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Posts Tagged ‘Big-Government Republicans’

Ever since there was a deal to bust the budget caps back in February, I knew it was just a matter of time before Congress and the White House responded with an odious orgy of new spending.

Some people told me I was being too pessimistic.

After all, the President’s Office of Management and Budget has a big banner on the budget webpage. It boldly states that President Trump is going to “reverse the trend of rising government spending.”

But I’ve learned to discount the rhetoric of politicians. It’s more important to look at the actual budget numbers in legislation that the President signs into law.

And that’s what Trump did yesterday, giving his approval to a bill that funds the parts of the budget included in annual appropriations.

So did he “reverse the trend”?

The good news is that the answer is yes. But the bad news is that he reversed the trend by increasing spending faster than Obama.

I’m not joking. Courtesy of the Committee for a Responsible Budget, here are the year-over-year numbers for various parts of the bill.* This table tells you everything you need to know about the grotesque recklessness of Washington.

An overall increase of 12.9 percent!

But maybe spending is climbing so rapidly because the cost of living has suddenly jumped?

Nope, that’s not an excuse. The CRFB put together a list of the major inflation projections. As you can see, there’s not the slightest sign of a spike in prices in either 2018 or 2019.

Indeed, it turns out that the Republican Congress and the Republican President decided to increase spending six times faster than needed to keep pace with inflation. Six times.

Yes, we can definitely say the spending trend has been reversed. Just not in a good way.

So who should be blamed, congressional Republicans or Trump?

The simple answer is both.

Trump is responsible because he could veto budget-busting bills. All he would need to do is tell the crowd on Capitol Hill that he is perfectly happy to close down the non-essential parts of the federal government until he gets some responsible legislation. Sooner or later, the pro-spending crowd would have to cave.

That being said, congressional GOPers also deserve blame. It’s a failure by the Republicans on the Appropriations Committee who are motivated by a desire to spend the maximum amount of money. It’s a failure of GOP leadership for not removing members from that Committee if they don’t agree to some level of spending restraint. It’s also a failure of leadership that they don’t get conservatives and moderates in a room and hammer out a common approach that would restrain the growth of Leviathan. And it’s a failure of the individual Senators and Representatives for not upholding the Constitution and not doing what’s right for the country.

But this also brings me back to Trump. If the President credibly drew a line in the sand and said “I’ll veto any spending bill that is over X”, that would change behavior on Capitol Hill. But Members of Congress believe (correctly, it seems) that Trump has no interest in fiscal restraint. So without any leadership from the White House, you get an every-man-for-himself, grab-as-much-pork-as-you-can attitude among lawmakers that makes it virtually impossible for leadership to pursue an effective strategy.

The net result is that politicians win, the special interests win, and the bureaucracy wins.

And who loses? Well, look in the mirror for the answer.

*The data in the CRFB table is for “budget authority” rather than “budget outlays.” These are closely related concepts, but technically different. When Congress approves “budget authority,” it is basically giving money to an agency. When the agencies then spend the money, it is “budget outlays.”

P.S. I’m a big fan of spending caps, but I confess that they aren’t very helpful if politicians simply change the law whenever they want more spending. The ultimate answer is to have constitutional spending limits, like Switzerland and Hong Kong, but amending the Constitution is hardly as easy task. So my best guess is that we’ll become Greece at some point.

P.P.S. Some people tell me not to worry because the real problem is entitlement spending rather than appropriated spending. They’re right that entitlements are the biggest long-run problem. But I point out that if GOPers aren’t willing to tackle the low-hanging fruit of pork-filled appropriations, that doesn’t fill me with optimism that they will ever adopt genuine entitlement reform.

P.P.P.S. The same people also claim that at least Republicans will hold the line on taxes. I think they’re hallucinating. If we don’t get control of spending, sooner or later we’ll get massive tax hikes. Which will make our fiscal problems worse, needless to say. But that’s our grim future because of GOP irresponsibility today.

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To be blunt, Republicans are heading in the wrong direction on fiscal policy. They have full control of the executive and legislative branches, but instead of using their power to promote Reaganomics, it looks like we’re getting a reincarnation of the big-government Bush years.

As Yogi Berra might have said, “it’s deja vu all over again.”

Let’s look at the evidence. According to the Hill, the Keynesian virus has infected GOP thinking on tax cuts.

Republicans are debating whether parts of their tax-reform package should be retroactive in order to boost the economy by quickly putting more money in people’s wallets.

That is nonsense. Just as giving people a check and calling it “stimulus” didn’t help the economy under Obama, giving people a check and calling it a tax cut won’t help the economy under Trump.

Tax cuts boost growth when they reduce the marginal tax rate on productive behavior such as work, saving, investment, or entrepreneurship. When that happens, people have an incentive to generate more income. And that leads to more national income, a.k.a., economic growth.

Borrowing money from the economy’s left pocket and then stuffing checks (oops, I mean retroactive tax cuts) in the economy’s right pocket, by contrast, simply reallocates national income.

Indeed, this is one of the reasons why the economy didn’t get much benefit from the 2001 Bush tax cut, especially when compared to the growth-oriented 2003 tax cut. Unfortunately, Republicans haven’t learned that lesson.

Republicans have taken steps in the past to ensure that taxpayers directly felt the benefits of tax cuts. As part of the 2001 tax cuts enacted by President George W. Bush, taxpayers received rebate checks.

The article does include some analysis from people who understand that retroactive tax cuts aren’t economically beneficial.

…there are also drawbacks to making tax changes retroactive. …such changes would add to the cost of the bill, but would not be an effective way to encourage new spending and investments. “It has all of the costs of the tax cuts but none of the economic benefits,” said Committee for a Responsible Federal Budget President Maya MacGuineas, who added that “you don’t make investments in the rear-view mirror.”

I’m not always on the same side as Maya, but she’s right on this issue. You can’t encourage people to generate more income in the past. If you want more growth, you have to reduce marginal tax rates on future activity.

By the way, I’m not arguing that there is no political benefit to retroactive tax cuts. If Republicans simply stated that they were going to send rebate checks to curry favor with voters, I’d roll my eyes and shrug my shoulders.

But when they make Keynesian arguments to justify such a policy, I can’t help but get upset about the economic illiteracy.

Speaking of bad economic policy, GOPers also are pursuing bad spending policy.

Politico has a report on a potential budget deal where everyone wins…except taxpayers.

The White House is pushing a deal on Capitol Hill to head off a government shutdown that would lift strict spending caps long opposed by Democrats in exchange for money for President Donald Trump’s border wall with Mexico, multiple sources said.

So much for Trump’s promise to get tough on the budget, even if it meant a shutdown.

Instead, the back-room negotiations are leading to more spending for all interest groups.

Marc Short, the White House’s director of legislative affairs, …also lobbied for a big budget increase for the Pentagon, another priority for Trump. …The White House is offering Democrats more funding for their own pet projects.

The only good news is that Democrats are so upset about the symbolism of the fence that they may not go for the deal.

Democrats show no sign of yielding on the issue. They have already blocked the project once.

Unfortunately, I expect this is just posturing. When the dust settles, I expect the desire for more spending (from both parties) will produce a deal that is bad news. At least for those of us who don’t want America to become Greece (any faster than already scheduled).

Republican and Democratic congressional aides have predicted for months that both sides will come together on a spending agreement to raise spending caps for the Pentagon as well as for nondefense domestic programs.

So let’s check our scorecard. On the tax side of the equation, we’ll hopefully still get some good policy, such as a lower corporate tax rate, but it probably will be accompanied by some gimmicky Keynesian policy.

On the spending side of the equation, it appears my fears about Trump may have been correct and he’s going to be a typical big-government Republican.

It’s possible, of course, that I’m being needlessly pessimistic and we’ll get the kinds of policies I fantasized about in early 2016. But I wouldn’t bet money on a positive outcome.

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While flipping through the radio on my way to pick my son up from school yesterday afternoon, I was dumbfounded to hear Congressman John Boehner talk about repealing Obama’s Medicare cuts on Sean Hannity’s show.

I wasn’t shocked that Boehner was referring to non-existent cuts (Medicare spending is projected to jump from $519 billion in 2010 to $677 billion in 2015 according to the Congressional Budget Office). I’ve been dealing with Washington’s dishonest definition of “spending cuts” for decades, so I’m hardly fazed by that type of routine inaccuracy.

But I was amazed that the presumptive future Speaker of the House went on a supposedly conservative talk radio show and said that increasing Medicare spending would be on the agenda of a GOP-controlled Congress. (I wondered if I somehow misinterpreted what was being said, but David Frum heard the same thing)

To be fair, Boehner also said that he wanted to repeal Obamacare, so it would be unfair to claim that the interview was all Bush-style, big-government conservatism. But it is not a positive sign that Boehner is talking about more spending before he’s even had a chance to pick out the drapes for his new office.

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