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Archive for April, 2011

The recent agreement between Obama and Boehner supposedly cuts spending by $38 billion. I’ve already explained that this number is disappointingly small and noted that the effect on spending for the current fiscal year is almost too small to measure.

But my analysis was entirely too kind. My Cato Institute colleagues have put together a clever one-minute video mocking both Obama and Boehner for using the dishonest Washington definition of a spending cut – meaning they claim spending cuts merely because they increase the budget by less than previously planned.

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By taking advantage of  “must-pass” pieces of legislation, Republicans have three chances this year to restrain the burden of government.  They didn’t do very well with the ‘CR fight” over appropriated spending for the rest of FY2011, which was their first opportunity. I was hoping for an extra-base hit off the fence, but the GOP was afraid of a government shutdown and negotiated from a position of weakness. As such, the best interpretation is that they eked out an infield single.

The next chance to impose fiscal discipline will be the debt limit. Currently, the federal government “only” has the authority to borrow $14.3 trillion (including bookkeeping entries such as the IOUs in the Social Security Trust Fund). This is a very big number, but America’s gross federal debt will hit that limit soon, perhaps May or June.

Republicans say they will not raise the debt limit unless such legislation is accompanied by meaningful fiscal reforms. The political strategists in the Obama White House understandably want to blunt any GOP effort, so they are claiming that any delay in passing a “clean debt limit” will have catastrophic consequences. Specifically, they are using Treasury Secretary Tim Geithner and Federal Reserve Bank Chairman Ben Bernanke to create fear and uncertainty in financial markets.

Just a few days ago, for instance, the Treasury Secretary was fanning the flames of a financial meltdown, as noted by Bloomberg:

“Default would cause a financial crisis potentially more severe than the crisis from which we are only now starting to recover,” Geithner said. “For these reasons, default by the United States is unthinkable.”

The Fed Chairman also tried to pour gasoline on the fire. Here’s a passage from an article in the New York Times earlier this year:

Mr. Bernanke said the debt ceiling should not be used as a negotiating tactic, warning that even the possibility of the United States not being able to pay its creditors could create panic in the debt markets.

There are two problems with these statements from Geithner and Bernanke. First, it is a bit troubling that the Treasury Secretary and Fed Chairman are major players in a political battle. The Treasury Secretary, like the Attorney General, traditionally is supposed to be one of the more serious and non-political people in a  President’s cabinet. And the Fed Chairman is supposed to be completely independent, yet Bernanke is becoming a mouthpiece for Obama’s fiscal policy.

But let’s set aside this first concern and focus on the second problem, which is whether Geithner and Bernanke are being honest. Simply stated, does a failure to raise the debt limit mean default? According to a wide range of expert opinion, the answer is no.

Donald Marron, head of the Urban-Brookings Tax Policy Center and former Director of the Congressional Budget Office, explained what actually would happen in an article for CNN Money.

Our monthly bills average about $300 billion, while revenues are about $180 billion. If we hit the debt limit, the federal government would be able to pay only 60 cents of every dollar it should be paying. But even that does not mean that we will default on the public debt. Geithner would then choose which creditors to pay promptly and which to defer. …Geithner would undoubtedly keep making payments on the public debt, rolling over the outstanding principal and paying interest. Interest payments are relatively small, averaging about $20 billion per month, and paying them on time is essential to America’s enviable position in world capital markets.

And here is the analysis of Stan Collender, one of Washington’s elder statesman on budget issues (and definitely not a small-government conservative).

There is so much misinformation and grossly misleading talk about what will happen if the federal debt ceiling isn’t increased that, before any more unnecessary bloodcurdling language is used that increases everyone’s anxiety, it’s worth taking a few steps back from the edge. …if a standoff on raising the debt ceiling lasts for a significant amount of time, the alternatives to borrowing eventually may not be enough to provide the government with the cash it needs to meet its obligations. Even at that point, however, a default wouldn’t be automatic because payments to existing bondholders could be made the priority while payments to others could be delayed for months.

The Economist magazine also is nonplussed by the demagoguery coming from Washington.

Tim Geithner, the treasury secretary, sent Congress a letter on January 6th describing in gory detail the “catastrophic economic consequences” such an event would entail. …Even with no increase in the ceiling, the Treasury can easily service its existing debt; it is free to roll over maturing issues, and tax revenue covers monthly interest payments by a large multiple. But in that case it would have to postpone paying something else: tax refunds, Medicare or Medicaid payments, civil-service salaries, or Social Security (pensions) cheques.

There are countless other experts I could cite, but you get the point. The United States does not default if the debt limit remains at $14.3 trillion. The only exception to that statement is that default is possible if the Treasury Secretary makes a deliberate (and highly political) decision to not pay bondholders. And while Geithner obviously is willing to play politics, even he would be unlikely to take this step since it is generally believed that the Treasury Secretary may be personally liable if there is a default.

The purpose of this post is not to argue that the debt limit should never be raised. That would require an instant 40 percent reduction in the size of government. And while that may be music to my ears (and some people are making that argument), I have zero faith that politicians would let that happen. Instead, my goal is to help fiscal conservatives understand that Geithner and Bernanke are being dishonest and that they should not be afraid to hold firm in their demands for real reform in exchange for a debt limit increase.

Last but not least, with all this talk about the debt limit, it’s worth reminding everyone that deficits and debt are merely symptoms of too much government spending. As this video explains, spending is the disease and debt is merely one of the symptoms.

By the way, the final chance this year to impose spending restraint will be around October 1, when the 2011 fiscal year expires and the 2012 fiscal year begins. But I won’t be holding my breath for anything worthwhile if Republicans screw up on the debt limit just like they failed to achieve much on the CR fight.

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President Obama didn’t offer a budget plan yesterday. The White House hasn’t released anything beyond a set of talking points.

But that’s not terribly surprising since his speech was really the opening salvo of his 2012 reelection fight. And it’s clear that a central theme of his campaign will be class warfare.

But if we translate his campaign-style demagoguery into the overall budget framework, we get something like this fiscal continuum. Obama, for all intents and purposes, has taken the moderately left-wing proposal crafted by his Fiscal Commission and moved it significantly in the wrong direction by adding class-warfare tax policy. As such, he is close to the left end of the line, which represents “Statism.”

The Ryan plan, by contrast, is the moderately right-wing mirror image of the Fiscal Commission. But rather than cementing in place bigger government, as proposed by Simpson and Bowles,  Ryan’s budget slowly shrinks the fiscal burden of government. As such, it is on the “Liberty” side of the continuum.

America’s Founding Fathers had the right idea, of course, They envisioned a very limited central government, and for much of our nation’s history, the federal budget consumed about 3 percent of GDP. Unfortunately, the Hoover-Roosevelt policies began the process of moving America in the wrong direction, and federal spending now consumes nearly one-fourth of America’s economic output.

But enough history. Let’s revisit Obama’s speech and the accompanying talking points. In addition to the class warfare (more on that below), we also see an explicit call to reduce the growth of Medicare spending by “strengthening the Independent Payment Advisory Board.”

In other words, Obama wants to use his control of the purse strings to give bureaucrats more ability to decide what kind of care seniors can receive. It’s politically incorrect to call this type of entity a “death panel,” so I’ll simply contrast Obama’s top-down bureaucratic approach with the Ryan plan, which is based on giving vouchers to future seniors so they can pick the health plans that best fit their needs (people over 55 would be stuck with the current system). And since this is very similar to the system used to provide health care for Members of Congress and their staff, you know it must work reasonably well.

Let’s briefly return to the tax side of the fiscal equation. I’ll have more to say about this in a separate post giving a behind-the-scenes look at what Democrats really hope to achieve in the area of tax policy, but I want to offer a basic explanation of why the soak-the-rich approach is doomed to fail. There are five reasons in this video to reject class warfare, including a very important warning that high tax rates on the rich almost always are a tactical move to facilitate higher taxes for the rest of us.

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Some people thought I was being unfair when I referred to the budget deal as a kiss-your-sister agreement.

But as more information is revealed, it looks like the GOP got the short end of the stick – largely because they were afraid of a government shutdown (even though I explained Republicans actually did very well during and following the 1995 fight with Clinton).

National Review has retracted its kind words about the deal, writing that:

There’s realism and then there’s cynicism. This deal — oversold and dependent on classic Washington budget trickery — comes too close to the latter. John Boehner has repeatedly said he’s going to reject “business as usual,” but that’s what he’s offered his caucus. It’s one thing for Tea Party Republicans to vote for a cut that falls short of what they’d get if the controlled all of Washington; it’s another thing for them, after making so much of bringing transparency and honesty to the Beltway, to vote for a deal sold partly on false pretenses.

And Philip Klein, writing for the Washington Examiner, says:

…a new Congressional Budget Office report showing that the deal that purported to slash spending by $38.5 billion for the remainder of the year, really only reduces outlays by a fraction of that amount, and only cuts this year’s deficit by a mere $352 million. If the $38.5 billion was chump change in the context of $14 trillion debt, I wouldn’t even know what to call $352 million. Bread crumbs, maybe?

The moral of the story is that Republicans need to make a fundamental decision. Are they serious about protecting taxpayers and America, or are they in the business of blowing smoke while getting a cut of the corruption in Washington? I explained yesterday that GOPers in Washington are governed by noble and base impulses. The budget deal was an example where the devil on one shoulder had more influence than the angel on the other shoulder.

 

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Responding to widespread criticism of his AWOL status on the budget fight, President Obama today unveiled a fiscal plan. It already is being criticized for its class warfare approach to tax policy, but the most disturbing feature may be a provision that punishes the American people with higher taxes if politicians overspend.

Called a “debt failsafe trigger,” Obama’s scheme would automatically raise taxes if politicians spend too much. According to the talking points distributed by the White House, the automatic tax increase would take effect “if, by 2014, the projected ratio of debt-to-GDP is not stabilized and declining toward the end of the decade.”

Let’s ponder what this means. If politicians in Washington spend too much and cause more red ink, which happens on a routine basis, Obama wants a provision that automatically would raise taxes on the American people.

In other words, they play and we pay. The last thing we need is a perverse incentive for even more reckless spending from Washington.

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Thanks to demographics and ill-conceived entitlement programs, America is on a path to becoming a bankrupt European-style welfare state. We know how to fix this problem, but whether we make the necessary reforms depends on the heart and soul of the GOP.

Are Republicans a bunch of hard-right Tea Party types, salivating at the thought of reversing the welfare state and ushering a new ear of limited government?

Or are GOPers a bunch of political hacks who have decided the cesspool of Washington is really a hot tub and merely pretend to be fiscally conservative to appease the conservative base?

The answer is yes and yes.

More specifically, almost all politicians are some combination of these two descriptions.  It’s almost like they have an angel on one shoulder and a devil on the other.

They usually have some underlying principles, and they would like to do the right thing and make America a better place.

Yet they also want to get reelected and accumulate power, and this lures them into casting votes that they know are bad for the country.

Sometimes the devil has the most influence. During the Bush years, for instance, most Republicans on Capitol Hill went along with Bush’s bad proposals, such as the no-bureaucrat-left-behind education bill, the prescription drug entitlement, the corrupt farm bills, the pork-filled transportation bills, and the TARP bailout. The lawmakers will admit, especially in private, that those were bad votes, but they “went along to get along.”

Yet every so often the angel gets control. All Republicans, including the ones who were in office and doing the wrong thing during the Bush years, presumably are going to vote for Congressman Paul Ryan’s budget later this week, which would limit the growth of federal spending and fundamentally reform Medicare and Medicaid. And they’ll cast that vote even though they’ll get demagogued in 2012.

So what decides whether the angel or devil is in charge? I may not have learned much in my 25 years in Washington, but I think a key factor is that politicians are often willing to take political risks and do the right thing if they think there’s actually a chance of implementing good policy.

In other words, there is a chance of saving America. I think Republicans can be convinced to charge the machine gun nests of big government. But we need to create the right set of circumstances – and that means persuading them that the long-run policy benefits will offset the short-run political risks.

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Maybe Obama’s not so bad on Second Amendment issues.

His Administration has contracted with the folks at Ruger to produce a special pistol in honor of the government workforce.

This new gun will be called “The Bureaucracy Special.” The only downside is that it doesn’t work and you can’t fire it.

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If you are an average American, today is a great day. According to the Tax Foundation, you have finally worked long enough and earned enough money to satisfy the annual tax demands of federal, state, and local governments.

This means you now get to keep any additional income you earn.

That’s the good news. The bad news is that Tax Freedom Day only measures the direct and immediate impact of taxation. It doesn’t measure the overall burden of government. This chart from the Tax Foundation shows that the fiscal burden of government has jumped enormously since the end of the Clinton years.

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The Department of Housing and Urban Development is trying hard to win the “Bureaucracy of the Year Award,” and they have a new motto.

But I think the bureaucrats at HUD are cheating. I’m almost sure I saw one of these signs during my last visit to the DMV, though I confess I started hallucinating after three hours.

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I’m not a big fan of the IRS, but usually I blame politicians for America’s corrupt, unfair, and punitive tax system. Sometimes, though, the tax bureaucrats run amok and earn their reputation as America’s most despised bureaucracy.

Here’s an example. Earlier this year, the Internal Revenue Service proposed a regulation that would force American banks to become deputy tax collectors for foreign governments. Specifically, they would be required to report any interest they pay to accounts held by nonresident aliens (a term used for foreigners who live abroad).

The IRS issued this proposal, even though Congress repeatedly has voted not to tax this income because of an understandable desire to attract job-creating capital to the U.S. economy. In other words, the IRS is acting like a rogue bureaucracy, seeking to overturn laws enacted through the democratic process.

But that’s just the tip of the iceberg. The IRS’s interest-reporting regulation also threatens the stability of the American banking system, makes America less attractive for foreign investors, and weakens the human rights of people who live under corrupt and tyrannical governments.

This Center for Freedom and Prosperity video outlines five specific reason why the IRS regulation is bad news and should be withdrawn.

I’m not sure what upsets me most. As a believer in honest and lawful government, it is outrageous that the IRS is abusing the regulatory process to pursue an ideological agenda that is contrary to 90 years of congressional law. But I guess we shouldn’t be surprised to see this kind of policy from the IRS with Obama in the White House. After all, this Administration already is using the EPA in a dubious scheme to impose costly global warming rules even though Congress decided not to approve Obama’s misguided legislation.

As an economist, however, I worry about the impact on the U.S. banking sector and the risks for the overall economy. Foreigners invest lots of money in the American economy, more than $10 trillion according to Commerce Department data. This money boosts our financial markets and creates untold numbers of jobs. We don’t know how much of the capital will leave if the regulation is implemented, but even the loss of a couple of hundred billion dollars would be bad news considering the weak recovery and shaky financial sector.

As a decent human being, I’m also angry that Obama’s IRS is undermining the human rights of foreigners who use the American financial system as a safe haven. Countless people protect their assets in America because of corruption, expropriation, instability, persecution, discrimination, and crime in their home countries. The only silver lining is that these people will simply move their money to safer jurisdictions, such as Panama, the Cayman Islands, Hong Kong, or Switzerland, if the regulation is implemented. That’s great news for them, but bad news for the U.S. economy.

In pushing this regulation, the IRS even disregarded rule-making procedures adopted during the Clinton Administration. But all this is explained in the video, so let’s close this post with a link to a somewhat naughty – but very appropriate – joke about the IRS.

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When I was in college and first became active in politics and public policy, I periodically would meet people who warned about sinister conspiracies that had to be exposed and overcome.

The most common villain, reviled by conspiracy theorists on the left and right, was something called the Trilateral Commission, though the Council of Foreign Relations often was mentioned in the same breath (I also remember a lefty friend warning about the Bilderbergers and Illuminati, though I never quite understood who or what they were supposed to be).

It’s been a long time since I’ve heard anybody mention any of the above groups, but this doesn’t mean conspiracy theories have faded into the sunset. There are thriving communities of people who think:

a) Obama is a Kenyan and/or Muslim (the birthers).

b) The U.S. government and/or George W. Bush were complicit in the 9-11 attacks (the truthers).

c) The Federal Reserve is a sinister cabal.

d) The Koch brothers have a secret plan to turn America into…well, I’m not sure, but they have a secret plan to do something bad.

This is probably just the tip of the iceberg, but you get the idea. The common theme in all these conspiracies is that wealthy/powerful people, in some unaccountable and hidden fashion, manipulate the levers of government to achieve some evil goal.

I suppose a quick disclaimer would be appropriate. The Koch brothers directly or indirectly provide 3 percent of the funding for the Cato Institute, so if they have a conspiracy, I’m part of it. Though I’m not sure how a conspiracy can be a conspiracy if it’s all public information.

But I digress. The main point I want to make is that it is almost always foolish to believe in conspiracies. Or, to be more specific, it’s foolish to believe in big conspiracies. We have a government that is spectacularly incompetent, filled with some of the most short-sighted and narcissistic people in the world, so why would anyone think it is realistic to believe that this bunch of buffoons could maintain a conspiracy using an organization that doesn’t even have the ability to give away money without creating giant clusterf*cks?

In a column for National Review, Jonah Goldberg made this point quite effectively in discussing the fevered speculations of the birthers and truthers.

I’m not saying there are no secret dealings in Washington. There are lots of them. But they involve run-of-the-mill corruption, with politicians doing things like providing earmarks in exchange for campaign cash. That’s the kind of scheme that works, because only a tiny handful of people are in on the deal, and they obviously have lots of reasons to keep quiet. Heck, in most cases there’s probably not even an overt conspiracy, just an implied understanding.

I think people are drawn to conspiracy theories because they assume that things happen for a reason, as part of a deliberate design. So if we have a TARP bailout, for instance, they assume that there was a deliberate effort to create chaos so the people who are part of the conspiracy can grab more money and power.

I’m willing to accept the last part of that scenario. Washington is filled with people who are willing to use any excuse to grab money and power. But I think it is silly to think that some hidden group of bigwigs orchestrated the financial crisis for that reason.

As indicated in my title, it is much more realistic to believe bad things happen because of corruption, incompetence, politics, ideology, greed, and self-interest. These ever-present characteristics of human nature help explain why politicians, bureaucrats, lobbyists, and interest groups pursued the various policies (easy money, housing subsidies, etc) that inadvertently came together in a perfect storm to destabilize the financial system.

Yes, powerful interest groups have a lot of influence on the political system. But it’s not a hidden conspiracy. Take the example of Goldman Sachs, which frequently is cited as being part of some evil plan. Their lobbyists are well known, their campaign contributions are public knowledge, and their policy positions are openly stated.

I often disagree with the actions of Goldman Sachs. But you don’t need to believe that the company’s endorsement of, say, the Dodd-Frank bailout bill is part of a conspiracy. It’s just the kind of the out-in-the-open, day-after-day, special-interest deal-making that is routine in Washington.

I like good conspiracy theories, but I like them in David Baldacci novels rather than as explanations for what happens in Washington.

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I’m not sure if this is an energy policy joke or a monetary policy joke, but it’s still worth sharing

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The next time you decide to go on a trip or vacation, consider getting a bunch of these Gas Coupons.

I didn’t realize it, but these coupons are good for one gallon of gas at most retailers.  I have seen them around, but until recently never took advantage of them, I never realized their actual worth.

You probably have one or two just lying around somewhere, now is the time to use them before they lose their value, and it’s too late!!

These coupons can be obtained at most banks and retail stores across America.


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Well, we didn’t get the shutdown, which I think could have been a key tactic to get more budget cuts, so let’s at least enjoy some one-liners about the topic from the late-night comics.

  • A lot of people wonder what a government shutdown would be like. I think a lot more people wonder what a government running properly would be like. – Jay Leno
  • The shutdown would mean that all non-essential workers would stop coming to work. I’m OK with that. Why do we even have non-essential workers? – Jimmy Kimmel
  • It looks like we’re heading for a government shutdown. And you thought Joe Biden had nothing to do before. – Jay Leno
  • The most embarrassing part is that by the weekend, our government could be shut down, but Moammar Gadhafi’s government could still be working. – Jay Leno
  • Due to the budget impasse, the federal government may shut down next week. There will be another season of “Jersey Shore,” but the U.S. government is still up in the air. – Conan
  • If Congress can’t agree on a budget by midnight Friday, the government will shut down. Democrats are demanding to tax all of the people’s money and use it to fund abortions, while the Republicans want to sell the country to Exxon Mobile and relocate gays to Puerto Rico. – Jimmy Kimmel
  • All government services may be shut down next week, which could really make the DMV inconvenient. – Jimmy Kimmel
  • It turns out the White House might have to lay off staff members if the government shuts down on Friday. It’s really bad news for non-essential workers — you know, interns, pages, Biden . . . – Jimmy Fallon

Last but not least, these aren’t shutdown jokes, but they’re worth sharing.

  • President Obama said he plans on running for re-election against the Republicans. After the tax cuts for the rich, the bailouts for Wall Street, and the bombing in Libya, I already thought he was the Republican candidate. – Jay Leno
  • President Obama announced his re-election campaign, though it’s not really a surprise. He did all the things that make it official: He filed the paperwork, redesigned his website, and printed another fake birth certificate. – Craig Ferguson
  • President Obama’s approval ratings are so low now, Kenyans are accusing him of being born in the United States. – Jay Leno

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There were reports about 10 days ago that the crowd in Washington reached a budget deal, for the remainder of the 2011 fiscal year, with $33 billion of cuts. That number was disappointingly low. I wrote at the time that if this was a kiss-your-sister deal, we didn’t have any siblings that looked like Claudia Schiffer.

I knew it was unrealistic to expect the full $61 billion, but I explained that $45 billion was a realistic target.

We now have a new agreement, which supposedly is final, and the amount of budget cuts has climbed to $38 billion. So our sister is getting prettier, but she still isn’t close to being a supermodel. Here are the highlights (or lowlights) from the New York Times story.

Congressional leaders and President Obama headed off a shutdown of the government with less than two hours to spare Friday night under a tentative budget deal that would cut $38 billion from federal spending this year. …the budget measure would not include provisions sought by Republicans to limit environmental regulations and to restrict financing for Planned Parenthood and other groups that provide abortions.

As with all deals (such as last December’s agreement extending the 2001 and 2003 tax cuts), there are good and bad provisions. The good news is:

o President Obama, before the current fiscal year began last October 1, wanted a $40 billion increase for these “discretionary” programs. Cutting $38 billion may not be a big number, but it is a step in the right direction. And it is the first time fiscal policy has moved in the right direction in at least 10 years.

o There will be no funding for additional IRS agents. This is a nice victory. Implementing Obamacare would require as many as 16,000 new tax bureaucrats to harass the American people, so at least that process will be stalled.

o A school choice program for Washington, DC, has been restored, thus reversing President Obama’s disgusting decision to kill the program and sacrifice poor black children to advance the greedy interests of the teacher unions.

Now let’s look at the less desirable parts of the agreement.

o Total spending jumped by almost $2 trillion during the Bush-Obama spending binge, so a $38 billion cut is almost too small to mention.

o Left-wing organizations such as Planned Parenthood will continue to feed at the public trough, something that should be objectionable to everyone, regardless of your views on abortion.

o Obamacare is not repealed (not that I ever thought that was possible) and there is no restriction on the EPA’s unilateral assertion that is has regulatory power to implement radical Kyoto-style global warming policies.

I will have more comments this week about what happens next. Suffice to say that this was just one battle in a long war.

The 2012 budget resolution, for instance, will be a key test of fiscal responsibility, but in this case the debate will be about $trillions rather than $billions. The debt limit vote will an opportunity for some much-needed reform of the budget process. And it is quite likely that there will be another potential shutdown fight when it is time to put together appropriations bills for the 2012 fiscal year, which starts October 1.

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I would not be a very good juror, particularly if a judge expected me to suspend my moral judgments and narrowly follow the law. And I say this even though I realize that a good legal system should be based on that principle.

I’ve cited some tough cases in previous posts, dealing with thorny topics such as brutal tax collection stories, Sharia law, healthcareincest, and vigilante justice.

Our latest you-be-the-judge story comes from Massachusetts, where a 57-year old man in a wheelchair is in legal trouble for slugging a 27-year old guy with a baseball bat because of allegations that he molested a little girl. Here are excerpts from a story in the Daily Mail.

A wheelchair-bound paraplegic grandfather could face up to 10 years in jail after using a baseball bat to hit a man he suspected of molesting his three-year-old granddaughter. Frank Hebert, 57, has been hit with a felony assault charge over the incident involving 27-year-old Joshua Hardy. …Computer salesman Mr Hebert said: ‘I’m not a hero, that’s for sure. I’d do it again tomorrow, knowing the consequence. …Mr Hebert, who was left confined to a wheelchair with only partial use of his arms after a car crash in Falmouth a decade ago, was summonsed to Edgartown District Court on March 25 and charged with assault and battery with a dangerous weapon. …Mr Hebert claims it was over Christmas that the child began asking her grandparents to protect her. He said that on February 22 his partner took her daughter and granddaughter, who were visiting, back to the mainland to talk to police, while he lured Hardy to his Mac PC Sales and Service shop in Vineyard Haven. According to the Boston Herald, Mr Hebert said ‘fear’ prompted him to bring a baseball bat and to call state police to back him up. Mr Hebert said he pointed the bat at Hardy and ordered him to stay seated until police arrived. He said he used the bat after Hardy stood up and laughed at him.

If the government insists on bringing this case to trial, how would you vote?

I almost certainly would practice jury nullification and vote “not guilty.” To be sure, I say this with some hesitation because we don’t know for sure if the guy who got slugged, Mr. Hardy, actually did molest the child. And we also don’t know whether he was seriously injured or just bruised. It might also affect my decision if I found out that Mr. Herbert hit Hardy one time or twenty times.

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Michael Gerson is upset that the GOP budget would trim some money from the foreign aid budget. In his Washington Post column, he regurgitates Obama Administration talking points, claiming that less foreign aid will kill tens of thousands of poor children in Africa.

USAID estimates that reductions proposed in the 2011 House Republican budget would prevent 3 million malaria treatments. …this means about 1.5 million people in need of treatment would not receive it. About 3 percent of untreated malaria infections progress to severe malaria — affecting 45,000 children. Of those children, 60 to 73 percent will not survive, yielding 27,000 to 30,000 deaths. …global health programs are not analogous to many other categories of federal spending, such as job training programs or support for public television. A child either receives malaria treatment or does not. The resulting risk of death is quantifiable. The outcome of returning to 2008 spending levels, as Republicans propose, is predictable. …One can be a budget cutter and still take exception to cuts at the expense of the most vulnerable people on earth. …Cuts for global health programs should be of special concern to those of us who consider ourselves pro-life. No pro-life member of Congress could support welfare savings by paying for abortions.

Gerson’s moral preening is a bit tedious. He’s a guy who presumably is part of top 2 percent of income earners in America. And I bet his family’s overall level of consumption must be in the top 1 percent worldwide. Yet he wants to take money from the rest of us, with our lower living standards, so he can feel morally superior.

Having met Gerson a couple of times, I don’t doubt his sincerity, and I’m guessing he probably gives a lot of money to charity. Moreover, I doubt he personally benefits from more spending in these areas (i.e., he’s not an overpaid bureaucrat, a consultant with a fat contract from USAID, or anything like that).

But I still have a hard time taking him seriously because he thinks the coercive power of government should be used to spend money in ways that he finds desirable – even if that means that people with much lower levels of income and wealth are picking up the tab for something that Gerson wants.

My Cato colleague, Roger Pilon, had a column in yesterday’s Wall Street Journal examining the broader issue of whether federal spending is an appropriate way of fulfilling charitable impulses. As Roger notes, it’s not charity when you make other people pay for things that you think are important.

‘What Would Jesus Cut?” So read the headline of a full-page ad published in Politico last month by Sojourners, the progressive evangelical Christian group. Urging readers to sign a petition asking Congress “to oppose any budget proposal that increases military spending while cutting domestic and international programs that benefit the poor, especially children,” it was the opening salvo of a campaign to recast the budget battle as a morality play. Not to be outdone, Catholics for Choice took to Politico on Tuesday to run “An Open Letter from Catholic State Legislators to Our Colleagues in the US Congress.” The letter condemned “policies that unfairly target the least among us,” echoing a blogger at the National Catholic Reporter who averred last month that the federal budget is, after all, “a moral document.” …The budget battle is thus replete with moral implications far more basic than Sojourners and Catholics for Choice seem to imagine. They ask, implicitly, how “we” should spend “our” money, as though we were one big family quarreling over our collective assets. We’re not. We’re a constitutional republic, populated by discrete individuals, each with our own interests. Their question socializes us and our wherewithal. The Framers’ Constitution freed us to make our own individual choices. The irony is that Jesus, properly understood, saw this clearly—both when he asked us to render unto Caesar what is Caesar’s and unto God what is God’s, and when he spoke of the Good Samaritan. The ads’ signers imagine that the Good Samaritan parable instructs us to attend to the afflicted through the coercive government programs of the modern welfare state. It does not. The Good Samaritan is virtuous not because he helps the fallen through the force of law but because he does so voluntarily, which he can do only if he has the right to freely choose the good, or not. Americans are a generous people. They will help the less fortunate if left free to do so. What they resent is being forced to do good—and in ways that are not only inefficient but impose massive debts upon their children. That’s not the way free people help the young and less fortunate.

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Just days after the introduction of a very good plan by the Chairman of the House Budget Committee, leaders from the Republican Study Committee in the House of Representatives have introduced an even better plan.

In a previous post, I compared spending levels from the Obama budget and the Ryan budget and showed that the burden of federal spending would rise much faster if the White House plan was adopted.

If the goal is to restrain government, the RSC blueprint is the best of all worlds. As the chart illustrates, government only grows by an average of 1.7 percent annually with that plan, compared to an average of 2.8 percent growth under Ryan’s good budget and 4.7 percent average growth with Obama’s head-in-the-sand proposal.

According to the numbers released by the Republican Study Committee, the burden of federal spending would fall to about 18 percent of GDP after 10 years if the RSC plan is implemented.

While that’s a great improvement compared to today, the federal government would still consume as much of the economy as it did when Bill Clinton left office.

Last but not least, for those who are focused on fiscal balance rather than the size of government, this is the only plan that produces a balanced budget. Indeed, red ink disappears in just eight years.

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I’ve been writing too much about the Ryan budget, the government shutdown, and other fiscal policy issues. Time for some wholesome politician bashing.

But I’m not going to pick on the U.S. Congress, which is one of my favorite targets. Instead, we’re going to cross the ocean and mock the political elite of the European Parliament (a.k.a., the Potemkin-Village legislature). These lawmakers don’t really have any real responsibility. They largely exist to give faux democratic legitimacy to the decisions of the European Commission.

But they have figured out how to butter their own bread. They are provided lavish pay and benefits in exchange for very little work. And they get all sorts of perks that might cause even American politicians to blush with embarrassment.

For example, they automatically get to travel in business class, courtesy of the long-suffering taxpayers of Europe. And when somebody has the gall to suggest that this is a waste of money, the politicians link arms and defend their privileged status.

Here are some excerpts from a report in the EU Observer.

MEPs have said parliament’s budget should be increased by 2.3 percent next year, at the same time rejecting a proposal for euro-deputies to take more economy class flights in future. …In adopting the report on Wednesday, MEPs also rejected an amendment to save money by ensuring flights under four hours were carried out on economy class, citing procedural reasons. At present, MEP travel is reimbursed to the level of a business class flight or a first class rail ticket. The rejected amendment would have saved between €15 to €20 million a year… A parliamentary source defended the decision. “Most MEPs agree that economy-flex tickets are okay, but they think the budget procedure is not the way to do this,” the official said on condition of anonymity.

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I’ll see some of you at this important discussion about the economic impact of government spending, but I want to remind folks that they can watch online.

If you want to watch online (or if you want to make a last-minute decision to attend), just click this link for more info.

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Washington is filled with groups that piously express their devotion to balanced budgets and fiscal responsibility, so it is rather revealing that some of these groups have less-than-friendly responses to Congressman Ryan’s budget plan.

The Committee for a Responsible Federal Budget, for instance, portrays itself as a bunch of deficit hawks. So you would think they would be doing cartwheels to celebrate a lawmaker who makes a real proposal that would control red ink. Yet Maya MacGuineas, president of the CRFB, basically rejects Ryan’s plan because it fails to increase the tax burden.

…while the proposal deserves praise for being bold, the national discussion has moved beyond just finding a plan with sufficient savings to finding one that can generate enough support to move forward. All parts of the budget, including defense and revenues, will have to be part of a budget deal… Now that both the White House and House Republicans have made their opening bids, this continues to reinforce our belief that a comprehensive plan to fix the budget like the one the Fiscal Commission recommended has the best hope of moving forward.

I’m mystified by Maya’s reference to an “opening bid” by the White House. What on earth is she talking about? Obama punted in his budget and didn’t even endorse the findings of his own Fiscal Commission. But I digress.

Another example of a group called Third Way, which purports to favor “moderate policy and political ideas” and “private-sector economic growth.” Sounds like they should be cheerleaders for Congressman Ryan’s plan, but they are even more overtly hostile to his proposal to reduce the burden of government.

House Budget Chairman Paul Ryan’s budget is a deep disappointment. There is a serious framework on the table for a bipartisan deal on our long term budget crisis. It’s the Bowles-Simpson blueprint, now being turned into legislation by the Gang of Six. It puts everything on the table – a specific plan to save Social Security, significant defense cuts, large reductions in tax expenditures and reforms to make Medicare and Medicaid more efficient, not eliminate them.

That sounds hard left, not third way. But it’s not unusual. Many of the self-proclaimed deficit hawks on Capitol Hill also have been either silent or critical of Ryan’s plan.

Which leaves me to conclude that what they really want are tax increases, and they simply use rhetoric about debt and deficits to push their real agenda.

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I’ve written several times about the major fight in Wisconsin to control excessive compensation for government bureaucrats. Governor Walker basically won the first battle in that important and necessary campaign, but Yogi Berra sagely explained that “the opera ain’t over ’til the fat lady sings.”

In this case, the proverbial fat lady is yesterday’s election for Wisconsin’s Supreme Court. Leftists control three of the seven seats on the Court and were hoping to use the fight over bureaucrat compensation as a trigger to pick up a critical fourth vote. Here’s how today’s Milwaukee Journal describes what was at stake.

Interest groups on both sides had portrayed the election as a referendum on Gov. Scott Walker’s agenda and particularly on the collective bargaining law. Conservatives backed Prosser, and liberals supported Kloppenburg, even though the candidates themselves insisted they were politically neutral.

The election is critical, not just in terms of whether the Wisconsin reforms could be blocked by an ideologically motivated state Supreme Court, but also because the election has been closely watched by political activists in other states.

Simply stated, the winning side will gain lots of momentum. Unions poured lots of money and muscle into the race. They want to send a signal to lawmakers around the nation that any effort to control compensation costs will result in a political backlash.

At this stage, you’re probably saying, “enough blather, Dan, tell us who won!” Unfortunately, I can’t answer that question. Here’s the screen capture of the latest results from the Milwaukee newspaper. As of this moment, the union-backed candidate is trailing by a very tiny margin.

We’ll find out later today (hopefully!) who won the race, but I feel much better than I did last night. When I went to sleep, Kloppenburg had a lead of 18,000 votes and it appeared things were trending in her direction.

P.S. This election comes very close to debunking my cranky post from last year saying that voting was theoretically a waste of time since no single vote would ever decide an election.

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Forget all this talk about giant “spending cuts” of $6.2 trillion in Congressman Ryan’s budget plan. That’s music to my ears, but it’s also based on Washington’s bizarre budget math – i.e., the screwy system where politicians can increase spending but say they’re cutting spending because the budget could have grown even faster.

What really matters is how much money government is spending this year compared to how much money will be spent in subsequent years. Using this common-sense benchmark, let’s look at two competing proposals.

According to the new numbers released today, Congressman Ryan’s budget plan will result in government growing, on average, by almost 2.8 percent annually over the next 10 years.

President Obama’s budget plan, by contrast, would increase the burden of government spending by an average of nearly 4.7 percent each year.

This chart compares the two budget plans. Because Chairman Ryan does not let spending grow as rapidly, cumulative spending over that period will be $6.2 billion less than it would be based on the President’s plan. That’s an impressive amount of money that taxpayers will save if Ryan is successful, but it’s not a spending cut.

Not surprisingly, the big spenders in Washington are claiming that the “spending cuts” in Representative Ryan’s budget are “harsh” and “extreme.” But Ryan’s proposal would allow the budget to grow faster than inflation, which is projected to average less than 2.1 percent annually over the 10-year period.

Good fiscal policy is very simple. Restrain the size and scope of government so that outlays grow slower than the private sector. If that happens, the burden of federal spending will shrink as a share of economic output

That’s exactly what happens with Ryan’s plan. By 2018, the federal budget will drop to less than 20 percent of GDP. That still doesn’t bring us back to where we were at the end of the fiscally responsible Clinton years, when federal spending consumed only 18.2 percent of GDP. But after a 10-year spending binge under Bush and Obama, Congressman Ryan’s plan would move America back toward fiscal responsibility.

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The left already is wailing about the Medicare and Medicaid reforms in Congressman Paul Ryan’s budget. They don’t have any solutions of their own for these bankrupt programs, but they hope to scare voters in the short run and don’t seem to care about the nation in the long run.

But, as Margaret Thatcher famously warned, the problem with socialism is that sooner or later you run out of other people’s money. With that in mind, it’s quite appropriate to cite a story about another needless death resulting from the inefficient U.K. government-run health care system.

But what makes this story so remarkable is that the person who died was part of the upper-level bureaucracy. When folks relatively high in the pecking order start suffering from needless death and wind up having their surgeries delayed four times, you know it’s just a matter of time before the system collapses.

A former NHS director died after waiting for nine months for an operation – at her own hospital. Margaret Hutchon, a former mayor, had been waiting since last June for a follow-up stomach operation at Broomfield Hospital in Chelmsford, Essex. But her appointments to go under the knife were cancelled four times and she barely regained consciousness after finally having surgery. Her devastated husband, Jim, is now demanding answers from Mid Essex Hospital Services NHS Trust – the organisation where his wife had served as a non-executive member of the board of directors.

Keep in mind that this is America’s future if we don’t reform entitlements. That’s what the leftist critics of Ryan’s plan aren’t telling you.

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The Chairman of the House Budget Committee, Congressman Paul Ryan of Wisconsin, will be unveiling his FY2012 budget tomorrow. Not all the details are public information, but what we do know is very encouraging.

Ryan’s plan is a broad reform package, including limits on so-called discretionary spending, limits on excessive pay for federal bureaucrats, and steep reductions in corporate welfare.

But the two most exciting parts are entitlement reform and tax reform. Ryan’s proposals would simultaneously address the long-run threat of bloated government and put in place tax policies that will boost growth and improve competitiveness.

1. The long-run fiscal threat to America is entitlement spending. Ryan’s plan will address this crisis by block-granting Medicaid to the states (repeating the success of the welfare reform legislation of the 1990s) and transforming Medicare for future retirees into a “premium-support” plan (similar to what was proposed as part of the bipartisan Domenici-Rivlin Debt Reduction Task Force).

2. America’s tax system is a complicated disgrace that manages to both undermine growth and promote corruption. The answer is a simple and fair flat tax, and Ryan’s plan will take an important step in that direction with lower tax rates, less double taxation of saving and investment, and fewer distorting loopholes.

One potential criticism is that the plan reportedly will not balance the budget within 10 years, at least based on the antiquated and inaccurate scoring systems used by the Congressional Budget Office and Joint Committee on Taxation. While I would prefer more spending reductions, I’m not overly fixated on getting to balance with 10 years.

What matters most is “bending the cost curve” of government. Obama’s budget leaves government on auto-pilot and leaves America on a path to becoming a decrepit European-style welfare state. Ryan’s budget, by contrast, would shrink the burden of federal spending relative to the productive sector of the economy.

Along with other Cato colleagues, I’ll have more analysis of the plan when it is officially released.

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This Thursday, April 7, Senator Corker of Tennessee will be the opening speaker at the Cato Institute’s conference on “The Economic Impact of Government Spending” (an event that is free and open to the public, so register here if you want to attend).

The Senator will be discussing his proposal to cap and then gradually reduce the burden of government spending, measured as a share of gross domestic product. With federal outlays currently consuming about 25 percent of economic output, excessive federal spending is America’s main fiscal problem.

Corker’s proposal would put federal spending on a 10-year glide path so that it eventually shrinks to 20.6 percent of GDP. This chart, from the Senator’s upcoming presentation, shows that government will grow at a much slower pace as a result of this restraint. Indeed, total savings over the 10-year period, measured against a baseline that assumes the federal government is left on auto-pilot, would exceed $5 trillion.

There are two things to admire about Senator Corker’s CAP plan.

First, he correctly understands that the problem is the size of government. As explained in this video, spending is the problem and deficits are a symptom of that problem.

Unfortunately, many policy makers focus on the budget deficit, which often makes them susceptible to misguided policies such as higher taxes. At best, such an approach merely substitutes one bad way of financing federal spending with another bad way of financing federal spending. And it’s much more likely that higher taxes will simply lead to more spending, thus exacerbating the real problem.

Second, Corker’s legislation has a real enforcement mechanism. If Congress fails to produce a budget that meets the annual spending cap, there is a “sequester” provision that automatically takes a slice out of almost every federal program.

Modeled after a similar provision in the successful Gramm-Rudman-Hollings law of the 1980s, this sequester puts real teeth in the CAP Act and ensures that the burden of government spending actually would be reduced.

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On April 7, the Cato Institute will be hosting an important conference on the economic implications of big government.

We have a great line-up of speakers, including economists who will look at the evidence and lawmakers who will discuss different ways of restraining the growth of the public sector.

This post is largely for readers in the DC area, but anybody who is sufficiently concerned about America’s fiscal future is welcome to attend – even if it requires a special trip to Washington.

Register at this link, which also has information for those that can’t attend but would like to watch online.

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A new study from the Adam Smith Institute in the United Kingdom provides overwhelming evidence that class-warfare tax policy is grossly misguided and self-destructive. The authors examine the likely impact of the 10-percentage point increase in the top income tax rate, which was imposed as an election-year stunt by former  Gordon Brown and then kept in place by his feckless successor, David Cameron.

They find that boosting the top tax rate to 50 percent will slow economic performance. And because of both macroeconomic and microeconomic responses, tax revenues over the next 10 years are likely to drop by the equivalent of more than $550 billion. Here’s a key paragraph from the executive summary of the new study.

The country is suffering from a 50%-­plus marginal tax rate which even its architect admits was imposed without economic purpose. Now our analysis shows that the policy is set for failure: at best leading to flat growth for a decade and £350bn of lost revenue. The Chancellor should seize the occasion of the 2011 budget to reverse this disaster promptly, for the benefit of public revenues, economic growth, the government’s standing with domestic wealth-creators, and the UK’s reputation with world business.

The authors urge Prime Minister Cameron to reverse this disastrous policy, but the odds of that happening are very slight. I hope I’m wrong, but I have repeatedly noted on this blog that Cameron almost always makes the wrong choice when deciding between liberty and statism.

President Obama wants to impose similar policies in the United States and there is every reason to expect similarly poor results. I’ve already posted evidence from IRS data showing that the rich paid much more tax following the Reagan tax cuts, so it shouldn’t shock anybody when the reverse happens if Obama is successful in moving America back toward a 1970s-style tax system.

To emphasize these critical points, let’s close with two videos. This first video explains the Laffer Curve and why politicians are foolish if they assume that there is a fixed linear relationship between tax rates and tax revenue.

This second video debunks the notion of class-warfare tax policy.

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My post earlier today nailed Obama for imposing new regulations that will require us to spend more for new cars while exempting himself from abiding by the same rules.

Sticking with that general theme, there’s a great cartoon from The Corner at NRO.

Switching to the budget fight, I’ve written about the overwrought rhetoric from politicians and their big-government allies, who want us to believe that tiny spending cuts would ravage the federal budget (we should be so lucky). This second cartoon from NRO is a good description of the faux-panic being spread by special interest groups trying to protect their spots at the federal trough.

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I don’t like it when politicians pass laws that undermine the freedom and prosperity of the American people. But I really hate it when politicians pass those laws and exempt themselves.

Years ago, as a lowly Senate staffer, I recall watching a debate about whether politicians were going to increase fuel economy regulations and thus force people into cars that were smaller, less convenient, and less safe. One good Senator, I think perhaps Don Nickles of Oklahoma, offered an amendment that basically would have forced bigwigs on Capitol Hill to live by the same rules by requiring limousines for congressional leaders to meet the same onerous restrictions. Needless to say, the arrogant political class thought this was absurd and to this day they get driven in luxury gas guzzlers (paid for by you and me).

We now have another version of this laws-for-thee-but-not-for-me mentality from the Obama Administration. No, I’m not talking about Tim Geithner, the Treasury Secretary who is in charge of the Internal Revenue Service but got a free pass after illegally hiding $80,000 of income from the IRS. I’m talking about the President and his personal fleet of limousines.

He wants us to abide by rules that will be expensive and lower the quality of cars, but those rules won’t apply to him. Here’s what the Detroit News reported.

The U.S. Secret Service said today that some federal vehicles for law enforcement and security purposes will be exempt from President Barack Obama’s directive that all federal vehicles purchased starting 2015 be advanced technology models. Secret Service spokesman Robert Novy said the directive wouldn’t apply to vehicles used for some law enforcement or security reasons by various federal agencies. …That would include the GM-built Cadillac presidential limousine and other vehicles in the motorcade. It also expected to include many law enforcement vehicles.

Not surprisingly, this is completely contrary to what the President said he would do, as noted elsewhere in the article. Unless, of course, you think “100 percent” means something other than “100 percent.”

Obama announced the plan this week to “green” the federal fleet. “I’m directing our departments and our agencies to make sure 100 percent of the vehicles they buy are fuel-efficient or clean energy cars and trucks by 2015.Not 50 percent, not 75 percent — 100 percent of our vehicles,” Obama said today at an appearance in Landover, Md., at UPS facility to urge private companies to green their vehicle fleets.

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Eli Lehrer of the Heartland Institute has an article in the Weekly Standard claiming that underfunded pension plans are not the problem with state budgets. This paragraph is a good summary of his article.

In the end, many states facing very large current budget gaps—New York, Florida, Texas, and Wisconsin among them—have pension systems that are likely capable of paying their obligations indefinitely with only minimal tweaks. Even in California, where absurdly generous public employee pensions have attracted enormous media attention, both of the major pension funds have shortages of around 10 percent that the state could cover pretty easily with some combination of economic growth, tax hikes, and service cuts, if its other fiscal problems were not so severe.

I’m a fan of some of Eli’s work, particularly his efforts to bar discriminatory taxes on foreign reinsurance companies (here’s my similar take on the issue). On the other hand, I’m distressed that Eli recently endorsed higher taxes.

Writing for National Review, Veronique de Rugy of Mercatus took issue with Eli’s article. Eli responded here, which then led to comments from Yuval Levin and Nicole Gelinas.

I think Veronique wins the debate. Eli’s case is only plausible if you accept his very narrow definition that “the problem” is short-term state budget deficits.

But I think the discussion is too narrow for two reasons (though both reasons are connected to the fact that government workers are overpaid relatively to people in the productive sector of the economy).

1. The generous pay and benefits for government workers diverts labor from more productive uses. The undermines growth.

2. The generous pay and benefits for government workers is unfair to the (generally less well off) private sector workers who foot the bill.

In other words, even if Eli was right (and I don’t think he is), there are powerful arguments for scaling back the overall compensation of government employees.

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