Archive for July 22nd, 2011

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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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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