Government programs & regulations, spending, deficit, and budget process

[Crafty_Dog]

This thread would be more precisely targeted for discussions of the GSA:

http://dogbrothers.com/phpBB2/index.php?topic=2228.0

[Crafty_Dog]

http://www.cnbc.com/id/41491193/

[Crafty_Dog]

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.

[Crafty_Dog]

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.

========================

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).

[DougMacG]

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.

[Crafty_Dog]

http://dogbrothers.com/phpBB2/index.php?topic=2228.0

[DougMacG]

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.  

[Crafty_Dog]

http://www.usatoday.com/news/washington/story/2012-05-18/federal-deficit-accounting/55179748/1

[DougMacG]

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.

[ccp]

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

[Crafty_Dog]

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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).

[DougMacG]

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

[DougMacG]

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.

[Crafty_Dog]

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.

[JDN]

"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?   

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."

[Crafty_Dog]

"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

[DougMacG]

"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.

[DougMacG]

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

[Crafty_Dog]

http://www.dickmorris.com/obama-repeals-welfare-reform-dick-morris-tv-lunch-alert/?utm_source=dmreports&utm_medium=dmreports&utm_campaign=dmreports

[DougMacG]

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

[objectivist1]

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.

[Crafty_Dog]

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.
                                               
                                       
                                       

                                       

[DougMacG]

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.

[Crafty_Dog]

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

[DougMacG]

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
------------
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.

[Crafty_Dog]

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.

[Crafty_Dog]

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

[Crafty_Dog]

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.

[DougMacG]

"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

[DougMacG]

"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

[G M]

"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....

[Crafty_Dog]

At current interest rates IIRC we are paying about $250B a year on interest on the debt.  Do the math. 

[DougMacG]

"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.

[DougMacG]

Start with the chart:



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.

[DougMacG]

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!

[G M]

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.

[Body-by-Guinness]

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

[ccp]

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....

[Crafty_Dog]

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.
 

[G M]

Looters and Moochers will loot and mooch. You think they'll be reasoned out of that ?

[Crafty_Dog]

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

[DougMacG]

'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

[Crafty_Dog]

An interesting point, but one that changes constant measuring standard that we use to discuss this number.

[DougMacG]

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."

-----------------
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.

[DougMacG]

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.

[G M]

Vote present and give the dems everything they want. We're already through the looking glass.

[Crafty_Dog]

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.

[Crafty_Dog]

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
.
.
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.

Enlarge Image


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Bloomberg
 
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.

[G M]

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.

[DougMacG]

"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.
--------------
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.