Freedom Line Blog

So the government reported tepid 2.5% gross domestic product (GDP) third quarter growth yesterday, and the market celebration it triggered says a lot about the bleak nature of the Obama economy.

First of all, that reading fell below consensus expectations of 2.7% growth.  Second, 2.5% falls almost a full percentage point below the post-war historical average of 3.3% quarterly growth.  Third, GDP should be growing even faster than that 3.3% long-term average during a period of so-called “recovery” – recall that the most recent recession officially ended nine quarters ago in June 2009.  At a similar point during the Reagan recovery in 1984, GDP grew at a 7.1% rate following consecutive quarters of 9.3%, 8.1%, 8.5% and 8.0% growth.  And at the same point during the Bush recovery from the Clinton/Gore tech bubble downturn and 9/11, GDP grew 3.7% following a previous quarter of 6.7% growth.  Fourth, 2.5% growth is insufficient to significantly improve the nation’s festering unemployment problem.

A 2.5% rate certainly beats the 0.4% and 1.3% readings for the preceding two quarters of 2011, but America’s desperate need for new economic leadership becomes clear when such a lackluster result is seen as “good” news.

In our commentary this week entitled “While Federal Spending Hit New Record in 2011, Washington, D.C. Became America’s Wealthiest City”, we highlight the interrelation between federal spending reaching a new record high in 2011 and the Washington, D.C. metropolitan area becoming the nation’s wealthiest.   Among other facts, we pointed out that wages of federal employees themselves are over 1/5 higher than comparable private-sector employees, and that federal benefits stand 20%-40% higher than those of private counterparts.

Today, Senators Jeff Sessions and Olympia Snowe sustain our point in their commentary within The Wall Street Journal entitled “An End to Budgetary Trickery.”  Advocating the Honest Budget Act they’ve introduced to end “the most blatant and dishonest” overspending gimmicks, they highlight “Fake Federal Pay Freezes”:

In November 2010, the president promised to institute a ‘two-year pay freeze for all civilian federal workers.’  He explained that ‘getting this deficit under control is going to require broad sacrifice.’  But 70% of civilian federal workers have continued to receive 2%-3% automatic ‘step’ increases just for showing up – costing taxpayers an extra billion dollars every year.  The Honest Budget Act, in keeping with the president’s pledge, would simply make the federal pay freeze real by legislative mandate.”

Senators Sessions and Snowe also seek to end false “emergency” spending, phony “rescissions” and timing shifts in their legislation.  As they summarize, “No more gimmicks, tricks or shell games.”  We agree, and urge you to take a quick moment to contact your two Senators in support of the Honest Budget Act.   Let’s get this done.

The Canadian Press reports that its government will hire consultants from Deloitte Inc. to devise ways to reduce annual spending by $4 billion by next March.  Cost of the contract: $19.8 million.

Here’s the Conservative government’s response to those badgering it for spending $90,000 a day to reduce spending:

A spokeswoman for Clement defended the contract, saying Ottawa needs the best advice available for reducing costs.

“Engaging private sector advisers who have been successful with cost-saving operational reviews will better enable ministers and deputy heads not only to compile their individual cost-savings proposals but also to provide practical advice on what to look for and how to execute their plans,” press secretary Heather Hume said in an email.

“As always, our government is committed to maintaining an open, fair and transparent procurement process while obtaining the best possible value for Canadians.”

If President Barack Obama and Congress are so willing to set aside the normal constitutional processes for writing budgets and tax policies (as evidenced by the creation of the congressional ‘supercommittee’ charged with finding $1.5 trillion in savings by Thanksgiving), why not go all the way and let experts in the private sector scrub the books and find the savings?

Even for Barack Obama’s supporters, this has to be getting old.

Today, responding to a question about an American economy still struggling after almost three years of deficit-driven Obama “stimulation,” he went back to the “Bush Card” with radio host Tom Joyner:

George Bush left us with a $1 trillion deficit, so it’s a lot harder to climb out of this hole when we don’t have a lot of money in the federal coffers.”

There are several problems with President Alibi’s rationalization.  Among other things, (1) the recession officially ended all the way back in June 2009, (2) the money in those “federal coffers” to which he refers actually reached an all-time high under Bush in 2007 (several years after the Bush tax cuts and well into the Iraq and Afghan wars that Obama now scapegoats) and (3) nothing seems to have stopped him so far from spending trillions of dollars that we don’t have.

But forget about those realities for a moment.  On a more basic moral level, what does it say about Obama as a man that this is what he continues to offer the nation to justify his performance and his request for a job extension?

Byron York eviscerates the common liberal meme that former President George W. Bush was worse on spending and taxes than President Barack Obama.  After showing that Bush’s tax cuts increased federal revenues and shrank deficits while Obama has increased the national debt at twice Bush’s pace, York ends with a resounding rebuke of the common “eight years of Republican rule” canard.

None of this is to say that George W. Bush had a good record on spending. He didn’t, and he’s fair game for criticism. But is it honest to condemn reckless spending in “eight years of Republican rule” when Democrats controlled the Senate for four of those years and the House for two? Is it honest to talk about the “cost” of the Bush tax cuts when federal revenues increased significantly while they were in effect? And is it honest to refer to Bush’s ballooning deficits when deficits actually trended down for much of his presidency — at least before Democrats won control of Congress?

Of course Obama partisans would like to pin the president’s troubles on Bush. But they should get their facts straight first.

Dan Walters, the dean of California political journalists, is sounding the alarm over a series of moves by the state’s Democratic machine to restrict conservative access to statewide ballot initiatives.

As California Democrats see it, conservatives are poised to unleash a torrent of ballot measures to rein in government spending and regulations, as the state continues to suffer double-digit unemployment and annual budget deficits.  With Democrats controlling all levers of government, there’s only one area where their tax-and-spend liberalism could be challenged: at the ballot box.

To eliminate that threat, Democrats in and outside government are pushing to criminalize paying signature gatherers per name collected, and issuing radio ads linking petition-signing with identity theft.  Last week, Democratic Governor Jerry Brown vetoed the criminalization measure, but others are waiting the wings.

The motivation behind the Democrats’ ploy is protecting the public employee union members who live off legislative largesse, be it sweetheart pension deals, deferred compensation, or over-generous overtime pay.

With Californians waking up to the fact that economic growth isn’t possible without serious reforms, it’s becoming clearer by the day that the liberal Democrats running the state are not governing in the taxpayer’s best interest.  So to the statist’s mind, it’s far better to cut off debate than face reality.

Lanny Davis, former special counsel to President Bill Clinton, writes in TheHill that the “Penny Plan” by Rep. Connie Mack (R-FL) is a “simple and creative” way to balance the budget.

…since the “balanced” solution of both increased revenues and spending cuts is supported in virtually every poll by substantial majorities of all voters, including large numbers of Republicans, Democrats need to find a spending cut formula that they can live with. The Mack Penny Plan seems a good place to start — it is simple, it makes common sense, and with some adjustments protecting the poor and the unemployed, it could be seen as fair even to many of the most liberal Democrats.

Ignoring Davis’ call to undermine the elegance of Mack’s Penny Plan by creating vague exceptions for the poor and unemployed – as I wrote recently, the attraction of Mack’s plan is its uniform treatment of all budget items – it’s welcome news that a high-ranking Clintonista can sense good policy when he sees it.

Earlier in his column Davis warned his fellow liberals that it would be “a moral stain on our generation if we leave this red-ink legacy for generations to come to deal with.”

Davis is right.  Let’s hope he urges his fellow Democrats to back Mack’s Penny Plan so we can get on the road to fiscal solvency as soon as possible.

Annette Meeks, CEO of the Freedom Foundation of Minnesota, offers this damning editorial of Democratic Governor Mark Dayton’s decision to shut down the state’s government rather than sign a balanced budget without tax increases.

Among the bevy of withering arguments against Dayton’s action, Meeks points out that the budget passed by the legislature actually increased state spending by 6 percent while filling a $5 billion deficit.  The problem for Dayton: no soak-the-rich “millionaires’ tax.”

Like President Barack Obama with the nation’s debt ceiling, Governor Dayton is playing a dangerous game for the sake of fiscal discrimination.  Moreover, Dayton is unwilling to consider the state equivalent of a continuing budget resolution.

I’ll give Meeks the last word:

Last week, Republican legislative leaders, in a desperate move to stave off closing the government, proposed a “lights on” budget resolution that would have allowed services to continue while negotiations continued. In a crass, cynical move, Dayton rejected this good-natured offer.

We are here for one reason — Dayton. He insists upon inflicting as much pain as possible for state residents and government employees. And he is doing this so that the Legislature will bend to his will and raise income taxes, launching Minnesota into the stratosphere of high income taxes.

There are certain principles worth fighting for. Preserving a sound economic future for our state is one of those things.

Remember the wasteful duplicate engine for the F-35 Joint Strike Figher that just wouldn’t die?

Or, more accurately, that appropriators refused to let die?

Pratt & Whitney won the contract to produce the F-35 engine fair and square.  But forces in Congress continued to promote a wasteful alternative version developed by General Electric/Rolls-Royce.  The Pentagon doesn’t want the duplicate engine.  The Senate voted it down.  The House voted it down.  The Bush White House sought to stop it.  Even the infamously spendthrift Obama White House has sought to stop it.

Most recently, General Electric/Rolls-Royce claimed to offer to “self-fund” development of the duplicate engine for the next few years.  The problem is that “self-funding” is a scheme to eventually place American taxpayers on the hook at a later date.  That is the conclusion of none other than Ashton Carter, Defense Department Under Secretary for Acquisition, Technology and Logistics.  Responding to an inquiry from Senator Joe Lieberman, Carter confirmed that allowing the duplicate engine to continue would eventually mean government funding:

Regarding ‘self-funding,’ as you know, the Department estimates that developing the F136 engine and preparing it for completion would cost $480 million in Fiscal Year 2012 and would take six years and $2.9 billion to complete.  Unless this full expense is covered by the F136 contractor, the ‘self-funded’ effort would simply be a means to reestablish government funding for development of the F136 at a later date.  Furthermore, in order to ensure that the engine was truly self-funded by the contractor, Section 252 would need to state that any and all costs associated with the further development of the F136 engine and preparation for competition would be unrecoverable directly or indirectly in any present (via overhead charges) or future contract with the US Government.  This would extend the prohibition against the Government paying for the support or use of the Government’s property to the contractor’s costs for developing the F136 engine and preparing it for completion.

The Department appreciates your support for the JSF program and your interest in ensuring its success.  It is our firm view that Sections 215 and 252 would significantly impede this objective.”

The F-35 Joint Strike Fighter will help ensure American air superiority into the future, but it is also the largest acquisition program in Defense Department history.  We simply cannot afford to let the wasteful duplicate engine proposal to continue jeopardizing the program’s vitality and cost-efficiency.

Yesterday, Ezra Klein of the Washington Post listed five hardball questions he’d like to hear answered by President Barack Obama:

1. You have repeatedly lauded the economy of the Clinton years, yet in a time of high and mounting deficits, you want to make most of the Bush tax cuts permanent. Economically speaking, what makes you believe the Clinton-era tax rates are too high?

2. During the 2008 campaign, you pledged never to raise taxes on any families making less than $250,000 a year. The excise tax on high-value health insurance plans, which you supported as part of health-care reform, did raise taxes on families making less than $250,000 a year. If you’re going to raise almost a trillion dollars by cutting and capping expenditures, as your budget proposes, that will also affect families making less than $250,000. When will you admit that fiscal responsibility requires tax increases on families who aren’t rich?

3. Your budget empowers the Independent Payment Advisory Board to push Medicare toward value-based purchasing designs. But it doesn’t empower the board to experiment with benefit design more broadly, or any form of cost sharing. The committee’s powers remain mostly restricted to payment reforms. Why?

4. The main differences between your budget and the Simpson-Bowles report is that your budget raises less in taxes and cuts less in defense spending. Why were those decisions made?

5. You’ve talked frequently about the need to “win the future” through new investments and initiatives. But unlike the budgets proposed by the House Progressives or Andy Stern or EPI, Demos and the Century Foundation, there’s nothing in your budget that specifically commits to any such investments, nor any particular funding source dedicated to them. If these investments are so important, why not build them into your budget? Why accept the framework that this discussion should be entirely about cuts?

The day before, Klein listed eight thoughtful questions to House Budget Committee Chairman Paul Ryan about the latter’s health care reform.

Responses to each set of queries would be greatly beneficial to Americans trying to sort out whether each man’s plan passes the logic and laugh tests.  After hosting several town hall meetings about his budget reforms, Ryan seems eager to go point-by-point.  The president and his entourage; not so much.

This morning, the Labor Department announced that first-time unemployment claims rose again, from 414,000 last week to 424,000 this week.

As demonstrated by this Labor Department graph, weekly unemployment claims average approximately 300,000 during periods of economic normalcy.  One year ago, the number stood at 463,000 when the Obama Administration proclaimed the arrival of the “Recovery Summer,” yet it never dipped below 400,000 for the remainder of 2010.  We finally dipped into the high 300,000 range in February of this year – still an elevated level – but the number climbed back to 478,000 last month.

This is the Obama “stimulus,” over two years and $1 trillion of government spending later.

An editorial in today’s Stockton Record crystallizes one of the reasons California is facing a $20 billion deficit: it has no master list of state-funded commissions and boards.

Per the Record:

…apparently no one really knows how many are out there although 300 is the number most often cited. A 1989 report by the Little Hoover Commission put it at 400. More recently, the California Performance Review evaluated 339 state boards and commissions. Others have put the number as high as 1,000.

How much they’re costing also is unknown, although getting rid of the 37 panels Brown has targeted would save about $10 million. Admittedly, that’s a drop in the proverbial state budget bucket, but do the math, and if 37 panels are costing us $10 million, what are all of them costing?

And lest anyone think this scandal isn’t bipartisan:

When he swept into office, Gov. Arnold Schwarzenegger vowed to dismantle the forest of boards and commissions that had grown like weeds in state government. That led to the creation of another panel to review government operations.

Among the panel’s findings: “These entities are so scattered and numerous across government that arriving at a firm number is nearly impossible. In our search, there was no single source we could turn to find out which commissions existed and why. In fact, state government has no master list of all boards and commissions and the thousands of political appointees that populate them.”

Incredible.

Indeed.

City Journal has a piece by Pacific Research Institute’s Steve Greenhut praising the California Assembly’s GOP leadership for proposing a series of small fixes that would result in dramatic savings for the state budget:

But much more encouraging is that the Republican plan suggests how simple reforms can save serious dollars. Take the provision of medical care for prison inmates. According to the Assembly GOP’s budget white paper, “The cost of providing health care to state prisoners has been the fastest growing part of the corrections budget. After the [federal] receiver took control of the system in 2006, medical costs skyrocketed. They reached $2.5 billion a year, including mental health care. The cost of health care for each inmate per year in California is approximately $11,600, while prison healthcare costs $5,757 in New York; $4,720 in Florida; $4,418 in Pennsylvania; and $2,920 in Texas. While costs have increased dramatically, it has not improved the quality of care enough to take the system out of federal court receivership.” Under the Republican plan, the state would contract out the correctional health-care system, saving $400 million. But that would mean taking on the powerful California Correctional Peace Officers Association, the prison-guard union that just won an absurdly generous contract from the governor.

Other budget cuts in the Republican blueprint include $3.7 billion from programs related to early childhood, mental health, the poor, and the elderly, as well as $1.1 billion from the state payroll. The plan also includes $2.8 billion in other savings from a bill that has already passed the Assembly but hasn’t become law. It doesn’t go far enough toward addressing the size and scope of California’s government, since the state faces even bigger fiscal problems down the road. But Republicans have made their point: California can fix at least its short-term budget problem if Democrats truly want to.

The Assembly GOP’s white paper on their budget proposal balances the state’s remaining $15 billion budget deficit without raising taxes.  Greenhut points out that although the proposal doesn’t fix the structural issues plaguing California’s chronically dysfunctional governing process, it does show that there are at least a few Republicans able to offer a serious solution to the state’s most troubling problem.

Rasmussen Reports says that 40% of Americans are still undecided on whether to support the “Path to Prosperity” budget plan by Rep. Paul Ryan (R-WI).  CFIF strongly endorses the House Budget Committee Chairman’s attempt to rein in federal spending, while giving Medicare beneficiaries more choices in their health care decisions.

According to the poll, 26% of likely voters support Ryan’s plan, while 34% oppose it.  That leaves 40% who still don’t know enough about Ryan’s proposal to have an opinion.

The liberal media is already waging a misinformation campaign against Ryan and other sensible fiscal conservatives.  For a primer on the “Path to Prosperity” go here.

In order to change the culture in Washington, voters need to change the terms of the debate.  Educating yourself and others on Ryan’s plan gives fiscal conservatives the ammunition they need to win the hearts and minds of the 40% still undecided.

Mark Steyn puts federal spending into yet another helpful perspective:

Under the 2011 budget, every hour of every day the government of the United States spends a fifth of a billion dollars it doesn’t have.

Your (future) tax dollars at work.

Here’s more encouraging news:  Americans are “getting it” on the issue of federal deficits and debt.  According to a new Gallup survey, an overwhelming 73% to 22% majority blames excess spending for the deficit, not insufficient taxation.  Barack Obama and his liberal apologists seek to blame “tax cuts for the rich” and insufficient revenues as the problem.  But as illustrated by the Heritage Foundation’s newly-released 2011 Budget Chart Book, our budget would still be approximately balanced if spending merely returned to early 2000s levels.  Does any serious person contend that government was too small in the first half of the 2000s, that government didn’t spend enough, that the poor and hungry were somehow cast out on the cold streets, that bureaucrats went unpaid?  Of course not.  The problem is explosive spending growth.  Obama oversaw an 84% increase in domestic discretionary spending, including his failed “stimulus,” in just his first two years.

Fortunately, Americans see through his attempt to demand even more taxpayer dollars to feed the insatiable leviathan he hopes to enlarge.

Although the campaign for America’s fiscal survival continues, it is important to recognize battle victories along the way.

CFIF has participated in the effort to stop the duplicative, unnecessary and wasteful second engine for the new F-35 Joint Strike Fighter that refused to die.  Pratt & Whitney was awarded production of the F-35 engine, but forces in Congress perpetuated the wasteful General Electric/Rolls-Royce second engine.  The Pentagon doesn’t want it.  The Senate has voted it down.  The House has voted it down.  The Bush White House sought to stop it.  The Obama White House has sought to stop it.

Unfortunately, the second engine project rambled on at a cost to taxpayers of $1 million per day, because of Beltway pork-barrel political forces and the previous Congress’s failure to even pass a 2011 budget.

But at long last, the Defense Department this week instructed G.E. and Rolls Royce that the second engine contract has been terminated.  This is progress.

Byron York of the Washington Examiner says that although many Republicans will be tempted to let the debt ceiling debate go down to the wire, most of them will eventually vote to raise it.

The bottom line is, the debt ceiling issue won’t be settled before an extended game of chicken, one in which Republicans will undoubtedly win some concessions but will, in the end, have to give in.

With the Tea Party still licking its wounds after a much less-than-expected cut in current federal spending, don’t be surprised if raising the debt ceiling becomes the issue upon which many activists base their support for Republican members of Congress.

Observers like Charles Krauthammer are correct:  Barack Obama’s partisan budget attack this week was a “disgrace.”  Almost every sentence was tawdry, caustic or simply dishonest.

One suggestion early in Obama’s speech stood out because it is so easily refuted by simple numbers.  Namely, his latest attempt to scapegoat the Bush Administration and portray his own record deficits as somehow attributable to it:

We increased spending dramatically for two wars and an expensive prescription drug program -– but we didn’t pay for any of this new spending.  Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts -– tax cuts that went to every millionaire and billionaire in the country; tax cuts that will force us to borrow an average of $500 billion every year over the next decade.  To give you an idea of how much damage this caused to our nation’s checkbook, consider this:  In the last decade, if we had simply found a way to pay for the tax cuts and the prescription drug benefit, our deficit would currently be at low historical levels in the coming years.”

But take a look at the actual historical deficit data, with particular attention to 2007, which was the last year under a Republican Congress and White House.  That year’s deficit came in at $161 billion, which is one-tenth the size of Obama’s projected record $1.65 trillion 2011 deficit.  That 2007 deficit was also down from $378 billion in 2003, when the tax cuts, Iraq invasion and drug benefit occurred.  In his usual straw-man manner of argumentation, Obama mocked those who claim we can reduce our debt by eliminating “waste, fraud and abuse,” but what better way to characterize his latest un-presidential harangue?

Roll Call reports deposed congressman Alan Grayson (D-FL) sent out a characteristically inflammatory email to supporters yesterday accusing Republican budget cutters of murder:

Grayson complained in his email that Republican budget cuts would “kill” 70,000 children by cutting immunization programs that could put children at risk. Of course, Grayson became infamous for extreme rhetoric in general and specifically for suggesting the GOP health care plan was for citizens to “die quickly.”

“I would very much prefer to see these children alive,” Grayson wrote.

The voters of Florida’s 8^th District mercifully substituted state legislator Daniel Webster for the toxic Grayson.  If the latter gives Orlando residents another chance, let’s hope they make the same decision in 2012.