While We Wait for Details about “The Deal,” Here’s Some Debt Limit Entertainment

Two of my rules for fiscal policy are:

1) The details of any budget agreement will be to the left of what is first announced, and,

2) The “spending cuts” in any budget agreement will evaporate within two years.

With this in mind, I’m not expecting to be overjoyed when we get the details of the supposed agreement.

So let’s pass the time with some debt-ceiling entertainment (who knew such a genre even existed?).

We’ll start with one of the entries in Powerline’s debt contest. This video didn’t win a prize, but I urge you to share this post widely because the creator highlighted excessive spending and redistribution, thus putting the focus on the real problem of too much government rather than just looking at the symptom of too much red ink.

And the video also is entertaining.

And for downright cleverness, let’s look at the horrible things that happen, if Iowahawk’s predictions are accurate, if the government shuts down.

Beltway policy experts begin living by own wits; after 45 minutes there are no survivors.

Roving bands of outlaws stalk our streets, selling incandescent bulbs to vulnerable children.

Unregulated mohair prices at the whim of unscrupulous mohair speculators.

NPR news segments no longer buffered by soothing zither interludes.

Breadlines teeming with jobless Outreach Coordinators, Diversity Liaisons, and Sustainability Facilitators.

Cowboy poetry utterly lacking in metre.

General Motors unfairly forced to build cars that people want, for a profit.

Chaos reigns at Goldman Sachs, who no longer knows who to bribe with political donations.

Mankind’s dream of high speed government rail service between Chicago and Iowa City tragically dies.

Sesame Street descends into Mad Maxian anarchy; Oscar the Grouch fashions shivs out the letter J and the number 4

No longer protected by government warning labels, massive wave of amputations from people sticking limbs into lawn mowers

New York devolves into a dystopian hellscape of sugared cola moonshiners, salty snackhouses and tobacco dens.

At-risk Mexican drug lords forced to buy own machine guns.

Chevy Volt rebate checks bounce, stranded owners more than 50 miles from outlet.

WH communications office reduced to sending talking points to Media Matters via smoke signals and log drums.

Potential 5-year old terrorists head to boarding gates ungroped.

Defenseless mortgage holders forced to live in houses they can actually afford.

Without college loan program, America loses an entire generation of Marxist Dance Theorists.

Embarrassing state dinners, as Obamas are forced to downgrade from Wagyu to Kobe beef.

President Obama places tarp over Washington Monument to conceal from Chinese repo men.

With the Dept of Ed shuttered, national school quality plummets to 1960s levels.

Anthony Weiner is forced to pay for own sex addiction therapy.

Displaced teenaged policy wonks organize under Supreme Warlord Ezra Klein.

Nation’s freeway exits croweded with desperate bureaucrats waving ‘will regulate for food’ signs.

State Department diplomacy becomes 38% less diplomatic.

WH holds rummage sale Rose Garden; all HOPE merchandise, styrofoam Greek columns 95% off.

Iowahawk, by the way, is the creator of the funniest public policy video ever produced. You will watch it more than one time.

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Is Pentagon Waste Even More Egregious than Welfare-State Waste?

I realize that national defense is one of the few legitimate functions of the federal government, but that doesn’t mean the Pentagon budget isn’t riddled with waste, fraud, and abuse.

Here’s a jaw-dropping example reported by Bloomberg.

A U.S. contractor in Iraq overbilled the Pentagon by at least $4.4 million for spare parts and equipment, including $900 for an electronic control switch valued at $7.05, according to a new audit. Based on the questionable costs identified in a $300 million contract with Dubai-based Anham LLC, the U.S. should review all its contracts with the company in Iraq and Afghanistan, which total about $3.9 billion, said Special Inspector General for Iraq Reconstruction Stuart Bowen. “The audit found weak oversight in multiple areas that left the government vulnerable to improper overcharges,” Bowen wrote in the forward to his 30th quarterly report, released today. The contract in question was funded with a combination of money earmarked for Iraqi Security Forces and Army operations and maintenance funds. Among the “egregious examples of overbilling” by Anham were $4,500 for a circuit breaker valued at $183.30, $3,000 for a $94.47 circuit breaker and $80 for a small segment of drain pipe valued at $1.41.

Those mark-ups are absurd, but I wonder whether this example from the story is even worse.

In other cases, Anham used subcontractors to purchase items that could have been bought directly from the manufacturer at lower prices, the report said. When Anham was asked to buy a loudspeaker system to alert warehouse employees of any danger, it chose not to buy the system directly from the manufacturer at the retail price of $44,615, the report said. Instead, Anham sought bids from subcontractors and paid a company called Knowlogy $90,908. That price included $20,000 for installation, even though the system setup meant little more than wheeling it into place and plugging it in.

I think I made a mistake becoming a policy wonk. I could have a great career as a loudspeaker installer.

On a more serious note, it would be nice if governments didn’t squander so much money. Maybe things wouldn’t be so bad if some people went to jail for these rip-offs of taxpayer money.

And let’s not forget that the bigger issue is whether the national security of the United States is advanced or undermined by nation building in the Middle East. Or remaining in alliances such as NATO that lost their raison d’être when the Warsaw Pact disappeared 20 years ago.

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Just in Case You Need One More Reason Why the Department of Housing and Urban Development Should Be Abolished…

Welcome Instapundit readers. If you want to get even more upset, here’s a big list of posts about waste, fraud, and abuse, including one about Social Security bureaucrats enjoying a $700,000 junket and another about a lawyer getting $25,000 of “stimulus” money for writing a two-sentence memo.

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While I’ve been somewhat critical of Senator Coburn’s willingness to raise taxes, I’ve never doubted that he is a sincere and tireless fighter for smaller government.

Indeed, his staff periodically share examples of government waste that boggle the mind, though I don’t share many of them on the blog since I’m afraid people will become desensitized to the sleazy boondoggles that are so beloved by lawmakers.

However, the last email from Senator Coburn’s office included a story that shows, in a rather remarkable fashion, how a bloated federal government has a corrupting impact on the rest of society.

According to a Wisconsin newspaper, a local governments is trying to “sell” federal funds, sort of like how I used to scalp football tickets as a student.

River Hills, Milwaukee County’s richest suburb, has found little use for what has become an annual allocation of about $20,000 in federal community development block grant money. So village leaders instead have cut deals with other suburbs to lend or transfer the grant money and have even sought unsuccessfully to sell the River Hills block grant allocation to another community. …Assistant Corporation Counsel John Jorgensen said selling the HUD allocation wouldn’t break any rules or laws, as long as the grant money is used for allowable projects. In a memo to county supervisors, Jorgensen said his opinion matched advice he’d gotten from local HUD officials. But Sullivan said the Milwaukee field office had questioned the practice in the past. Officials from the Milwaukee office of the Department of Housing and Urban Development declined to comment.

The Department of Housing and Urban Development has always been near the top of my list of government entities that should be shut down. This latest scam is merely the cherry on the ice-cream sundae of the argument to eliminate HUD as soon as possible.

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Basic Economics for Financial Journalists and Other Dummies

While driving home last night, I had the miserable experience of listening to a financial journalist being interviewed about the anemic growth numbers that were just released.

I wasn’t unhappy because the interview was biased to the left. From what I could tell, both the host and the guest were straight shooters. Indeed, they spent some time speculating that the economy’s weak performance was bad news for Obama.

What irked me was the implicit Keynesian thinking in the interview. Both of them kept talking about how the economy would have been weaker in the absence of government spending, and they fretted that “austerity” in Washington could further slow the economy in the future.

This was especially frustrating for me since I’ve spent years trying to get people to understand that money doesn’t disappear if it’s not spent by government. I repeatedly explain that less government means more money left in the private sector, where it is more likely to create jobs and generate wealth.

In recent years, though, I’ve begun to realize that many people are accidentally sympathetic to the Keynesian government-spending-is-stimulus approach. They mistakenly think the theory makes sense because they look at GDP, which measures how national income is spent. They’d be much less prone to shoddy analysis if they instead focused on how national income is earned.

This should be at least somewhat intuitive, because we all understand that economic growth occurs when there is an increase in things that make up national income, such as wages, small business income, and corporate profits.

But as I listened to the interview, I began to wonder whether more people would understand if I used the example of a household.

Let’s illustrate by imagining a middle-class household with $50,000 of expenses and $50,000 of income. I’m just making up numbers, so I’m not pretending this is an “average” household, but that doesn’t matter for this analysis anyway.

Expenses                                                        Income                                  

Mortgage           $15,000                        Wages                $40,000

Utilities               $10,000                        Bank Interest       $1,000

Food                     $5,000                        Rental Income      $8,000

Taxes                  $10,000                        Dividends             $1,000

Clothing               $2,000

Health Care         $3,000

Other                   $5,000

The analogy isn’t perfect, of course, but think of this household as being the economy. In this simplified example, the household’s expenses are akin to the way the government measures GDP. It shows how income is allocated. But instead of measuring how much national income goes to categories such as consumption, investment, and government spending, we’re showing how much household income goes to things like housing, food, and utilities.

The income side of the household, as you might expect, is like the government’s national income calculations. But instead of looking at broad measures of things such wages, small business income, and corporate profits, we’re narrowing our focus to one household’s income.

Now let’s modify this example to understand why Keynesian economics doesn’t make sense. Assume that expenses suddenly jumped for our household by $5,000.

Maybe the family has moved to a bigger house. Maybe they’ve decided to eat steak every night. But since I’m a cranky libertarian, let’s assume Obama has imposed a European-style 20 percent VAT and the tax burden has increased.

Faced with this higher expense, the household – especially in the long run – will have to reduce other spending. Let’s assume that the income side has stayed the same but that household expenses now look like this.

Expenses                                                       

Mortgage           $15,000

Utilities                 $9,000        (down by $1,000)

Food                     $4,000        (down by $1,000)

Taxes                  $15,000        (up by $5,000)

Clothing               $2,000

Health Care         $3,000

Other                   $2,000        (down by $3,000)

Now let’s return to where we started and imagine how a financial journalist, applying the same approach used for GDP analysis,  would cover a news report about this household’s budget.

This journalist would tell us that the household’s total spending stayed steady thanks to a big increase in tax payments, which compensated for falling demand for utilities, food, and other spending.

From a household perspective, we instinctively recoil from this kind of sloppy analysis. Indeed, we probably are thinking, “WTF, spending for other categories – things that actually make my life better – are down because the tax burden increased!!!”

But this is exactly how we should be reacting when financial journalists (and other dummies) tell us that government outlays are helping to prop up total spending in the economy.

The moral of the story is that government is capable of redistributing how national income is spent, but it isn’t a vehicle for increasing national income. Indeed, the academic evidence clearly shows the opposite to be true.

Let’s conclude by briefly explaining how journalists and others should be looking at economic numbers. And the household analogy, once again, will be quite helpful.

It’s presumably obvious that higher income is the best thing for our hypothetical family. A new job, a raise, better investments, an increase in rental income. Any or all of these developments would be welcome because they mean higher living standards and a better life. In other words, more household spending is a natural consequence of more income.

Similarly, the best thing for the economy is more national income. More wages, higher profits, increased small business income. Any or all of these developments would be welcome because we would have more money to spend as we see fit to enjoy a better life. This higher spending would then show up in the data as higher GDP, but the key things to understand is that the increase in GDP is a natural result of more national income.

Simply stated, national income is the horse and GDP is the cart. This video elaborates on this topic, and watching it may be more enjoyable that reading my analysis.

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Atlas Shrugged Comes to Detroit

In a perverse way, I’m glad that there are places such as Greece and Illinois. These profligate jurisdictions are useful examples of the dangers of bloated government and reckless statism.

There also are some cities that serve as reverse role models. Detroit is a miserable case study of big government run amok, so I enjoyed a moment or two of guilty pleasure as I read this CNBC story about the ongoing decay of the Motor City. Here are some excerpts.

Detroit neighborhoods with more people and a better chance of survival will receive different levels of city services than more blighted areas under a plan unveiled Wednesday that some residents fear may pit them against each other for scarce resources. …the boundaries of the 139-square-mile city aren’t receding. The plan also backs away from forcing the redistribution of what’s left of the population into areas where people still live and where the houses aren’t on the verge of caving in. …Detroit’s population of about 713,000 is down about 200,000 from 10 years ago, according to U.S. Census figures, and has fallen more than 1 million since 1950. Some areas have fewer occupied homes than vacant ones. …A 2010 survey found Detroit had 33,000 vacant houses and scores of empty, weed-filled and trash-cluttered lots.

How predictable, I thought. This is what happens when vote-hungry politicians adopt policies that reward people for riding in the wagon and punish the folks who are pulling the wagon.

But there was also something about this story that rang a bell. It took a few minutes, since I’m getting old and decrepit, but then I realized that “blighted areas” was an eerily familiar term. Didn’t Ayn Rand use that term in one of her books?

Indeed, she did. Thanks to the miracle of Google Books, here is one of several passages in Atlas Shrugged that mentions Detroit…oops, I mean “blighted areas.”

No railroad was mentioned by name in the speeches that preceded the voting. The speeches dealt only with the public welfare. It was said that while the public welfare was threatened by shortages of transportation, railroads were destroying each other through vicious competition, on “the brutal policy of dog-eat-dog.” While there existed blighted areas where rail service had been discontinued, there existed at the same time large regions where two or more railroads were competing for a traffic barely sufficient for one. It was said that there were great opportunities for younger railroads in the blighted areas. While it was true that such areas offered little economic incentive at present, a public-spirited railroad, it was said, would undertake to provide transportation for the struggling inhabitants, since the prime purpose of a railroad was public service, not profit.

Heck, this isn’t the first time real-world events seem to have come straight from the pages of Rand’s book. I wrote last month about the creepy similarity of the waiver process for Obamacare and the bond de-freezers in Atlas Shrugged.

Many people say that Rand’s books are not very good literature, despite the amazing sales figures. Others say her philosophy is flawed, despite the profound influence of her writings.

I’m not competent to comment on those debates, but I can say that Atlas Shrugged does an amazing job of capturing the statist mindset and it tells a compelling story of how excessive government is self-destructive.

Fifty years ago, the book was viewed as a dystopian fantasy. Today, Greece, Illinois, and Detroit are making Ayn Rand seem like a prophet.

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Needless Budget Drama in Congress, Time Machines, and some Debt Limit Humor

In the spirit of the budget battle, readers have to eat their peas (i.e., endure my analysis) before getting to the dessert menu of jokes from the late-night comics.

The big news today is that Speaker Boehner had to cancel a vote on his “Budget Control Act” last night. But other than the political-drama angle, I’m not sure why this is newsworthy.  Senate Democrats were united against the plan, with all 53 members signing a letter of opposition.

In other words, this was just a symbolic vote.

But I must admit that I’m puzzled why the GOP leadership decided to even bother going down this path. Republicans were beginning to make progress with the theme of “We’ve passed two proposals, where’s Reid’s plan or Obama’s plan?”

So why did they let the Democrats off the hook by launching an intra-party fight over a proposal that Senate Dems already have rejected? Beats the heck out of me.

In my conversations with folks on the Hill, I’ve suggested that GOPers should do three things.

1. Explain that they’ve passed a debt limit increase as part of cut, cap, and balance.

2. Explain that they look forward to hammering out a compromise deal in a conference committee as soon as the Senate approves its version of a debt limit increase.

3. Express disappointment that the Senate has failed to act, especially with time running out, and also reiterate that the White House has never put forward a plan.

These three steps won’t lead to anything wonderful. I’ve always been realistic about the GOP not having the power at this point to win a policy victory. But this approach sounds – and is – very reasonable and might help pressure the left into a reasonable deal.

Last but not least, I’m also curious about how the anemic growth numbers released today – flat in the first quarter and only 1.3 percent growth in the second quarter – will impact the debate. Given the low quality of debate in DC, I won’t be surprised if some hacks argue that the GOP’s failure to fully surrender on the debt limit issue somehow is responsible for how the economy performed in the first half of the year. Maybe time machines.

The only thing I can say for sure is that there is no risk of default, which is what I told the Canadian Broadcasting Company.

Now, for a bit of levity, here are a few jokes from the talk shows. I’ll give Conan the edge for this batch.

Leno

• They say “Captain America” is successful because it takes place in a time when America could fight a war and get out of a depression at the same time. A whole different thing from today.
• The Kardashian sisters made $65 million. Maybe they should be running the country.
• Iowa Congressman Steve King says that if the country falls into default, President Obama could be impeached. Obama could stop that with three words: “President Joe Biden.”

Conan:

• The government is less than a week away from not being able to pay its bills. We may have to move in with Canada for a while.
• The debt ceiling debate is such a mess right now, al-Qaida is desperately trying to find a way to take credit for it.
• If the debt ceiling isn’t raised by Aug. 2, the whole country can go into default and we won’t be able to pay our bills. Then we’ll have to ask our parents for money, which will be very embarrassing.
• President Obama urged the American people to call Congress and demand that both parties work together on a compromise. The calls are 99 cents for the first minute, and a trillion dollars for each additional minute.

Kimmel:

• John Boehner told Republicans to “get in line.” He was very angry. His face turned from orange to mandarin orange.
• They say that the United States might default on its loans and China might foreclose. We’ll have to move into a cheap rental country or something.

Letterman:

• The NFL lockout is over. All the parties agreed and we have a compromise. It’s too bad the national debt isn’t as important as football.

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Notwithstanding Paul Krugman’s Assurances, the United Kingdom Announces More Healthcare Rationing

A couple of years ago, Paul Krugman assured us that government-run healthcare was a good idea, writing that “In Britain, the government itself runs the hospitals and employs the doctors. We’ve all heard scare stories about how that works in practice; these stories are false.”

Well, if the stories are false, the British press must love to tell negative lies about their own nation, as I’ve pointed out in a series of often-horrifying blog posts here, here, here, here, here, here, and here.

And now there’s a new revelation that further demolishes Krugman’s assertion. But more troubling, it also provides a glimpse at America’s future with Obamacare. Here are some cheerful excerpts from a story in the UK-based Independent.

Hip replacements, cataract surgery and tonsil removal are among operations now being rationed in a bid to save the NHS money. Two-thirds of health trusts in England are rationing treatments for “non-urgent” conditions as part of the drive to reduce costs in the NHS by £20bn over the next four years. One in three primary-care trusts (PCTs) has expanded the list of procedures it will restrict funding to in the past 12 months. …According to responses from the 111 trusts to freedom-of-information requests, 64 per cent of them have now introduced rationing policies for non-urgent treatments and those of limited clinical value. Of those PCTs that have not introduced restrictions, a third are working with GPs to reduce referrals or have put in place peer-review systems to assess referrals. In the last year, 35 per cent of PCTs have added procedures to lists of treatments they no longer fund because they deem them to be non-urgent or of limited clinical value. ..Bill Walters, 75, from Berkshire, recently had to wait 30 weeks for a hip operation instead of the standard 18.

I’ve never pretended the American healthcare system is perfect, largely because of massive government intervention and control. And even a laissez-faire system doubtlessly would generate some horror stories.

But I feel very comfortable in stating that the United Kingdom is a good example of why more government is never the answer for problems created by government involvement in the first place.

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Does the Boehner Plan Include a Tax Increase Trap?

In an ideal world, GOPers would hold firm and not pass any debt limit until Democrats agreed to enact something like the Ryan plan/Cut-Cap-Balance.

But I’ve never thought that was a realistic strategy. When we got to the drop-dead point, Obama would have Geithner or Bernanke give an inflammatory speech designed to panic financial markets – at which point the White House would prevail because enough Republicans would panic (remember TARP?) and surrender.

This is why, even though there are several things I would have done differently, I think it’s reasonable to cut some slack for Speaker Boehner and House Republicans. They are trying to win a debt-limit fight when they can’t use the nuclear option and the other side controls both the Senate and the White House.

Moreover, the media is in the tank for the White House and is willing to regurgitate palpably false narratives (i.e., failure to raise the debt limit equals default). As such, from the beginning of this battle, I’ve assumed Republicans will lose.

And this also explains why I haven’t criticized the new “Budget Control Act” proposed by Speaker Boehner. Yes, it’s grossly inadequate. Yes, it’s a bit gimmicky. And, yes, it basically kicks the can down the road. But is anybody under any illusion that something good can get past Harry Reid’s Senate and the Obama White House?

But there is one aspect of the Boehner plan that is causing me considerable angst. The plan would create a new super-committee of six Senators and six Representatives, and this bi-partisan group (equal numbers of Democrats and Republicans) would be responsible for proposing $1.8 trillion of additional “deficit reduction.” Congress would be obliged to vote on the package, and approval of that package would enable a further increase in the debt limit.

This sets off alarm bells. I hope I’m wrong, but here’s the scenario I envision:

1. The joint committee proposes a terrible package of fake spending cuts and real tax increases (just like the Gang of Six).

2. Since only one Republican vote will be needed to approve the package (and because Senate Republicans are genetically incapable of saying no to awful deals), this package will be approved.

3. Harry Reid, recognizing a good deal (from his perspective) will immediately push the package through the Senate.

4. Republicans control the House, so theoretically the bad package can be stopped, but here’s where the trap exists. Failure to approve the awful tax-hike package will be portrayed as being critical in order to raise the debt limit and save America from default.

5. GOPers will capitulate, giving the Democrats more money to waste and dispiriting the Tea Party in an election year.

You can see why I’m a very dour person.

Speaking of the debt limit, here are two recent interviews on the topic. In the first clip, I talk with Neil Cavuto about debt-limit demagoguery.

And in this interview for Bloomberg Asia, I explain the debt limit fight in the context of the American political system.

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Debunking the Left’s Tax Burden Deception

I testified earlier today before the Joint Economic Committee about budget process reform. As part of the Q&A session after the testimony, one of the Democratic members made a big deal about the fact that federal tax revenues today are “only” consuming about 15 percent of GDP. And since the long-run average is about 18 percent of GDP, we are all supposed to conclude that a substantial tax hike is needed as part of what President Obama calls a “balanced approach” to red ink.

But it’s not just statist politicians making this argument. After making fun of his assertion that Obama is a conservative, I was hoping to ignore Bruce Bartlett for a while, but I noticed that he has a piece on the New York Times website also implying that America’s fiscal problems are the result of federal tax revenues dropping far below the long-run average of 18 percent of GDP.

In a previous post, I noted that federal taxes as a share of gross domestic product were at their lowest level in generations. The Congressional Budget Office expects revenue to be just 14.8 percent of G.D.P. this year; the last year it was lower was 1950, when revenue amounted to 14.4 percent of G.D.P. But revenue has been below 15 percent of G.D.P. since 2009, and the last time we had three years in a row when revenue as a share of G.D.P. was that low was 1941 to 1943. Revenue has averaged 18 percent of G.D.P. since 1970 and a little more than that in the postwar era.

To be fair, both the politician at the JEC hearing and Bruce are correct in claiming that tax revenues this year are considerably below the historical average.

But they are both being a bit deceptive, either deliberately or accidentally, in that they fail to show the CBO forecast for the rest of the decade. But I understand why they cherry-picked data. The chart below shows, rather remarkably, that tax revenues (the fuschia line) are expected to be back at the long-run average (the blue line) in just three years. And that’s even if the Bush tax cuts are made permanent and the alternative minimum tax is frozen.

It’s also worth noting the black line, which shows how the tax burden will climb if the Bush tax cuts expire (and also if millions of new taxpayers are swept into the AMT). In that “current law” scenario, the tax burden jumps considerably above the long-run average in just two years. Keep in mind, though, that government forecasters assume that higher tax rates have no adverse impact on economic performance, so it’s quite likely that neither tax revenues nor GDP would match the forecast.

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A Message from Soros: Regulation for Thee, but Not for Me

I think it may be time to update the dictionary definition of irony.

George Soros, the billionaire who finances statist organizations and causes in order to promote more government, has decided that he doesn’t want to deal with some of the new regulatory burdens resulting from the Dodd-Frank bailout legislation.

Consider this blurb from the Financial Times.

Quantum, which will continue to manage about $24.5bn of Soros family money, blamed the decision on new financial regulations requiring hedge funds to register with the Securities and Exchange Commission. “An unfortunate consequence of these new circumstances is that we will no longer be able to manage assets for anyone other than a family client as defined under the regulations”, Jonathan and Robert Soros, Mr Soros’ sons and Quantum’s co-deputy chairmen, wrote in a letter to investors on Tuesday. New regulations require hedge funds with more than $150m under management to report details about investments, employees and investors, and also makes them subject to possible inspections by the SEC. Mr Soros’ decision contrasts with his own reputation as an advocate for both government and corporate transparency.

The Wall Street Journal’s editorial page has some fun with this news.

Like many a rich political liberal, George Soros made his fortune in some of the least regulated corners of the capital markets. So it’s no great surprise that the left-wing financier announced yesterday that his hedge fund will cease investing on behalf of others in order to avoid Dodd-Frank’s new registration mandate. …This is one more example of Dodd-Frank’s 2,300-pages of unintended consequences. The 81-year-old Mr. Soros will no doubt still make a handsome living, but the trade-off is bad for the country. Better to have the billionaire preoccupied with decisions about allocating capital to maximize profit than spending his time donating to groups and politicians who want government to allocate capital for political purposes.

Poking fun at Soros and exposing left-wing hypocrisy is a noble endeavor, to be sure, but there’s a very serious side to this issue. The growing regulatory burden and increased level of intervention is both discouraging investment in the American economy and undermining the efficient allocation of capital that does get invested. The Dodd-Frank bailout bill is an obvious example, as is the IRS’s horrible interest-reporting regulation.

This translates into less growth, less vitality, and lower living standards (compared to what they would be in the absence of bad policy). The chart in this blog post is a good example of the cost of bad policy and the benefits of good policy.

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You Should Support a Value-Added Tax…if You Want Bigger Government and More Debt

I testified before the House Ways & Means Committee earlier today. As always, my trip inside the belly of the beast was an interesting adventure.

The tax-writing committee was holding a hearing on the value-added tax. I was on a panel with five other witnesses, and all of the other people testifying were sympathetic to a VAT. But since I had truth on my side, that made it a fair fight (though it did cross my mind that it’s not a good sign when a Republican-controlled committee stacks the witnesses in favor of a European-style tax system).

I made two points. First, a VAT is less destructive than the current income tax. As such, if we somehow repealed the 16th Amendment and replaced it with something ironclad that would prevent the income tax from ever again haunting the land, I would gladly make a trade.

But that’s not going to happen, so my second point was to warn that the VAT would be a recipe for bigger government. And even though some of my fellow witnesses said the revenue could be used to reduce deficits, I pointed out that Europe adopted VATs beginning in the 1960s and that hasn’t stopped welfare states such as Greece and Portugal from spending themselves into a fiscal crisis.

This chart, which is similar to what I included in my testimony, compares spending and debt levels in EU-15 nations (Western Europe) and the United States. As you can see, the burden of spending and debt is onerous in America (red columns), but even worse in Europe (blue columns).

That doesn’t prove that a VAT causes bigger government and more debt, to be sure, but it certainly seems to suggest that the other side is smoking dope when they claim a VAT will lead to deficit reduction. Instead, it seems like Milton Friedman was right when he warned that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”

I made some of these points in my VAT video.

P.S. Here are three very good cartoons on the VAT (here, here, and here).

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Obama’s Policies Are Bad News for Black America

I don’t have my finger on the pulse of black America, and I don’t pretend to understand the emotional and symbolic value of a black President to the African-American community.

But I do know that the big-government policies of the Obama Administration have not been good news for blacks. Here’s an excerpt from a new Associated Press story about the growing wealth gap between white and black America.

The wealth gaps between whites and minorities have grown to their widest levels in a quarter-century. The recession and uneven recovery have erased decades of minority gains, leaving whites on average with 20 times the net worth of blacks and 18 times that of Hispanics, according to an analysis of new Census data. The analysis shows the racial and ethnic impact of the economic meltdown, which ravaged housing values and sent unemployment soaring.

To be fair, the numbers started turning in the wrong direction under Bush, and Obama is right when he says he inherited a bad situation. On the other hand, Obama has continued the big-government and interventionist policies of his predecessor, so it’s not clear that this is much of an excuse.

The unemployment data also shows bad news for blacks. This chart uses data from the Bureau of Labor Statistics and it shows unemployment among African-Americans has nearly doubled in recent years.

Once again, it’s worth pointing out that the numbers were heading in the wrong direction as Obama took office. But as I note above, I’m not sure that matters since Obama has continued Bush’s approach of higher spending and more intervention. But even if you can’t accept that analysis because you’re a partisan Democrat or Republican, all that really matters is that the black unemployment rate has increased dramatically and is now stubbornly high.

The moral of the story, needless to say, is that free markets and small government are the right policies. That’s the best approach to improve living standards for all Americans.

But lower-income Americans are especially vulnerable to economic fragility, so better economic performance disproportionately helps people on the bottom rungs of the economic ladder.

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Republicans Should Copy the Bill Clinton Approach on Federal Spending

I’ve pointed out on several occasions that the burden of federal spending fell significantly during the Clinton years. Indeed, if we did nothing other than bring federal spending back down to 18.2 percent of GDP (where it was when Clinton left office), we’d have a budget surplus before the end of the decade (even with all the tax cuts made permanent).

Here’s a debate from a couple of months ago, but the issues haven’t changed. I debate Pat Choate (the 1996 running-mate of Ross Perot) about fiscal policy. I explain that spending is the problem and we could solve that problem by unwinding all the counterproductive spending of the Bush-Obama years.

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The Short-Term Problem Is Obama’s Ideological Stubborness, the Long-Term Problem Is American Decline

As a Washington policy wonk somewhat involved in the current debt-limit fight, I will confess that it is very frustrating that the White House has never produced a deficit-reduction plan. I’d much prefer a spending-restraint plan, of course, but I’m flummoxed that Obama has gotten away with doing nothing other than deliver some speeches filled with hollow platitudes.

So how does the GOP respond? Instead of loudly repeating “we’ve passed two plans and we’re waiting for Obama and/or Reid to put some cards on the table,” Republicans have been lulled into negotiations where the White House seems solely focused on getting GOPers to feed the spending beast (and undermine their own political prospects) by surrendering to a tax increase.

To make matters worse, Obama’s negotiating position was just strengthened by the so-called Gang of Six, which undercut GOP negotiators and enabled Obama to move even farther to the left.

Mark Steyn seems similarly frustrated and has an article that focuses on the absurd dishonesty of the White House. Here’s part of what he wrote for National Review.

Obama has done his best to pretend to take them seriously. He claimed to have a $4 trillion deficit-reduction plan. The court eunuchs of the press corps were impressed, and went off to file pieces hailing the president as “the grown-up in the room.” There is, in fact, no plan. No plan at all. No plan whatsoever, either for a deficit reduction of $4 trillion or $4.73. As is the way in Washington, merely announcing that he had a plan absolved him of the need to have one. So the president’s staff got out the extra-wide teleprompter and wrote a really large number on it, and simply by reading out the really large number the president was deemed to have produced a serious blueprint for trillions of dollars in savings. …The only “plan” Barack Obama has put on paper is his February budget. Were there trillions and trillions of savings in that? Er, no. It increased spending and doubled the federal debt. How about Harry Reid, the Senate majority leader? Has he got a plan? No. The Democrat Senate has shown no interest in producing a budget for two-and-a-half years. …The domestic media coverage of this story has been almost laughably fraudulent: To the court eunuchs, a failure to raise the debt ceiling by a couple of trillion would signal to the world that American government was embarrassingly dysfunctional. In reality, raising the debt ceiling by a couple of trillion without any spending cuts would confirm to the world that American government is terminally dysfunctional.

But while the short-term political maneuvering may be frustrating, the long-term implications are sobering, if not terrifying.

Writing in the Wall Street Journal, Arthur Brooks of the American Enterprise Institute wonders whether the United States is condemned to become either Sweden or Greece.

First, this is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism. Second, it is a moral fight, not an economic one. …Consider a few facts. The Bureau of Economic Analysis tells us that total government spending at all levels has risen to 37% of gross domestic product today from 27% in 1960—and is set to reach 50% by 2038. The Tax Foundation reports that between 1986 and 2008, the share of federal income taxes paid by the top 5% of earners has risen to 59% from 43%. Between 1986 and 2009, the percentage of Americans who pay zero or negative federal income taxes has increased to 51% from 18.5%. …despairing souls have concluded there are really only two scenarios. In one, we finally hit a tipping point where so few people actually pay for their share of the growing government that a majority become completely invested in the social welfare state, which stabilizes at some very high level of taxation and government social spending. (Think Sweden.) In the other scenario, our welfare state slowly collapses under its weight, and we get some kind of permanent austerity after the rest of the world finally comprehends the depth of our national spending disorder and stops lending us money at low interest rates. (Think Greece.) In other words: Heads, the statists win; tails, we all lose.

Sadly, I think the answer is Greece, for reasons Mr. Brooks already identifies. America is becoming a society where the top 20 percent pay a lot and the bottom 50 percent pay very little. When combined with demographic change, this is an unsustainable and unstable dynamic, very much akin to Greece. In Sweden, by contrast, the people paying the taxes and collecting the benefits tend to be the same. And even though taxes and spending are far too high, thus dampening growth, the rest of the economy is very free market and the entitlements are designed to be somewhat sustainable.

Let’s close this depressing post with a bit of gallows humor. Here’s a clever cartoon from Mike Ramirez at Investor’s Business Daily.

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Is Obama a Conservative?

Welcome Instapundit readers. I also have written about whether Obama is a socialist, which is a good companion to this post.

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That seems like a joke question, but it’s an apparently serious belief of Bruce Bartlett, a former supply-sider and Bush Administration official who has flipped sides and joined the left.

I’ve known Bruce for decades and he’s a fun guy to hang out with, but he’s gone hard left in recent years, pimping for a VAT and urging GOPers to sell out on health care.

But now he is officially crazy, because he wants us to believe that Obama is a conservative, or at least a moderate conservative.

Bruce cites five reasons in his article for this bizarre hypothesis.

1. “His stimulus bill was half the size that his advisers thought necessary”

This is a rather strange assertion. Obama flushed $800 billion down the federal toilet on a fake stimulus, but we’re supposed to believe he’s a “moderate conservative” because he didn’t waste even more of our money.

2. “He continued Bush’s war and national security policies without change and even retained Bush’s defense secretary”

Okay, maybe this is true. I’m not competent to make any sweeping judgments on foreign policy.

3. “He put forward a health plan almost identical to those that had been supported by Republicans such as Mitt Romney in the recent past, pointedly rejecting the single-payer option favored by liberals”

This is an indictment of Romney and other squishy Republicans, not a sign of Obama’s moderate conservatism. Obama has radically expanded the role of government in a sector that already has been screwed up by government intervention. If this is conservative, I’m a communist.

4. “He caved to conservative demands that the Bush tax cuts be extended without getting any quid pro quo whatsoever”

Bruce is simply wrong. Obama wanted all of the “middle class” tax cuts extended, and he had to strike a deal with GOPers about “tax cuts for the rich.” To be fair, Obama’s position was at least somewhat moderate at the time, but he’s since come out of the pro-tax closet as part of the budget negotiations.

5. “And in the past few weeks he has supported deficit reductions that go far beyond those offered by Republicans.”

Bruce must be smoking crack. If Obama really wanted maximum deficit reduction, he could have supported the Ryan budget or the Republican Study Committee plan, both of which contained more deficit reduction than anything Obama has ever supported. But Bruce is making it seem as if the conservative position is maximum deficit reduction when the real goal is restraining the size of government. By Bruce’s absurd logic, doubling all taxes would be the conservative choice since “deficit reduction” theoretically is maximized.

I actually feel guilty about this blog post. I suspect Bruce doesn’t really believe what he writes and is just seeking attention. But I couldn’t resist.

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Inside the Debt-Limit Negotiations, a Love Song from Obama to Boehner

I hope the Speaker resists this siren song and says no to higher taxes.

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The Transatlantic Government-Incompetence-and-Stupidity Contest: The U.S v. U.K.

Last week, we compared a bone-headed display of incompetence by the German government with a perverse form of harassment by a local government in the United States.

We have another America-v-Europe contest, but the roles are reversed. This time, the buffoons in Washington get dinged for a spectacular screw-up, and it is a local government in England that earns ridicule for a brainless decision.

Let’s start in America, where a Virginia newspaper has the gory details, including this excerpt.

They are the two ships no one wanted, almost constantly embroiled in one dispute or another for the past 25 years. The two Navy behemoths have never gone on a mission, were never even completed, yet they cost taxpayers at least $300 million. Now the vessels, the Benjamin Isherwood and the Henry Eckford, are destined to leave Virginia waters for good and be scrapped at a Texas salvage yard, with no money coming back to the U.S. Treasury.

Isn’t that wonderful. A $600 million disbursement of tax dollars, getting absolutely nothing in exchange. Though I suppose that’s better than some other federal expenditures that have negative rates-of-return.

Now let’s turn to the United Kingdom, where a local government put a keep-off-the-grass sign on a plot of grass so small that it would be a challenge for two people to stand in it. Here are the key passages from a Daily Mail story.

It’s a patch of scruffy grass barely big enough to sit down on – but that hasn’t stopped one town hall making a great deal of fuss about it. The verge measures only 3ft by 2ft but has its own ‘Keep Off The Grass’ sign. The warning has appeared as officials plan £70million of cuts. Resident Tom Beardmore, 29, said he was ‘flabbergasted’ when he saw it in Raynes Park, south-west London. …A council spokeswoman said the matter was being looked into but was unable to confirm how much the sign had cost or why it was placed there.

Maybe I’m just being jingoistic, but I think the Brits win this contest. Yes, the American government flushed a lot more money down the toilet, but there is something truly breathtaking about what happened in London.

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Political Jokes from the Late-Night Comics

Jay Leno and Jimmy Fallon have the best ones this week.

From Jay Leno:

• President Obama’s motorcade was fined $16 for traffic it caused while in the United Kingdom. Typical for Obama, he said, “My grandkids will pay for it.

• Texas Gov. Rick Perry says God is calling on him to run for president, and Michele Bachmann says God is calling on her to run for president. If God is so indecisive, he’s probably for Mitt Romney.

• President Obama said he turns 50 this week, but he actually doesn’t turn 50 until Aug. 4. This means that even he hasn’t seen his birth certificate.

• President Obama’s staff got raises of 8 percent, more than double the average for regular Americans, which is 3 percent. But to be fair, many of them will be unemployed next November.

From Jimmy Kimmel:

• Republicans are blaming President Obama for bringing the heat from his native Kenya.

• The Republican presidential candidates held a debate on Twitter. It combined the excitement of C-SPAN with the suspense of typing.

From Conan:

• MSNBC suspended one of their commentators for calling President Obama a bad name. Meanwhile, Fox News suspended one of their commentators for not calling President Obama a bad name.

From Jimmy Fallon:

• A woman in Colorado was arrested for groping a TSA agent last week. On the bright side, today she was offered a job with the TSA.

• The U.S. is now in serious danger of defaulting on our foreign loans. Which explains why today, China showed up and broke the Statue of Liberty’s kneecaps.

From David Letterman:

• Mitt Romney is so boring, he introduced his own fragrance called “Unscented.”

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Republicans May Win the Debt-Limit Fight? I Won’t Believe It ’til I See It…and I’m Not Sure It Would Matter

There are rumors that Obama may do a bit Clinton-era triangulation and agree to a GOP-friendly increase in the debt limit. That means no tax increases and as much as $3 trillion of so-called spending cuts.

I’m skeptical, and even if it happens, I suspect that most of the spending cuts will be ephemeral (like the junk we got during the government-slowdown fight earlier this year), and that’s even assuming that we should accept Washington’s dishonest definition of a budget cut. As I explained to Investor’s Business Daily:

In Washington-speak, a spending cut means a government program that is projected to grow, say, 5% next year will rise just 3%. “If I told you I was starting a diet and a month later I told you I was successful because I only gained five pounds instead of 10 pounds, you’d probably call me a stupid jerk,” said Dan Mitchell, a senior fellow at the libertarian Cato Institute. “But if I was a congressman you’d call me a frugal, fiscally responsible lawmaker.”

And I also wouldn’t be surprised if some of the spending cuts turn out to be back-door revenue increases. Under Washington budget-scoring rules, if the government makes us pay higher Medicare premiums or Fannie Mae loan fees, those revenues are counted as “offsetting receipts” and counted as “negative spending.” I’m not joking.

Notwithstanding these potential concerns, a budget deal with no explicit tax increases and a multi-trillion spending cut number (however exaggerated) would be a much better outcome than I’ve been expecting.

But let’s not kid ourselves. The GOP may win a political victory, but that doesn’t mean America’s fiscal problems will be solved. Something like the Ryan budget would be a real step in the right direction. But that’s not what we can expect, even in a best-case scenario.

As such, we’ll still be heading for a Greek-style fiscal nightmare, as I note in these two recent interviews.

Here’s my interview for the Willis Report on Fox Business.

And here’s what I had to say for Larry Kudlow’s CNBC program.

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Senator Kent Conrad: Is He a Clown, Hack, or Demagogue?

Actually, the answer is all of the above.

He pontificates about debt, but he voted for the fake stimulus and budget-busting Obamacare legislation.

He’s a preening self-styled deficit hawk, but the nation’s four largest deficits have occurred since he became Chairman of the Senate Budget Committee.

As Chairman of the Budget Committee, with a bloated staff and a budget of millions of dollars, his only responsibility – under law – is to produce a budget resolution every year, yet it’s now been more than 800 days since he’s bothered to fulfill this obligation.

You may be asking why I’m going after Senator Conrad. Is it because I’m upset that he has played a key role in tricking some gullible Republicans into supporting tax increases, based on a laughably vague set of talking points?

Sure, that galls me, but I’m used to Republicans engaging in self-immolation. I can’t really get too upset with Conrad for taking advantage of GOP naiveté.

What irks me is that this buffoon went to the Senate floor last night to make an impassioned plea for higher taxes. But rather than honestly say that he wants to take more of our money, he demagogued about a building in the Cayman Islands.

According to our financial-wizard friend from North Dakota, there is something inherently criminal about this structure (offices of a top-flight international law firm) because it is the home of more than 18,000 companies.

Here’s an image I captured from one of Conrad’s earlier speeches, where he made the same accusation.

So why am I irritated about his speech? Is it because Senator Conrad lied about the number of companies at Ugland House? No, the Senator is correct (unlike Obama, who demagogued about the same building during the 2008 campaign, but said there were 12,000 companies).

What bothers me is that Conrad presumably is educated enough to understand that he is being disingenuous. While he’s been sucking on the public teat his entire life, surely he knows that a company’s home is merely the place where it is chartered for legal purposes. A firm’s legal domicile has nothing to do with where it does business or where it is headquartered.

But just to make things clear, here’s a picture of another building. This building is smaller than Ugland House, yet it is the home of more than 200,000 companies.

So why isn’t the empty suit from North Dakota attacking this building? Maybe we should ask the Vice President. After all, this building is in Wilmington, Delaware.

The moral of the story is that companies like to make their legal homes in jurisdictions that have honest courts, sensibly light levels or red tape, and business-friendly reputations. The Cayman Islands is such a place, as is Delaware.

To Kent Conrad, that’s de facto evidence of criminal activity. To normal and honest people, that’s evidence that good policy generates more economic activity.

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A New Miracle Drug – Better than Viagra According to Politicians

Kudos to the Concerned Women for America, not only for this clever video, but also for putting the focus on the burden of government spending rather than the symptom of too much red ink.

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Bureaucracy Humor, Probably Created by Somebody at Homeland Security or HUD

I’ve shared ant-related humor before with this modern version of the fable of the ant and the grasshopper.

Now our six-legged friend makes an appearance in a joke that I received from an increasingly famous libertarian on the left coast.

It’s very amusing, so long as you’re willing to laugh at bureaucracy’s expansion and America’s decline. Enjoy.

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Want to know why we are still in a recession even though we have added

over 200,000 new federal employees in the past two years?

Simple, it’s not a good time to be an ant!

If you like this post, you will also enjoy this one and this one. Similar themes about the inefficiency of government and who pays the price.

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Welcome to all Instapundit readers! Your comments are great, especially about the creeping bureaucratization of corporate America. Yes, the same cartoon could apply to companies like GM.

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The Never-Ending Government Fraud Racket

Here’s a great example of family values, but only if you think it’s noble for a husband, wife, and daughter to conspire together to rip off taxpayers. I guess the family that steals together, stays together.

Here are some of the details from the Daily Caller expose.

A special investigation by The Daily Caller has discovered that a State Department contract specialist participated in awarding more than $52 million in taxpayer-funded contracts to a company owned and operated by her husband and daughter. Kathleen McGrade helped their company, Sterling Royale Group, win 43 federally funded contracts over the last few years. McGrade acted as the Contracting Officer (CO) for awards to Sterling Royale Group. McGrade’s husband, Brian Collinsworth, serves as the company’s Vice President. McGrade’s daughter, J.L. (Jennifer) Herring, is its president and CEO.

What isn’t apparent from the story, but which presumably will add insult to injury (or, perhaps in this case, injury to injury) is how much money was involved and the degree to which the money was spent on purposes that would be illegitimate even if the contracting process was honest. And speaking of government fraud (is that a redundancy?), James O’Keefe of ACORN fame is back with a set of undercover videos on Medicaid fraud. Experts have estimated that there are tens of billions of dollars of fraud in Medicare and Medicaid, so O’Keefe isn’t uncovering the tip of the iceberg. He’s looking at one snowflake on top of the tip of the iceberg.

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Looking at Europe’s Self-Inflicted Economic Disaster (and Getting a Glimpse of America’s Obamanian Future)

Allister Heath is one of the best economic columnists in Europe and his analysis of Europe’s fiscal situation is rather grim. But Americans can’t be smug. This is where the Bush-Obama policies, combined with demographics, are leading America.

Here’s Allister’s analysis of where things stand in Europe.

Gold hit £1,000 an ounce today for the first time, as equities fell, Club Med government bond yields jumped, spreads increased and the fear and loathing in the credit markets intensified – and all of that in response to the EU’s banking stress tests on Friday night, which were supposed to reassure investors that all was well. What a farce. The tests’ preposterous lack of credibility – they didn’t even envisage the possibility that a government could go bust – have been greeted with the contempt they deserved.

In other words, feckless behavior and grotesque dishonesty from the political class have made a big mess. So what’s going to happen? Allister clearly is a believer in Mitchell’s Law, so he expects the politicians and bureaucrats to use the crisis they created as an excuse to impose additional bad policies.

…the most likely outcome is that the EU will eventually find a way (by bending or rewriting rules) to federalise the debt of failed, bankrupt states: they will issue vast amounts of EU-backed bonds (say €1 trillion, as an order of magnitude) and tell all financial institutions, including insurers and pension funds, that they wish to buy every single government bond from bankrupt countries that they are willing to sell, probably at the discount to face value being priced in at that particular time by the markets. The authorities would give holders an ultimatum: sell now, or bear all future losses. It may be that such an arrangement will not be ready on time for Greece, which could yet be left to go bust and be thrown out of the euro. But regardless of the details, a giant euro-bond would transfer the default risk from private institutions stupid enough to trust Club Med governments (or who were forced, for regulatory reasons, to hold their bonds) to all European taxpayers. This could damage the credit rating of more solvent countries – but even if it doesn’t, it would be tantamount to a massive bailout. In return, the EU would want its pound of flesh: the weaker Eurozone countries would be turned into quasi-protectorates. Such a plan would further discredit capitalism (even though the people who caused the crisis were over-spending politicians) and it would rob the EU of its legitimacy in the eyes of both Southern Europeans (who would lose their independence) and Northern Europeans (who would pay for the south’s greed, stupidity, mismanagement and economic illiteracy).

Allister closes with a very accurate observation about why bureaucrats and politicians enjoy a good crisis.

The EU has always worked on the basis that every crisis is good because it invariably provides an excuse to centralise powers. But the present nightmare could prove to be a bridge too far and herald the beginning of the end for the entire project. Fun and games are about to start.

Yes, they are. And American politicians are playing the same game – more government, less freedom, more government. Lather, rinse, repeat.

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The Gang of Six Is Back from the Dead: Contemplating the Good, the Bad, and the Ugly in their Budget Plan

The on-again, off-again “Gang of Six” has come back on the scene and is offering a “Bipartisan Plan to Reduce Our Nation’s Deficits.”

The proposal is quite similar to the one put forth by the President’s Simpson-Bowles Commission, which isn’t too surprising since some of the same people are involved.

At this stage, all I’ve seen is this summary (A BIPARTISAN PLAN TO REDUCE OUR NATIONS DEFICITS v7), so I reserve the right to modify my analysis as more details emerge (and since I fully expect the plan to look worse when additional information is available, the following is an optimistic assessment.

The Good

o Unlike President Obama, the Gang of Six is not consumed by class-warfare resentment. The plan envisions that the top personal income tax rate will fall to no higher than 29 percent.

o The corporate income tax rate will fall to no higher than 29 percent as well, something that is long overdue since the average corporate tax rate in Europe is now down to 23 percent.

o The alternative minimum tax (which should be called the mandatory maximum tax) will be repealed.

o The plan would repeal the CLASS Act, a provision of Obamacare for long-term-care insurance that will significantly expand the burden of federal spending once implemented.

o The plan targets some inefficient and distorting tax preference such as the health care exclusion.

The Bad

o The much-heralded spending caps do not apply to entitlement programs. This is like going to the doctor because you have cancer and getting treated for a sprained wrist.

o A net tax increase of more than $1 trillion (I expect that number to be much higher when further details are divulged).

o The plan targets some provisions of the tax code – such as IRAs and 401(k)s) – that are not preferences, but instead exist to mitigate against the double taxation of saving and investment.

o There is no Medicare reform, just tinkering and adjustments to the current system.

o There in no Medicaid reform, just tinkering and adjustments to the current system.

The Ugly

o The entire package is based on dishonest Washington budget math. Spending increases under the plan, but the politicians claim to be cutting spending because the budget didn’t grow even faster.

o Speaking of spending, why is there no information, anywhere in the summary document, showing how big government will be five years from now? Ten years from now? The perhaps-all-too-convenient absence of this critical information should set off alarm bells.

o There’s a back-door scheme to change the consumer price index in such a way as to reduce expenditures (i.e., smaller cost-of-living-adjustments) and increase tax revenue (i.e., smaller adjustments in tax brackets and personal exemptions). The current CPI may be flawed, but it would be far better to give the Bureau of Labor Statistics further authority, if necessary, to make changes. A politically imposed change seems like nothing more than a ruse to impose a hidden tax hike.

o A requirement that the internal revenue code maintain the existing bias against investors, entrepreneurs, small business owners, and other upper-income taxpayers. This “progressivity” mandate implies very bad things for the double taxation of dividends and capital gains.

This quick analysis leaves many questions unanswered. I particularly look forward to getting information on the following:

1. How fast will discretionary spending rise or fall under the caps? Will this be like the caps following the 1990 tax-hike deal, which were akin to 60-mph speed limits in a school zone? Or will the caps actually reduce spending, erasing the massive increase in discretionary spending of the Bush-Obama years?

2. What does it mean to promise Social Security reform “if and only if the comprehensive deficit reduction bill has already received 60 votes.” Who defines reform? And why does the reform have to focus on “75-year” solvency, apparently to the exclusion of giving younger workers access to a better and more stable system?

3. Will federal spending under the plan shrink back down to the historical average of 20 percent of GDP? And why aren’t those numbers in the summary? The document contains information of deficits and debt, but those figures are just the symptoms of excessive spending. Why aren’t we being shown the data that really matters?

Over the next few days, we’ll find out what’s really in this package, but my advice is to keep a tight hold on your wallet.

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Exaggerating Poverty for Political Gain

Is America filled with tens of millions of people suffering from harsh material deprivation? That’s what the pro-redistribution crowd wants you to think, but a new report from the Heritage Foundation demolishes that stereotype.

Here are some of the most remarkable findings in the study.

For most Americans, the word “poverty” suggests destitution: an inability to provide a family with nutritious food, clothing, and reasonable shelter. …Yet if poverty means lacking nutritious food, adequate warm housing, and clothing for a family, relatively few of the more than 30 million people identified as being “in poverty” by the Census Bureau could be characterized as poor. While material hardship definitely exists in the United States, it is restricted in scope and severity. …As scholar James Q. Wilson has stated, “The poorest Americans today live a better life than all but the richest persons a hundred years ago.” In 2005, the typical household defined as poor by the government had a car and air conditioning. For entertainment, the household had two color televisions, cable or satellite TV, a DVD player, and a VCR.

Here’s one of the most remarkable findings from the report.

…the typical poor American had more living space than the average European.

And here’s the key data on healthcare and nutrition.

The typical poor American family was also able to obtain medical care when needed. By its own report, the typical family was not hungry and had sufficient funds during the past year to meet all essential needs. …Consumer items that were luxuries or significant purchases for the middle class a few decades ago have become commonplace in poor households. …On average, the poor are well nourished. The average consumption of protein, vitamins, and minerals is virtually the same for poor and middle-class children. In most cases, it is well above recommended norms. Poor children actually consume more meat than higher-income children consume, and their protein intake averages 100 percent above recommended levels. In fact, most poor children are super-nourished and grow up to be, on average, one inch taller and 10 pounds heavier than the GIs who stormed the beaches of Normandy in World War II.

So why does this issue matter? Because the left understands that an agenda of redistribution is more likely to be successful if they can deceive the American people about the true scope of poverty. This polling data cited in the report shows why the left is so anxious to perpetuate falsehoods about how many people suffer from genuine deprivation.

…a poll conducted in June 2009 asked a nationally representative sample of the public whether they agreed or disagreed with the following statement: “A family in the U.S. that has a decent, un-crowded house or apartment to live in, ample food to eat, access to medical care, a car, cable television, air conditioning and a microwave at home should not be considered poor.” A full 80 percent of Republicans and 77 percent of Democrats agreed that a family living in those living conditions should not be considered poor.

Last but not least, we find out that a bad situation may become even worse. The left already uses a grossly exaggerated definition of poverty for political gain. But that’s not enough. As I noted in an earlier post, the Obama Administration wants to use a new methodology that would – no joke – show that there is more poverty in America than Bangladesh.

There is a vast gap between poverty as understood by the American public and poverty as currently measured by the government. Sadly, President Barack Obama plans to make this situation worse by creating a new “poverty” measure that deliberately severs all connection between “poverty” and actual deprivation. This new measure will serve as a propaganda tool in Obama’s endless quest to “spread the wealth” and will eventually displace the current poverty measure. Under the new measure, a family will be judged poor if its income falls below certain specified income thresholds or standards. There is nothing new in this, but unlike the current poverty income standards, the new income thresholds will have a built-in escalator clause. They will rise automatically in direct proportion to any rise in the living standards of the average American. …Another paradox of the new poverty measure is that countries such as Bangladesh and Albania will have lower poverty rates than the U.S.—even though the actual living conditions in those countries are extremely low—simply because they have narrower distribution of incomes, albeit very low incomes.

There is one thing that’s worth adding to all the good information cited from the study. Regardless of how the poverty rate is defined, the massive increase in federal spending on anti-poverty programs has been a terrible failure. Trillions of dollars have been spent since the “War on Poverty” began, but the poverty rate has been flat, averaging about 13 percent.

But what’s most remarkable is that the poverty rate was steadily falling before the so-called War on Poverty began. In other words, once the federal government began subsidizing poverty, we stopped making progress.

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The Debt-Limit Fight, “Cut, Cap, and Balance,” and Rescuing America from Greek-Style Fiscal Collapse

Here’s a new video from the Cato Institute, featuring my pearls of wisdom, along with equally sage commentary from my colleague Chris Edwards.

We make two simple points. First, America faces a Greek-style fiscal crisis if we leave the federal budget on autopilot (actually, it will be worse since we won’t get a bailout from the IMF).

Second, the country can be saved from this fate with relatively modest spending restraint. Genuine spending cuts would be preferable, of course, but merely slowing the growth of spending can put America on a sustainable path.

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The Federal Government Has Been Bailing Out Romneycare, but Who Will Be Available to Bail Out Obamacare?

The Beacon Hill Institute in Massachusetts has just released a very good – but very depressing study. The research finds that costs have jumped under Romneycare, but that’s not surprising. After all, politicians always underestimate the cost of new entitlements.

The important revelation in this new research is the degree to which the system has been propped up by the federal government (i.e., taxpayers in the rest of the nation).

That’s probably good news for Bay State politicians, who get to shift a fiscal burden to people outside the state, And it’s probably good news for Mitt Romney, because it somewhat disguises the magnitude of the disaster he imposed on the taxpayers of his state.

But it doesn’t bode well for the United States. Who will be available to bail out Obamacare? The Chinese? Martians? The Federal Reserve creating money out of thin air?

While you ponder those questions, here are some key excerpts from the study.

In this study, the Beacon Hill Institute at Suffolk University (BHI) attempts to fill the gap by calculating the effect of health care reform on state and federal governments and the private health insurance markets, including employee contributions to their private insurance plans. We find that, under health care reform:

• State health care expenditures have risen by $414 million over the period;

• Private health insurance costs have risen by $4.311 billion over the period;

• The federal government has spent an additional $2.418 billion on Medicaid for Massachusetts.

• Over this period, Medicare expenditures increased by $1.426 billion;

• For a total cumulative cost of $8.569 billion over the period; and

• The state has been able to shift the majority of the costs to the federal government.

The federal government continues to absorb a significant cost of health care reform through enhanced Medicaid payments and the Medicare program. …We estimate the effects of health care reform by comparing the actual value of each variable with the value it would have had, based on recent trends, had health care reform not been implemented.

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So Long as He Gets What He Wants, Obama Is Flexible in the Budget Negotiations

Welcome Instapundit readers. Check out this post for additional info on Obama’s disingenuous rhetoric.

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Appearing on Freedom Watch, I explain that the White House is very flexible. The President will be happy if GOPers cut their own wrists and agree to a tax increase. That means Obama can tax and spend.

But he’ll also be satisfied if Republicans approve a “clean debt limit increase,” meaning Obama can borrow and spend.

The unifying theme, in case it’s not obvious, is that the Administration will go along with any outcome that enables more spending and bigger government.

In the second half of the video, the discussion shifts to whether the government has the right to seize children if parents allow them to get too chubby. Not surprisingly, I’m leery of giving bureaucrats that kind of power.

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We Are the Champions

With apologies to Freddy Mercury, the Bungalow Exporters are now the champions of the Arlington County Tuesday night softball league, sweeping our way through the tournament with four straight victories. We clinched the title yesterday with two mercy-rule victories, showing that even the leftists on the team don’t believe in redistribution when push comes to shove.

The only thing that tarnishes our victory is that we played in a government-organized league with government-provided umpires. I even drove on government-maintained roads to get to the government-owned fields. Heck, a majority of people on the team work for the government. I guess that proves I’m a pragmatic moderate after all.

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