Freedom Line Blog

So maybe the era of big government really wasn’t over when former President Bill Clinton declared it so.  Jim MacDougald of the Free Enterprise Nation explains that the balanced budget Clinton delivered was the product of a shell game with the Social Security Trust Fund, not a profile in political courage.  From a blog entry discussing the history of Social Security and Medicare:

The federal government recognized that beginning in about 2011 the transfer payment system wouldn’t work. There would be too many recipients of benefits and not enough workers to take money from to pay for it. To avoid the financial catastrophe that loomed ahead, in 1983 the government substantially increased employer and employee contribution requirements to (at least partially) pre-fund for 2011 and thereafter.

Planning ahead for an event that would occur 28 years in the future was a commendable and far-sighted act by our elected officials. “Baby-boomers,” who made up the majority of our workforce, were subsequently “taxed twice,” with matching contributions from employers. One portion of their tax was to pay for those on Social Security who had already retired, the second portion was to pre-fund a part of their own retirement benefits.

Congress took this excess tax revenue and put it in a “trust fund” to pay future benefits. But the trust fund they established was an enormous shell game because the money was treated as general revenues…a huge windfall to the federal government. It enabled President Clinton to announce at a State of the Union address, that the deficit was “exactly zero.” Even today, people are still congratulating Presidents Clinton and H.W. Bush for having balanced budgets and reducing national debt. But Congress had accomplished that feat by taking and spending all of the “excess revenue” that was coming in from payroll taxes for Social Security, and there was a lot of it to spend! From 1983 to 2008, the federal government took $2.5 trillion more than required to pay current Medicare and Social Security recipients, and they “bought Treasuries” with it. In other words, they spent it all.

Now, it makes a lot more sense how the federal government could “balance” the budget so quickly with nary a squeal heard from entrenched interests.  As MacDougald makes clear in the rest of his article, starting next year there are no more games to play.  The 2011 budget for Social Security and Medicare is $1.22 TRILLION – more than all of the federal income taxes paid by all of the workers in America last year.  In order to pay for the payments owed to Baby Boomers (who, as a cohort, begin reaching 65 in 2011), every American worker will have to pay at least $10,000 in new federal taxes every year.

Add this to the cost of ObamaCare and….pass the tryptophan and bring on the food coma.

Yesterday David Nolan, co-founder of the Libertarian Party and creator of the “Nolan Chart,” died.  He was 66.  In honor of the man whose recent U.S. Senate campaign touted the slogan, “Minimum Government, Maximum Freedom” here is a link to “The World’s Smallest Political Quiz” – a sleek version of Nolan’s famous chart identifying a person’s political orientation based on answers to government-related questions.  By taking it you’ll join more than 16 million fellow seekers.

H/T: Advocates for Self Government

The lame duck Congress passed a squealer of an appropriation last Friday: $1.15 billion funding the Pigford II class action lawsuit settlement.  Earlier this year CFIF profiled Rep. Steve King (R-IA), a staunch opponent of this taxpayer-funded giveaway.  As King and others have pointed out, Pigford I & II were initially brought to give black farmers a way to get compensation for past USDA discrimination in farm loans.  To date, however, more black farmers have received payments under the settlement than the Census Bureau has records for.  The result is quite possibly the biggest civil rights litigation scam in American history.

Thanks for picking up the check.

Demographer Joel Kotkin writes an insightful analysis of the state of modern liberalism for Politico today.  As you probably guessed, the diagnosis isn’t pretty.

Admittedly, Kotkin identifies as an old-school Democrat, the kind that sees the New Deal as a model for curbing unemployment while building the kind of infrastructure that advances civilization and secures votes for a generation.  He is not, however, a fan of the environmental left or public employee unions because they inhibit these kinds of programs for the benefit of insulated elites.

When FDR commissioned projects such as the Tennessee Valley Authority, he literally brought light to darkened regions. The loyalty created by FDR and Truman built a base of support for liberalism that lasted for nearly a half-century.

Today’s liberals don’t show enthusiasm for airports or dams — or anything that may kick up some dirt. Deputy Assistant Secretary of the Interior Deanna Archuleta, for example, promised a Las Vegas audience: “You will never see another federal dam.”

Harold Ickes, FDR’s enterprising interior secretary, must be turning over in his grave.

It’s also well to remember, as Kotkin does, that “In retrospect, it’s easy to see why many great liberals – like FDR and New York City Mayor Fiorello LaGuardia – detested the idea of public-sector unions.”  Indeed.  If Kotkin can kick-start a bipartisan movement to end public employee unions, maybe we can at least get public policy’s focus back on private citizens instead of enriching government workers.

Rep. Michele Bachmann’s (R-MN) recent failure to win the chairmanship of the House Republican Conference Committee is an important reminder for the wave of new GOP congress members coming into office in January.  If you spend more time courting a movement outside Congress, don’t be surprised when those inside it promote from within.

Such is the case of Michele Bachmann.  Widely considered the highest profile Tea Party leader inside the federal government, Bachmann’s loss to Rep. Jeb Hensarling (R-TX) for the chairmanship is linked to her cultivated outsider status.  She may be brilliant with red meat speeches and raising money, but she is presumed to be light on policy details.  Moreover, the time she spent promoting the Tea Party were moments taken away from building the kinds of relationships with fellow members that lead to endorsements and favorable chairmanship votes.  That, more than anything else, explains the reason Bachmann lost to Hensarling.

But it isn’t just Bachmann that needs to consider how to parlay her grassroots support into actual results as a member of Congress.  The GOP leadership too needs to weigh carefully how to grow her brand while enhancing its own appeal to Tea Party voters.  Perhaps the latter consideration is what led House Republicans to create a new leadership position for the incoming class.  Ironically, the Republican congress member most deserving of representing the views of this Tea Party-flavored class is Bachmann herself.  Too bad the position is only open to freshmen.

A survey of Democratic 2010 campaign operatives shows 64% of those polled said the Tea Party was a source of enthusiasm for the GOP, not division.  Perhaps now the politicians and pundits trying to blame tea partiers for everything from falling short of a GOP Senate majority to racism will now find a new hobby.

The limited government movement continues to pick up steam as the newly empowered congressional Republicans aim to rein in federal spending.  But while Tea Party members may favor GOP candidates, don’t be surprised if failing to make progress on spending reform leads to more contested GOP primaries in 2012.

H/T: Politico

As CFIF recently noted, the Democrats in Congress are committed to passing more controversial legislation before their chokehold on the legislative process eases in January.  Reporting from the San Antonio Express-News confirms that members of the Congressional Hispanic Caucus are personally lobbying President Barack Obama to put the weight of his slight frame behind a vote on the DREAM Act during the lame duck session.

As noted in the Express-News article, there are 800,000 reasons to do so:

The DREAM Act, or Development, Relief and Education for Alien Minors Act, would require the affected youths to enter the armed forces or attend college for two years, clear a background check and have no criminal records to be eligible for citizenship.

Roughly 800,000 teens and young adults would be eligible, according to immigration rights groups.

With one of those immigration rights groups estimating an annual addition of 65,000 potential beneficiaries under the DREAM Act, the only thing standing in the way of a multi-generational Latino dependency on the Democratic Party is a GOP-led filibuster in the Senate.

There may be no politician more adept at turning Tea Party popularity into actionable results than Senator Jim DeMint (R-SC).  Yesterday, the conservative icon took the unusual step of publicly withdrawing his support of his party’s fundraising head, Republican National Committee Chairman Michael Steele.  There are good reasons to do so, but by publicizing his displeasure DeMint is serving notice on the rest of the GOP that he is ready to push for a more robust conservative presence throughout the party’s apparatus.

With his Senate Conservatives Fund DeMint went head-to-head and beat several GOP primary candidates supported by the National Republican Senatorial Committee, led by fellow Senator John Cornyn (R-TX).  With freshman senators like Florida’s Marco Rubio, Kentucky’s Rand Paul, and Utah’s Mike Lee owing much to DeMint’s patronage, expect to see the junior senator from South Carolina take on a much bigger role in deciding his party’s next presidential nominee.  If DeMint manages to replace Steele with a RNC Chairman of his choosing, he will be better positioned than any conservative in the party to make a serious run for the nomination.

H/T: Roll Call

Canaries and markets are sensitive creatures.  Take a canary down a coal mine and the poor bird starts dying as soon as the toxic levels of coal dust start rising.  Wait too long, and coal miners will be following their yellow feathered friend down the River Styx.  The key is to monitor the canary carefully for signals that it’s time to stop digging before it’s too late.

The market is a similar beast, even though the data miners of economic trends at places like Princeton and the Federal Reserve Board choose to think otherwise.

Practitioners of microeconomics presume they have “perfect information” by which they mean knowing all the relevant data before making a decision.  Thusly armed they sally forth to wage war on behalf of whatever economic model (or political interest) they claim provides the greatest good.

Such is the case with Federal Reserve Board Chairman Ben Bernanke, the Princeton economist responsible for authorizing the printing of hundreds of billions of dollars to “quantitatively ease” the lack of money flowing in the marketplace, and spur a “healthy” bit of inflation.  Bernanke is doing this because he assumes he has all the relevant data to support such a move.

A new price survey of a Wal-Mart grocery basket says otherwise.  The retail giant is raising prices, a market signal that inflation is already underway without government interference.  Like any market leader, Wal-Mart’s actions will be quickly emulated by others in their sector, with down market effects reverberating across the economy.

The market is already sensing the need for inflation and is acting accordingly.  A massive injection of “Fed Stimulus” to achieve the same goal will result in accelerating inflation beyond what’s considered healthy, devaluing the dollar and making it harder for middle class families to buy necessities.  That kills an economy.  If Bernanke continues to ignore the ability of the market to adjust itself, it will soon be his career lying lifeless in the shaft.

It is if it means exporting a set of beliefs into an area ill-suited to implement them.  So says a startling (but by no means new) assertion about the real world effects of foreign aid.  In an article that fleshes out the unease some of us encounter about the efficacy of giving good money to bad people, Margaret Wente of The Globe and Mail argues that aid to Africa is being used to prolong suffering rather than end it.

Ethiopia provides one sobering example.

The starving children of Ethiopia were not the victims of drought, as most people believed at the time. They were the victims of politics. The government of the time was using famine as an instrument of war, and the rebels were more interested in defeating the government than in feeding famine victims. As William Easterly, a leading aid skeptic, puts it, “It’s not the rains, it’s the rulers.” Political famines attract the food aid industry, with the consequence that governments or rebel groups are able to feed their own armies and divert resources to buy more weapons. Humanitarian aid in conflict zones is always problematic. It helps the bad guys as well as the innocent.

Today, the children of Ethiopia are still starving, and the brutal regime that keeps them hungry continues to get funding from well-intentioned people trying to fix the wrong problem.  It’s not the rains, it’s the rulers.  Unless the rule of law protects the property and dignity of individuals, all that the philanthropy in the world will do is empower the strong at the expense of the weak.

At least outgoing House Speaker Nancy Pelosi (D-CA) can claim credit for creating one job during her tenure.  According to The Hill, Pelosi – the frontrunner to become Minority Leader when the defeated Democrats give up power next Congress – has a novel idea how to decide which of two people gets one available job: create a new position.  (Title and portfolio TBD)

How perfect.  Rather than let Reps. Steny Hoyer (D-MD) and Jim Clyburn (D-SC) compete for the position of Minority Whip, Pelosi is proposing to create a federal job that spends more taxpayer money.  (Unless, unlike all other congressional leadership positions, the new post comes without staff, office, and an expense account; a situation that would hardly appeal to anyone gunning for a job with real power.)

Even in the face of a 60 seat rebuke that cost her the Speakership, San Francisco Nancy is still following the same liberal formula of growing the federal government.  If this is the kind of in-the-box, hidebound thinking House Democrats want to pursue over the next two years, Republicans should get ready to win even more seats in 2012.

Traditionally, presidents facing opposition at home go abroad to find policy and political success.  Basically, if you can’t beat them, play with someone else.  It’s an especially useful move in the latter part of a president’s second term, when lame duck status settles in and speculation about a successor mounts.

Perhaps we’re seeing that now with one-term President Barack Obama.  One thing is missing, however, from the script: a foreign policy success.

So far, the president’s 10 day Asian trip has been a disaster.  It started with a badly handled mis-impression that 34 warships costing $200 million a day were escorting the president to India.  (They weren’t.)  Then his staff was embarrassed by press handlers working for the Indian government.  Now, he’s failing to secure a crucial free trade deal with South Korea while being ostracized at the G-20 meeting for his fiscal and monetary policies.

All this may make him more likely to be defeated in his reelection campaign, but it is a terrible projection of powerlessness to the rest of the world.

On today’s Foundry blog at the Heritage Foundation there is a crisp analysis of the cost-cutting decisions being weighed by states threatened with billions in rising health care costs under ObamaCare.  With a massive, mandatory expansion of Medicaid rolls beginning in 2014, state budget writers are seriously considering dropping out of the Medicaid program in order to avoid bankrupting their treasuries.

Granted, it’s outrageous that the liberal elites running Washington, D.C. are forcing state governments to spend more of their taxpayers’ money on health care.  After all, the States didn’t get to vote on ObamaCare.  But too often in this debate there’s a simple – though difficult – solution that up until now hasn’t been mentioned.

Opt out.  The only way the federal government can dictate spending and policy decisions to the states is if the states agree to the terms.  Those terms are buried in the fine print of federal programs that condition receipt of federal money on compliance with federal policies.  Like dramatically increasing Medicaid rolls.

Though opting out of Medicaid will be difficult because it also means losing the matching funds that come with it, the renewed control over a state’s budget should give state legislators much more room to maneuver during this era of dwindling tax receipts.  Governments, like individuals, need options.  Opting out of Medicaid is an important first step to regaining state sovereignty.

With Rep. Michele Bachmann (R-MN) announcing the end of her campaign to be Republican Conference Chairman, the likely top four House GOP leadership spots look like this:

(1)   Speaker – Rep. John Boehner (R-OH)

(2)   Majority Leader – Rep. Eric Cantor (R-VA)

(3)   Majority Whip – Rep. Kevin McCarthy (R-CA)

(4)   Conference Chairman – Rep. Jeb Hersarling (R-TX)

It’s always interesting to see where leadership team members are from because it indicates where the strength of the party lies.  Since leadership positions are sought and won by members with multiple terms in office, it’s intriguing to see four Republicans representing each corner of the country.

Contrast this with the locations represented by the outgoing top four House Democrat leaders:

(1)   Speaker – Rep. Nancy Pelosi (D-CA)

(2)   Majority Leader – Rep. Steny Hoyer (D-MD)

(3)   Majority Whip – Rep. James Clyburn (D-SC)

(4)   Caucus Chairman – Rep. John Larson (D-CT)

Aside from Clyburn, all the Democrat leaders come from deep blue coastal states (e.g. California, Maryland, and Connecticut).  Counting Clyburn, the Democrats’ claim to a “southern” voice is tied to a gerrymandered district designed to elect a liberal African-American.  If Hoyer beats Clyburn for the Minority Whip post, even that fig leaf of regional diversity will blow away.

The House Democratic caucus lost 29 of 57 “blue dog” members last Tuesday, making the remaining chamber membership much more liberal.  It also wiped out the Democrats’ claims to represent regions other than the high-tax, morally bankrupt coasts.  That, combined with Nancy Pelosi’s likely retention as caucus leader, will make it substantially more difficult for the party to recruit viable candidates in 2012.

Conservatives shouldn’t count on gifts like this forever, but for now, we’ll gladly take them.

As a former staff member in the Texas House of Representatives, I have an interest in news that the chamber may be headed for conservative leadership.  This morning, Rep. Ken Paxton (R-McKinney) announced his bid to unseat current Speaker Joe Straus (R-San Antonio).  If successful, Paxton would be the third Republican Speaker in under three years, since Straus ascended to power by beating former Speaker (and my old boss) Tom Craddick (R-Midland) in 2009.

What does an intra-party fight in one of the reddest states in America mean for citizens outside the Lone Star State?  Plenty.

Texas is already the exemplar of low-tax, low-regulation state government.  Moreover, because the legislature only meets for 140 days every two years, Texas government has not had a chance to weigh in legislatively on issues like Arizona’s approach to illegal immigration and Virginia’s response to block implementation of ObamaCare.  With the kick-off of the legislative session next January, a more conservative Republican House majority will be able to make some big statements about the power of the 10^th Amendment in our federal system.

That is, if the House is run by a true conservative.  Stay tuned…

The House GOP isn’t wasting any time putting President Barack Obama on notice that they are ready to test his new commitment to bipartisanship on education issues.  Rep. John Kline (R-MN), the incoming-Chairman of the House Education and Labor Committee, is promising to recreate the D.C. school voucher program Obama and the Democrats killed two years ago.

Vouchers are despised by teachers’ unions because the device introduces competition into the K-12 education market.  If parents don’t like the curriculum, culture or administration at a public school a voucher lets them send their children to a private school that meets their needs.  For all the canards about separation of church and state, the real reason teachers’ unions hate vouchers is because less students means less of a need for public school (i.e. unionized) teachers.

Supporting a bill that recreates the D.C. school voucher program would be good politics and good policy.  Good politics because President Obama could legitimately claim a bipartisan victory with Republicans on an issue that moves the president to the political center.  It would be good policy because it would allow low-income students the probability of the single biggest attraction of a better education: a better life.

All this for only recreating what already existed.  If the president can’t muster the courage to support this kind of feel-good, localized issue he’ll have no one to blame for the gridlock but himself.

H/T: Washington Times

A new Rasmussen Reports poll shows that most voters want the new House Republican majority to investigate the spending impact of ObamaCare.  The survey found that 55% of respondents support a close look at the costs and implications of the health care “reform” bill jammed through Congress earlier this year.

With the tentacles of ObamaCare reaching far beyond the purview of “health” don’t be surprised if House committees like Budget, Oversight and Government Reform, and even Commerce (among others) open investigations into the most drastic government power grab since LBJ’s Great Society.

Alex Pollock’s contribution in The American, a publication for the American Enterprise Institute (AEI), is much needed medicine for the regulatory fever about to be unleashed when the Dodd-Frank “financial reform” bill is implemented.

The key to understanding boom-and-bust cycles, according to Pollock, is realizing the limits of a mathematical model’s ability to predict the future.  To quote Pollock quoting a colleague, “The model works until it doesn’t.”  That is, until someone falsifies the model by acting in a way contrary to the model’s assumptions.  Then everybody who uses the model is out a lot of money.

So, if profit-hungry businesses can’t figure out a way to avoid losing money, what in the world makes the denizens on Capitol Hill think they can create a federal agency with such powers?

Hubris and stupidity.  Political cultivation of those qualities is a science unto itself.

Weekend Bonus Link: For another theory of the business cycle, click here.

The folks over at Reason.tv have a wicked sense of humor.  Their latest target is newly (and indefinitely) suspended pundit Keith Olbermann from MSNBC.  Apparently, all it took was $7,200 in near meaningless campaign donations to Democratic candidates to finally convince the network that Olbermann was too partisan to be on-air.

Here’s a sample of some his classic work:

For a guy who won a 21-month-long campaign, you’d think Senator-Elect Marco Rubio (R-FL) would get the weekend off.

Hardly.

He’s already been asked to deliver the GOP’s response to President Barack Obama’s weekly address.  Welcome to primetime, all the time, Mr. Rubio.