Freedom Line Blog

When every opposition group voted down his austerity budget earlier this week, Portugal’s prime minister resigned.  Now, the European Union is preparing to bail out a third member nation in just over a year.  (The other two are Greece and Ireland.)

While the Portuguese mess probably won’t have an immediate fiscal impact on the United States, the EU’s crisis of federalism could soon be felt over here.

States like Illinois and California are teetering on the edge of insolvency after spending like a bunch of reckless European countries.  Because of the EU’s shared currency and the effects a default would have on the rest of the federation, the EU feels pressed into covering the costs of some members’ excess.

The same thinking seems likely to migrate across the Atlantic.  Members of Congress are mulling options like bankruptcy for failing state governments, though that risks undermining state sovereignty.  Also, bailouts run the risk of prolonging hard decisions, as well as deepening the dependency of states on the feds.

There are no easy answers, but there are some necessary decisions.  Time will tell if those in Sacramento and Springfield can come to better resolutions that the parliament in Lisbon.

If at first liberals don’t succeed, they plead their case to a friendly judge.  Last Friday, a Wisconsin judge granted a temporary restraining order to block publication of the state’s recently passed union law.  (State law requires the Secretary of State to publish the contents of the law to the public in order for the law to be valid.)

The law’s opponents claim Wisconsin Republicans violated the state’s open meetings law by negotiating the substance of the bill outside the normal committee hearing process.  The judge says all Republicans have to do is re-pass the bill with adequate notice (i.e. 24 hours instead of 2).

Where were these process-conscience Democrats when their federal counterparts rammed through ObamaCare while violating almost every legislative procedure?  Where was the outrage when the Reid-Pelosi gang used the budget reconciliation process and ‘deem-and-pass’ to thwart deliberation?  At least Wisconsin Republicans gave their absentee opponents a heads-up.

One of the many important votes the new House Republican caucus has taken includes yesterday’s vote to defund National Public Radio (NPR).

While the bill is expected to die in a Democrat-controlled Senate, the measure puts a majority of House members on record as supporting the complete defunding of a government agency that unabashedly promotes pro-state liberalism.  One of the hardest things to do in politics is get a majority of legislators to vote “Yes” on something – especially when the bill has little chance of becoming law.

But this group of House Republicans is different.  These votes and others are setting out clear distinctions between conservative and liberal spending priorities.  In 2012, voters will know exactly how candidates prioritize taxpayer money.

There’s a confrontation brewing between fiscal conservatives in the House GOP caucus and their leadership over how best to handle the budget crisis.  House leadership wants to keep negotiating while passing short-term spending bills to avoid a shutdown.  Fiscal conservatives like Rep. Mike Pence (R-IN) are voting No and getting killed for it.

Pence is fighting back.

“I have no doubt that Speaker John Boehner and Republican Leader Eric Cantor and the rest of our leadership will privately, and if needs be, publicly denounce any effort to essentially bad mouth the intentions of Republicans that are simply fighting for fiscal responsibility,” the former GOP conference chair said Thursday morning on “The Hugh Hewitt Show.”

It’s funny to hear that the House leadership is fuming at fiscal conservatives for voting their principles when those same leaders say that the latest budget extension is the last one.  With House leadership moving towards the fiscal conservatives’ position, maybe leadership is just ticked that they’re losing negotiations with both Democrats and Republicans.

For every crisis there is an opportunity.  The Detroit public school system is in a fiscal state of emergency with a mandate to eliminate its $327 million deficit.  At first, leadership planned to close 40 of the district’s 142 schools.

Now, more innovative heads have prevailed.  Yesterday it was announced that instead of closing schools the district would convert 41 of them into privately-run charter schools.  Estimated savings to the taxpayer: more than $28 million.  Estimated benefit to parents looking for a hand-up out of failing classrooms: priceless.

Of course, teachers’ union advocates bristle at the idea that nearly one-third of their Detroit membership will be laid off and required to reapply for jobs without costly pension funds and tenure protection.

But the data doesn’t support the status quo.  Since Louisiana lawmakers transformed New Orleans into the only public school system where a majority of students attend charter schools, scores on student achievement exams have risen dramatically.

Louisiana’s reform was made possible by the devastation of Hurricane Katrina.  Michigan’s ongoing financial crisis may be just the opportunity Detroit families need to get the education – and the tax relief – they deserve.

Their howls of protest notwithstanding, Wisconsin Democrats – whenever they gain control of state government again – are likely to retain Republican Governor Scott Walker’s ban on collective bargaining by public employees.

The Manhattan Institute’s Josh Barro explains that Democrats in Wisconsin are about to learn the joys of writing their own budgets; just like their peers in other states and the federal government.

For this reason, I am skeptical of Democrats’ vigorous hopes to retake Wisconsin’s government and repeal this new law. There is no clamor among Democrats in Virginia to give collective-bargaining privileges to public workers, nor have Democrats in Washington, D.C., shown much interest in empowering federal workers’ unions. This is because Democratic officeholders, quite rationally, prefer to write their budgets themselves, rather than hand over control of employee-compensation costs to unions. Once Wisconsin lawmakers get used to the new status quo, I think this is likely to be true there, too — why would mayors, school-board members, and state legislators want to give up a powerful new budgeting tool they’ve been given?

Eventually, Democrats will take power in Wisconsin again, and when they do I think they are likely to restore the “dues checkoff” — automatic deductions from public payrolls to pay union dues, eliminated in the just-passed bill. But I think they are likely to find the federal model of limited collective bargaining pretty useful, just as Barack Obama has. Under pressure from municipal officials, Wisconsin Democrats will be more likely to “reform” this law while retaining significant constraints on bargaining than to repeal it entirely.

A sobering bit of news for college administrators about to go on spring break:

“The current prolonged recession means that we can no longer expect new revenue to pay for increasing attainment in higher education,” said Jane V. Wellman, Executive Director of the Delta Cost Project, which does a study every year on the cost of higher education. “In the next decade, we are going to be lucky to hold onto the resources we have. That means that all institutions – from the Ivies to the community colleges –are going to have to develop investment strategies that support goals for attainment. That will require new habits: looking at spending, and promoting the values of efficiency and cost effectiveness as co-partners to the never-ending search for new revenues.”

At first, one might be tempted to think that higher education needs to take a financial haircut just like the rest of the economy.  While that is undoubtedly true, the consequences will be enormous.

Federal higher education loans like Stafford and Grad Plus (and their state counterparts) are used like entitlements, though you’d never hear a recipient saying so.  Though only 1 in 4 Americans eventually graduate with a college degree, nearly everyone qualifies for the loans to finance one.

Because the cost of attendance continues to grow at several times the rate of inflation, grads and non-grads are piling up huge debt loads; prompting some to call the looming student loan crisis our next financial disaster.

The coming cuts in state and federal budgets for higher education financing will significantly decrease the subsidies available to students.  That means fewer students going to college, leaving enrollments peopled with those able to count on private financing.

Since passage of the 1944 GI Bill an essential part of the American dream has been having the opportunity to go to college by removing cost as a consideration.  The same bill did the same thing to spur home ownership via the VA-backed mortgage.  We all know how slippery that slope turned out to be.

Austerity is coming to America.  Hopefully, we can adjust to reduced expectations.

Not so fast, says Fox News columnist Chris Stirewalt.  An important difference between the 1995 shutdown that empowered President Bill Clinton was the lack of public anxiety over the $4.97 trillion debt.  Now, it’s $14 trillion plus, “a sum equal to the size of our entire economy.”

If Democrats in Washington make the same miscalculation as Democrats in Wisconsin, they will suffer brutally at the next election.  Shutting down the government in favor of public employee unions or unsustainable federal spending is a fool’s strategy.  With President Barack Obama and party leaders like Senator Chuck Schumer (D-NY) daring House Republicans to stand firm on budget cuts, expect to see thousands of pro-shutdown protestors flood Washington if government buildings go dark.

If dormant long enough, perhaps some of those buildings – and the agencies that house them – will never be revived.  The debt and spending issues are more important now than in 1995.  If Democrats fail to realize that, they may help hasten a reduction in government overall.

In a characteristically well written piece Matt Bai identifies several political skills wielded by New Jersey’s dynamic governor.  Among them, Chris Christie’s ability to humanize mundane issues like pension policy stand out.

The theme of the week was pension-and-benefits reform, and in his introductory remarks, Christie explained the inefficiency in the state’s health care costs not by wielding a stack of damning statistics, as some politicians might, but by relating a story.

When he was a federal prosecutor, Christie told the audience, he got to choose from about 100 health-insurance plans, ranging from cheap to quite expensive. But as soon as he became governor, the “benefits lady” told him he had only three state plans from which to choose, Goldilocks-style; one was great, one was modestly generous and one was rather miserly. And any of the three would cost him exactly 1.5 percent of his salary.

“ ‘You’re telling me,’ ” Christie said he told the woman, feigning befuddlement, “ ‘that no matter which one I pick, the good one or the O.K. one or the bad one, I’m going to pay 1½ percent of my salary?’ And she said, ‘Yes.’

“And I said, ‘Then everyone picks the really good one, right?’ And she said, ‘Ninety-six percent of state employees pick the really good one.’

“Which led me to have two reactions,” Christie told the crowd. “First, bring those other 4 percent to me! Because when I have to start laying people off, they’re the first ones!” His audience burst into near hysterics. “And the second reaction was, of course I would choose the best plan,” Christie said, “and so would you.

Bai goes on to report seeing Christie’s mixed race audience nodding in agreement that public employees should be required to pay more for the better plan.  As Christie says, this isn’t rocket science, just common sense.  His ability to relate hard truths in understandable terms is a unique gift shared by the likes of Bill Clinton, Ronald Reagan, JFK, and FDR.  Not bad company for a guy from New Jersey.

After originally pledging to cut $100 billion in spending this year the House GOP leadership settled for a cut of $30 billion.  Then, the Tea Party-backed freshman caucus weighed in and forced a rethink.  Early this morning, the House voted to cut $60 billion in this year’s budget.

That’s real, measureable progress.  Getting 60% of a loaf may not satisfy everyone’s hunger for budget cuts, but it is still a victory for fiscal conservatives.  Well done.

If you ever doubted the indivisibility of disparate Leftist causes, then for proof look no farther than Madison, WI.  A community organizer-turned-POTUS is sending his minions to supplement Badger State public employee unions.  Jesse Jackson is leading a march in support of workers’ rights.  (Apparently, the only color in Jackson’s Rainbow/PUSH Coalition these days is red.)

All we need now is a cadre of eco-friendly celebrities to descend on the Wisconsin state capitol and declare their love for collective bargaining (while demanding A-list treatment in their next film contract).  With the battle over union overreach spreading to other states, this may the beginning of a very tense year in states across the country.

The Wall Street Journal’s Kimberly Strassel describes perfectly the triumph of democracy that House Speaker John Boehner (R-OH) made possible this week by opening up the budget bill to floor amendments from anyone.

Neglected questions were once again asked. Should we get rid of federal funding for the arts? Should the government be designating federal monuments? What’s the role of NASA? And Congress finally got to air some dirty secrets.

One of this week’s more symbolically rich cuts came from Arizona’s Republican Jeff Flake, who won an amendment erasing $34 million for the National Drug Intelligence Center in Johnstown, Pa. The center, despite serving no real purpose, had been protected for decades, via earmarks, by the late Defense appropriations chair John Murtha.

A little later, Strassel identifies the best aspect of Boehner’s new regime:

This week’s exercise forced members to read the underlying spending bill; to understand the implications of hundreds of amendments; to remain on the floor for debate; and to go on record with votes for which voters will hold them accountable.

Indeed, John Murtha and corrupt legislative processes are dead.  Long live this new era under Speaker Boehner’s new House rules where members of Congress can finally earn their money.

A funny thing happened when House Republicans opened up the process to allow amendments to spending bills: a bipartisan coalition voted overwhelmingly to cancel a $3 billion boondoggle.

Interestingly, the project killed was the F-35 Joint Strike Fighter’s alternative engine.  Following a well-trodden path to budgetary immortality, contractors General Electric and Rolls Royce spread the work around many states hoping enough Congress members would vote to keep the money flowing to their districts.

No more.  Both the Bush and Obama administrations have called for the termination of the alternative engine program as a way to cut waste in the Pentagon’s budget.  After years of work and billions in spending everyone involved anticipates billions more in appropriations before the engine becomes operational.

With yesterday’s vote to stem the tide of red ink on the books, let’s hope there are more chances for an open budget process that saves taxpayers money.

Last month, we noted with alarm that the Congressional Budget Office forecast a record $1.5 trillion federal budget deficit for fiscal 2011.

It’s apparently even worse than that.  Today, the Obama Administration unveils its proposed budget, projecting that this year’s deficit will actually reach $1.6 trillion.  So after telling Americans during his 2008 campaign that he was going to go through the budget “line-by-line” and reduce the deficit, Obama has given us deficits of $1.4 trillion, $1.3 trillion and now a record $1.6 trillion.  And what to show for it?  Unemployment remains at or above 9% for a post-World War II record 21st consecutive month, despite Obama’s promises that it would top out at 8% in October 2009 and decline to between 6% and 7% today.

As for those who continue their mindless “Blame Bush” rationalization crusade, they must explain how three years into the Age of Obama, the deficit is increasing, not decreasing, from $1.3 trillion to $1.6 trillion (an almost 25% increase).

The uniqueness of Senators Rand Paul (R-KY), Mike Lee (R-UT), and Jim DeMint (R-SC) in joining their chamber’s Tea Party caucus shone forth again when yet another freshman conservative declined to join their ranks.  Tea Party darling Senator Marco Rubio (R-FL) refuses to join.  Now, it’s John Boozman’s (R-AR) turn.

Officially, Boozman says he doesn’t want the public to confuse the tri-partisan nature of the Tea Party (Republican, Reagan Democrat, and Independent) with being an arm of the GOP.  But closer scrutiny of Boozman’s rationale to ABC News indicates he’s not ready to balance the budget by cutting agricultural subsidies.

“But it doesn’t sound like ag subsidies will be at the top of your list for things to cut,” Karl said.

“We’re going to have to look at everything but ag subsidies are like everything else. That affects jobs,” the senator said. “Now listen, the one thing about agriculture is we’ve lost our manufacturing, we’ve lost a great deal of jobs overseas, lots of our industry. The last thing in the world we need to do is lose the ability to produce our food.”

Chances are Boozman doesn’t want to tie himself to unqualified budget cutters like Paul, Lee, or DeMint.  Boozman’s calculation may be that it’s far better to fight for certain cuts while arguing to keep tax-supported jobs in his home state.

Senators like Rubio and Boozman argue that caucus membership in the Senate isn’t as important in the upper chamber as it is in the House.  Any member of the Senate can unilaterally slow or kill legislation he doesn’t like.  While that’s true, it’s also a way to sidestep a measure of accountability.  After all, if your major theme is cutting the budget, why not join a group that won’t make exceptions for pet pork projects?

Eventually, Paul, Lee, or DeMint might prove the truth of the single senator theory by killing bills favored by Rubio or Boozman.  If that happens, don’t be surprised to find Rubio and Boozman caught between their rhetoric and their record.

Florida Republican Governor Rick Scott unveiled his much-anticipated budget proposal on Monday in front of a crowd teeming with Tea Party activists.  Slashing $4.6 billion from last year’s budget, Scott takes aim at many sacred cows.  AOL News lists the five most controversial:

(1)   10% cut in education spending

(2)   Eliminating 1,690 jobs from the Department of Corrections

(3)   An 8,700 overall reduction in the state government workforce

(4)   Tax cuts worth $4 billion

(5)   A $4 billion Medicaid reform

None of these changes, however, may be as consequential as Scott’s proposal to require state public employees to start contributing 5% of their paychecks to their pensions.  If state retirement funds are ever to become solvent the employees who benefit from them will have to put some money in the kitty.  Scott also wants to put new state hires into a 401(k)-type retirement system, a shift that would move the state toward a pension system of defined contributions instead of defined benefits.

If Scott is successful in Florida other states might follow suit.  For the sake of taxpayers in the Sunshine State and beyond, let’s hope he prevails.

Since a majority of the smart people in Washington, D.C., agree that the nation’s astronomically high $14.3 trillion debt ceiling, chattering class consensus says all the “sane” members of Congress will stand together and once again extend America’s line of credit.  With that in mind, GOP budget cutters are proposing to get deep spending cuts in return for raising the debt ceiling.

Not so fast, says Federal Reserve Chairman Ben Bernanke.  Playing his faux apolitical persona to the hilt yesterday, Bernanke said House Republicans should “not play around” with the debt ceiling vote to extract any spending concessions.  That would make a fiscal issue too political.  Instead, they should treat spending and tax issues separately; exactly the unconditional debt raising approach espoused by the Obama Administration.

But the logic of the Republicans’ negotiating tactic is clear: get spending cuts now so that the debt limit becomes a true ceiling once more instead of a temporary marker.  Having a limit on one’s credit card does not require the user to treat it as a goal.  It’s an emergency option, not a default.  Because fiscally conservative House and Senate members are the only public officials actually trying to get control of the budget, demanding concessions from the debt ceiling vote may be the only way to make progress in a fractured government.

If Bernanke is too partisan to see that, he should at least recognize that politics isn’t just an exercise in means; it’s the attainment of principled ends as well.

In its monthly report this morning, the Labor Department announced that unemployment has now remained at or above 9% for a post-World War II record 21st consecutive month.  Additionally, it reported just 36,000 new jobs, well short of the expected 140,000 number.

On the eve of the 100th anniversary of Ronald Reagan’s birth, these numbers contrast the results of a big government agenda versus a free market agenda.  In the 23 months since Obama’s massive $1 trillion “stimulus” passage, unemployment has increased from 8.2% to 9%.  One would expect better results in exchange for deficits of $1.4 trillion in 2009, $1.3 trillion in 2010 and an expected record $1.5 trillion this year.  Keep in mind that Obama projected that if we followed his big government agenda, unemployment would be down between 6% – 7% by now.  In contrast, the 23 months following the effective date of Reagan’s tax cuts in January 1983 saw unemployment plummet from 10.4% to 7.2%.

The facts speak for themselves.  Inexplicably, Obama nevertheless called for even more federal “stimulus” in his State of the Union address.  As we celebrate the Gipper’s 100th birthday, we should remember the timeless lesson taught by his freedom agenda’s success.

Newt versus The Wall Street Journal editorial board – the unofficial 2012 Republican campaign is off to a very lively start.

On January 22, the Journal ran a commentary entitled “Amber Waves of Ethanol” in which it criticized federal ethanol subsidies.  It noted that, “Four of every 10 rows of corn now go to produce fuel for American cars or trucks, not food or feed,” which does nothing to improve the environment or our reliance on foreign oil, but wastes billions in taxpayer dollars and drives food price inflation.  Likely 2012 candidate Newt Gingrich responded in Iowa last Tuesday, repeatedly referring to himself “as an historian” and accusing the Journal as part of a sinister cabal, saying, “Obviously big urban newspapers want to kill it because it’s working, and you wonder, ‘What are their values?'”

This morning, the Journal responds in its lead commentary entitled “Professor Cornpone.” This dispute, it says, symbolizes the larger fight “between the House Republicans now trying to rationalize the federal fisc and the kind of corporate welfare that President Obama advanced in his State of the Union”:

Given that Mr. Gingrich aspires to be President, his ethanol lobbying raises larger questions about his convictions and judgment.  The Georgian has been campaigning in the Tea Party age as a fierce critic of spending and government, but his record on that score is, well, mixed…  Now Republicans have another chance to reform government, and a limited window of opportunity in which to do it…  So along comes Mr. Gingrich to offer his support for Mr. Obama’s brand of green-energy welfare, undermining House Republicans in the process.”

Regardless of one’s views toward Mr. Gingrich as a potential candidate, the fact that the race is already lively with substantive policy debate is a healthy sign.

Barack Obama assured Americans throughout his campaign that if we hired him, he’d reduce the deficit.  Here is Obama in his own words from his closing infomercial of October 29, 2008:

I believe we need to usher in a new era of responsibility.  Across the country, families are tightening their belts, and so should Washington.  That’s why, for my energy plan, my economic plan and the other proposals you’ll hear tonight, I’ve offered spending cuts above and beyond their cost.  I’ll also go through the federal budget, line by line, eliminating programs that don’t work … and making the ones we do need work better and cost less.”

Here’s the ugly reality, over two years later:  The Congressional Budget Office (CBO) announced this week that the 2011 budget deficit will reach a record $1.5 trillion.  That follows $1.4 trillion and $1.3 trillion deficits in his first two years.  The 2008 deficit, for purposes of comparison, was $455 billion.

Something to consider when assessing Obama’s latest State of the Union address, and his upcoming promises over the next two years.