Feeds:
Posts
Comments

Posts Tagged ‘Government Shutdown’

I don’t care about the current shutdown battle, but I still feel compelled to add my two cents when people make silly arguments about the economy suffering because government is temporarily spending less money.

This is actually a two-part debate.

From a microeconomic perspective, there is some genuine disruption for affected federal bureaucrats, even if they eventually will get full – and lavish – compensation for their involuntary vacations. And some federal contractors are being hit as well.

There’s also a debate about the macroeconomic impact, with some making the Keynesian argument that government spending is somehow a stimulant for the economy.

I’ve endlessly explained why Keynesian argument is bad in theory and a joke in reality.

In this interview, I tried to make a more nuanced point, explaining that we should focus more on gross domestic income (GDI), which measures how we earn our national income, rather than gross domestic product (GDP), which measures how we allocate national income.

I’m not sure I got my point across effectively in a 30-second sound bite, but it’s a point worth making since people who understand GDI are much less susceptible to the Keynesian perpetual-motion-machine argument.

But enough from me.

Harold Furchtgott-Roth, in a column for the Wall Street Journal, analyzes the potential macroeconomic consequences of the shutdown.

Does the U.S. government shutdown endanger economic growth? It has led to missed paychecks… Yet these employees represent approximately 0.5% of all American workers… The effect of the furloughs on gross domestic product is likely small. …U.S. GDP is more than $20 trillion annually, or approximately $55 billion daily. The daily compensation of furloughed federal workers is about $52.5 million, or less than 0.1% of GDP. This figure does not include affected government contractors, but even doubling or tripling this figure yields only a small share of GDP. …The net effect of the partial shutdown on direct salaries and wages will primarily be to delay, but not reduce, income for the affected families. …Maybe that’s one reason the stock market, a barometer of expectations of future economic growth, has been unperturbed by the budget impasse. The Dow and the S&P 500 are up nearly 9% since the shutdown began Dec. 22. Experience also gives reason for optimism. The last major government shutdown occurred in 1995-96. It affected the entire federal government, not only part of it. Yet U.S. GDP growth increased from 2.7% in 1995 to 3.8% in 1996.

That final sentence is key.

The Keynesians are always predicting bad consequences when there’s some sort of policy that limits government spending.

But the real-world outcome is always different, as we saw with the sequester.

Steve Malanga, writing for the City Journal, takes a microeconomic perspective on the shutdown.

I’ve seen no evidence that the shutdown will affect me and my family. I’ve heard no friend, neighbor, or relative even mention it. Virtually everyone I know outside of my professional life seems to be going about their business. Still, I’ve taken a thorough look at press coverage over the past two weeks and found nearly 500 stories on how the closure is supposed to affect our lives. …The press seems intent on convincing the rest of us that we’re at risk… Many headlines stoking fear contradict the articles they introduce. A story in the Guardian, for instance, was pitched as a tale of the shocking impact that the shutdown would have on a small rural town. Though the paper tells us the town is “in the grip of a partial government shutdown,” readers find little evidence of it. “We really haven’t noticed anything,” City Manager Mike Deal confesses. …a story in the Bangor Daily News noted that the Small Business Administration, which hands out government-subsidized loans to firms, won’t be making them during the shutdown. Still, the story notes, that’s not going to make much of a hit on the local economy, since the SBA has made just 2,687 loans in Maine since 2010, for an average of just 27 a month. …a story in the Lafayette Daily Advertiser entitled, “How the shutdown is affecting local breweries in Louisiana.” The problem, the owner of Bayou Teche Brewing explains, is that the Alcohol and Tobacco Tax and Trade Bureau is responsible for approving labels for new beers, and the agency’s not working right now. “With every government shutdown that’s happened since we opened, we’ve had a beer needing label approval,” said Karlos Knott of Bayou. “And that results in beer we’re just having to sit on.”

Steve’s column reminds me of a piece I wrote back in 2013.

Which is why I wish one of the lessons we learned from the shutdown fight is that much of what government does is either pointless or counterproductive.

I’m not holding my breath waiting for that to happen.

Anyhow, no column on a government shutdown would be complete without some satire.

We’ll start with a sarcastic observation from Libertarian Reddit. Though it actually raises a serious point. I want to downsize Washington, but I don’t want any needless pain for bureaucrats. Yet shouldn’t we be similarly sensitive to the plight of folks in the private sector who suffer because of D.C.’s bad policies?

And it appears that government bureaucrats have figured out what to do with their hands now that they have extra time on their hands.

For what it’s worth, some bureaucrats engage in such recreation even when the government is open.

If you enjoy shutdown humor, you can find older examples here and here, and a new example here.

Read Full Post »

I cared a lot about the 1995-96 shutdown and the 2013 shutdown because those were battles involving the size and scope of government.

But I don’t have a dog in the current fight over immigration and border security. That being said, I told Neil Cavuto that there are several fiscal policy lessons we can learn from the current shutdown fight.

A short TV interview just scratches the surface of an issue, so here are some additional details.

The first lesson is that much of what the government does is irrelevant to America.

I pointed out that ordinary Americans don’t notice or care that departments such as Housing and Urban Development are closed because there’s no net value generated by such bureaucracies.

And polling data supports my assertion.

The second lesson is that some parts of government should be shut down permanently.

If people don’t care or notice that a department is temporarily closed, they probably won’t care or notice if it is permanently closed.

I think that message applies to bureaucracies that are affected by the current shutdown (such as HUD and Transportation) as well as to some of the bureaucracies that are unaffected (Education, Energy, Agriculture, etc).

The third lesson is that temporary shutdowns are not a money-saving exercise.

A shutdown does not alter the amount of entitlement spending and it does not change annually appropriated spending. And since bureaucrats always get back pay for their involuntary vacations, there aren’t any savings there, either.

Some argue (see here and here) that a shutdown gives the executive branch unilateral authority to save money. I actually hope that’s true, but I have very little reason to think the Trump Administration is interested in fiscal rectitude.

The fourth lesson is that a busy and productive Congress is a dangerous Congress.

I included the brief blurb by Senator Tillis prior to my interview because I don’t want a “productive” Congress.

I’m not being nihilistic. Instead, I’m making the simple point that America’s Founders had the right idea in creating a factionalism-based system that enables gridlock.

Last but not least, the fifth lesson is that bureaucrats should have less power over economic activity.

I mentioned that there wouldn’t be any threat of disrupted air travel if all airports got to use a privatized version of TSA.

But that’s just one small example. Tim Carney’s column in the Washington Examiner is a must-read on the issue of pointless bureaucratic impediments to commerce.

…the government shutdown is another lesson… Before now, if an out of state brewery issued a new seasonal, you could simply purchase it across state lines thanks to…Form 5100.31 approvals… Of course, if you’re a particularly skeptical type, you may have a question… Why in the world should a brewer need federal approval on new beer labels? Once we ask that question, a thousand analogous questions come to mind. And in the asking, we expose the trick in so many stories about the crucial work of our expansive federal government. The trick is that the government’s work is often made necessary only by needless federal meddling in the first place. …when some reporter tries to tell you to be grateful that the federal government is opening a gate for you, ask them why the wall is there in the first place.

Amen.

This is what I was trying to get across in the interview about business decisions being stymied until some bureaucrats signs off.

Let’s wrap up today’s column with a superb Reason video by John Stossel.

P.S. No column on this topic would be complete without adding to our collection of shutdown humor (h/t: Libertarian Reddit).

You can see other examples of shutdown satire by clicking here, herehere, and here.

Read Full Post »

I’ve previously explained why I don’t have a dog in the current shutdown fight in Washington.

Simply stated, Trump isn’t fighting to make government smaller. Instead he wants more spending for a wall and isn’t even proposing some offsetting reductions to keep the overall burden of government from expanding.

That being said, I get annoyed when defenders of the status quo act as if the economy is in danger simply because a small handful of non-essential bureaucracies and departments are temporarily shuttered.

In addition to the interview with Fox Business, I also pontificated on the same topic for Cheddar, which is a new network covering financial and economic issues.

So why are TV networks bothering to cover this non-story?

Because some people think the partial shutdown does matter. Here are some excerpts from a report by USA Today.

Economists are starting to weigh the potential damage of the ongoing federal government shutdown…if the impasse drags into late January or beyond, it could take a noticeable toll by dampening federal workers’ productivity, temporarily halting their paychecks… The biggest damage could be inflicted on consumer and business confidence that’s already been dented by the recent stock market selloff. …Economist Jesse Edgerton of JPMorgan Chase predicts it could trim growth by a half a percentage point. That’s about how much the 16-day partial government shutdown reduced growth in late 2013.

Sigh.

The people who made up numbers about the alleged harm of the 2013 shutdown are basically the same people who said the sequester would hurt growth. They were wrong then and they are wrong now.

You use a crummy Keynesian model (which presupposes that government spending is good for the economy) and you get predictably nonsensical Keynesian results.

Writing for the American Spectator, Christopher Buskirk has a more sober perspective.

The DC media complex is not happy with the partial shutdown of the federal government. The government shutdown drags into the New Year, they tell us! …Yet for all of the breathless commentary from Beltway media, the reality is that the federal government can’t even shut itself down properly. Only about 25 percent of the federal government is affected. The military is fully funded and on duty, as are Social Security and Medicare. The US Postal Services continues delivering unwanted flyers and coupons, the TSA is fully funded and patting people down, and the Veterans Administration is still providing substandard care to our veterans. …when I turn on the faucet, water still comes out. When I drive to the store, the street lights are still on. In fact, I passed a police officer on the way to get a coffee this morning, so our neighborhood remains safe. So what am I missing? Not much it turns out. And neither is almost anyone else. …what we learned from the shutdown is that…the federal government is mostly non-essential.

Amen.

This is one of the reasons I don’t get agitated about shutdown (at least the ones that occur because someone is fighting for good policy). If we kept parts of the government shut down for a long period of time, maybe people would notice that nothing bad happened and then conclude that it would be a good idea to never let those departments and agencies reopen.

In any event, the focus of fiscal policy should be on shrinking the federal government, not merely a temporary partial shutdown (which doesn’t even save money since bureaucrats eventually get full pay for the days they weren’t in their offices).

Let’s close with a bit of humor I received in my inbox.

You can see other examples of shutdown satire by clicking here.

P.S. As I noted in my interview, the current shakiness of financial markets should be blamed on Trump’s protectionism and the hangover from Keynesian monetary policy.

Read Full Post »

In this interview with Dana Loesch, I make several points about the Trump budget, including the need to reform means-tested entitlements and Obamacare (with a caveat from my Second Theorem of government), as well as some comments on foreign aid and fake budget cuts.

But those are arguments that I make all the time. Today, I want to call attention to the mid-point of the interview when I explain that President Trump is actually in a strong position to get a win, notwithstanding all the rhetoric about his budget being “dead on arrival.”

Simply stated, while he can’t force Congress to enact a bill that reforms entitlements, his veto power means he can stop Congress from appropriating more money that he wants to spend.

But if he wants to win that battle, he needs to be willing to allow a partial government shutdown.

Which he wasn’t willing to let happen when he approved a bad deal a few weeks ago to fund the government for the rest of the 2017 fiscal year.

But we have some good news. He may have learned from that mistake, at least if we take this tweet seriously.

Amen. Trump should be firm and explicitly warn Congress that he will veto any appropriations bill that spends one penny above what he requested in his budget.

And if Congress doesn’t comply, he should use his veto pen and we’ll have a partial shutdown, which basically effects the “non-essential” parts of the federal government that presumably shouldn’t be funded anyhow.

The only way Trump loses that fight is if enough Republicans join with Democrats to override his veto. But that’s unlikely since it is mostly Democrat constituencies (government bureaucrats and other recipients of taxpayer money) who feel the pinch if there’s a partial shutdown.

This is a big reason why, as we saw during the Clinton years, it’s Democrats who begin to cave so long as Republicans don’t preemptively surrender.

The bottom line is that being tough on the budget isn’t just good policy. As Ronald Reagan demonstrated, there are political rewards when you shrink the burden of government and enable faster growth.

P.S. I’m not convinced that Trump actually wants smaller government, but I hope I’m wrong. This upcoming battle will be very revealing about where he really stands.

P.P.S. And if we do have a shutdown fight, I hope it will generate some amusing political humor, such as what’s at the bottom of this post. Other examples of shutdown-related humor can be enjoyed by clicking here, hereherehere, and here.

Read Full Post »

Republicans control the House, the Senate, and the White House.

In theory, that means a long-overdue opportunity to eliminate wasteful programs and cut pork-barrel spending.

In reality, it mostly means business as usual.

Politicians in Washington just reached a deal to fund the government for the rest of the current fiscal year. As reported by the Washington Post, it’s not exactly a victory for libertarians or small-government conservatives.

Democrats are surprised by just how many concessions they extracted in the trillion-dollar deal, considering that Republicans have unified control of government. …Non-defense domestic spending will go up, despite the Trump team’s insistence he wouldn’t let that happen. The president called for $18 billion in cuts. Instead, he’s going to sign a budget with lots of sweeteners that grow the size of government. …the NIH will get a $2 billion boost — on top of the huge increase it got last year. …Planned Parenthood…will continue to receive funding at current levels. …after the deal was reached…, Chuck Schumer and Nancy Pelosi quickly put out celebratory statements. …“Overall, the compromise resembles more of an Obama administration-era budget than a Trump one,” Bloomberg reports. …Reuters: “While Republicans control the House, Senate and White House, Democrats scored … significant victories in the deal.” …Vox: “Conservatives got almost nothing they wanted.”

I guess you could call this a triumph of “public choice” over campaign rhetoric. Politicians did what’s in the best interest of politicians rather than what would be best for the nation.

I’m disappointed, as you might expect. But as I say in this interview, there are far more important battles. I’ll gladly accept a bit of pork and profligacy in the 2017 budget if that clears the decks for much-needed repeal of Obamacare and long-overdue reform of the tax code.

But here’s the catch. I don’t expect that these reforms will actually happen. Yes, the deck has been cleared, but I don’t think Republicans will take advantage of the opportunity.

The fundamental problem, which I pointed out in a different interview, is that there’s not a governing majority for smaller government. And that has some very grim implications.

Even more depressing, I point out that only Trump has the power to turn things around. Yet I see very little evidence that he, a) believes in smaller government, or b) is willing to expend any political capital to achieve smaller government.

To make matters worse, Republicans have convinced themselves that they lose the spin battle whenever there is a shutdown or some other high-stakes fiscal fight with Democrats.

For what it’s worth, I’m trying to remind Republicans that it is in their long-run political interests to do the right thing (as Reagan demonstrated). That’s why, in the first interview, I said they need to gut Obamacare and lower taxes if they want to do well in the 2018 and 2020 elections.

But don’t hold your breath waiting for the “stupid party” to behave intelligently.

Read Full Post »

I’m normally a big fan of shutting down the government and I’ve tried to convince timid lawmakers that shutdown fights can be worthwhile.

The bottom line is that nothing really bad happens when there’s a shutdown (notwithstanding petty efforts by bureaucrats) for the simple reasons that only “non-essential” parts of the bureaucracy actually get closed. In other words, a government shutdown in all cases is simply a partial shutdown.

And since I don’t favor any funding of non-essential functions, I view a partial shutdown as a good start. Indeed, while the various interest groups in DC hyperventilate about supposed disaster, I experience a feeling of joy and serenity (as illustrated by this modified cartoon, which originally was altered to show my reaction to sequestration).

As far as I’m concerned, the key lesson from shutdown fights is that our nation will be better off if bureaucracies such as the Department of Housing and Urban Development or Department of Education are permanently shuttered. And let’s add the Department of Energy, Department of Transportation, and Department of Agriculture just for the fun of it.

These entities shouldn’t get short-run funding or long-run funding.

That’s the point I made in the second half of this recent interview on Fox Business.

I’m not the only person who likes the idea of a partial shutdown.

Writing for the Resurgent, Erick Erickson explains how a shutdown fight would be valuable.

Americans need to be reminded that the world will not end if the government shuts down. They need to be reminded to take care of themselves instead of relying on Uncle Sam’s teet. A government shutdown with the GOP in charge would be a far different thing from a government shutdown run by Democrats. President Obama tried to inflict maximum pain on the American people to force the GOP to reopen government. President Trump, instead, could take a different approach and use the experience to show Americans how out of control government has really gotten.

And Larry Kudlow had a similar message in a column for National Review back in 2015.

…sometimes you have to make a point. Send a message. Show voters what you really believe. Take a stand. …Most of the Beltway media will blame Republicans. Democrats will blame Republicans. And GOP pundits will blame Republicans. Political death, they will say. Really? …during the Reagan-O’Neill era, most of the shutdowns were budget focused. Reagan wanted less spending; the Democrats wanted more. …The Reagan-O’Neill-era shutdowns were short, and in most of them Reagan prevailed. Meanwhile, the Reagan recovery flourished, the Republicans held the Senate (until 1986), and the Gipper was reelected in a landslide in 1984. Going back to the Obamacare-related shutdown of 2013, a bit more than a year later the Republicans swept the Senate and gained an even larger majority in the House. …shutdowns are a cumbersome way to make a point. …But perhaps Republican leadership in both Houses might think of this: There are too many deals and not enough principles, beliefs, and clear messaging.

Having now provided all this evidence in favor of government shutdowns, you would think I’m excited about the possibility that there will be a partial shutdown this Saturday when a temporary funding bill expires.

Unfortunately, that’s not the case. I view shutdown as a means to an end. I want those fights to occur in hopes that there will be reforms that shrink the overall burden of government spending.

In this case, though, the shutdown fight largely revolves around President Trump’s request for money to build part of a wall between Mexico and the United States. Some people think that’s a good idea and others think it’s a bad idea, but the one thing I can say with certainty is that it’s not a money-saving idea. Even if Trump wanted to finance the wall by reducing outlays in other parts of the budget, the net result would not be smaller government.

The bottom line is that even though I almost always cheer for a government shutdown, I’ll be sitting on the sidelines for this fight.

But if Trump and congressional Republicans at some point decide to fight for much-needed spending restraint (a naive hope, I realize), then I’ll be the first to cheer if that battle leads to a shutdown.

P.S. My favorite bit of shutdown humor is at the bottom of this post, and other examples of shutdown-related humor can be enjoyed by clicking here, hereherehere, and here.

Read Full Post »

Does Donald Trump have a consistent and coherent set of economic policies?

He sometimes says things indicating that he understands Washington is a cesspool of waste. But on other occasions, he seems to be singing off the same song sheet as Bernie Sanders.

Which is why, when I recently tried to dissect Trumponomics, I admitted to being clueless.

The honest answer is that I don’t know. He has put forth a giant tax cut that is reasonably well designed, so that implies more prosperity, but is he serious about the plan? And does he have a plan for the concomitant spending reforms needed to make his tax proposal viable? He also has lots of protectionist rhetoric, including a proposal for a 45 percent tax on Chinese products, which implies harmful dislocation to the American economy. Is he actually serious about risking a global trade war, or is his saber rattling just a negotiating tool, as some of his defenders claim?

For what it’s worth, I’m getting more skeptical that Trump would try to restrain and limit the federal government if he got elected.

And I have three recent news reports to underscore my concern.

Here’s a very disturbing example. Trump actually criticized Governor Scott Walker of Wisconsin for not raising taxes. Here’s an excerpt from a report in the U.K.-based Guardian.

Donald Trump attacked Wisconsin governor Scott Walker for failing to raise taxes in order to properly fund schools and roads on Tuesday, in a startling new break from rightwing orthodoxy… “There’s a $2.2bn deficit and the schools were going begging and everything was going begging because he didn’t want to raise taxes ’cause he was going to run for president,” said Trump. “So instead of raising taxes, he cut back on schools, he cut back on highways, he cut back on a lot of things.”

To dig deeper into the issue, Governor Walker had just endorsed Ted Cruz, so I can understand why Trump would try to take a few shots at someone who is supporting a rival for the GOP nomination.

But attacking the Wisconsin governor for successfully balancing his state’s budget without a tax hike? Sounds more like something Hillary would say. Maybe it’s time to induct Trump into the Charlie Brown Club.

Trump also doesn’t like federalism. Assuming he even knows what it is. In his column for the Washington Post, Professor Jonathan Adler shares some Q&A from a recent CNN interview with Trump.

QUESTION:  In your opinion, what are the top three functions of the United States government?

TRUMP:  Well, the greatest function of all by far is security for our nation.  I would also say health care, I would also say education.

This doesn’t sound like a candidate who wants to reduce the federal government’s footprint.

Here’s more of the interview.

COOPER:  So in terms of federal government role, you’re saying security, but you also say health care and education should be provided by the federal government?

TRUMP:  Well, those are two of the things.  Yes, sure.  I mean, there are obviously many things, housing, providing great neighborhoods…

Huh, providing “great neighborhoods” is now a legitimate function of the federal government?!? I guess if Washington gets to be involved with underwear, neighborhood policy is just fine.

And why is he talking about education when the goal should be to eliminate the Department of Education?

To be fair, Trump also said in the interview that he wants to get rid of Common Core.  So it’s unclear what he actually envisions.

His answer on healthcare is similarly hazy.

COOPER:  And federal health care run by the federal government?

TRUMP:  Health care – we need health care for our people.  We need a good – Obamacare is a disaster.  It’s proven to be…

COOPER:  But is that something the federal government should be doing?

TRUMP:  The government can lead it.

So he wants the federal government involved, but he also thinks Obamacare is a “disaster.” I certainly agree about the Obamacare part, but once again we’re left with no idea whether a President Trump would make good reforms of bad reforms (i.e., would he move the “health care freedom meter” in the right direction or wrong direction?).

One thing that is clear, however, is that Trump doesn’t seem to have any core principles about the size and scope of the federal government.

He may not even realize that federalism is a key issue for advocates of limited and constitutional government.

Last but not least, Trump criticized Senator Cruz for the partial government shutdown fight that occurred in 2013. Here are some passages from a report by Byron York in the Washington Examiner.

When Trump did get around to Cruz, his critique focused…on the 2013 partial government shutdown. …He goes and he stands on the floor of the Senate for a day and a half and he filibusters …. To stand there and to rant and rave for two days and to show people you can filibuster — and in the meantime, nothing was accomplished.

I guess this isn’t an issue of underlying principles, but it does give us some idea of whether a President Trump would be willing to fight the Washington establishment.

Moreover, his assessment of the shutdown fight is completely wrong. By reminding voters that Republicans were opposed to Obamacare, the GOP won a landslide victory in 2014.

But you don’t have to believe me. Even an ultra-establishment, anti-Cruz figure like Trent Lott (former senator and now lobbyist) grudgingly admits that the shutdown was a success.

Cruz views the shutdown as a victory because the Affordable Care Act remains unpopular and Republicans swept to victory in 2014. Lott said…“That was their strategy, and it worked, so maybe they’re right and I’m wrong.”

The bottom line is that America is heading in the wrong direction, with Washington projected to consume ever-larger amounts of the economy’s output. This is a recipe for continued economic weakness in the short run and economic crisis in the long run.

Turning policy in the right direction requires a principled President who is fully committed to overcoming resistance from the special interests that dominate Washington’s culture.

I still don’t pretend to know where Donald Trump is on the big issues, but I’m not holding my breath for good results if he somehow gets elected.

P.S. Though I do expect more examples of clever political humor the longer he’s in the public eye.

Read Full Post »

Older Posts »

%d bloggers like this: