative is an attempt to placate angry voters.
The initiatives are half of a slate of six that were initiated by citizens who gathered signatures and had the measures certified by the secretary of state in January. Under Washington state rules, when a voter initiative is approved by the Legislature, it is enacted without requiring approval from the Governor. The remaining three, including efforts to repeal the capital-gains tax and end cap-and-trade climate regulation, will go before voters in November.
It wasn’t on anyone’s bingo card, but Argentina, long the most profligate of fiscal deadbeats, has adopted fiscal responsibility. On Javier Milei’s first day in office, he eliminated half of the government’s cabinet-level ministries. Argentina now has a budget surplus:
Argentina, under newly-elected President Javier Milei, is in the black for the first time in nearly 12 years, as its first monthly budget ended with a surplus of $589 million, at the official U.S. exchange rate.
The country’s economy ministry announced the milestone on Friday, adding the surplus also includes payments on interest accrued on the public debt.
This is "the first (monthly) financial surplus since August 2012, and the first surplus for a January since 2011," the Economy Ministry said, as reported by the Telam news agency.
Since taking office on Dec. 10, Milei has made good on many campaign promises to fundamentally overhaul the historically socialist federal government of Argentina.
Of course, there are leftist protests against the loss of easy money, but he won overwhelmingly on a pledge to cut federal spending by 14% of the country’s GDP and he set about doing it.
5% of GDP to be cut from federal government transfers to provinces
2% of GDP to be eliminated by privatizing public works
5% of GDP to be adjusted in an overhaul of the subsidies program, directing support to the neediest households, rather than companies
1% of GDP to be cut by eliminating privileged retirement packages granted high-ranking government officials 1% of GDP to be reduced by selling or closing unprofitable state-owned companies
It may be harder under our system to achieve as rapidly here what Milei did in Argentina, but we could do more to emulate what President Calvin Coolidge did.
The period from 1919 to 1922 has striking parallels with our own time.
The 1919–1922 period had a significant pandemic -- the influenza pandemic...
Both periods also brought a massive expansion of government budgets and publicly held debt... Federal outlays grew by 2,493 percent from 1916 to 1919. Why was that? Because we were fighting the Great War, and we went from low to extremely high outlays overnight.
Yet in 1923, federal outlays were still 340 percent higher than they had been in 1916. So although the war had ended, spending did not come back down to pre-war levels. This is the ratchet effect of federal outlays: they just keep increasing.
Publicly held debt grew from $3.6 billion in 1916 to $22.3 billion in 1923, which is a 519 percent increase...
Coolidge put Washington on a diet and deficits disappeared. Coolidge reduced federal debt by a third… But it wasn’t just about starving the Beltway beast. In a separate piece for the Coolidge Review, John Cochrane explains
the beautiful, peaceful revolution that only occurred because Washington did not interfere. Without government interference, private enterprise quickly electrified the country and created a transportation revolution as more Americans could drive their new automobiles.
Average earnings rose 30 percent in a decade. Gross domestic product (GDP) rose by a third... This great economic and lifestyle revolution for Americans of modest means happened with basically no guidance from the federal government. The government largely stayed out of the way.
We can dream, can’t we?
https://www.americanthinker.com/articles/2024/03/we_could_use_a_man_like_calvin_coolidge_again.html?fbclid=IwAR3IQxXjhhym9vu49TfpMdmsHo5G1aBsHrnDhdfewtETEEvU1a2xIu73Fyg
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https://nypost.com/2024/03/11/us-news/biden-unveils-massive-7-3t-budget-with-5-5t-in-tax-hikes-post-state-of-the-union-address/
I watch VDH who has shown he is becoming more cynical and more pessimistic about the future of the USA then ever.
I am agreeing with him.
It is hard sitting here watching the Democrats throw this country into the drain and feel like I am watching national suicide in slow motion.
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(over 5 years)
https://issuesinsights.com/2024/03/12/bidens-budget-proves-what-an-epic-disaster-hes-been/
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Biden Offers a Budget Fantasy
His outline for fiscal 2025 supposes a world that doesn’t exist.
By The Editorial Board
March 11, 2024 6:19 pm ET
Most U.S. presidential budgets are exercises in fiscal deception, but even by that standard President Biden’s Monday proposal for fiscal year 2025 sets a record for unreality. It proposes defense spending as if the world is at peace, entitlement spending that isn’t sustainable, and tax increases that would hurt the economy if they passed, which they won’t. Congratulations, Team White House.
Start with the proposal for national defense, which would increase a mere 1% to $895 billion next fiscal year. That number includes various and sundry Energy Department programs related to national security. The Pentagon gets only $850 billion, which is a real cut in military muscle after inflation.
The $895 billion was part of the debt-limit deal with former Speaker Kevin McCarthy, and we warned the number for 2025 was inadequate. We’ll elaborate on the defense-budget details later in the week, but suffice to say the budget doesn’t come close to matching Mr. Biden’s rhetoric in last week’s State of the Union about the global threats to democracy. He talks like it’s 1941, but his defense budget suggests it’s 1991 at the end of the Cold War.
Mr. Biden would spend only 3.1% of GDP on defense in 2025, falling through the rest of the 10-year budget window to 2.4% of the economy in 2034. This makes it appear that overall outlays are lower than they would be if defense stayed constant, but at the cost of reduced security in a world that is certain to grow more dangerous. The only people delighted to see these numbers are the Democratic left in Washington and the rulers in Beijing.
Meanwhile, the overall spending numbers fly in the face of fiscal reality. Mr. Biden proposes spending of $7.3 trillion in 2025, which is an increase of $1.1 trillion in two years. For those scoring at home, that’s 18%.
As a share of the economy, Mr. Biden wants spending to reach 24.8%, or a quarter of national wealth. The 1974-2023 average was only 21% and, as Mr. Biden told the country last week, the Covid crisis is over. But instead of letting outlays fall as a share of GDP, as they always have after a recession or crisis, the President wants the government to stay at a new and higher spending plateau.
As for revenue, Mr. Biden is counting on more and more. Tax receipts will hit 18.7% of the economy in 2025, and they’ll keep rising every year for the next decade—to 20.3%. The 1974-2023 average was 17.3%. Mr. Biden is proposing about $4.9 trillion in net tax increases—mostly on business and those making more than $400,000 a year, which is his definition of rich.
But notice the tax sleight of hand with that $400,000 level. That's the number below which he said no one would pay more in taxes during his first campaign in 2020. He’s using the same number now, despite four years of inflation running as high as 9%. That $400,000 spin zone isn’t indexed for inflation, so it means that each year more of the middle class climbs into his tax-increase maw.
The White House claims the budget would reduce the deficit by some $3.3 trillion over the next decade, but that’s only if his tax increases pass and don’t hurt the economy. Mr. Biden’s spending boom means that the annual deficit barely falls at all in 2025—to $1.78 trillion from an estimated $1.86 trillion in 2024. That would be 6.1% of GDP, despite the growing economy that Mr. Biden keeps boasting about. Mr. Biden keeps racking up unprecedented non-crisis or non-recession deficits, and his budget doesn’t foresee a deficit below 4% of GDP until 2034.
Mr. Biden’s deficits mean that debt as a share of the economy also keeps rising. He foresees debt held by the public rising to 102.2% in 2025, though it was only 79% as recently as 2019. Covid spending by Donald Trump and Mr. Biden caused the debt to explode to levels not seen since the end of World War II.
But unlike after that war, Mr. Biden is making no attempt to control the debt. Public debt in his budget keeps growing and growing—to 106% of GDP in 2030. Interest on that debt will surpass defense spending this year when it hits $890 billion, and it keeps climbing to $1.57 trillion over the next decade.
This is a budget for a world that doesn’t exist, and Americans can hope it will never become law.
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… and won’t tell congress what he spent it on, though it is required by law:
https://www.theepochtimes.com/us/bidens-treasury-hiding-40-billion-in-outlays-law-requires-to-be-disclosed-on-usaspending-gov-sen-ernst-5605897?welcomeuser=1
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O'Reilly pointed out on his show
the largest budget prior covid was 4.75 trillion and Biden now wants a budget of 7.3 trillion!
Of course in the election yr it is we can be sure it is crammed with redistribution
I just did search online and all the left wing media have headlines like more money for the border more money for health care
Soc Sec and Medicare not to be touched ......
Here is a Fox news mention on it:
https://www.msn.com/en-us/news/politics/house-gop-leaders-tear-up-bidens-new-73t-budget-proposal-reckless-spending/ar-BB1jI1pz
now compare this to the CNN version:
hhttps://www.msn.com/en-us/news/other/what-s-in-biden-s-budget-proposal/ar-BB1jIiDmttps://www.msn.com/en-us/news/other/what-s-in-biden-s-budget-proposal/ar-BB1jIiDm
stifling corporations taxing the producers who will of course shift the costs to us, and slow the economy
does not seem like a recipe for success.
BTW no military increases in his budget........
all at the same time flooding the country with illegals that could cost hundreds of billions of our money.
we have to at least increase the retirement age
we cannot have people retiring at 45 to 55 with pensions etc.
Bill O says if we don't win this election we will be a socialist country
it sure looks like that to me.
he also asks if the average person even knows what the budget proposal is and what it all means other then looking for the goodies in it for themselves.
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"Balancing the budget is like protecting your virtue, you have to learn to say no."
- Ronald Reagan told Johnny Carson, 1975
https://youtu.be/H1aKYs82CGo?si=YQEDeOgzB6l5YpHY
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Most of what Reagan said holds true today
If only Trump had his temperament. He would be up 10 to 15 points.
I wonder what Johnny was really thinking during the interview.
I recall when it became public that Johnny was a die hard Democrat how surprised and disappointed I was.
Same with Cronkite.
And I might add Johnny was an equal employment opportunity provider in that nonetheless apart from his personal political views he would make jokes on both parties and Presidents.
Not like today.
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act that Biden so proudly he hails
https://thehill.com/opinion/4517470-dei-killed-the-chips-act/
how utterly stupid is this ?
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Claims reductions by embracing accounting tricks and unlikely circumstances. Rather, his budget proposal put us on a glide path toward a $45 trillion deficit:
https://www.cato.org/blog/bidens-phony-deficit-reduction
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https://twitter.com/WallStreetSilv/status/1767626651213426979
This is an amazing number to watch in the next few years. Individual income taxes are about 1/2 of the govt revenue.
For February, the US govt collected $120 billion from individual income taxes. They had to spend $76 billion in February to pay interest on the nation debt.
E.J. Antoni, Ph.D.
@RealEJAntoni
It took 63% of all personal income taxes in Feb to pay the interest on the debt - no roads, no military, no schools, no social security - JUST INTEREST
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The debt is now more than the entire defense budget
and climbing
defense spending bill from Biden shows a slight increase but adjusted for inflation it is actually a cut.
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At the heart of their lying is for someone with one year left on a 4 year term to tell us how things will be in 5 years and 10 years. How about fix what you can now and we'll have someone else lead us in 5 or 10 years.
The budget is completely our of control and NOTHING is being cut. If he did cut anything it would be our ability to defend ourselves.
Crafty has been pointing out for years that "baseline" budgeting is the biggest of big government scams. Zero based budgeting is how common sense works. To every agency, show us your positive results. And show us the damage you are doing so we can compare. Show us the difference in positive results for every additional dollar you receive above zero, or zero it is.
Of course it's a political trap. Biden didn't cut the deficit by a trillion. He didn't cut the new budget by anything. Anyone see that in the top line number 7.3T in spending when we are taking in 4.8T in taxes at maxed out rates. But if Trump comes forward with real cuts, watch what happens. Starving the poor and taking Grannie off her meds one more time.
Biden is failing and losing so he goes back to the old play book one more time. These plays got a lot of Democrats elected for a lot of years. Not one new idea in it, just more money for every key interest group and more talk of soaking the rich. How can we oppose that?
We oppose it by pointing out failure after failure.
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Gent makes great hot sauce he can’t sell due to state and local regulations. Some interesting, unrelated graphs at the bottom of the piece:
https://www.cato.org/commentary/i-make-great-hot-sauce-state-regulations-ensure-youll-never-taste-it
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Unfunded obligations will equal %500 of GDP by 2098:
Medicare and Social Security Are Responsible for 100 Percent of US Unfunded Obligations
Cato @ Liberty / by Romina Boccia / Mar 20, 2024 at 8:34 AM
Romina Boccia
A grayscale picture of a cracking dam.
The Financial Report of the United States Government (also known as the Financial Report) raises significant concerns about the country’s long‐term financial health. Unsustainable deficits contribute to rising debt levels as spending growth outpaces revenue growth at an accelerating pace. Over the next 75 years, US taxpayers face over $73 trillion in long‐term unfunded obligations. What’s more, this unfunded obligation is entirely driven by only two federal government programs: Medicare and Social Security.
Here are key takeaways from the Financial Report (all figures are in net present value terms over the 75‐year horizon) with additional details below:
Total unfunded obligation: $73.2 trillion.
Medicare and Social Security are responsible for 100 percent of the unfunded obligation.
Current policy is unsustainable as debt would exceed 500 percent of GDP by 2098.
Closing the fiscal gap will require annual deficit reduction of 4.5 percent of GDP, assuming Congress acts immediately.
The US government’s unfunded obligation totals $73.2 trillion. The unfunded obligation is the difference between the present value of projected non‐interest spending of $433.1 trillion (see Figure 1) and the present value of total receipts of $360.0 trillion over a 75‐year period. Present value means that future cash flows have been discounted to adjust for projected interest rates. The discount rate reflects the expected rate of return taxpayers could have received over the next 75 years if they invested the 2023 value in US Treasury bonds.
Medicare and Social Security funding shortfalls comprise 100 percent of the total unfunded obligation. As shown in Figure 2 below, over the next 75 years, Medicare and Social Security’s funding shortfalls will amount to $78.3 trillion, which is $5.1 trillion more than the total unfunded obligation. This indicates a $5.1 trillion surplus in other parts of the budget, over the same projection period. In other words, under current policy, the entire US unfunded obligation is due to Medicare and Social Security spending. Certainly, if Congress chooses to increase spending, whether on defense, other health care programs, or to subsidize particular industries, as the Biden administration has been fond of doing, Congress could increase unfunded obligations from the other parts of the budget over that time horizon. Regardless, given the sheer size of the Medicare and Social Security unfunded obligation, it’s clear that legislators will make little progress on averting a fiscal crisis until they grapple with excess spending growth in old‐age benefit programs.
Debt will exceed 200 percent of GDP by 2047 and reach 531 percent of GDP by 2098. The report’s authors state the obvious, albeit in muted terms: “While this estimate of the ’75‐year fiscal gap’ is highly uncertain, it is nevertheless nearly certain that current fiscal policies cannot be sustained indefinitely.” While economists cannot predict country thresholds for when a debt‐to‐GDP ratio will trigger a fiscal crisis, Congress shouldn’t try to find out what that threshold is for the US by blasting past it. The prudent path is for Congress to correct unsustainable fiscal policies before a severe crisis forces their hands.
Closing the fiscal gap requires primary (non‐interest) deficit reduction of 4.5 percent of gross domestic product (GDP) over the next 75 years. The fiscal gap is an estimate of what it would take, over the next 75 years, to stabilize fiscal policy. A sustainable fiscal policy means the ratio of debt, which the US government is borrowing in credit markets, is stable or declining over the long term. The Financial Report indicates that closing the fiscal gap would require non‐interest spending reductions and or revenue increases of 4.5 percent of GDP annually, over the next 75 years. Any delays in adopting this deficit reduction would substantially increase required future deficit reductions.
If legislators delay reforms for 10 years, to begin in 2034, closing the fiscal gap will require 5.3 percent of GDP annually. Delaying reforms by 20 years increases the required deficit reduction to 6.5 percent of GDP. The fiscal gap is an effective way to measure the burden that current US government budget policy will impose on younger and future generations and what it would take to stabilize fiscal policy.
Financial Report Assumptions Are Overly Optimistic
Mark J. Warshawsky from the American Enterprise Institute (AEI) suggests that the Financial Report’s projections are based on overly optimistic assumptions, such as steady increases in income tax revenues, unchanged Medicaid spending despite an aging population, and unchanged defense spending despite growing geopolitical threats. Warshawsky and his colleagues developed a model to project the fiscal gap under alternative assumptions. It offers a much graver outlook, projecting that the debt‐to‐GDP ratio will increase “to 132 percent in 2032, 268 percent in 2053, and 785 percent in 2095 under current policy.”
The Financial Report Deserves More Attention
The Financial Report of the United States Government received a silent reception in Washington and across the country when it was published on February 15. Readers of this blog will be hard‐pressed to find mention of it among any of the major news outlets. The Financial Report deserves more attention. The report’s findings are especially relevant in today’s political climate where politicians from both parties feel pressure to distance themselves from benefit cuts to Medicare and Social Security.
The report makes it painfully obvious that Medicare and Social Security spending are the primary drivers of government debt. Adopting sensible reforms to old age entitlement programs is both necessary and urgent.
Thanks to Ivane Nachkebia for his support in updating graphics and data for this post.
For more on the costs of high and rising debt and the implications of a severe fiscal crisis, see “Bankruptcy—Gradually, Then Suddenly?” For last year’s coverage of the Financial Report see here.
https://www.cato.org/blog/medicare-social-security-are-responsible-100-percent-us-unfunded-obligations
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https://www.breitbart.com/entertainment/2024/03/24/hollywood-studios-reap-25-billion-from-states-film-tax-credits-taxpayers-see-massive-losses/
claims local economies lose money and negative ROI
governments lose 100% get back ~ 20%.
what a joke
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https://www.breitbart.com/entertainment/2024/03/24/hollywood-studios-reap-25-billion-from-states-film-tax-credits-taxpayers-see-massive-losses/
claims local economies lose money and negative ROI
governments lose 100% get back ~ 20%.
what a joke
It also happens to be the exact opposite of equal protection under the law.
And tax cuts fot the wealthy that they rail against all the rest of the time.
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Joe's new "budget" is 7.3T.
Roughly 130 million households in US.
Federal spending is 57,000 per household.
Are you getting your share?
Revenues are at about $5T.
Isn't it a stretch to even call this a "budget"?
How do we get through to people that government spending IS a tax. It takes resources out of the private productive economy in much the same way taxes do, and drives up the cost of everything.
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And deficits are future taxation.
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https://www.thegatewaypundit.com/2024/03/watch-illegal-alien-lists-all-things-new-york/
Free Hotel, free breakfast, free lunch, free dinner, free smartphone, free healthcare, free lawyers, I might want to try leaving and coming back in.
Can you see how this drives up the cost for everyone else?
(Recording is in Spanish.)
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Local government pensions were a major recipient, w/ those commitments correlating w/ strong government union presence:
Fiscal Federalism Turned Upside-Down
The Beacon / by Peter C. Earle and Thomas Savidge / Mar 26, 2024 at 5:32 PM
A recent study from the American Enterprise Institute (AEI) found that many states misused federal aid related to the pandemic. Instead of using funds for projects related to healthcare, education, and infrastructure, state politicians used the lion’s share of federal funding for the general fund and public pensions.
Aside from the blatant misuse of federal dollars, this study highlights another important issue: state and local government dependence on funding from the federal government. The more states are dependent on DC, the more control DC has over state and local fiscal affairs. When DC inevitably cuts funding to the states, fiscal crises are bound to occur.
AEI’s study found that state government revenues and spending “increased by around 70 cents per incremental windfall dollar of committed federal funds by 2022.” States where public employees had the most influence over pension fund boards saw the largest increases in pension contributions with those federal dollars.
While this misuse of funds is no surprise to many of the critics of federal pandemic aid, it should be shocking to the average American. Despite the US Treasury explicitly banning the use of federal funds for pensions and tax cuts, it still occurred. Evidence from the research shows “no observed increases in liquid cash positions and essentially full spending of received aid.”
In this case, states must obligate federal money from the American Rescue Plan (ARPA) by December 31, 2024. They then have until December 31, 2026, to spend it or give it back to the federal government. Incentives matter, and in a case of “use it or lose it,” states will find ways for the money to be spent. The latest data show that the average state gets 38 percent ($21.6 billion) of its revenue from federal funds, the largest single category. Expenditures funded by general fund revenue make up the second largest category of expenditures ($20.9 billion). Other funds include revenue sources that are restricted by law for specific functions or activities (gas taxes for a transportation fund, tuition and fees for higher education, or provider taxes for Medicaid) make up the third largest category ($13.5 billion). Bonds make up the smallest category of expenditures ($1 billion), although bond types included in the calculations vary by state.
State Budget Expenditures (Capital Inclusive) by Source, 2022 (50 State Average)
(Source: Authors’ Calculations, National Association of State Budget Officers State Expenditure Report Historical Data)
Unfortunately, this is not a new development. Since 1991 (the earliest data available), federal funds have steadily increased as a share of total expenditures at the state level. The chart below shows that the largest increases in federal funds to the states occurred immediately following recessions. Out of fear of losing revenue, state officials seek aid from the federal government, which is more than happy to oblige.
It is a manifestation of the Public Choice concept “the ratchet effect,” where federal spending spikes immediately after a recession or emergency, then lowers when the crisis subsides, but never down to pre-crisis levels.
State Budget Expenditures (Capital Inclusive) by Source as a Percentage of Total Expenditures, 1991-2023
(*2023 totals are projected
Note: Shaded areas indicate periods of recession
Source: Authors’ Calculations, National Association of Ste Budget Officers State Expenditure Report 2023 and Historical Data)
The National Association of State Budget Officers (NASBO) also projects that 2023 data will show that general fund expenditures will exceed federal fund expenditures for the first time since 2020, yet it is not expected to return to 2019 levels. With federal money from ARPA still left to spend, federal funds will likely still make up at least a third of the average state budget.
Like so much else in government spending, the trend is unsustainable. The most recent Financial Report of the United States Government concludes by saying that “[t]he projections in this Financial Report indicate that if policy remains unchanged, the debt-to-GDP ratio will steadily increase throughout the projection period and beyond, which implies current policy under this report’s assumptions is not sustainable and must ultimately change” (emphasis added).
That untenability, furthermore, has not gone unnoticed. In August 2023 Fitch Ratings downgraded the US credit rating from AAA to AA+, the second following the August 2011 lowering by Standard and Poor. In November 2023, Moody’s Investment Service changed the US credit outlook to negative. Lower credit ratings threaten higher interest costs on an already massive amount of government debt. These rising costs and debt will force lawmakers in Washington to make some difficult cuts to spending. When the time comes to make painful cuts, politicians in DC will cut funding to the states, expect state leaders to deal with the funding issues, and let them take the blame for the inevitable tax hikes and spending cuts.
Most US states ended FY 2021, 2022, and 2023 with budget surpluses. Many states took the opportunity to focus on tax relief, switching from graduated income taxes to flat income taxes. While the flat tax revolution helped many Americans keep more of their hard-earned money, the gains will be for naught if states do not properly control spending.
The best way for states to rein in spending is by enacting constitutional rules at the state level such as the Taxpayer’s Bill of Rights (TABOR) in Colorado. TABOR limits the growth of government to the maximum growth of population plus inflation, requires any taxes collected in excess of that limit to be refunded to taxpayers with interest, and requires voter approval before new taxes. This rule also applies to local governments, so the state cannot grow government by way of unfunded mandates on local governments. TABOR, however, does not apply to federal funds given to Colorado.
Another example is provided by Utah, which established the Financial Ready Utah program in the wake of the Great Recession. This package of bills requires state agencies to have emergency plans in place for anywhere between a 5-percent to 25-percent reduction in funding and requires state agencies to seek legislative approval before applying for federal funds.
State-level constitutional limits on taxes and spending provide greater protection from reckless government spending than relying on the “right” candidates to win elections or the “right” bureaucrats to be appointed. When government actors are bound by strong institutional constraints regarding political instincts and incentives toward reckless spending, already-overtaxed citizens needn’t rely on wishful thinking.
This article was originally posted on AIER.org. You can read the original here.
The post Fiscal Federalism Turned Upside-Down appeared first on The Beacon.
https://blog.independent.org/2024/03/25/amendment-california-constitution-housing-affordability-crisis/?utm_source=rss&utm_medium=rss&utm_campaign=amendment-california-constitution-housing-affordability-crisis
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If only congress would listen to the Congressional Budget Office:
Tipping Point: CBO Director’s Warning on America’s Fiscal Path
US debt risks market shock
•The Beacon / by Craig Eyermann / Mar 28, 2024 at 1:36 PM
The director of the Congressional Budget Office is sounding the alarm on the U.S. government’s unsustainable fiscal path. Philip Swagel issued his warning in an interview with Claire Jones of the Financial Times.
Phillip Swagel, director of the Congressional Budget Office, said the mounting US fiscal burden was on an “unprecedented” trajectory, risking a crisis of the kind that sparked a run on the pound and the collapse of Truss’s government in the UK in 2022.
“The danger, of course, is what the UK faced with former prime minister Truss, where policymakers tried to take an action, and then there’s a market reaction to that action,” Swagel said in an interview with the Financial Times.
The US was “not there yet”, he said, but as higher interest rates raise the cost of paying its creditors to $1tn in 2026, bond markets could “snap back”.
Swagel refers to the U.S. government’s net interest payments in that last paragraph. The CBO projects these net payments to the U.S. government’s creditors will rise to $1 trillion in 2026. The U.S. government’s gross interest payments to its creditors started exceeding that level in 2023. If not for a Supreme Court ruling rejecting student loan forgiveness last year, the U.S. government’s net interest costs would soon be nearing that $1 trillion level.
Fear of a Bond Market “Snap Back”
Swagel’s bigger message is that the growing cost of financing the national debt increases the risk of a government-debt-induced fiscal crisis in the United States. The “snap back,” he fears, would be in the form of a sharp increase in interest rates should the bond market become reluctant to loan money to Uncle Sam. That scenario played out in the United Kingdom in 2022 under Prime Minister Liz Truss, which led to her resignation in very short order.
Can something similar happen in the U.S.? It may be more likely than many would like to admit. The United States experienced a more minor debt scare in October 2023, when interest rates briefly spiked upward. The event rattled markets and prompted action by U.S. Treasury and Federal Reserve officials to mitigate its impact.
Fortunately, that interest rate spike didn’t last long. However, the potential for a fiscal crisis to develop from such an event is real. The risk of such an event is increasing because of the unsustainable path of the U.S. government’s fiscal policies and spending in particular.
What happened in October 2023 was just a small taste of what a fiscal crisis could be. I don’t think anyone of sound mind would want to go back for seconds, much less larger portions.
The post Tipping Point: CBO Director’s Warning on America’s Fiscal Path appeared first on The Beacon.
https://blog.independent.org/2024/03/28/tipping-point-cbo-directors-warning-on-americas-fiscal-path/?utm_source=rss&utm_medium=rss&utm_campaign=tipping-point-cbo-directors-warning-on-americas-fiscal-path
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Why worry about debt when we can just print more money with which to service it? After all, it's kinda worked for other nations, so long as we don't get worked up about hyperinflation:
The Threat of Fiscal Dominance: Will the US Resort to Money-Printing to Finance the Rising Debt Challenge?
Cato @ Liberty by Romina Boccia / Apr 4, 2024 at 6:07 AM//keep unread//hide
With entitlement spending growth driving a worsening fiscal picture, the US could enter a new period of fiscal dominance where monetary policy serves fiscal ends, threatening central bank independence and America’s economic future. Following aggressive fiscal and monetary stimulus during the pandemic, legislators should avoid the siren’s call of elevated deficit spending or risk higher inflation.
During the COVID-19 pandemic, Congress unleashed a deluge of emergency spending—roughly $6 trillion, according to the Committee for a Responsible Federal Budget (CRFB)—bringing deficits to new heights. For context, the deficit in 2020 was nearly 15 percent of Gross Domestic Product—deficits haven’t been that severe since World War II.
At the same time, the Federal Reserve increased the broad money supply (M2) by 40 percent and massively increased its asset holdings, including government bonds and mortgage‐backed securities, by $4 trillion. Record‐high deficits and an intense bout of inflation accompanied the unprecedented fiscal and monetary expansion as the pandemic came to an end.
Eventually, the Fed responded to elevated inflation with interest rate hikes and by reducing its asset holdings. While inflation appears to have slowed, it remains a problem, underscoring the challenge of using monetary instruments to deal with a fiscally driven problem. The pandemic episode illustrates an example of fiscal dominance whereby, as the Mercatus Center’s Eric Leeper puts it, “some fiscal action forces the central bank to react in ways that it otherwise would not.”
With Congress currently unwilling to seriously address the entitlement spending problem that’s driving the US toward a fiscal cliff, it’s worth evaluating the possibility of more frequent episodes of fiscal dominance and their consequences.
History as a Guide
To understand whether we live in a fiscal or monetary dominance regime, we should ask: is the central bank’s prime directive to maintain an inflation target, or is the central bank primarily focused on accommodating government spending? When fiscal dominance reigns supreme, countries experience higher inflation and sometimes hyperinflation (high and accelerating inflation). Several historical examples illustrate the dangers of fiscal dominance.
During emergencies, central banks may temporarily accommodate expansionary fiscal policy, such as during World War II or the COVID-19 pandemic. As Cato’s James Dorn points out, “Fiscal authorities normally dominate central banks during wartime. That was certainly the case during the two world wars. The Fed kept yields low on government securities by monetizing a large share of the US debt.” Dorn further highlights the 1960s and early 1970s, when the “Fed engaged in easy monetary policies to fund fiscal deficits, which led to inflation.”
Fiscal dominance can also be observed abroad. According to Greg Ip, writing in the Wall Street Journal, Argentina is a textbook case of fiscal dominance. To finance fiscal deficits, the Argentine treasury issues bonds that are bought up by the central bank. This debt monetization has led to devastating inflation, reaching a 12‐month rate of 276 percent in February.
Leeper identifies two more examples of fiscal dominance overseas. After World War I, Germany realized it could not pay off its debts through conventional taxes alone, so it rapidly printed money to finance new spending. Likewise, President Erdoğan of Turkey eroded central bank independence, pushed for lower interest rates, and expanded government spending in recent years. As Leeper stated, “Erdoğan effectively converted an independent inflation‐targeting central bank into a fiscal ATM.” In both cases, fiscal dominance resulted in severe and economically damaging inflation.
The US Threat of Fiscal Dominance
Fiscal dominance has a track record of triggering severe inflation and leading to economic decline. With US deficits at crisis levels in the face of rising entitlement spending, and with the federal debt‐to‐GPD ratio exceeding its record high of 106 percent in 2028 (Figure 1), the risks of fiscal dominance in the United States are rising. An excessive and rising debt, high interest rates, and a political landscape hostile to entitlement spending reductions create a dangerous fiscal environment that may exhaust the US fiscal space over the next 15–20 years.
If Congress leaves spending corrections to the last minute, legislators may perceive the draconian fiscal consolidation necessary to bring debt under control as less desirable than monetizing the debt. In such a scenario, printing more money might become the easiest or only politically feasible way out.
At a recent House Budget Committee hearing on the need for a fiscal commission to resolve the US debt challenge, former chairman John Yarmuth suggested just such a policy, stating on the record,
We are a sovereign currency, we can print all the money we want to serve the people whom we serve. … [W]hy are we paying interest on the money we borrow? And why do we borrow money anyway? We can print it and put it in the Treasury.
No amount of balance sheet manipulations will allow the US to print more money ad infinitum with no adverse consequences. Should this type of thinking become more mainstream, it is not entirely unrealistic to think that fiscal dominance and debt monetization might be willingly undertaken under the right political circumstances.
Avoiding Fiscal Catastrophe
Rising US spending and debt in light of heightened political polarization and congressional budgetary gridlock raise concerns about the sustainability of government finances. The recent credit downgrade by Fitch Ratings and Moody’s Investors Service lowering its outlook on the US credit rating is a reflection of the nation’s concerning long‐term fiscal trajectory and poor fiscal governance. Without a political willingness to reduce the growth in old age benefit programs, the erosion of central bank independence to finance future spending represents a growing risk. Argentina, Germany, Turkey, and other historical cases serve as stark reminders of the dangers of fiscal dominance. Central bank money printing to finance government spending can lead to hyperinflation and economic ruin.
Fiscal dominance could also deteriorate the reputation of the US as a guarantor of its credit. The perception of Treasury securities as safe assets undergirds the entire financial system. US policymakers should not clumsily waltz into additional periods of fiscal dominance that could contribute to economic instability and reduce the global standing of the US dollar.
As Charles Calomiris notes, “Ultimately, the US may face a political choice between reforming entitlement programs and tolerating high inflation and financial backwardness.” Confronting the entitlement spending behemoth is politically daunting but necessary and can be done through a well‐designed fiscal commission. Establishing smart fiscal guardrails, backed by a shared understanding of the budgetary future the US faces, can similarly reduce the risk of a fiscal crisis.
Time is of the essence to slow the growth in spending before fiscal dominance becomes the seemingly more attractive option.
https://www.cato.org/blog/threat-fiscal-dominance-will-us-resort-money-printing-finance-rising-debt-challenge
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Don't we already have catastrophe? What would a guardrail look like? Slow the rate of spending increases?
Updates from usdebtclock.org today:
Deficit actual, current, 1.944 trillion
Revenues: 4.712 Trillion
We are spending 41.2% more than we take in.
Do people believe we are even borrowing all that? Who is lending it?
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Pithy datum.
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https://townhall.com/columnists/bobbarr/2024/04/04/crony-capitalism-targets-latest-victim-fantasy-sports-players-n2637400
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https://www.usaspending.gov/search?hash=1881222a672d3e33600f710f4e21e4c9&tab=map
https://en.wikipedia.org/wiki/List_of_U.S._states_and_territories_by_population
not clear why some states get disproportionately more than others.
For example, Indiana and Minnesota seem to get why more than their population.
North Dakota too.
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more information
according to them spending is down as comparted to GDP.
debt now over 34.5 trillion
overall spending breakdown
and debt graphs
https://fiscaldata.treasury.gov/americas-finance-guide/national-debt/#funding-programs-and-services
some ways to reduce debt proposals:
https://www.cbo.gov/system/files/2020-12/56783-budget-options.pdf
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https://www.foxnews.com/media/denver-migrant-advocates-six-months-free-rent-food-not-enough-slap-face-offensive
6 months free housing and food is not enough?
Seriously, what is the matter with us that we do things like this?
We are a nation of immigrants and this is NOT how we did it.
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Niall Ferguson (Bloomberg.com)
My sole contribution to the statute book of historiography — what I call Ferguson’s Law — states that any great power that spends more on debt service (interest payments on the national debt) than on defense will not stay great for very long. True of Hapsburg Spain, true of ancient régime France, true of the Ottoman Empire, true of the British Empire, this law is about to be put to the test by the US beginning this very year, when (according to the CBO) net interest outlays will be 3.1% of GDP, defense spending 3.0%. Extrapolating defense spending on the assumption that it remains consistently 48% of total discretionary spending (the average of 2014-23), the gap between debt service and defense is going to widen rapidly in the coming years. By 2041, the CBO projections suggest, interest payments (4.6% of GDP) will be double the defense budget (2.3%). Between 1962 and 1989, by way of comparison, interest payments averaged 1.8% of GDP; defense 6.4%. (Sources: niallferguson.com, bloomberg.com)
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The Ongoing Rise of U.S. Debt Amid Geopolitical, Financial and Economic Constraints
Apr 3, 2024 | 18:10 GMT
Political, financial and economic constraints will continue to limit the U.S. government's flexibility in adjusting spending in view of rising defense spending requirements, likely resulting in rising debt levels. In its most recent update of its long-term projections released in March, the Congressional Budget Office projected large fiscal deficits and a continued increase of the debt-to-GDP ratio in the United States driven by increasing entitlement and net interest expenditures. It is unlikely that the projected increase in government spending over the next two decades will cause any financing difficulties, let alone a financial crisis. This is because of the pivotal role of the dollar in the global financial system, the relative attractiveness of U.S. assets and a more favorable growth outlook than in most other advanced economies. Continued large deficits could, of course, lead to higher long-term interest rates, which might then lead the government to rein in the fiscal deficit to prevent too rapid an increase in the debt-to-GDP ratio. The current trend of more modest economic growth, at least compared to two decades ago, and large fiscal deficits will, however, translate into greater constraints on defense spending.
U.S. federal government debt stands at $35 trillion, which translates into more than $100,000 per citizen. U.S. federal government debt has more than tripled since the beginning of the century, increasing from 32% of gross domestic product in 2001 to 96% of GDP in 2023. The CBO currently projects the debt-to-GDP ratio will reach 116% of GDP by 2034 and 166% of GDP in 2054. Federal budget deficits will average about 6% of GDP.
Mandatory spending will increase from 13.9% of GDP to 15.1% of GDP over the next 10 years, while discretionary spending is projected to decrease from 6.4% of GDP to 5.1% of GDP, which would represent a substantial squeeze should it come to pass. If the decline in discretionary defense and nondefense spending were to be evenly split, U.S. defense spending would fall to less than 3% of GDP by the middle of the next decade — close to a post-World War II low.
A fiscal adjustment involving reforms to Social Security would help create more space for significant defense expenditure increases, but such reforms are highly unlikely in the short or medium term. Mandatory spending covers expenditures on entitlement and other programs, including Social Security, Medicare, Medicaid and several other programs related to health care or the elderly, which require Congress to approve separate legislation and cannot be modified as part of the annual budget process. Discretionary spending, on the other hand, is controlled by the annual budget process and pays for the operations of most federal agencies and national defense. It requires annual authorization. Discretionary spending as a share of GDP has declined gradually over time, while nondiscretionary (or mandatory) spending has continued to increase. An aging population makes it more difficult to substantially reduce entitlement spending, as the elderly account for a more substantial share of the electorate each year. Moreover, U.S. voters regard Social Security as almost on par with constitutionally guaranteed rights, making it very difficult to cut benefits or otherwise reform the entitlement program. At a minimum, this will require any entitlement reform to phase in a reduction of expenditure (relative to the baseline) very gradually so as not to upset actual and potential beneficiaries in terms of their accrued welfare benefits — and even this will prove politically difficult. That neither party supports reforming social security and other programs is evidence of these political constraints, with the last significant entitlement reform that sought to balance the books having taken place in 1983.
In FY 2023, the U.S. federal government spent $6.1 trillion. The U.S. federal government spends more than what the Japanese economy, the world's third-largest, produces.
Mandatory spending accounts for 60% of federal spending, discretionary spending for 30% and interest on debt 10%. Discretionary spending includes defense and nondefense spending with defense spending accounting for 13-15% of federal spending (or roughly half of discretionary spending).
As per the 2020 census, 17% of Americans were aged 65 or older. This share will increase to 23% by 2050. In absolute terms, this age group will increase from 58 million to 82 million.
The political, financial and economic constraints on U.S. defense spending will strengthen over time. Economically, high levels of defense spending are detrimental to long-term growth if spending reduces the availability of national savings and investment, which is typically the case. Even if investment represents a significant share of defense spending, it tends not to have much of an impact on civilian economic productivity. In the short run, however, a sharp increase in defense expenditure can help boost economic growth, particularly in the presence of ample spare capacity. Increased defense expenditures need to be financed through higher debt, increased revenues or budget cuts in other areas. With more resources allocated to consumptive defense spending and no offsets elsewhere, savings and investment will fall, and economic growth will suffer over the medium to long term. Faced with increased geopolitical competition, the need for increased defense spending will make for painful economic, financial and political choices, while increased defense spending (as a share of GDP) will weigh on the longer-term growth outlook. While none of this means that the United States will not be able to increase defense expenditure, it does mean that the economic, financial and political trade-offs and constraints will become more important over time.
In the short run, the government can almost always mobilize massive resources to support defense spending if flanked by appropriate economic and financial measures, such as capital controls, central bank purchases of additional debt issuance, increased taxes or reduced expenditures elsewhere. In 2023, U.S. defense spending (including Department of Energy spending on nuclear weapons) was 3.5% of GDP. In 1953 (during the Korean War), U.S. defense spending reached 11.3% of GDP; in 1968 (during the Vietnam War), 8.6% of GDP. In 1999, it fell to a post-1940 low of 2.7% of GDP before increasing again to reach 4.5% of GDP in 2010 (during the Afghanistan and Iraq wars). Defense spending exceeded 40% of GDP during World War II.
In the long term, however, there are economic limits to defense spending. The reduction of defense spending following the end of the Cold War led to the so-called "peace dividend" that allowed for lower government spending, higher national savings and lower interest rates. Unsustainable defense spending meanwhile drove the USSR into economic stagnation, financial failure and ultimately political collapse.
The United States remains the world's top military spender by a wide margin, but Chinese defense spending has been increasing rapidly on the back of rapid economic growth, which, in turn, is putting increased pressure on U.S. military spending. A decade or so ago, the United States spent more on defense than the rest of the world combined. Today, measured in current dollar terms, U.S. expenditure continues to account for nearly 40% of global spending, while China accounts for less than half of U.S. spending. The size of defense spending matters, but it is not everything. Several caveats apply. First, comparing military spending — even if adjusted for purchasing power parity to capture the effective spending power — is difficult, as different countries include and exclude different defense-related spending categories and items, and some countries' defense expenditure figures lack transparency. Second, even with a purchasing power parity adjustment, it is not obvious that one dollar of defense spending buys an equivalent amount of security. Leaving aside that security is a relative concept, even purchasing power parity is an imperfect metric to compare spending, both in quantitative and qualitative terms, even when adjusted for purchasing power. This is due to differences in terms of what the money is spent on as well as what adjusted dollars can buy, given that advanced military technology is not necessarily traded on international markets and local production costs differ, and sometimes certain defense-related technologies are unavailable for comparison. Moreover, not only what the money is spent on matters, but how it is spent, as well as the ultimate strategic value one gets. For example, directing funds to procurement and development rather than spending them on veterans' pensions or outdated platforms is likely to increase security, particularly in the longer term, and translate to greater military effectiveness.
The United States accounts for almost 40% of global military spending. China and Russia account for a combined 17%, with China accounting for 13% and Russia for 4%. The so-called Big Four European countries account for 9.5%, compared to Russia's 3.9%.
In 2023, U.S. defense expenditure accounted for 3.5% of GDP and China's official defense expenditure for less than half at 1.6% of GDP. Due to much more rapid underlying economic growth, Chinese defense expenditure has been growing much more rapidly in dollar terms without translating into higher expenditure as a share of GDP.
When comparing U.S. and Chinese defense expenditures, it is important to take into consideration differences in terms of force structure and military posture. The U.S. has worldwide commitments and a costly and extensive global security footprint. China does not, and its military forces are geographically much more concentrated. Military spending should therefore at best be seen as a proxy for defense capabilities. In this sense, the political and economic costs the United States faces to increasing defense expenditure act as a constraint. Yet this constraint can be alleviated, at least partly, via means other than increasing defense spending, including better resource allocation. In the long term, however, significant differences in spending will affect the military balance, especially in East Asia.
In current dollar terms, the United States spent a little less than $900 billion and China $300 billion on defense. In 2010, the United States spent $740 billion, compared to Chinese spending of $100 billion. In purchasing power parity terms, Chinese defense spending was about two-thirds of U.S. spending.
In addition to faster economic growth, China has also greater scope to increase defense spending as a share of GDP without jeopardizing its long-term economic outlook because it has excess savings and limited profitable investment opportunities. This should allow it to convert its excess savings into military consumption without unduly undermining the long-term growth outlook; the United States is far more constrained in this respect.
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"U.S. federal government debt stands at $35 trillion"
- Seems like just a minute ago we were troubled by debt reaching 30 31 32 33 34 Trillion.
Does anybody know how much is too much?
Does anybody know about the law of holes. When you find you're in one, stop digging.
These projections of rising debt to GDP ratios fail to take into account:
a) The ruling party Democrats are proposing more new spending every waking day of every year.
b) What happens to that rising debt to GDP ratio when GDP collapses??
"In FY 2023, the U.S. federal government spent $6.1 trillion. The U.S. federal government spends more than what the Japanese economy, the world's third-largest, produces."
- Sure that sounds like a lot but it's only the half of it. We are a nation of states. Those federal government expenditures are (supposedly) just the ones for things like providing for our common defense. We still have to build roads and run schools. None of your property taxes, sales taxes or state income taxes count in that number that is already higher than the world's third largest economy.
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(1) FTC VOTES TO BAN NON-COMPETE AGREEMENTS NATIONWIDE: The Federal Trade Commission (FTC) voted yesterday on a new rule to ban non-compete agreements nationwide in a 3-2 party-line vote.
FTC attorney Ben Cady said the new rule will allow existing non-compete agreements for senior executives, but once it is implemented, all other current non-compete agreements will become unenforceable.
The U.S. Chamber of Commerce said the new rule is “blatantly unlawful” and said it will file a lawsuit to block the rule.
Why It Matters: Previous arguments say that non-compete agreements undermine the economy by locking former employees out of new jobs and economic opportunities, while opponents say these agreements are intended to protect businesses from unfair practices. This new rule is likely to be impacted by Supreme Court decisions expected this session that could strike down Chevron Deference. – R.C.