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

[DougMacG]

"military spending is like turning a big ocean going tanker-- it takes a LONG time to turn, start, or stop."  - True.

I'm REALLY not liking what I am reading about what the sequester cuts are doing and am glad to see them being lessened.
   - Point taken.

OTOH, defense spending 2013 was $821B, cut back to 2010 levels but more than years 2003-2009 with two wars going.  http://www.usgovernmentspending.com/federal_budget_estimate_vs_actual_2013_XXbs1n#usgs302
If it is being spent unwisely, increasing the total won't necessarily address that.

One might also say:  Domestic spending is like turning a big ocean going tanker-- it takes a LONG time to turn, start, or stop.
---------------

The (other) good news in the budget deal (give Paul Ryan credit for this) is that so-called tax loopholes were left untouched, leaving the closing of loopholes, exclusions and tax system gimmicks on the table for real tax reform that could lower the rates across the board and help grow the economy - if we ever become interested in that.

[DougMacG]

$20.7 trillion was spent on the war on poverty.  This graph shows (nearly) 50 years of data.  Looks like no improvement to me.


http://socialwork.columbia.edu/sites/default/files/file_manager/pdfs/News/Anchored%20SPM.December7.pdf
http://www.nationaljournal.com/all-powers/what-the-50-year-war-on-poverty-tells-us-about-government-20140107

[Crafty_Dog]

Obama will get that budget to you. . .eventually. Sometime. It's in the mail. 
Published by: Robert Laurie

He'll be 'at least' a month late, as usual.
He'll be 'at least' a month late, as usual

By law, the President must submit his budget proposal for the upcoming fiscal year by the first Monday in February. Barack Obama doesn't care. You'll get his budget when he decides to give it to you. That attitude has so far resulted in four blown deadlines.  According to Congressional Quarterly, he's about to make it five.

The White House is said to be at least a month behind its own schedule for developing a fiscal 2015 budget, which by statute is supposed to be submitted to Congress on the first Monday in February. That will slow work on next year’s spending bills, even though the budget accord negotiated by House Budget Chairman Paul D. Ryan, R-Wis., and Senate Budget Chairwoman Patty Murray, D-Wash., established overall discretionary spending levels. There is no penalty for a late presidential budget submission, but appropriators cannot hold hearings until they have a chance to review the administration’s proposals. Last year, Obama’s budget was released two months late, in early April, a delay that factored into Congress’ failure to clear any fiscal 2014 spending bills in 2013.

As Townhall points out, the three previous Presidents were late with their proposals a whopping 4 times in 20 years. Obama has now been late five of six times during his tenure. You can say that doesn't matter, since not even Democrats are willing to vote for the craziness his budgets contain, but it still means he's missed more of these deadlines that any President in almost a hundred years.

We're sure this is thrilling news for the left, since it will probably make it easier for Harry Reid to simply ignore the entire budget process -something he is often wont to do. CQ believes that Reid and the Dems will use the Paul Ryan / Patty Murray budget deal as cover, so they can dodge their legal budgetary duties.

The expectation is Senate Majority Leader Harry Reid, D-Nev., will keep a Senate budget deal off the floor, arguing the Ryan-Murray pact makes it unnecessary. Senate debate on a budget resolution could open the door to numerous amendments that the chamber’s Republicans can use to force highly partisan votes just months before the elections.

Heaven forbid the Dems have to stand up for the things in which they believe - during an election year!

Chastise the President all you like, but he's a man who knows what his priorities are. Budget be damned, he has to hit the golf course, go snorkeling, grab some shave ice, play basketball, and take a few selfies.  If there's time, he'll host a Jay-Z concert in the White House. After that, maybe - if you're lucky - he'll deal with those pesky numbers.

[G M]

He came back from his  4 million dollar vacation so he could lecture America on a lack of economic equality. Say thank you, you bitter clingers.

[DougMacG]

The Chris Christie scandal in a nutshell, as explained in the media:  The Port Authority has a program to close lanes on a key bridge at busy times in order to study how much worse the congestion and traffic delays will be as compared to the usual lousy to horrible.  Some aide of Christie allegedly triggered this program for the wrong reasons, to retaliate against a Mayor who would not endorse the Governor for reelection. 

I disagree.  The scandal is the existence of such a program in the first place. 

[DougMacG]

Robert Samuelson, Washington Post:

"The War on Poverty's success at strengthening the social safety net... should not obscure its failure as an engine of self-improvement."

http://www.realclearpolitics.com/articles/2014/01/13/how_we_won_--_and_lost_--_the_war_on_poverty_121197.html

[Body-by-Guinness]

http://www.lawfareblog.com/2014/01/a-guide-to-the-coming-onslaught-of-presidential-administration/

[Crafty_Dog]

Congress Handcuffs Pentagon Cost-Cutters
Bases that can't be closed, weapons that can't be retired, benefits that can't be touched. What's left? The essentials.
By Todd Harrison And Mark Gunzinger
Jan. 26, 2014 5:20 p.m. ET

While the budget battles in recent years have been difficult for many parts of the federal government, they have forced the Pentagon into a perpetual state of crisis management, limping from one budget showdown to the next. This fiscal chaos is not conducive to carrying out the nation's defense.

If military spending must decline as part of an overall reduction in federal spending, Congress should abide by three simple rules: (1) a gradual decline in military spending rather than a sharp drop; (2) a greater degree of budgetary certainty for the coming years; and (3) the flexibility necessary for the Pentagon to make smart, strategically informed reductions.

The Ryan-Murray budget agreement, passed by Congress late last year, conforms to two of these rules. It reduces the cuts required in 2014-15 so that spending reductions are phased in gradually. It also gives the Defense Department more certainty in its future funding because both the House and Senate passed the two-year deal in a bipartisan manner. While Congress must still pass appropriations bills that conform to the budget caps, Ryan-Murray allows Pentagon planners to do something they haven't done in several years—prepare a realistic defense budget that has a chance of passing.

One important task remains. Congress needs to give the Pentagon greater flexibility to make smart reductions informed by strategy. This requires more than passing an annual appropriations bill and avoiding sequestration. It means Congress must set aside parochial political interests and allow the Pentagon to make tough decisions that are likely to be unpopular with some constituencies.

For example, the Defense Department has repeatedly asked Congress for another Base Realignment and Closure Commission so it can shed excess bases and facilities, which the military estimates is about 20% of its existing infrastructure. Yet current law prohibits the Pentagon from closing these unneeded bases and facilities, forcing it to waste billions of dollars every year. While no private company would tolerate such waste, key members of Congress have blocked efforts to close bases because this wasteful spending supports jobs in their districts.

The Pentagon has also asked for sensible reforms to rein in its growing personnel costs, such as raising the fee working-age military retirees pay for health insurance by a few dollars per month. Congress has repeatedly blocked these reforms, and as a result the cost per service member for pay and benefits grew by 57% from 2001 to 2012 when adjusted for inflation and excluding war-related costs. This growth was due to a number of factors, including rising health-care costs, higher than requested pay raises, and new and expanded benefits such as Tricare for Life, a Medicare supplemental policy provided free of charge to military retirees 65 and older.

If Congress will not allow the Pentagon to change military compensation to slow this growth, it will have little choice but to cut the number of military personnel. And if compensation costs continue growing while the overall budget declines, the Pentagon will have to continue cutting people to the point where the military may be too small to protect all of our nation's global security interests.

The Pentagon also needs greater freedom to retire legacy weapons. The Air Force has said it needs to retire some older aircraft—including the A-10 ground-attack aircraft and the KC-10 aerial refueler—to fit within Congress's budget constraints. Both planes have been incredibly valuable in the past, and the A-10 in particular has proven its worth in Iraq and Afghanistan. If resources weren't constrained both aircraft would be worth keeping. But the budget is constrained, and the Air Force has determined it has other aircraft that can do the same jobs. Because the Defense Department is now more focused on countering threats in the Asian-Pacific region than preparing for major ground wars, the A-10, whose primary mission is providing close air support for ground forces, is understandably a lower priority.

Yet some members of Congress are already working to prevent the Air Force from making financially smart and strategically informed reductions. The other military services have similar issues, with Congress repeatedly blocking the Navy from retiring older ships and forcing the military to keep production lines open for legacy weapons it no longer wants to buy.

With all of these constraints layered on top of one another—not being able to close bases, reform compensation or retire legacy weapons—the Pentagon has few degrees of freedom left. If the nation wants effective and efficient government, it has to start making smart decisions. It is time for Congress to set aside politics and give the Defense Department the flexibility to do what is best for the nation, both fiscally and strategically.

Messrs. Harrison and Gunzinger are senior fellows at the Center for Strategic and Budgetary Assessments in Washington, D.C.

[Crafty_Dog]

Debt Limit Reached

The federal government reaches its borrowing limit today, leaving Treasury
Secretary Jack Lew to resort to "extraordinary measures" to avoid default. He
can hold off until the end of February, he says. Republicans are still trying
to figure out what item to demand in exchange for raising the debt ceiling,
which doesn't exactly put them in a strong bargaining position. We expect them
to just concede to a "clean" hike in order to make a better election issue out
of it. Meanwhile, federal spending goes in the same direction it always does:
up.

[bigdog]

http://thehill.com/blogs/on-the-money/budget/198044-house-gop-pulls-debt-plan-move-to-clean-bill

From the article:

The lack of consensus within the majority has sapped its leverage, leading to Boehner’s decision on Tuesday to hand control of the floor over to Democrats.

“We don’t have 218 votes, and when you don’t have 218 votes, you have nothing.”

[Crafty_Dog]

Given how the play by Ted Cruz, Rand Paul, and Mike Lee worked out last time, to try it again would fit the definition of insanity: Doing the same thing and expecting a different result.

[DougMacG]

The federal government is wasting an astonishing hundred billion dollars a year in improper welfare payments to recipients not entitled to them. This is an amount of money greater than the GDP of most nations on earth, more than Morocco and within striking distance of Hungary. The figure comes from a study by Veronique de Rugy and Jason Fichtner [George Mason University / Cato], who produced the following chart based on the OMB's High-Error Programs Report:

http://www.americanthinker.com/blog/2014/02/100_billion_in_improper_welfare_payments_per_year.html
http://www.paymentaccuracy.gov/high-priority-programs

    Medicare fee-for-service, Medicare Advantage, and Medicaid top the chart and combine for $61.9 billion in improper spending, which should surprise no one given their sheer size. But their relatively high rates of errors should especially worry us as the federal government is expanding its reach into the health-care market - does anyone think the Affordable Care Act will be any different from other federal health programs?

    Interestingly, though Medicare fee-for-service is the biggest drain in absolute terms - wasting nearly $30 billion in 2012 - it's far from the worst offender on a dollar-for-dollar basis. The Earned Income Tax Credit is responsible for $12.6 billion in improper payments, almost a quarter of what the program spent in 2012.

[Crafty_Dog]

Paul Ryan Unveils GOP Plan to Balance Budget in 10 Years
Budget Blueprint Proposes Changes to Medicare, Medicaid, Food Stamps, Other Programs
By Damian Paletta and Kristina Peterson
April 1, 2014 10:30 a.m. ET

Paul Ryan speaks at the CPAC Conference last month in National Harbor, Maryland. Getty Images

House Budget Committee Chairman Paul Ryan (R., Wis.) Tuesday proposed eliminating the government's budget deficit in 10 years through major changes to Medicare, Medicaid, food stamps and other programs—and took the controversial step of counting in assumptions on how the plan would spur economic growth.

The fiscal year 2015 budget blueprint is a largely political document that establishes House Republicans' commitment to eliminating the deficit as a top priority. Mr. Ryan says it would cut $5.1 trillion in projected spending over a decade, with 40% of that coming from simply repealing the Affordable Care Act.

To replicate a point of pride in his budget blueprint last year — namely balancing the federal budget in 10 years--Mr. Ryan this year has opted to formally incorporate an estimated economic boost that he says would result from reducing the deficit, in turn lowering interest rates and spurring growth.

"The greater economic output that stems from a large deficit-reduction package would have a sizable impact on the federal budget," Mr. Ryan writes in his plan.

For example, Mr. Ryan estimates that in 2024, the government under his plan would spend $4.995 trillion and bring in $4.926 trillion in revenue. That would result in a deficit of $69 billion.

But the budget includes a new line item that didn't exist in his past proposals, which Mr. Ryan has labeled "macroeconomic fiscal impact" and which he says would further reduce the deficit by $74 billion that year. This would result in a $5 billion net surplus.

Building in assumptions about economic growth is a controversial part of budget math, and Mr. Ryan didn't include the same assumptions in prior proposals. This sort of analysis is popular with Republicans, who often cite it in proposals to cut taxes. . Steve Bell, a former top Senate budget aide now with the Bipartisan Policy Center, called Mr. Ryan's move "unconventional," but wouldn't expound further.

Mr. Ryan's budget also broadly calls for reining in the federal government and expanding the role of states and private companies in an effort to boost growth and lower costs for an array of programs, including food stamps and Medicaid. It would include deep cuts to domestic programs, far beyond the sequester-level reductions that some members of both parties have recently worked to reverse.

The GOP budget resolution stands no chance of passing the Democratic-controlled Senate, but budgets have long served as important markers of party priorities. In this year's midterm elections, Democrats are likely to seize on Republican proposals to cut spending and refashion Medicare, while GOP lawmakers will tout their commitment to reducing the deficit.

The government has roughly $17.5 trillion in debt. Lawmakers from both parties have said the debt will grow to unsustainable levels if policy makers don't take action.

The White House in March proposed reducing the deficit—but not eliminating it—through a combination of spending cuts and tax increases. Democrats and Republicans in recent years have taken steps to reduce the growth of the debt by restraining spending and allowing certain tax cuts to expire. The deficit has fallen sharply as a result, but it is expected to grow again due to a wave of worker retirements and projections of higher health care costs.

Mr. Ryan faces an extra political hurdle this year: Winning back the support of the 62 House Republicans who voted against a two-year spending deal that he reached with Senate Budget Committee Chairman Patty Murray (D., Wash.) in December. Because Democrats will oppose the plan from Mr. Ryan, he will need many of those GOP votes to win approval for his proposal in the House.

The GOP budget includes the overall spending level for fiscal year 2015 from that deal, which some Republicans opposed because it temporarily loosened spending caps. Republicans on the Budget Committee have said they hope balancing the budget in 10 years, in part by overhauling federal health and safety-net programs, will lure back GOP support.

Mr. Ryan's new budget would spend roughly $42.6 trillion over 10 years, compared to $47.8 trillion under current policies.

This year's House GOP budget includes greater savings than last year's plan from repealing the Affordable Care Act, the president's 2010 health care overhaul. It includes $2.066 trillion in savings over 10 years from scrapping the health law, compared to $1.783 trillion in last year's plan.

This element has long proven controversial, though, as the nonpartisan Congressional Budget Office has said repealing the law would actually make the deficit worse in the next decade. It wasn't immediately clear how this year's additional savings would materialize.

Mr. Ryan's budget also says that defense cuts proposed by the Obama administration are overzealous. The GOP budget, for instance, pushes back against Mr. Obama's proposed troop reduction, labeling the drawdown a "significant risk in an environment that, as has been noted, is extremely challenging and uncertain." It calls for more Army and Marine Corps. funding than the White House had requested.

Notably, Mr. Ryan's budget doesn't endorse the ambitious tax overhaul released by Ways and Means Committee Chairman Dave Camp (R., Mich.) in late February, which has drawn criticism as it seeks to take on special interests in the tax code. Mr. Camp on Monday announced he won't seek re-election to Congress.

Rather than include his tax plan, the GOP budget doesn't embrace any particular proposal but "calls for a tax code that is simpler, fairer and more competitive." Mr. Ryan is considered Mr. Camp's likely successor, since the Michigan lawmaker's chairmanship was set to expire under the GOP's term-limit rules.

The budget blueprint does mention Mr. Camp's plan, as well as proposals introduced by GOP Reps. Michael Burgess of Texas and Rob Woodall of Georgia, saying Congress should "should consider these and the full myriad of pro-growth plans."

Mr. Ryan's budget doesn't include new proposals to revamp anti-poverty programs, but Mr. Ryan has said he would offer new ideas sometime this year. It reiterates past proposals to turn over more control of the Supplemental Nutrition Assistance Program, also known as food stamps, and Medicaid to states.

Mr. Ryan's proposal would create a new alternative to Medicare that would allow older Americans to choose private insurance plans and receive government support for premiums. They could also choose to stay in traditional Medicare.

People who are now aged 56 and older would be exempt from any changes, but younger people would automatically face the premium support choice going forward. Last year people aged 55 and older were exempt. Some Democrats have been receptive to this idea, but many others have said it would allow Republicans eventually to dismantle Medicare.

The plan also tweaked how to calculate the government's contribution so seniors in many private plans would see their costs go down, compared to current law, though some remaining in traditional Medicare might pay more.

Senate Democrats have signaled that they have no plans to vote on a budget resolution this year after reaching an agreement with Republicans several months ago on spending levels for the current and 2015 fiscal years.

[Crafty_Dog]

Sorry I do not have a URL, but I gather Obama's budget just was voted down in the House 413-2.

[Crafty_Dog]

Though the press corps isn't reporting it, this is turning out to be a boom year for Uncle Sam. Federal tax revenue is hitting new records, even with mediocre economic growth.

The Congressional Budget Office reports in its April budget update that tax revenues for the first seven months of fiscal 2014 are up 8.2% to $1.74 trillion, or $132 billion more than a year earlier. That's probably bigger than your raise this year. Individual tax receipts are up 3.6% due to higher rates, payroll levies are up 12.2% and corporate income taxes have soared by 14.5% to $156 billion.

Intriguingly, CBO reports that even this gusher is as much as $20 billion less than it predicted in its most recent 10-year fiscal projections. This may be due to slower than expected growth caused in part by the big tax wallop to the economy. The higher tax rates, which President Obama says aren't high enough, are nonetheless yielding a windfall for Congress to spend.

By the way, this revenue boom doesn't include $57 billion from Fannie Mae FNMA +10.02% and Freddie Mac. FMCC +9.29% The Treasury is forcing the toxic mortgage giants to turn over all of their earnings to the feds, and the take so far this year is $42 billion more than in the first seven months of fiscal 2013. Under the perverse federal budget rules, those payments aren't counted as tax revenues but instead are counted against spending as "net negative outlays." Thus federal spending looks $57 billion lower in the first seven months than it actually is.

The federal deficit was still $301 billion through April, which is down from $488 billion but should still be much lower five years into an economic expansion. But don't blame taxpayers, who are certainly doing their part.

[ccp]

How LBJ ruined America:

**********Great Society's decline: The high cost of Lyndon Johnson's grand project

 By George Will 

 JewishWorldReview.com |    Standing on his presidential limousine, Lyndon Johnson, campaigning in Providence, R.I., in September 1964, bellowed through a bullhorn: “We’re in favor of a lot of things and we’re against mighty few.” This was a synopsis of what he had said four months earlier.

Fifty years ago this Thursday, at the University of Michigan, Johnson had proposed legislating into existence a Great Society. It would end poverty and racial injustice, “but that is just the beginning.” It would “rebuild the entire urban United States” while fending off “boredom and restlessness,” slaking “the hunger for community” and enhancing “the meaning of our lives” — all by assembling “the best thought and the broadest knowledge.”

In 1964, 76 percent of Americans trusted government to do the right thing “just about always or most of the time”; today, 19 percent do. The former number is one reason Johnson did so much; the latter is one consequence of his doing so.

Barry Goldwater, Johnson’s 1964 opponent who assumed that Americans would vote to have a third president in 14 months, suffered a landslide defeat. After voters rebuked FDR in 1938 for attempting to “pack” the Supreme Court, Republicans and Southern Democrats prevented any liberal legislating majority in Congress until 1965. That year, however, when 68 senators and 295 representatives were Democrats, Johnson was unfettered.

He remains, regarding government’s role, much the most consequential 20th-century president. Indeed, the American Enterprise Institute’s Nicholas Eberstadt, in his measured new booklet “The Great Society at Fifty: The Triumph and the Tragedy,” says LBJ, more than FDR, “profoundly recast the common understanding of the ends of governance.”

When Johnson became president in 1963, Social Security was America’s only nationwide social program. His programs and those they subsequently legitimated put the nation on the path to the present, in which changed social norms — dependency on government has been destigmatized — have changed America’s national character.

Between 1959 and 1966 — before the War on Poverty was implemented — the percentage of Americans living in poverty plunged by about one-third, from 22.4 to 14.7, slightly lower than in 2012. But, Eberstadt cautions, the poverty rate is “incorrigibly misleading” because government transfer payments have made income levels and consumption levels significantly different. Medicare, Medicaid, food stamps, disability payments, heating assistance and other entitlements have, Eberstadt says, made income “a poor predictor of spending power for lower-income groups.” Stark material deprivation is now rare:

“By 2011 . . . average per capita housing space for people in poverty was higher than the U.S. average for 1980. . . . [Many] appliances were more common in officially impoverished homes in 2011 than in the typical American home of 1980. . . . DVD players, personal computers, and home Internet access are now typical in them — amenities not even the richest U.S. households could avail themselves of at the start of the War on Poverty.”

But the institutionalization of anti-poverty policy has been, Eberstadt says carefully, “attended” by the dramatic spread of a “tangle of pathologies.” Daniel Patrick Moynihan coined that phrase in his 1965 report calling attention to family disintegration among African Americans. The tangle, which now ensnares all races and ethnicities, includes welfare dependency and “flight from work.”

Twenty-nine percent of Americans — about 47 percent of blacks and 48 percent of Hispanics — live in households receiving means-tested benefits. And “the proportion of men 20 and older who are employed has dramatically and almost steadily dropped since the start of the War on Poverty, falling from 80.6 percent in January 1964 to 67.6 percent 50 years later.” Because work — independence, self-reliance — is essential to the culture of freedom, ominous developments have coincided with Great Society policies:

For every adult man ages 20 to 64 who is between jobs and looking for work, more than three are neither working nor seeking work, a trend that began with the Great Society. And what Eberstadt calls “the earthquake that shook family structure in the era of expansive anti-poverty policies” has seen out-of-wedlock births increase from 7.7 percent in 1965 to more than 40 percent in 2012, including 72 percent of black babies.

LBJ’s starkly bifurcated legacy includes the triumphant Civil Rights Act of 1964 and Voting Rights Act of 1965 — and the tragic aftermath of much of his other works. Eberstadt asks: Is it “simply a coincidence” that male flight from work and family breakdown have coincided with Great Society policies, and that dependence on government is more widespread and perhaps more habitual than ever? Goldwater’s insistent 1964 question is increasingly pertinent: “What’s happening to this country of ours?”

[Crafty_Dog]

Excellent post.  Please post it in Liberal Fascism as well.

[DougMacG]

I took note of this content before noticing the author was Ron Paul.  He gets this about half right (and half wrong) IMHO.

http://townhall.com/columnists/ronpaul/2014/05/20/tax-reform-useless-without-spending-reform-n1840207

Tax Reform Useless Without Spending Reform

Recently, Republican leaders in Congress unveiled a "tax reform" plan that they claimed would provide the American people with a simpler, fairer, and more efficient tax system. While this plan does lower some tax rates and contains some other changes that may make next April a little less painful for Americans, there is little in it to excite supporters of liberty.

Taxes may even increase under this plan for some Americans, as it eliminates some of those tax deductions labeled “loopholes.” When I served in Congress I opposed bills that “closed loopholes” because closing loopholes is just a fancy way of saying raising taxes. Anything that leaves more money in the hands of the people is beneficial to both liberty and economic efficiency. As economist Thomas DiLorenzo put it, "...private individuals always spend their own money more efficiently than government bureaucrats do,” therefore sound economics, as well as a concern for liberty, requires opposition to any proposal to "let government bureaucrats spend more of the people's hard-earned money.”

Tax reformers also stray from sound economics when they endorse a tax system that is designed to direct consumption and savings. I share the concern that the current tax system distorts people’s behavior by discouraging savings. However, the solution is not for the government to create a tax code that punishes consumption in order to encourage savings. A truly efficient market is one where individuals are completely free to determine how to allocate their incomes between consumption and savings. No politician or bureaucrat can know the proper allocation of savings and investment that meets the needs of every individual, and government policies designed to cause individuals to devote more of their income to savings than they otherwise would distorts the market just as much as policies that encourage excess consumption.

The Republican tax plan adopts what is called “dynamic scoring.” Dynamic scoring is designed to recognize that tax cuts, by incentivizing work and investment, can increase revenue to the government. This is the argument of the famous Laffer curve. It has always seemed odd to me that a supposed free-market economist would argue for tax cuts on the grounds that it would enrich the state's coffers. After all, the more money the state has the greater its ability to violate our liberties. Does this mean that those concerned with liberty should vote against tax cuts? Of course not; the solution is to make sure tax cuts are big enough that they cost the government revenue.
--------------------------------------------------------------------------------------

When the contemporary tea party was new, I thought the over-riding theme was to cut spending first.  You also need to grow the economy in order to get relieve from the record high demand for government services.  He is right about a couple of concerns.  If you insist on tax cuts being revenue neutral, you have missed part of the point - smaller government.  And if you close all loopholes without gaining serious reductions in tax rates, you have actually increased taxes and sabotaged the potential for real reform.

I suggest moving in incremental steps.  Cut some spending up front and lock out baseline increases.  Make a big move toward right-sizing our regulatory burden.  Enact round one of tax rate cuts.  Get things rolling and repeat the incremental cut process.  I don't believe the electorate will go from supporting the furthest left President to slashing government down to a Ron Paul levels in a single step.  Something more like the penny plan has a better chance of slipping through:  http://www.onecentsolution.org/

[Crafty_Dog]

The Veterans Scandal Is Only the Start
If the country can't meet basic needs now, wait until the looming deficit disaster finally strikes.
WSJ
By William A. Galston
May 20, 2014 6:53 p.m. ET

The recent revelations about the Department of Veterans Affairs point to serious problems. But the root of the scandal is not what self-serving bureaucrats failed to do or tried to cover up; it is a federal budget that prevents us from meeting even the national needs on which our polarized political parties can agree.

Whatever the disagreements about the long wars of the past decades, Democrats and Republicans agree that we must fully honor the debt we have incurred to the tiny fraction of the population that does the fighting for the rest of us. Yes, the budget for the VA has risen sharply since 2002. But the number of returning veterans has risen even faster. Many live with grievous wounds from which they would have succumbed in previous conflicts. Many others struggle with the multiple effects of repeated deployments. Aging Vietnam-era patients require more care, and new responsibilities such as coping with Agent Orange add to the VA's burden.

In 2002, reports the Financial Times, 46.5 million veterans made outpatient visits to VA facilities. In 2012, the number of such visits had risen to 83.6 million. Between late 2010 and the summer of 2013, average waiting times for veterans' claims soared from 100 days to 375 days.

Roughly 42%—$66 billion—of the VA's budget is subject to annual appropriations. That's the nub of the problem. Our inability to agree on a sustainable approach to long-term fiscal policy has led, by default, to a relentless squeeze on discretionary spending that will hobble us at home and abroad. Last week, for example, the House Armed Services Committee approved an appropriations bill incompatible with long-term restraints in current law. Buck McKeon (R., Calif.), the committee chairman, admitted as much. He was, he said, hoping that "some miracle happens" so that we "get money . . . next year that we don't have now." He won't.
Enlarge Image

Getty Images

The Congressional Budget Office's latest budget projections showed that between 2013 and 2024, discretionary spending—defense and nondefense—is scheduled to fall from 7.2% of GDP to 5.1%, the lowest share since at least 1962. With only five cents out of each dollar of national income, we are supposed to defend the country, care for veterans, address the needs of children and the poor—and invest in the research, education and infrastructure on which America's future depends. It can't be done.

Not so fast, say the critics: As the economy expands, even a smaller share can yield increased resources. That's true in principle, but not in current practice. Last February, the CBO calculated the cost of maintaining appropriations, adjusted for inflation, at 2014 levels over the next decade. That total exceeded currently enacted limits by $735 billion.

Ten years from now, the funds available for the military and domestic programs will buy less than they do today. Meanwhile, costs in both categories are likely to rise faster than the rate of inflation. "Doing more with less" is a catchy slogan, but it only diverts attention from the real problem: the contradiction between our needs and the resources we commit to meet them.

The current structure of the federal budget makes this outcome inevitable. By 2015, federal revenues will recover from the Great Recession and stabilize at about 18% of GDP over the next decade. By 2024, however, we are on track to spend fully 17% of GDP on just two items—mandatory programs and interest on the debt—leaving almost nothing for discretionary spending. It only gets worse in the following decade.

That's a formula for endlessly increasing deficits and an ever-rising ratio of debt to GDP. After bottoming out at $469 billion next year, the CBO projects, the annual deficit will begin to rise again and will exceed $1 trillion by the early 2020s. After doubling from 35% to more than 70% during the Great Recession, debt as a share of GDP will near 80% by 2024. Although we reached a truce in the budget wars, we've only postponed the problem.

We know roughly how many veterans the wars in Iraq and Afghanistan will add to the VA's rolls, and we can estimate what they will cost per capita. Non-magical thinking would budget the amount required to meet their needs. We would have an honest public debate about the size and shape of the armed forces in coming decades, and we would appropriate what is necessary to make that blueprint a reality.

We would ask ourselves how much the government should invest in areas that promote growth, and we would stop pretending that shortfalls won't have consequences. We would also stop pretending that meeting the needs of the poor would be cheaper if we transfer programs to the states, and that cutting waste, fraud and abuse would solve our problems. And then, finally, we would be forced to confront the fiscal and economic consequences of putting revenues and mandatory programs on autopilot.

[DougMacG]

Americans Got $2 Trillion in Benefits from Federal Government in 2013
http://cnsnews.com/news/article/ali-meyer/americans-got-2-trillion-benefits-federal-government-2013

That is more than half the budget.  (SOME of these people deserve federal benefits.)

Benefits are nice, if you can get them, but for the most part, THEY HAVE NOTHING TO DO WITH GOVERNING.

In other news, new debt under this one President is now over 7 TRILLION DOLLARS.

Hope and change?  Throwing money at problems is not exactly new.

[Crafty_Dog]

http://www.usatoday.com/story/news/politics/2014/08/05/federal-spending-transparency-money-missing/13485581/

[Crafty_Dog]

http://dailysignal.com/2014/08/27/new-report-shows-u-s-deficit-just-year-huge/?utm_source=facebook&utm_medium=social

[G M]

http://dailysignal.com/2014/08/27/new-report-shows-u-s-deficit-just-year-huge/?utm_source=facebook&utm_medium=social

Does this account for Obama's stash of money as well?

[DougMacG]

I doubt if those numbers fully capture the new health care losses.

I wonder what the correlation is between defense spending reductions and future war impending.

[DougMacG]

http://www.washingtontimes.com/news/2014/sep/9/welfare-marijuana-jeff-sessions-tackles-loophole/
Welfare recipients can use debit (EBT) cards for marijuana

[Crafty_Dog]

Among his first acts as president in 2009, Barack Obama pushed the so-called "stimulus" -- $800 billion in new spending to reinvigorate the economy after the recession. Predictably, it failed to do what he promised. But it did set a new, higher baseline for federal spending and jack up the federal debt. In selling his snake oil, Obama promised "unprecedented measures that will allow the American people to hold my administration accountable," including Recovery.gov, a website meant for tracking spending. Now, however, The Washington Post reports, "y the end of the month, the ability to see which entities received contracts and grants through the American Recovery and Reinvestment Act is going to vanish from Recovery.gov, officials say, making it impossible to track where the more than $800 billion ended up." That's because the government "is not renewing its license with Dun & Bradstreet, a major U.S. financial firm that assigns an identification number to all entities doing business with the federal government. When the license expires at the end of this month, those identification numbers -- and other associated data -- will no longer be available to the government. No numbers, no way to track the money." It's just the price of Hope 'n' Change™. 

see more at http://www.washingtonpost.com/business/economy/data-on-800-billion-in-stimulus-spending-will-disappear-this-year-here-is-why/2014/09/09/ad277ff4-350a-11e4-8f02-03c644b2d7d0_story.html

[Crafty_Dog]

Scott saw my previous post and brings this post of his to our attention:

http://scottgrannis.blogspot.com/2012/10/arra-was-all-about-income-redistribution.html

[DougMacG]

"the multiplier [to grow the economy by stimulating demand] is way less than one"

"if you reclassify things such as education, housing assistance, and health as transfer payments, then over 75% of the $840 billion allocated to "stimulus" was essentially income redistribution"

"Only 8%—$65.5 billion—went for transportation and infrastructure (i.e., the "shovel-ready" projects"

  - He was out on the stump right after the $840 billion saying that we needed to invest in infrastructure.  Well, why didn't we?!

Not a dime went to increase anyone's incentive to work harder or invest more.

  - The sad story of the last 8 years.

[DougMacG]

As China's economy gets poised to overtake Obama's America, we can still take pride in being number one in the world in social spending programs:

USA SPENDING 30 TIMES MORE PER CAPITA THAN CHINA ON SOCIAL PROGRAMS

The enormous welfare handouts, which Hoft relates are now in excess of $1 trillion annually, are unsustainable. Contrarily, he contends that Asia Pacific, including Australia, Japan, and China, are prospering by increasing their reliance on capitalism, creating smart tax policy, and spending substantially less than the U.S. on social programs.

http://www.breitbart.com/Big-Government/2014/09/22/Book-USA-Spending-30-Times-More-Per-Capita-Than-China-on-Social-Programs

[G M]

China's leadership understands communism doesn't work. Too bad the same can't be said for us.

[ccp]

Hat tip to Mark Levin who spoke on his radio show tonight about Michele Malkin's article about the CDC.  This is a real eye opener.  Let me get this straight.  Private companies are funding government agencies like the CDC?

What the heck is that all about?

This cannot be kosher:

****AdTech Ad
Lead StoryThe Centers for Everything But Disease Control
Share   
By Michelle Malkin  •  October 14, 2014 09:33 PMScreen Shot 2014-10-14 at 9.16.35 PM

The Centers for Everything But Disease Control
by Michelle Malkin
Creators Syndicate
Copyright 2014

So now the federal health bureaucrats in charge of controlling diseases and pandemics want more money to do their jobs. Hmph. Maybe if they hadn’t been so busy squandering their massive government subsidies on everything but their core mission, we taxpayers might actually feel a twinge of sympathy.

At $7 billion, the Centers for Disease Control 2014 budget is nearly 200 percent bigger now than it was in 2000. Those evil, stingy Republicans actually approved CDC funding increases in January larger than what President Obama requested.

What are we getting for this ever-increasing amount of money? Answer: A power-hungry busybody brigade of politicized blame-mongers.

Money, money, it’s always the money. Yet, while Ebola and enterovirus D68 wreak havoc on our health system, the CDC has been busying itself with an ever-widening array of non-disease control campaigns, like these recent crusades:

Mandatory motorcycle helmet laws. CDC Director Dr. Thomas Frieden appoints a 15-member “Community Preventive Services Task Force” to promote pet Nanny State projects. An obscure Obamacare rule–Section 4003(b)(1)–stealthily increased the task force’s authority to study “any policies, programs, processes or activities designed to affect or otherwise affecting health at the population level.” Last year, the meddling panel extended the agency’s reach into transportation safety with a call to impose a federal universal motorcycle helmet law on the country. Is riding a Harley a disease? Why is this the CDC’s business?

Video games and TV violence. At Obama’s behest, in the wake of high-profile school shootings, the CDC scored $10 million last year to study violent video games and media images, as well as to assess “existing strategies for preventing gun violence and identifying the most pressing research questions, with the greatest potential public health impact.” Whatever that means. Why is this the CDC’s business?

Playground equipment. The CDC’s “Injury Centers” (Did you know there are 13 of them?) have crafted a “national action plan” and funded countless studies to prevent boo-boos and accidents on the nation’s playgrounds. Apparently, there aren’t enough teachers, parents, local school districts, and county and state regulators to police the slides and seesaws. Why is this the CDC’s business?

“Social norming” in the schools. The CDC has funded studies and campaigns “promoting positive community norms” and “safe, stable, nurturing relationships (SSNRs)” in homes and schools. It’s the mother of all government values clarifications programs. So bad attitudes are now a disease. Again, I ask: Why is this the CDC’s business?

After every public health disaster, CDC bureaucrats play the money card while expanding their regulatory and research reach into anti-gun screeds, anti-smoking propaganda, anti-bullying lessons, gender inequity studies and unlimited behavior modification programs that treat individual vices–personal lifestyle choices–as germs to be eradicated.

Here’s a reminder of what the CDC does with money that’s supposed to go to real disease control. In 2000, the agency essentially lied to Congress about how it spent up to $7.5 million earmarked each year since 1993 for research on the deadly hantavirus. “Instead, apparently without asking Congress, the CDC spent much of the money on other programs that the agency thought needed the funds more,” The Washington Post found. The diversions were impossible to trace because of shoddy CDC bookkeeping practices. The CDC also misspent $22.7 million appropriated for chronic fatigue syndrome and was investigated in 2001 for squandering $13 million on hepatitis C research.

As I pointed out years ago, the CDC has its own private funding pipeline in the form of “Friends of CDC,” an Atlanta-based group of deep-pocketed corporations, now including ATT, Costco, General Motors, Google, IBM and Microsoft. To date, the entity has raised some $400 million to support the CDC’s work.

Too bad some of those big bucks can’t be earmarked to find a cure for bureaucratic obesity and a vaccine for mission creep.

[DougMacG]

Forgotten in all of this is how much these programs harm their recipients!
-----------------------------------------------------------------------------------
"We have the world’s second-largest welfare state — just behind France."

http://www.washingtonpost.com/opinions/robert-samuelson-our-giant-welfare-state/2014/11/25/28f815bc-74c1-11e4-a755-e32227229e7b_story.html

Our giant welfare state
By Robert J. Samuelson  November 25   Washington Post

We Americans pride ourselves on not having a “welfare state.” We’re not like Europeans. We’re more individualistic and self-reliant, and although we may have a “social safety net” to protect people against unpredictable personal and societal tragedies, we explicitly repudiate a comprehensive welfare state as inherently un-American.

Dream on.

Call it a massive case of national self-deception. Indeed, judged by how much of their national income countries devote to social spending, we have the world’s second-largest welfare state — just behind France.

This is not just conjecture. The Organization for Economic Cooperation and Development (OECD) — a group of wealthy nations — has recently published new figures on government social spending. Covered is unemployment insurance, disability payments, old-age assistance, government-provided health care, family allowances and the like. By this measure alone, the United States is hardly a leader. It ranks 23rd in the world with social spending of roughly 19 percent of gross domestic product (GDP). This is slightly below the OECD average of 22 percent. France is the champ at nearly 32 percent. (The data are generally the latest available, including some estimates for 2014.)

But wait. Direct government spending isn’t the only way that societies provide social services. They also channel payments through private companies, encouraged, regulated and subsidized by government. This is what the United States does, notably with employer-provided health insurance (which is subsidized by government by not counting employer contributions as taxable income) and tax-favored retirement savings accounts.

The OECD report brims with insights about welfare systems. Did you know, for example, that China — heir to a communist social system — has a puny welfare state compared with most wealthy nations? In 2009, its social spending equaled 7 percent of GDP. Or did you realize that, despite all the talk of “austerity,” government social spending has hardly been reduced in most countries. The OECD reports cuts in a few nations (Greece, Germany and Canada, among them) but also finds that “in most countries social spending remains at historically high levels.”

The main message that Americans can take from this report is that we need a higher level of candor. The very complexity of our hybrid system seems intended to disguise the reality that we have a welfare state. We have created a new vocabulary to validate our denial. From our “safety net,” we distribute “entitlements” that are not “handouts” and don’t qualify as “welfare” payments. We pretend (or some of us do) that our Social Security taxes have been “saved” to provide for our retiree payments, when today’s Social Security checks are mainly financed by the payroll taxes of today’s workers, just as yesterday’s checks were financed by the taxes of yesterday’s workers.

If we were more honest about these matters, we might have an easier time debating what are admittedly difficult and unpopular choices. Who deserves benefits, how much and why? What are the consequences for taxpayers and the larger society? Does our hybrid mix of public and private power make sense? These are insistent issues that won’t vanish even though we pretend they don’t exist.
---------------------------------

In the United States ...total social spending is the second highest in the world ...
A focus on public budgets misses two important features that affect social spending totals and international comparisons of social expenditure: 1) private social expenditure and 2) the impact of tax systems.
http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf

[DougMacG]

Are we so big that we don't even report our program failures anymore?

Another Govt-Backed Solar Company Crashes
http://www.newsmax.com/Ira-Stoll/solar-solyndra-bailout/2014/12/01/id/610204/

Better solar technology is coming next year.  Why wait for a private market to function freely when you can pretend to command an economy - like the highly successful Soviets.

[Crafty_Dog]

The Power of the Purse
The ‘omnibus’ bill is no way to govern, but it offers hope for 2015.
Dec. 10, 2014 8:16 p.m. ET


The 113th Congress is sprinting to a finish, and few besides Harry Reid will lament its passing. In its final budget splurge, however, Congress is at least showing hints of better governance and how a Republican majority might effectively use the power of the purse next year.

House and Senate appropriators late Tuesday unveiled a $1.01 trillion bill to fund the federal government through September. Its 1,600 pages contain thousands of spending and policy changes that deserve more time to assess. Yet the House plans to vote Thursday.

Blame for this rush job is bipartisan, starting with Mr. Reid, who six years ago shut down regular appropriations to shield Democrats and the White House from having to make spending choices. Government has lurched from one short-term funding bill to the next, and an important measure of the new GOP majority will be if it returns to regular budget order.

We’ll also be watching Speaker John Boehner to see if he honors his promises to give the House and the public 72 hours to review legislation. The Dec. 11 deadline for government funding has been known for months, yet Mr. Boehner is now presenting his Members with a choice of passing his bill or shutting down the government. He owes voters better.

This Gargantua is nonetheless giving Republicans a chance to press some of their priorities. The bill funds 11 of 12 parts of the government through September and generally stays within the spending caps laid out in last year’s budget agreement—providing $521 billion to defense and $429 billion for domestic discretionary programs. It funds the Department of Homeland Security only through February, when Republicans will tee up a debate over President Obama’s immigration decree.

Some on the right are calling the caps a sham, and that’s partly true, since the bill adds $64 billion to fight Islamic State and $5.4 billion for Ebola that are outside the caps. Then again, the war has to be funded and defeating Ebola should be a priority.

More encouraging is that Republicans are showing how they can use Congress’s spending power to steer policy. Most of government has been on autopilot since 2010. This week’s bill starts to set new spending priorities.

The bill cuts nearly $350 million from an Internal Revenue Service that targeted conservative nonprofits and is acting as tax collector for ObamaCare. It slices $60 million from the imperial Environmental Protection Agency, whose budget is 21% below 2010 levels and will soon have as many employees as it did in 1989. The bill even does the unheard of and eliminates funding for programs, including Mr. Obama’s Race to the Top initiative that has stopped pushing useful education reform.

There are also useful policy riders, notably on regulation. Republicans began to reform the Dodd-Frank financial law by amending a rule that threatened to raise costs on Main Street businesses. They are also banning the Fish and Wildlife Service from placing the sage grouse on the Endangered Species list, ending the threat of a government land grab in 11 states. They are sparing farmers from an EPA plan to apply the Clean Water Act to small ponds and irrigation ditches, and truckers from new rules that slash their work weeks.

School districts will soon have more flexibility in implementing Michelle Obama’s proscriptive school-lunch menus. Failing multi-employer pension plans will be able to reduce benefits to reduce the chances that the plans are dumped on taxpayers.

And Republicans are helping taxpayers and the cause of free speech by raising the contribution limits to political parties. The higher limit, which will increase by 10 times to $324,000, is designed to allow the parties to fund their conventions with private dollars, since Republicans have eliminated taxpayer funds for those political shindigs.

Republicans were forced to concede on some of their highest priorities, such as the Keystone XL pipeline and substantive changes to ObamaCare, and they also gave in to Democratic spending increases for financial regulators, college loans, mass transit and federal employees, among other things. But Democrats still control the Senate, and Mr. Obama has the veto pen.

The omnibus nonetheless shows that Republicans can use the power of the purse if they pick the right fights and don’t insist on strategy of their-way-or-a-shutdown. Some breathless Beltway conservatives don’t seem to understand the difference.

Democrats like Henry Waxman used their majorities to build the entitlement and administrative state in increments year after year even with Republicans in the White House. Their method was to press small but notable liberal initiatives on so many fronts that the President’s men couldn’t stop them all. If the GOP brings along some Democrats in Congress, Mr. Obama find it even harder to veto. The mistake is portraying anything less than total victory as surrender.

The omnibus bill has plenty of barnacles, and its rush-to-a-vote is a disgrace, but Republicans are using it to make more policy progress than they have in four years. Next year they can make even more, if they understand that their spending power is formidable but not unlimited.

[DougMacG]

The rule or promise that you have to read all of a bill to vote for it is apparently no longer operative.  They will spend over a trillion dollars in over 1500 pages,  $.654 billion per page - and no one has read it.   http://rendevouswithdestiny.blogspot.com/2014/01/congressman-no-one-read-1t-omnibus-bill.html

[Crafty_Dog]

NASA's Monumental Waste
NASA once put a man on the moon just seven years after setting out to do so. The space agency enjoyed glorious triumphs and persevered through tragic disasters over the years, but we've never seen anything quite like this. The Washington Post reports, "In June, NASA finished work on a huge construction project here in Mississippi: a $349 million laboratory tower, designed to test a new rocket engine in a chamber that mimicked the vacuum of space. Then, NASA did something odd. As soon as the work was done, it shut the tower down. The project was officially 'mothballed' -- closed up and left empty -- without ever being used. ... The reason for the shutdown: The new tower -- called the A-3 test stand -- was useless. Just as expected. The rocket program it was designed for had been canceled in 2010." So how did this happen? "[A]t first, cautious NASA bureaucrats didn't want to stop the construction on their own authority. And then Congress -- at the urging of a senator from Mississippi -- swooped in and ordered the agency to finish the tower, no matter what. The result was that NASA spent four more years building something it didn't need. Now, the agency will spend about $700,000 a year to maintain it in disuse." A grossly over-budget monument to nothing now stands in Mississippi as a sad reminder that money without proper vision is a terrible waste. More...

[DougMacG]

Ignorance of the law is no excuse, while they add new "laws" at the rate of 75k pages per year, federal alone.
Were we under-regulated prior to 2014??!!  Are they done now - is everything fully regulated?
-----------------------------------------------------------------------
Obama Imposed 75,000 Pages of New Regulations in 2014
(All without a vote from Congress.)
http://www.thenewamerican.com/usnews/constitution/item/19803-obama-imposed-75-000-pages-of-new-regulations-in-2014

Federal Regulations Cost U.S. $2 Trillion Per Year, Study Shows
http://www.thenewamerican.com/economy/item/19116-federal-regulations-cost-u-s-2-trillion-per-year-study-shows

http://www.regulations.gov/#!searchResults;rpp=25;po=0;np=15;dct=FR%252BPR%252BN

[Crafty_Dog]

Scott Grannis:

Dynamic scoring is here to stay and it's huge
Posted: 06 Jan 2015 10:23 PM PST
For the past year or so, I've been talking about how dynamic scoring was on track to fundamentally change the way the Congressional Budget Office evaluates legislative proposals. Today it was made official, as Ed Lazear notes in tomorrow's WSJ:
The House of Representatives on Tuesday adopted a rule that will change Washington and lawmaking for the better. When legislation is proposed, the Congressional Budget Office is tasked with estimating its fiscal consequences. In most cases, the CBO assumes there is no effect on economic growth, positive or negative. In the future, the House will instruct the CBO to take macroeconomic effects into account when estimating the cost of legislation.

With this, a long-time dream of supply-siders has been realized. It will surely mark a turning point in the economic history of the U.S. economy.

Predictably, some Democrats denounced the change. In my view, this issue should transcend politics because it is simply a question of basic economics. If you raise or lower taxes, you will change people's behavior. If these dynamics are not properly considered, then legislation can and most likely will suffer from negative and "unforeseen" consequences.

As Scott Hodges of the Tax Foundation today noted:
Dynamic scoring is not a plot to cut taxes without paying for them, rather it is an important tool for raising the tax IQ of members of Congress so that they understand the different effects that various tax increases or tax cuts have on the economy. The ultimate goal is to enact tax policies that improve the lives of all Americans, which won’t happen if we continue to protect Washington’s status quo.



Read the whole thing
http://taxfoundation.org/blog/latest-critique-dynamic-scoring-ring-hollow-against-actual-results

[ccp]

Over the years, I've heard this before.  I can't get a job, I am too old to do what I do, and I am depressed and anxious and can't sleep.  As a result apply for disability.   Hey everyone else is taking advantage of the "system" so I don't really disagree:

http://www.cnsnews.com/news/article/ali-meyer/1-3-disability-have-mental-disorder-429-dc

[G M]

Over the years, I've heard this before.  I can't get a job, I am too old to do what I do, and I am depressed and anxious and can't sleep.  As a result apply for disability.   Hey everyone else is taking advantage of the "system" so I don't really disagree:

http://www.cnsnews.com/news/article/ali-meyer/1-3-disability-have-mental-disorder-429-dc

Sure, Obama has his money stash to cover everyone.

[Crafty_Dog]

What Democrats and the CBO Don’t Get
The numbers reveal that a robust economy, not higher taxes, is the most reliable way to increase federal revenue.
By Michael Solon
Feb. 2, 2015 7:37 p.m. ET
WSJ

The recent rule change by House Republicans to incorporate the macroeconomic impact of major legislation into official budget estimates—“dynamic scoring”—has triggered heated criticisms. But three decades of hard accounting data, in addition to supporting the rule change, should prompt Washington to reconsider the way it thinks about what drives federal revenues.

Since 1984 the Congressional Budget Office has tracked all revisions to its triennial projections of federal revenues, outlays and deficits to account for economic, technical and legislative changes. Its data—from the “Changes in CBO’s Baseline Projections” tables that are published annually in the CBO Budget Outlook, the Budget Update and the Analysis of the President’s Budget—indicate which federal policies grew or shrank the economy significantly enough to generate measurable revenue gains or losses. The data also reveal the failures of core Democratic economic policies and flaws within the CBO’s current economic model.

One fact above all others emerges from the data: Economic growth is the single most powerful determinant of federal revenues.

The CBO today projects that if annual gross domestic product were to average one percentage point higher (in real terms), there would be an additional $2.9 trillion in revenues and $370 billion less in federal spending over a decade. Conversely, its 10-year revenue projections have fallen $5.6 trillion since 2007. Most of the lost revenue was not due to the financial crisis and recession, but to the historically weak recovery.
Opinion Journal Video
President Obama’s 2016 budget proposal and the likely Republican response. Plus, what Obama's veto of the Keystone bill would say about his economic priorities, the White House outreach on Iran and Hermitage Capital CEO Bill Browder on his new book.

Here’s another vital fact: Economy-driven revenue changes can dwarf legislative changes. Consider the budget summit deal enacted in November 1990. The CBO projected that the law’s variety of tax hikes would raise $159 billion in revenues over five years. Two months later the CBO reported that the 1990 recession would cut revenue projections by $206 billion—wiping out 130% of the revenue supposed to be gained by higher taxes.

Or consider a more recent example: In December 2013 the tax cuts for upper incomes and small businesses enacted in the George W. Bush years were allowed to expire, effectively a $615 billion, 10-year tax hike. Yet the CBO’s revenue estimates were lowered in both February and August of 2014, because of economic weakness. The projected revenue loss over a decade: $1.9 trillion.

A week ago Monday the CBO reported additional 10-year revenue losses of $234 billion from slower growth, offsetting three-fourths of the $320 billion in new taxes proposed in the president’s State of the Union address the previous Tuesday.

Economic growth also can add far more to revenues than legislatively driven tax hikes. The CBO projected that President Clinton’s 1993 tax increase would raise $268 billion over five years. But after the 1997 bipartisan agreements on budget restraint, welfare reform and capital-gains tax cuts, revenues surged, which the CBO said in 2000 arose “from the strength of the economy and changes in characteristics of income.” The CBO’s projected revenues for that year “are now $303 billion more than estimated in 1997.”

In other words, the government gained in one strong year more than the first five years of Clinton’s 1993 tax hike. Overall, an extra $1.34 trillion in revenues flowed from September 1997 to January 2001 solely for economic reasons—five times higher than the projected revenues from the 1993 tax hike.

The CBO data also help identify the periods and policies where both public revenues and private incomes grew the most or the least. These data reveal flaws both in Democratic economic remedies and within the CBO’s economic model.

Once President Obama ’s agenda of stimulus and expansion of government power was implemented—along with the Federal Reserve’s record low interest rates—the CBO projected strong economic growth after 2010. In the three annual budget reports after the stimulus bill’s passage, the CBO projected average GDP growth for 2011, 2012 and 2013 of 4.3%, 3.8% and 3.4%, respectively. Instead, growth averaged 2%.

The Clinton administration is another example. Republicans took control of Congress in 1994, and over the next few years pushed through restraints on spending and regulation. As a result of declining federal borrowing, interest rates also were lower. After 1997 the CBO repeatedly projected real gross domestic product growth outside the initial year to drop to a 2.1% average during 1997 to 2000. Yet actual GDP growth averaged 4.7%.

Among many other changes, the 1986 Tax Reform Act lowered the top marginal income-tax rate to 28% from 50%. Instead of projecting an economic boost, the CBO immediately lowered projected average gross national product growth rates for 1987 through 1989 to 2.9% from 3.3% (CBO projections were changed to GDP in 1992). The final GNP figures averaged 3.8% growth, including a strong 4.2% surge in 1988 when the full rate reductions kicked in.

Neither Democrats nor the CBO appear to alter their assumptions or correct their model for economic reality. Both discount the impact of marginal tax-rate changes. The CBO has repeatedly projected since 2001 that the U.S. would enjoy numerous years of 3% or higher growth. But the only two years that occurred were in 2004 and 2005, immediately after the accelerated reductions in virtually all marginal tax rates.

The overwhelming weight of CBO accounting supports dynamic scoring. CBO revisions confirm that slow growth since 2007 has triggered a massive revenue gap, that all revenues lost in past recessions have been recaptured in recoveries until the current one, and that pro-growth policies have delivered revenue surges.

No evidence in the CBO data appears for the macroeconomic feedback that Democrats claim and the CBO assumes from stimulus spending. The data highlight the economic and fiscal benefits to the private and public sectors from tax reductions and “austerity” programs that Republicans tend to pursue but the CBO and Democrats tend to dismiss. Such findings may not change the CBO’s future projections or Democratic policy assumptions, but these are the undeniable facts of the CBO’s past accounting.

Mr. Solon was budget adviser to Senate Republican Leader Mitch McConnell and is currently a partner at US Policy Metrics.
Popular on WSJ

[DougMacG]

We used to have a dissident County Commissioner who gave out the equivalent of Former Sen Proxmire's Golden Fleece awards for outrageous uses of wasted taxpayer money.  He point out things like this and say, don't tell me we don't have enough money!  This program below isn't what is breaking our budget, but letting the government get SO big that this sort of thing can happen is exactly what bankrupts us.

Puerto Ricans [in Spanish speaking Puerto Rico] Getting Disability Checks [from Uncle Sam] Because They Don't Speak English

http://news.investors.com/blogs-capital-hill/040715-746878-ig-report-finds-some-awarded-disability-because-they-cannot-speak-english.htm#ixzz3WkfBO8Yp

Is not knowing how to speak English a disability? According to the Social Security administration, it can be.

In fact, it's even a disability in Puerto Rico, where 84% of the population doesn't speak English "very well," and where Spanish is one of the official languages.

That's the finding of an Inspector General report, which said that from 2011 to 2013... Puerto Ricans were deemed eligible for Social Security Disability Insurance benefits because they spoke only Spanish.

In one case cited by the IG, a 50-year-old dental assistant who claimed she suffered depression and back pain was approved for Social Security Disability Insurance, even though she was well enough to perform light work, because she wasn't fluent in English.
The IG's office says it couldn't get a definitive number on how many Puerto Ricans made it on disability using this excuse, because the Social Security Administration "lacked sufficient management information" to provide it.

[Crafty_Dog]

http://www.usherald.com/maine-welfare-recipients-must-work-for-their-benefits/#.VSMk815brdk.facebook

[DougMacG]

http://townhall.com/tipsheet/cortneyobrien/2015/04/12/cuomos-startup-ny-program-creates-a-whopping-76-jobs-costs-taxpayers-53-million-n1983086

Why can't we do more programs like these?

[objectivist1]

Why Are Many Former Workers Not Even Applying for Job Openings?

Patrick Tyrrell / April 20, 2015 - The Heritage Foundation - Daily Signal.

There was good news this month: private-sector job openings rose slightly in February, according to data released by the Bureau of Labor Statistics.

Openings rose to 3.8 percent of all private-sector jobs and the job openings—the highest rate since January 2001. Other data for the month showed the unemployment rate for workers age 25-54 (often called prime age workers) ticked downward to 4.6 percent from 4.8 percent.

More people who want jobs are finding them, but there is something else going on as well. The labor force participation rate for prime age workers has continued to decline. Fewer of them are working or actively looking for work than before.

How can job openings stand at 14-year highs, but the labor force participation rate for prime age people hover around levels not seen since 1984?

University of Chicago economics professor Casey Mulligan suspects he knows why. As detailed in his 2012 book, and elaborated on more recently in his blog, and in The Wall Street Journal, Congress made major changes to anti-poverty subsidies and regulations during the Great Recession. All these changes provided more benefits that phase out as recipients earn more money.

For example, the federal Lifeline Assistance Program began to give free cell phones and free monthly cell phone usage to applicants if their income was low enough. Mortgage-assistance programs cut the mortgage payments of people if they were not working, but those with jobs still paid full price. The Obamacare health subsidies fall as earnings rise, which is a tax on labor activity.

Mulligan calculates that the marginal tax rate, that is the extra taxes paid, and government subsidies foregone on an extra dollar earned working if taking a job rose from 40 percent to 48 percent within two years of the onset of the Great Recession.

As the recession began, the labor force participation rate fell along with the job openings rate. But as job openings rebounded labor force participation remained stagnant.

People who had left the labor force did not come back. As Mulligan says, “Helping people is valuable but not free. The more you help low-income people, the more low-income people you’ll have. The more you help unemployed people, the more unemployed people you’ll have.”

Mulligan tells the story of a recruiter he met who had many people turn down jobs he offered them because “accepting a job would net them less than $2 per hour, so they would rather stay home.”

If people do not work for $2 per hour, that does not mean they are lazy. It means they are reasonable.

Unfortunately the decision to avoid work to avoid losing government benefits—while often rational in the short term—has terrible long-term effects. Skills atrophy the longer someone is out of work, and government benefits carry with them no chance for promotion or advancement.

To fix this, each existing government subsidy meant to help the poor and unemployed should be examined by lawmakers to determine whether it creates incentives to work or to stay on welfare. Work requirements should be strengthened on all means-tested assistance, and the tax system should be overhauled to ensure that it doesn’t penalize work. Moving people from welfare to the workforce is a win for individuals and a win for society as a whole. It’s time for the government to stop encouraging potential workers to stay home.

[DougMacG]

Nice post Obj!  University of Chicago professor Casey Mulligan quoted in the article is a great economist to follow.  This is a good reminder to check his blog from time to time,  "supply and demand (in that order)".  http://caseymulligan.blogspot.com/  There is a lot more there.

"Mulligan calculates that the marginal tax rate, that is the extra taxes paid, and government subsidies foregone on an extra dollar earned working if taking a job rose from 40 percent to 48 percent within two years of the onset of the Great Recession."

40% marginal rate on a person needing a job is outrageous.  To know that instead of fixing that it just got 20% worse is ... unbelievable.  To know just a few of us even know or care about things like this yet keep voting for it is deplorable.  We are keeping millions and millions of people from moving forward and achieving their dreams.  Many of them are families with children. 

Some people in the low income categories face marginal tax rates of over 100%.  If they wanted to earn more and lift themselves up, they at some point would lose their food stamps, their section 8 voucher, their SSI support, their Obama free phone and now their Obamacare subsidy.

There aren't easy answers weaning able people off of support, but to continue supporting these programs without knowing or caring about the damage that they do is is the heart of what is wrong upside down economy.  It is not only capital formation and high end earners that are hit by high marginal rates taxing away their economic opportunity!

Robert Mundell called high marginal tax rates "asphyxiating" back before Reagan.  Looking at this, I would add 'criminal gross negligence' and 'crimes against humanity' to that charge.

Taking away the American Dream, piece by piece, is pretty close to treason.  Imagine if an external enemy was doing that to us.

[Crafty_Dog]

Social Insecurity: The Looming Crisis
By Jim Harrington · May 13, 2015
Print Email Bigger Smaller

For years, actuaries, financial analysts and policy wonks have warned that Social Security is doomed to crash. Contrary to rosy predictions a decade ago that this popular government program has a funded lifetime of 33 more years and won’t sink into the red until 2017, Social Security actually went red in 2010 and will go broke in 2024.

In 1983, the Social Security trustees predicted that reforms would maintain the program’s solvency through 2048. Even they’ve changed their tune, though they won’t admit it’s as moribund as it actually is.

Since its inception, Social Security has promised each succeeding generation that there will be at least a minimum of money for them at retirement. All working people are taxed at the rate of 12.4% of each paycheck, with the promise of a return. (Yes, employers pay half, but they also pay employees less as a result. It still costs “X” to employ a person; whether 6.2% is earmarked for direct Social Security payments matters not.) But that money’s gone in an insolvent system.

When Franklin Roosevelt created Social Security, the ratio of taxpayers to beneficiaries was 42:1. Today that ratio has plummeted to numbers FDRs' “Brain Trust” never contemplated — it’s now a puny 3:1, and with 80 million Baby Boomers beginning to enter the system that ratio will only get worse. Social Security’s already running a $200 billion annual deficit with 60 million recipients, so it’s difficult to understand the trustees' optimism.

Researchers Gary King of Harvard and Samir Soneji and Konstantin Kashin of Dartmouth analyzed the Social Security Administration (SSA) trustees actuarial reports and conclude the program’s insolvency is near. Their research found little or no bias in the annual reporting between 1978 and 1999, but from 2000 onward the bias presenting the program positively has been increasing steadily.

King reports that the trustees use outdated modes in the analyses, comparing them to “steering by sextant and dead reckoning” rather than using “global-positioning-systems.” They “employ research methods that are antiquated and opaque compared with the statistics and open-source data analytics powering today’s successful scientific and business enterprises.”

Steve Goss, the chief actuary of the SSA, nevertheless enjoys widespread credibility. Supporters in the public, academic and private sectors use his analyses in their own work.

Barron’s Bill Alpert explains why: Goss says SSA actuaries “leave politics at the door when they prepare” reports, and argues that “forecast errors in the past decade might have resulted from the 2008 recession.” Besides political independence, Goss values consistency in the projections and looks askance at changing assumptions or methods.

Goss cites as a cautionary tale the trustees' continuing to project long-term gains while productivity dropped during the 1980s. Then in 1995, the economy began a sharp climb. “[We] learned a lesson,” Goss said. “[M]aybe we should look at the long-term averages, not flip back and forth a lot based on very, very brief periods of recent experience.” One problem with that approach is that the U.S. is not your granddaddy’s country.

And Alpert notes another big problem for Goss: “[A] surprising number of past panelists complain that Goss has ignored their advice. A case in point is the way the actuaries predict death rates. Along with birth rates and immigration, death rates are a crucial consideration in projecting the future populations that will be paying into Social Security and drawing benefits. Since 1999, outside demographers on Social Security’s technical panels have unsuccessfully urged the actuaries to change their approach for predicting death rates. Goss' crew makes judgments about future death rates within each age group and sex from five separate causes, like heart disease, cancer, and violence — a process that obliges the actuaries to come up with 150 different parameters in a way that outside experts have never been able to plumb.”

Faulty methods distort projections for solvency.

Problems are many, solutions, few. The system has already raised the full eligibility age to 66, and soon, 67. That’s not enough. One suggestion: raise taxes (naturally). To maintain the promised benefits, former Bill Clinton adviser Bill Galston argues the payroll tax would have to rise from 12.4% to 15.9%. A middle-income family (about $50,000) would pay another $900 annually. Adding this to all other taxes they pay is unconscionable.

Republicans have promoted privatizing part of Social Security for more than 20 years. Were taxpayers allowed to invest their Social Security money in 401k’s, even a modest return would allow middle-income earners to retire on six-figure incomes. Social Security’s “return,” by comparison, is an obscene joke. It actually results in a loss due to the constant inflation of the 20th and 21st centuries.

Social Security is a Pony Express program in a smart phone world. It makes changes grudgingly and only long after they are obviously needed. And because it is the greatest Ponzi scheme of all time, some Americans will be hurt very badly. Yet this oft-repeated warning has never been heeded because government employees have their own pension system, and citizens only want what was promised to them — a retirement income. Anybody aiming to fix that, in the view of too many Americans, is merely trying to steal from them. In short, it’s an entrenched problem that will almost surely receive nothing but token Band-Aids as long as politicians can hold out.

[Crafty_Dog]

http://www.nytimes.com/2015/05/31/nyregion/three-quarter-housing-a-choice-for-recovering-addicts-or-homelessness.html?emc=edit_na_20150530&nlid=49641193&_r=0

[Crafty_Dog]

http://www.washingtontimes.com/news/2015/jul/23/congress-headed-potential-shutdown/

[Crafty_Dog]

http://scottgrannis.blogspot.com/2015/08/budget-deficit-down-to-only-22-of-gdp.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+blogspot%2FtMBeq+%28Calafia+Beach+Pundit%29