Ruth Marcus focuses on the silver lining surrounding Standard & Poor’s downgrading the United States’ credit rating:
The more shake-’em-up warnings that could prod the political system into action, the better. From the Obama administration’s point of view, you don’t want the financial markets overreacting to the news and therefore making economic matters worse – hence Treasury Secretary Timothy Geithner’s round of interviews saying that S&P was overly gloomy about the prospects for political agreement. At the same time, as long as the markets remain reasonably calm, as appears to be the case, the administration is happy to have the political classes riled up. Problem is, the administration has different messages for the two audiences but only a single microphone. (Emphasis added)
In this case, the Obama Administration isn’t suffering from a lack of transparency – it’s deleterious contradictions are all-too-easy to see as it walks America’s financial future right off a cliff.
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?
Gasoline prices have increased from the $3 range to the $4 range in just one year, we’re approaching all new record prices set in 2008 even though it’s not even summer driving season yet. But ignore higher gas and food prices, America. They only matter if you actually drive or eat. Federal Reserve Vice Chair Janet Yellen says it’s all “transitory,” and we need to keep the “stimulative” inflationary monetary spigots open because it “continues to be appropriate.”
Even the European Central Bank is raising interest rates in an attempt to avert inflation. Of course, there isn’t an Obama reelection campaign to sustain over there.
Shouldn’t America ensure that its military personnel and their families continue to receive paychecks, regardless of whether budget negotiations result in a deal or a federal shutdown? Barack Obama apparently doesn’t think so.
As bargaining continued yesterday, House Speaker John Boehner (R – Ohio) introduced legislation that would keep the government open one additional week and maintain military funding through the end of 2011 so that members of the armed forces would continue to be paid. The House quickly passed that bill, including 15 Democratic votes. Obama, however, grotesquely promised a veto, bizarrely labeling it a “distraction.”
Frankly, this entire debate wouldn’t be necessary if the preceding Congress overwhelmingly controlled by Obama’s own party had simply passed a 2011 budget. But for the first time since the inception of the Budget Act, they simply abdicated that basic responsibility. Regardless, our military is stretched thin across the globe, and many families live paycheck-to-paycheck. This obviously isn’t of paramount concern to a president who clearly seems to welcome a government shutdown.
This is one of the most shameful and pathetic episodes in an already shoddy presidency.
In this era of bureaucratic overreach and unsustainable spending and deficits, should government also enter the business of competing against private communications service providers? Doesn’t it already have its hands full?
We at CFIF think so. In fact, we testified last month before the North Carolina legislature on behalf of thousands of supporters and activists across that great state in support of H.B. 129, which would restrain government bureaucrats from unfairly competing against private providers of communications services. And with good reason. From Taiwan to Australia, from Chicago to Houston, and inside North Carolina itself, the history of public broadband is without exception one of failure. Every single public broadband project of which we’re aware has failed to so much as break even. Ultimately, taxpayer bailouts become necessary as government endeavors lose money and require constant upgrades to keep pace with evolving technology. Moreover, government broadband boondoggles undermine the billions of dollars invested in private network improvement and expansion, and discourage future private investment. After all, why risk one’s capital to compete against governments that can manipulate the rules and go to taxpayers for bailout? Inevitably, poorer service and layoffs in the vibrant tech sector result. Rural communities particularly suffer.
But none of that logic seems to matter to Democratic FCC Commissioner Mignon Clyburn. In a statement Monday, Clyburn attacked the North Carolina’s sensible legislation and defended the concept of government entering yet another portion of the private sector. Perhaps that’s not surprising, considering Clyburn’s vote last December to impose so-called “Net Neutrality” in the face of two-to-one public opposition, a unanimous Court of Appeals decision that the FCC didn’t possess such authority and condemnation from bipartisan groups in Congress.
Predictable or not, however, it is critical that Americans at the federal, state and local level vocally oppose the sort of government tech sector overreach that she advocates.
In the must-watch video below, House Budget Committee Chairman Paul Ryan lays out his 2012 budget proposal and the consequences should Congress fail to act now to restore the nation’s fiscal sanity.
This week provides a stark contrast between a leader actually willing to risk political capital, versus a man who now seeks four more years of politics-as-usual.
On the one hand, we have House Budget Committee Chairman Paul Ryan (R – Wisconsin). Tomorrow, Congressman Ryan will unveil a federal budget proposal that reduces spending by $4 trillion over the coming ten years, provides pro-growth tax reform and caps runaway federal spending. All without reducing Social Security benefits by a single penny for anyone already receiving them or over 55 years of age, along with Medicare reform that will save it from its catastrophic fate if nothing is done. Congressman Ryan knows full well that by offering budget leadership, Democrats will possess a “political weapon” to use against him, even if it means that “they will have to lie and demagogue” to do so. But instead of shrinking, he has chosen leadership.
On the other hand, we have the President of the United States. The purported leader of the Free World. The most powerful man on Earth. The man who formed a blue-ribbon deficit commission, then proceeded to ignore it. Instead of making sure that a Congress dominated by his own party could even manage to pass a 2011 budget, instead of offering decisive world statesmanship amid worldwide crises and instead of providing leadership in averting a national debt catastrophe, Obama instead focused on unveiling his 2012 reelection campaign this week. Instead of offering a plan, the AWOL Obama will apparently just sit back and attack Paul Ryan’s.
So there you have it. One man seeks to cut spending by $4 trillion, and the other man seeks to spend $1 billion getting himself reelected.
As the House and Senate enter budget negotiations, House Speaker John Boehner and Majority Leader Eric Cantor must not sacrifice the Kline Amendment de-funding the Obama Education Department’s so-called “Gainful Employment Rule” on the altar of false compromise.
The Gainful Employment Rule, which sets arbitrary bureaucratic formulas for federal student loan repayment, is a transparent attempt by the Obama Administration to cripple private career colleges. And the tale of its creation is a long, sordid one. First, there were allegations of insider trading between Education Department officials and short-sellers with a financial interest in seeing career colleges’ stock prices fall. Then, the the Government Accountability Office (GAO) had its sting operation against career colleges exposed as defective, ultimately forcing its retraction. These allegations are serious enough that separate investigations were commenced in the Senate and House.
Fortunately, a bipartisan group in the House of Representatives voted to de-fund any enforcement of the Gainful Employment Rule in budget bill H.R. 1. In an era of intense party acrimony, the fact that opposition to the Gainful Employment Rule attracted strong bipartisan agreement speaks volumes. Now, it’s a matter of Speaker Boehner holding strong on de-funding implementation of the rule, rather than offering it as “trade bait” to Senate Democrats. Please don’t allow the Kline Amendment de-funding the Gainful Employment Rule to become a casualty of politics as usual, Speaker Boehner.
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.
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.
Yet the unnecessary duplicate engine for the new F-35 Joint Strike Fighter refused to die, riding the wave of Washington, D.C. pork-barrel political force.
Fortunately, the Defense Department has ordered General Electric and Rolls-Royce to stop wasting dollars on a second engine for the F-35.
Pratt & Whitney serves as the main producer of the F-35 engine, but forces in Congress perpetuated the wasteful General Electric and Rolls-Royce second engine. Although both the House and Senate have voted to end the second engine and allocate those precious defense dollars on more critical needs, the project kept going because the previous Congress never passed a 2011 budget. That left the Defense Department to operate on continuing resolutions based on the fiscal 2010 appropriations.
It’s an embarrassing illustration of wasteful Beltway politics, and a reminder of what we who favor fiscal sanity must continually overcome. Fortunately, the Defense Department just provided an assist in that effort.
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.
Sanity in the debate over slashing the federal budget is coming from some odd places lately. Today, it’s courtesy of Politico’s Michael Kinsley, a liberal’s liberal if ever there was one. Writing in a terrific piece in the Los Angeles Times, Kinsley offers up some conservative wisdom in words better than any on the right have come up with:
Comparisons [of domestic spending programs proposed to be cut] with Pentagon spending are especially inappropriate, because defense spending is different. The payoffs from most types of government spending are incremental. You can decide how much you want the government to spend on, say, subsidizing symphony orchestras. There is no exact right answer: The more you spend, the more you get. More symphony orchestras are a good thing, but there are other good things you want the government to do, or of course you might want the government to stay out of it and lower your taxes instead.
But in the case of defense spending, notions like how much we can afford, or what it would be nice to have, are inappropriate. The value is not gradual or incremental. It is absolutely essential to spend whatever is necessary to keep our nation safe, and a total waste to spend a nickel more.
Another worthy use of federal money: having the passage above carved into the walls in the Democratic cloakrooms on Capitol Hill.
There were many fine speeches from last week’s Conservative Political Action Conference (CPAC) that deserved the attention of thoughtful conservatives. First among equals, however, was the address that Indiana Governor Mitch Daniels gave for Friday night’s Ronald Reagan Centennial Dinner.
The speech — written by Daniels himself — shows that the potential 2012 presidential candidate is not only a brilliant manager and a canny politician, but also an extremely sophisticated (and subtle) writer. In its defense of a prudent conservatism, the speech demonstrated that Daniels, not Barack Obama, is the great literary talent of 21st century politics. For unlike The One, Daniels speech was drenched in substance.
As such, the speech deserves no less than to be read in its entirety. Failing that, however, no passage deserves isolated quotation as much as Daniels’ definition and defense of fiscal conservatism, a masterpiece of dictional economy:
We believe it wrong ever to take a dollar from a free citizen without a very necessary public purpose, because each such taking diminishes the freedom to spend that dollar as its owner would prefer. When we do find it necessary, we feel a profound duty to use that dollar as carefully and effectively as possible, else we should never have taken it at all.
If you need any proof that the new generation of Republicans in Congress are breaking from the spendthrift ways of their forebears, look no further than this terrific idea, as reported by our friends at the Daily Caller:
With the 112th Congress in full swing, some members of the House’s conservative Republican Study Committee are making a renewed effort to establish a committee whose only purpose is to find programs to cut from the federal budget.
…
The idea is a throwback to the now-defunct “Joint Committee on Reduction of Non-essential Federal Expenditures,” started by former Virginia Sen. Harry Byrd in 1941. The bi-cameral committee slashed an (inflation-adjusted) $38 billion from the federal budget in its first four years. The committee cut and eliminated programs enacted under President Franklin Roosevelt’s “New Deal,” but was dismantled in 1974.
This proposal has two salutary effects. First, it has the potential to move conservatives from the abstract to the specific when it comes to spending cuts. Second, it puts skin in the game for Democrats — if they oppose the proposal it will give the lie to all of the vague pieties about deficit reduction that they’ve harnessed over the last year. This is a fight the conservatives in Congress should relish.
At The Daily Beast, Leslie Gelb discusses the other January 1961 presidential speech that should get more attention from Americans today. It was delivered by outgoing President Dwight Eisenhower.
Here are the Gelbian nuggets:
(1) Put the national interest ahead of politics
(2) There are no quick fixes to crises
(3) Balance is the best strategy
(4) Beware of spending beyond our means
(5) Guard against the power of special interests
The fifth point is best remembered as the warning against the military-industrial complex. The fourth point seems especially pertinent today with a $14 trillion debt that will surely “mortgage the material assets of our grandchildren (while) risking the loss also of their political and spiritual heritage.”
The entirety of Ike’s farewell address can be found here.
That’s the question Reason’s Nick Gillespie puts to the Cato Institute’s Chris Edwards, as they look at which governors have been the best friends of lower taxes and lower spending in the past two years:
Yes, you read that headline correctly. The day of reckoning for spendthrift states and localities is on the way according to Meredith Whitney, a research analyst who accurately predicted the global credit crunch. In a startling piece in the UK Guardian, Whitney predicts that the number of sizable defaults to come in the next year could hit the century mark. The record isn’t pretty:
Detroit is cutting police, lighting, road repairs and cleaning servicesaffecting as much as 20% of the population. The city, which has been on the skids for almost two decades with the decline of the US auto industry, does not generate enough wealth to maintain services for its 900,000 inhabitants.
The nearby state of Illinois has spent twice as much money as it has collected and is about six months behind on creditor payments. The University of Illinois alone is owed $400m, the CBS programme said. The state has a 21% chances of default, more than any other, according to CMA Datavision, a derivatives information provider.
California has raised state university tuition fees by 32%. Arizona has sold its state capitol and supreme court buildings to investors, and leases them back.
Potential defaults could also hit Florida, whose booming real estate industry burst two years ago, said Guy J. Benstead, a partner at Cedar Ridge Partners in San Francisco. “We are not out of the woods by any stretch yet,” he said.
Indeed we’re not. And don’t expect to see a robust private sector recovery as municipal governments crumble throughout the nation.
The folks over at Reason TV never miss a chance to make complex public policy simultaneously comprehensible and funny (how else to explain their decision to augment Nick Gillespie’s Ian Malcolm look with a chef’s hat?). Take a look at their new video on how to balance the federal budget and then visit the link where they explain their plan in detail. As a comprehensive look at how Congress could get the deficit mess under control without raising taxes, it’s a logical compliment to CFIF’s One More Vote campaign.
Let’s see… Federal employment has grown 17% since 2007, and federal employees’ total compensation has risen 37% in the past decade (compared to 9% for private sector employees), according to The Wall Street Journal and USA Today. Further, average federal employee compensation reached $123,000 in 2009, more than twice the $61,000 earned by the average private employee.
So in what moral universe are federal workers justified in reacting to a very modest two-year wage freeze proposal with “rage” and by labeling it a “slap” when they haven’t faced the brutal layoffs, salary reductions and cuts in health coverage their private counterparts must endure? A majority of Americans surveyed favor federal workforce reductions and salary cuts, so perhaps they should behave less like spoiled Greek, French and English rioters and instead express gratitude to American taxpayers who continue to subsidize their relative good fortune.
As the lame duck Congress prepares to take up the issue of what to do about the expiring Bush tax cuts, liberal pundits are busy proving to the American people that no journalism school in America provides economics education. A few points to make with your liberal friends as you argue economics the next time you join them for a non-fat soy latte made from fair trade ingredients:
Extending the Bush Tax Cuts Won’t “Cost” Anything — Liberals can’t stop carping about the $700 billion “cost” of extending tax cuts for Americans making over $250,000 a year. This is preposterous. The absence of tax increases isn’t a cost to the federal government. If it was, then every dollar kept in private hands instead of transferred to Washington would be a cost. Private businesses don’t account for imaginary revenues as costs, and there’s no reason for government to either. This is just an excuse for not bringing expenditures into line with “revenues” (i.e. money confiscated from you).
A Shortage of Tax Revenue Isn’t the Root of America’s Fiscal Problems — The class warfare rhetoric at the heart of the tax fight is a red herring for the real issue at hand. Virtually all taxes kill economic activity. Of course, some tax revenue will always be necessary to finance the basic functions of government, but beyond that baseline taxes are actively destructive. Thus the real choice when it comes to upper-level earners’ tax rates isn’t whether they should be soaked or not. It’s whether you think the federal government is doing too little (in which case taxes need to increase and more private economic activity should be killed) or too much (in which case spending needs to decrease).
Income Inequality is a Meaningless Metric — Proponents of aggressively progressive taxation who are prone to ideological rather than practical justifications of their beliefs have increasingly been leaning on an argument that America suffers from growing income inequality. This is specious for two reasons. First, it presumes that there is an ideal distribution of wealth that exists free of merit. The more free an economy is, however, the more income is a function of how much value one creates in the marketplace. So do we want a nation of C students (socialized mediocrity) or a nation where the highest achievers get A’s and the lowest ones are held back a year (with generous welfare benefits, we should add)? Also, these numbers are absolutely useless from a statistical perspective. Samples of income tiers measure groups, not individuals. So when we say that the rich are richer and the poor are poorer than 20 years ago, we ignore the dynamism of the American economy — and the resulting fact that many individuals who were on the lower rungs of the economic ladder two decades ago have moved up, and many at the top have moved down. This interpretation also ignores the fact that the gap is less important than the actual numbers. If you have $200 and I have $100, are incomes are closer to parity than if you have $1 billion and I have $1 million. But in the latter scenario, we’re both better off individually and society (if it consists of just you and I) is better off as a whole. Now imagine extrapolating that analysis to an entire nation
Virtually Every Number You See About Poverty in America is a Lie — For one simple reason: government calculations of poverty do NOT factor in benefits conveyed by government. To prove the point using an unrealistic example, a family of four making $40,000 a year but receiving $60,000 in government assistance, would still be captured in government statistics as making $40,000 a year, even though their actual income would be $100,000.
Unemployment Benefits are NOT a Form of Economic Stimulus — From Nancy Pelosi to Nicolas Kristof, every empty head on the left seems to have the idea that unemployment benefits are a form of economic stimulus rattling around inside it. The idea is that because the poor have the greatest need for liquidity (and will thus spend the cash the quickest) unemployment greases the wheels of commerce. This is a basic Keynesian fallacy: thinking of the economy only in terms of consumption. But if this is true, why wouldn’t the road to recovery be paved with every American emptying out their bank account for a trip to Nordstrom’s? Maximum economic efficiency is achieved by putting money to the use that provides the greatest benefit relative to the cost to the individual. In some cases, this will be consumption. But in others it will be investment or savings. Unemployment benefits can be justified on humanitarian grounds, but not on mechanical economic ones (indeed, excess unemployment benefits drive up unemployment — not a surprise if you remember that you always get more of what you subsidize). Paychecks generally provide the basis for a sounder economy than food stamps.
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