Archive

Posts Tagged ‘entitlements’
September 9th, 2013 at 6:09 pm
Ramirez Cartoon: The Entitlement Nation
Posted by CFIF Staff Print

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

January 9th, 2013 at 1:50 pm
Amend Budget Act, Not Constitution to Cut Spending?

Here at CFIF we’ve promoted the idea of a Balanced Budget Amendment to the U.S. Constitution that would require Congress to pass balanced budgets every year with certain 60 percent supermajority thresholds for raising taxes or the debt ceiling.

The idea comes with a stellar pedigree since conservative icons like Ronald Reagan, Jack Kemp, and the Contract with America all supported various Balanced Budget Amendments.

Alas, the BBA has yet to become law, and with the current lineup of liberals running the U.S. Senate and White House, it will be awhile before such an idea can be seriously discussed in Washington.

That said, Byron York says that Republicans might have an opening in the coming fight over raising the debt ceiling to get closer to a balanced budget; albeit by amending a statute, not the Constitution.

On its face, the Congressional Budget Act of 1974 sets out a clear deadline for passing a budget by April 15 every year.  The problem, however, is that there is no enforcement mechanism to punish Congress if it fails to do so.  With Harry Reid (D-NV) and Senate Democrats failing to pass a budget for the last 1,351 days as of today, the budget law’s impotency is on full display.

York reports:

“The law doesn’t have teeth,” says a Senate aide involved in the fight.  “Sen. Sessions and others have proposed process reforms to give the budget law teeth (one reform would make it harder to pass spending bills without a budget), but the debt ceiling is the strongest leverage we have on this. This is the opportunity.”

In other words, it is precisely because the budget law has no enforcement provision that Republicans believe they need some other form of leverage, in this case the debt ceiling deadline, to force Reid and his fellow Democrats to move.  In addition, whatever happens in the debt ceiling standoff, it seems clear that the original budget law should be amended to include some sort of enforcement method.

This strategy strikes me as a great way to get real value in return for raising the nation’s debt ceiling.  Imagine how much different Obama’s first term would have been if instead of ignoring the House Republicans’ Paul Ryan-inspired budgets, the President and Senate Democrats had to negotiate its terms up against a hard deadline.  Liberals would have been forced to debate conservatives on specifics instead of substituting scare tactics for policy.

So far, Republicans have said they want entitlement reform in exchange for upping the ceiling, and for good reason since spending on Social Security, Medicare, and Medicaid alone account for about 44 percent of the federal budget (other entitlements push the total to 62 percent).  Moreover, since entitlement spending is not discretionary, meaning it isn’t determined in the normal appropriations process but by eligibility formulas, reining in federal spending will require statutory changes that can only be gotten when the stakes are very high.

But if York is right, then Republican strategists would be wise to include changes to the Congressional Budget Act along with spending reforms to entitlements.  Winning both would improve the nation’s long-term fiscal outlook by helping conservatives change the way Washington does business.

December 22nd, 2012 at 3:36 pm
Silver Linings to Fiscal Cliff-Diving?

Avik Roy:

…despite all of the dramatic hyperbole about the “fiscal cliff,” it’s important to remember that going over the fiscal cliff will reduce the budget deficit by $503 billion in 2013, and $682 billion in 2014, relative to the “solutions” being bandied about on Capitol Hill.

Moreover, since President Barack Obama and his fellow liberals in Congress refuse to link tax increases with entitlement reform, perhaps it’s better to go over the fiscal cliff than accede to some tax increases and no reforms.  At least then Obama & Co. would own the tax-and-spending system their intransigence created.

November 12th, 2012 at 1:39 pm
After Immigration Reform, Then What?

Peter Beinart says the GOP’s “Hispanic problem” is about more than just immigration reform and competing forms of amnesty:

Hispanics do feel that the economic system is “stacked against them” and they do “want stuff” like health care, college-tuition assistance, and other government benefits that might help them get ahead. According to Pew, while only 41 percent of Americans as a whole say they want a bigger government that provides more services, a whopping 75 percent of Hispanics do.

Food for thought for those thinking Marco Rubio’s version of the DREAM Act or another legal quick fix will suddenly flip Hispanics from Democrats to Republicans.

May 16th, 2012 at 9:18 am
Ramirez Cartoon: Julia, the Uninvited House Guest
Posted by CFIF Staff Print

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

April 13th, 2012 at 1:43 pm
How Demographics Affect Defense Spending

The Daily Caller profiles a new book, Population Decline and the Remaking of Great Power Politics, that explains why aging and shrinking populations in China, Japan, and Europe will dramatically alter American foreign policy.

Some of the book’s findings are startling:

  • By the end of this decade India will surpass China as the most populous nation.
  • Japan will lose 1 million people a year by 2060, contracting from 127 million to less than 87 million.
  • Europe’s expensive social welfare model and aging populations will increasingly spur governments to scale back military spending in order to fund burgeoning entitlement program.
  • Even though America’s current rate of replacing itself gives it a demographic advantage, unless serious reforms are instituted to entitlement spending, it too will continue to cut military expenditures to pay for rapidly expanding benefits for the elderly.

India surpassing China means that democracy – not a communist-controlled autocracy – will be the government adopted by the most populous country on Earth.  It may also encourage the United States and India to forge a closer strategic partnership around shared values to check China’s ambitions.

And of course, we’ve already seen how the European model of heavy on services, light on defense is making the region – though not a few individual countries – increasingly irrelevant when it comes to making the world safe.

In his budgets, President Barack Obama has chosen to increase spending on entitlements and gut defense, arguing like a European that multilateral institutions such as the United Nations and NATO can accomplish more than any one nation.

Paul Ryan highlighted this danger in his latest budget proposal, “The Path to Prosperity: A Blueprint for American Renewal.”  In it, he faults President Obama for cutting $500 billion from the Defense Department instead of making the changes needed to entitlements so that Americans can be protected both at home and abroad.

Americans need not accept decline through badly prioritized budgets.  Instead, using innovative entitlement reforms like the ones in Ryan’s Path to Prosperity, we can have sustainable entitlement programs and a robust defense.

We’ve got the people.  Now we need to implement the right policies.

November 30th, 2011 at 4:33 pm
GOP Offering to Trade Federal Pay Freeze for Payroll Tax Cut Extension
Posted by Troy Senik Print

With the end of the year only about a month away, Republicans on Capitol Hill are stuck in a bit of a quandary. Under current law, the dawning of 2012 will bring with it the expiration of the payroll tax cuts passed last year, which dropped employee rates from 6.2 to 4.2 percent.

As I’ve written before, the payroll tax cuts get you less bang for your buck than virtually any alternative. The  savings for an average American are about $40 per paycheck — not nothing, but certainly not enough for even the most dyed-in-the-wool Keynesian to think aggregate demand will shift, particularly because the program’s temporary nature means that it is not altering long-term plans. Also, remember that the payroll tax is there to finance Social Security and Medicare, so pulling money out of those accounts only hastens the day of fiscal reckoning for both of those programs. Finally, there’s the fact that there’s only a cut to the employee’s chunk of the payroll tax, not the employer’s. That means it does absolutely nothing to galvanize hiring.

Savvy congressional Republicans have made these points, but voting to end the break would put them in the unusual position of defending an increase in taxes at a time of extreme economic weakness. While the payroll rate will eventually have to return to the status quo, the GOP is thus stuck looking for something to plug the hole in in the interim.

Kudos, then, to the Republican leadership, who, according to Politico, are looking to pay for the continued tax break by extending a salary freeze for federal employees and lawmakers, a move that would save about $100 billion. While the country’s biggest economic need is a wholesale overhaul of tax policy and regulatory policy combined with a dramatic reduction in federal spending, that won’t happen in the current atmosphere of political polarization in Washington. If we have to muddle through in the interim, this is a fairly reasonable way to do it — don’t increase the debt and let the Washington crowd foot the bill for the everyday Americans they’ve so badly misserved.

August 11th, 2011 at 8:15 pm
Britain’s Warning for America
Posted by Troy Senik Print

One does not have to be a particularly astute connector of socio-political dots to watch the recent rioting that has gripped London and find parallels to America’s enfeebled welfare state. That makes the following bravura passage from Theodore Dalrymple at City Journal all the more disquieting:

The riots are the apotheosis of the welfare state and popular culture in their British form. A population thinks (because it has often been told so by intellectuals and the political class) that it is entitled to a high standard of consumption, irrespective of its personal efforts; and therefore it regards the fact that it does not receive that high standard, by comparison with the rest of society, as a sign of injustice. It believes itself deprived (because it has often been told so by intellectuals and the political class), even though each member of it has received an education costing $80,000, toward which neither he nor—quite likely—any member of his family has made much of a contribution; indeed, he may well have lived his entire life at others’ expense, such that every mouthful of food he has ever eaten, every shirt he has ever worn, every television he has ever watched, has been provided by others. Even if he were to recognize this, he would not be grateful, for dependency does not promote gratitude. On the contrary, he would simply feel that the subventions were not sufficient to allow him to live as he would have liked.

A challenge for readers: remove the first sentence from the above passage. Then see if you can find anything that doesn’t apply to modern-day America. It could happen here.

August 3rd, 2011 at 10:09 am
Ramirez Cartoon: Obama and the Constitution
Posted by CFIF Staff Print

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

April 22nd, 2011 at 1:44 pm
Growth in Entitlements Kills Defense Capabilities

Byron York continues sounding a lone alarm over the connection between ballooning welfare spending and shrinking defense budgets.  With the United States largely abstaining from the lethal aspects of NATO’s Libyan adventure, entitlement-heavy countries like Britain and France are running out of missiles.

The reason?  Decades of budget decisions that favored butter over guns.

On a trip to Libya, Senator John McCain (R-AZ) reopens the straight talk express:

“…it’s a sobering fact that many NATO countries, even some of the big ones, are simply weak. They’ve been cutting their defense budgets for years as their welfare state commitments grew bigger and bigger. Now, they can’t mount much of a fight, even by the small-scale standards of the Libyan action. “No one will admit it, but both the British and the French are running out of precision-guided weapons,” says McCain. “They simply do not have the assets.”

Not that this evidence is convincing to modern liberals.  York also points out that members of Congress’ Progressive Caucus recently proposed a “People’s Budget” that raises taxes to expand entitlements like Social Security, Medicare, and Medicaid while “reducing strategic capabilities, conventional forces, procurement, and research & development programs.”

We’ve seen the future, and it’s the near military impotence of Britain and France.  The United States can and must do better.

April 19th, 2011 at 7:20 pm
Just in Case You Thought Democrats Could be Serious About Entitlement Reform
Posted by Troy Senik Print

Faced with the decline and eventual insolvency of America’s welfare state, congressional Republicans led by Paul Ryan laid out a 73- page plan to reform entitlements for a new generation and right America’s economic course. Democrats, on the other hand, cut this ad, a new low in demagoguery:

I don’t ever want to hear another Democrat refer to the GOP as “The Party of No”.

March 29th, 2011 at 10:39 pm
Marco Rubio Throws Down the Gauntlet on the Debt Ceiling
Posted by Troy Senik Print

Republicans in Congress are currently split on whether to accept incremental budget cuts in the name of political pragmatism or to hold a hard line — and face the possibility of a government shutdown or a freeze in the debt ceiling — in the name of principle. Freshman Florida Senator Marco Rubio takes to the editorial pages of the Wednesday edition of the Wall Street Journal with a message that leaves no doubt where he stands:

“Raising America’s debt limit is a sign of leadership failure.” So said then-Sen. Obama in 2006, when he voted against raising the debt ceiling by less than $800 billion to a new limit of $8.965 trillion. As America’s debt now approaches its current $14.29 trillion limit, we are witnessing leadership failure of epic proportions.

I will vote to defeat an increase in the debt limit unless it is the last one we ever authorize and is accompanied by a plan for fundamental tax reform, an overhaul of our regulatory structure, a cut to discretionary spending, a balanced-budget amendment, and reforms to save Social Security, Medicare and Medicaid.

For months now, we’ve heard “sober” politicians tell us that it’s time to have “an adult conversation” about the size and cost of government in which “everything is on the table”. It looks like Marco Rubio is calling their bluff.

January 4th, 2011 at 11:55 pm
European Governments Attempt to Solve Entitlement Crisis … By Stealing Private Pensions
Posted by Troy Senik Print

But it couldn’t happen here. Writing on the online version of the Christian Science Monitor, the Adam Smith Institute’s Jan Iwanik lays out the contemptible plan being used throughout Europe to keep state finances out of the red:

People’s retirement savings are a convenient source of revenue for governments that don’t want to reduce spending or make privatizations. As most pension schemes in Europe are organised by the state, European ministers of finance have a facilitated access to the savings accumulated there, and it is only logical that they try to get a hold of this money for their own ends …

The most striking example is Hungary, where last month the government made the citizens an offer they could not refuse. They could either remit their individual retirement savings to the state, or lose the right to the basic state pension (but still have an obligation to pay contributions for it). In this extortionate way, the government wants to gain control over $14bn of individual retirement savings.

Iwanik then goes on to delineate similar, though less severe plans, in Bulgaria, Poland, Ireland, and France.

Mussolini once summed up his theory of totalitarianism as “All within the state, nothing outside the state, nothing against the state.” Welcome to the millennial version of that philosophy. Who would have thought that Europe’s next generation of fascists would be wearing green eyeshades instead of brown shirts?

October 30th, 2010 at 1:46 pm
Retiring Democratic Rep. Details Where Dems Went Wrong

In an interview with the Wall Street Journal’s John Fund, retiring Rep. Brian Baird (D-WA) shares some thoughtful insights about what went wrong for Democrats the last two years.  From appallingly bad advice from so-called strategists (e.g. “voters don’t care about deficits”) to an “authoritarian” leadership that demanded blind loyalty from members, Baird’s interview could be read as a warning to the incoming Republican majority.  Common sense in rules and policy is a non-partisan winner.

Most revealing are the ideas Baird has for tackling entitlements:

In his new book, “Character, Politics and Responsibility,” Mr. Baird argues that in order to afford caring for the needy, liberals will have to challenge “unsustainable entitlements.” “I would eliminate the concept of entitlements and move to needs-based social insurance,” he says. “The key is to both promote personal responsibility while lowering expenditures by not promising or giving money or other benefits to those who don’t need it.”

Too bad Baird won’t be around to make that case inside Congress.

July 19th, 2010 at 10:22 am
Ramirez Cartoon: The Obama Pack Mule
Posted by CFIF Staff Print

Below is one of the latest cartoons from Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

June 14th, 2010 at 8:00 pm
We Are Doomed
Posted by Troy Senik Print

With apologies to John Derbyshire, that’s the conclusion it’s difficult to avoid reading the latest from Derb’s National Review colleague, Kevin Williamson. In a piece entitled “The Other National Debt“, Williamson looks at all of the extra liabilities that don’t make their way into the conventional tally of a $14 trillion national debt. His conclusions are hair-raising.

On state and local debt:

Beyond the official federal debt, there is another $2.5 trillion or so in state and local debt, according to Federal Reserve figures. Why so much? A lot of that debt comes from spending that is extraordinarily stupid and wasteful, even by government standards. Because state and local authorities can issue tax-free securities — municipal bonds — there’s a lot of appetite for their debt on the marketplace, and a whole platoon of local special-interest hustlers looking to get a piece. This results in a lot of misallocated capital: By shacking up with your local economic-development authority, you can build yourself a new major-league sports stadium with tax-free bonds, but you have to use old-fashioned financing, with no tax benefits, if you want to build a factory — which is to say, you can use tax-free municipal bonds to help create jobs, so long as those jobs are selling hot dogs to sports fans.

On exploding public pensions:

States aren’t going to be able to make up those pension shortfalls out of general tax revenue, at least not at current levels of taxation. In Ohio, for instance, the benefit payments in 2031 would total 55 percent of projected 2031 tax revenues. For most states, pension payments will total more than a quarter of all tax revenues in the years after they run out of money. Most of those pensions cannot be modified: Illinois, for instance, has a constitutional provision that prevents reducing them. Unless there is a radical restructuring of these programs, and soon, states will either have to subsidize their pension systems with onerous new taxes or seek a bailout from Washington.

And — the death shot — entitlements:

The debt numbers start to get really hairy when you add in liabilities under Social Security and Medicare— in other words, when you account for the present value of those future payments in the same way that businesses have to account for the obligations they incur. Start with the entitlements and those numbers get run-for-the-hills ugly in a hurry: a combined $106 trillion in liabilities for Social Security and Medicare, or more than five times the total federal, state, and local debt we’ve totaled up so far. In real terms, what that means is that we’d need $106 trillion in real, investable capital, earning 6 percent a year, on hand, today, to meet the obligations we have under those entitlement programs. For perspective, that’s about twice the total private net worth of the United States. (A little more, in fact.)

These numbers underscore the need for real change, quickly advanced. Keep your eyes fixed to CFIF, where we’ll soon be unveiling a campaign to corral the runaway spending.

May 20th, 2010 at 5:02 pm
The Beginning of an Economic Avalanche?
Posted by Troy Senik Print

No, I’m not referring to the recent precipitious decline in global stock markets (though there may be a connection). Instead, I’m talking about the tidal wave of state pension obligations that threaten to put the country’s entire economic infrastructure in peril. From a story in today’s Financial Times:

Joshua Rauh, associate professor of finance at the Kellogg School of Management at Northwestern University said that, without reform, some state pensions might run out within the decade. By 2030, as many as 31 states may not have the money to pay pensions. And, if these funds exhaust their assets, the size of payments for the benefits they have promised will be too large to cover through taxes, putting pressure on the federal government for a bail-out that could potentially cost more than $1,000bn, he says.

For those of you not accustomed to the British rendering, that last number would normally be referred to stateside as a jaw-dropping “trillion” .

But how could this scenario have ever gotten this far? The FT piece explains:

Estimates put the unfunded liabilities at between $1,000bn and $3,000bn after years of states promising benefits but not contributing enough in both good times and bad to cover them.

Many states base their calculations on an 8 per cent annual return and use an accounting method called smoothing, which staggers gains and losses over several years, two factors that some observers warn could mask the size of the shortfalls. The problem has come to the fore with the financial crisis and recession. Pension funds, like most money managers, suffered losses. The tax revenues that fund annual contributions to pensions, along with essential services such as healthcare and education, have plummeted, leaving little room to reimburse the losses.

Assuming that governments can get themselves out of this morass before it’s too late, the only way to prevent a reoccurence is to switch public-sector pensions from “defined benefit” plans to “defined contribution” plans. Mort Zuckerman did a good job of showing why over at U.S. News and World Report earlier this week:

[New York City] pensions are “defined benefit” plans, which are more expensive since they guarantee specific benefits on retirement.

On the other hand, private sector workers in the survey were mostly in “defined contribution” plans, which means that, unlike their cushioned brethren in the public sector, they do not have a pre-determined benefit at retirement. If New York City were to require its current workers to pay contributions toward health insurance equal to the amounts paid by the employees of local private sector firms, the taxpayer savings would approximate $628 million a year. In New Jersey, [Governor Chris] Christie says government employee health benefits are 41 percent more expensive than those of the average Fortune 500 company.

We know when the next bubble is coming.  But with the coming attractions provided by belligerent bureaucrats in Greece, which American politician will be the first to throw himself in front of the union gravy train?

November 13th, 2009 at 4:46 pm
CBO Chief: U.S. is Broke
Posted by Sam Batkins Print

Well, not yet.  But this week Congressional Budget Office (CBO) Director Doug Elmendorf issued a sobering report on the state of the nation’s finances.

The largest problem by far?  Entitlements … those “popular” little nuggets of government largesse that everyone enjoys receiving but no one (maybe some liberals) enjoys paying for out of their paycheck.  For example, Medicare and Medicaid are projected to grow by 80% over the next 25 years, while Social Security will only grow 20%.

As Elmendorf notes, the nation simply can’t continue to run up the national debt, currently at almost $12 trillion.  He alludes to possible crises down the road: a drastic drop in the dollar, an increase in interest rates and massive tax hikes.

His conclusion:

[F]iscal policy is on an unsustainable path to an extent that cannot be solved by minor tinkering. The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services. That fundamental disconnect will have to be addressed in some way if the budget is to be placed on a sustainable course.

September 3rd, 2009 at 4:16 pm
Video: ObamaCare and America’s Entitlement Kids
Posted by Sam Batkins Print