Freedom Line Blog

As the Senate debates proposed tax rules that would unfairly and discriminatorily target domestic oil and gas producers, the Center for Individual Freedom on behalf of its 300,000 supporters and activists across the United States today formally urged all Senators to vote “NO” on S. 940.   Addressing that counterproductive proposed legislation, Grant Aldonas (former Under Secretary of Commerce for International Trade) and Pamela Olson (former Assistant Treasury Secretary for Tax Policy) warned of its likely destructive consequences in a Washington Examiner opinion piece today.   Here is one particularly relevant excerpt from their commentary:

Rather than offering serious ideas about how to tackle entitlements, cut wasteful spending or reform the tax code, proponents of raising the oil companies’ taxes have seized on the notion that American energy producers benefit from billions of dollars in alleged tax subsidies.

[The] single most damaging thing the proposal does is mortgage our energy future to the state-owned energy giants that now dominate global energy markets. The U.S. economy runs on oil, but we produce only 40 percent of what we consume, meaning our economy and standard of living depend heavily on our access to foreign oil and gas resources.

Reid’s plan works just fine if you are comfortable having America’s energy future decided in Beijing, Moscow, or Tehran. Not so much if you think we should be deciding our own destiny.

Any proposal that would enhance the competitiveness of foreign government-owned oil giants at the U.S. companies’ expense and lead to greater volatility in oil markets and rising prices for U.S. consumers qualifies as a damaging unintended consequence.”  (Emphasis added.)

To read this excellent commentary in full, please click here.

CFIF also urges you to contact your Senators (contact information for your Senators available here) and urge them to vote “NO” on S. 940.

Last week, Ashton examined California’s economic failures courtesy of a John Fund piece that used restaurant CEO Andy Puzder as an object lesson in the Golden State’s fiscal insanity. Puzder recently appeared on Fox Business’s “The Wild Card” to explain the state’s travails in greater detail. Watch it and weep.

You probably don’t need any more sources of gloom on this tax day. But what you do need is an understanding of just how destructive America’s current tax regime is. And for that you couldn’t do much better than the words of conservative economist extraordinaire Arthur Laffer, who writes in today’s Wall Street Journal:

There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.

To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.

In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes.

For those of you keeping score at home, that’s the equivalent of a 30% tax on … well, paying taxes.

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.

Quote of the day from The Wall Street Journal’s L. Gordon Crovitz, writing in his weekly “Information Age” column:

In high-tech, by the time the political and legal systems catch up to an issue, the issue is moot.”

Whether anti-trust, so-called “Net Neutrality,” public broadband endeavors, wireless data roaming mandates or anything else, you can always count on bureaucrats to be a day late and a dollar short.  Are you paying attention, FCC?

One would think the Federal Communications Commission (FCC) had learned its lesson by now.

In the past calendar year, the FCC’s extralegal power grabs have brought judicial rebuke from a unanimous Court of Appeals for the D.C. Circuit, widespread public opposition and rare bipartisan Congressional condemnation.  But instead of internalizing those lessons, the FCC has once again endeavored beyond its legal authority by voting to impose data roaming mandates on private wireless carriers.  In a correspondence to the FCC, CFIF set forth the ways in which its latest rogue action is not only without legal foundation, but also unwise as a matter of public policy.

First, Section 332 of the Communications Act explicitly states that private mobile service providers “shall not be treated as a common carrier for any purpose under this Act.”  By  requiring wireless providers to forcibly enter agreements with other wireless carriers and allow non-customers to roam on their data networks, the FCC has violated that express provision. 

Second, a vibrant market for data roaming agreements already exists, meaning that this FCC action is unnecessary.  Carriers large and small already engage in very high rates of partnership, including Rural Cellular Association (RCA) members.  These agreements cover 3G and even 4G networks, contrary to extremists’ claims.  Indeed, numerous smaller carriers currently advertise nationwide broadband data coverage despite possessing relatively narrow license areas, meaning that they already have secured data roaming agreements.  Further, the prices negotiated in roaming agreements continue to decline. 

Third, the FCC’s bureaucratic intrusion into this realm will have the perverse effect of discouraging new investment and job creation in this cutting-edge sector.  After all, the FCC’s mandates will create incentives to piggyback on other networks rather than invest in new ones.  Carriers must be able to differentiate themselves and compete against counterpart carriers in the free market, which the FCC’s proposed mandates will undercut.  As data use continues to increase and smart phones impose new demands on network capacity, the inevitable result will be congestion, delay, fewer jobs and less investment.

Today’s FCC vote thus exceeds its legal authority and undermines new investment, while ignoring the fact that data roaming agreements are already prevalent.  It merely provides the latest evidence that the rogue FCC must be brought back to Earth, whether via Congress or the courts.

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.

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.

Gallup released a fascinating survey this week, under the heading “U.S. Steady as the Most Popular Destination for Potential Migrants.”

In fact, it’s not even close.  Using aggregated data compiled from 148 nations during the years 2007 through 2010, survey subjects were asked, “Ideally, if you had the opportunity, would you like to move permanently to another country, or would you prefer to continue living in this country?  To which country would you like to move?”  The United States was the runaway leader, with more than three times as many respondents as the next closest countries (Canada and the United Kingdom).  The U.S. led with 24%, Canada and the U.K. were far behind at 7% each, with France at 6% and Spain at 4%.  In fact, America was named as the top potential destination by as many people as the U.K., France, Spain, Germany and Italy combined.  So much for that supposedly superior European model.

President Obama may not believe in American exceptionalism, but apparently the rest of the world that he strangely seeks to follow rather than lead still does.

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.

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.

The nation’s capital is abuzz today over President Obama’s Wall Street Journal commentary, “Toward a 21st Century Regulatory System.” Astonishingly, Obama actually praises America’s free market system as “the greatest force for prosperity the world has ever known” while promising regulatory reform:

I am signing an executive order that makes clear that this is the operating principle of our government.  This order requires that federal agencies ensure that regulations protect our safety, health and environment while promoting economic growth.  And it orders a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive.  It’s a review that will help bring order to regulations that have become a patchwork of overlapping rules, the result of tinkering by administrations and legislators of both parties and the influence of special interests in Washington over decades.”

Whether Obama speaks honestly, or simply seeks to deceive the electorate in anticipation of 2012, lies beyond our powers of divination.  The available evidence, however, justifies extreme skepticism.

One cause for doubt stands out immediately.  In identifying examples of the federal regulatory state run amok, the best Obama can do is point to saccharine, saying that the Food and Drug Administration (FDA) permits it for consumption in coffee while his Environmental Protection Agency (EPA) labels it a “dangerous chemical.”  That’s it?  That’s the best example he can cite?

Just one month ago, Obama’s own Federal Communications Commission (FCC) flagrantly defied two-to-one public opposition, a unanimous Court of Appeals and a bipartisan group of 300 members of Congress by voting to regulate the Internet via “Net Neutrality.” Obama claims in his column that he aims to prevent “regulations that stifle job creation and make our economy less competitive,” but that’s exactly what “Net Neutrality” will do.  The FCC seeks to regulate an Internet sector that has thrived over the past two decades precisely because the federal government has refrained from interfering with regulations such as this.  The result will be fewer incentives for continued Internet investment, expansion and innovation, as well as declining service as capacity fails to keep pace with demand.

Additionally, Obama’s Labor Department seeks to impose “card check,” which will end secret ballot voting in union elections, and his EPA seeks to impose global warming carbon cap-and-tax regulations.  Both of those agenda items failed miserably in Congress even when controlled by Democratic supermajorities, but Obama’s regulatory agencies now seek to impose them anyway.

So Obama talks a good game in today’s op/ed.  But unless he issues an immediate cease-and-desist order on “Net Neutrality,” card check and cap-and-tax, his words will prove just as meaningless as his other broken promises.

This week, the Heritage Foundation and The Wall Street Journal released the 2011 edition of their Index of Economic Freedom.

Once again, the facts speak for themselves:  Economic freedom means not only more prosperity, but also greater overall wellbeing.  In calculating economic freedom and ranking the world’s economies, the Index examines 10 criteria:  business freedom, trade freedom, fiscal freedom, government spending, monetary freedom, investment freedom, financial freedom, property rights, freedom from corruption and labor freedom.  The correlation between economic freedom and living standards is once again made clear:

Despite varying degrees of economic freedom across the regions, the relationship between economic freedom and prosperity remains constant within the regions.  Per capita incomes are much higher in countries that are economically free.  Not surprisingly, overall human development also thrives in an environment that is economically free…  Higher economic freedom induces greater overall human development as measured by the United Nations Human Development Index, which assesses the combined progress of life expectancy, literacy, education, and the standard of living.”

The good news is that 117 of the world’s economies improved over the past year, whereas only 58 declined.  For Americans, the bad news is that we fell from 8th to 9th.  On that front, note the Index’s comments about the  importance of reducing government spending:

Countries that reduced government spending had economic growth rates almost two percentage points higher in 2009 than countries whose government spending scores worsened, and countries with the highest rates of government spending had gross domestic product (GDP) growth rates 4.5 percentage points lower on average than countries where government spending was best contained.”

Will the new 112th Congress help reverse that decline?  As we approach the 2012 elections, that will prove a critical question.

This morning, the Labor Department announced a national unemployment rate of 9.4%.  Unfortunately, this means that the unemployment rate has surpassed 9% for a post-World War II record 20 consecutive months.  Moreover, the announcement of just 103,000 new jobs fell well short of the anticipated gain of 150,000 new jobs.

The Obama Administration will trumpet the misleading 0.4% decline from last month’s 9.8% rate as evidence that its agenda is somehow succeeding.  That claim, however, conceals the fact that the rate had already dropped from January 2010’s 9.7% rate to 9.5% in June, only to climb back to 9.8% to finish the year.  Further, this is the same Obama Administration that promised unemployment would peak at 8% in October 2009 – fourteen months ago – and be down to 7% by now if we just passed his so-called “stimulus” bill back in February 2009.  Almost $1 trillion in deficit spending and two years later, the verdict is clear.  It has failed miserably.

It’s something to remember as the Obama Administration attempts to “triangulate” and claim successful governance as we steam toward the 2012 reelection campaign.

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 services affecting 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.

From President Obama’s remarks earlier today defending his deal with Congressional Republicans to prevent tax increases:

I’ve said before that I felt that the middle-class tax cuts were being held hostage to the high-end tax cuts. I think it’s tempting not to negotiate with hostage-takers, unless the hostage gets harmed. Then people will question the wisdom of that strategy. In this case, the hostage was the American people, and I was not willing to see them get harmed.

Not quite “we refuse to negotiate with terrorists.” Let’s hope the press conference wasn’t airing on Al-Jazeera.