Freedom Line Blog

When asked by the Washington Examiner about the policy choices facing American voters this election, Paul Ryan painted a picture of stark contrasts, beginning with the Obama Administration’s high-tax, high-spending approach:

“Those kinds of packages won’t succeed in preventing a debt crisis. We’ll pass one round of austerity, that won’t work, then the bond markets will get us, then we’ll do another round and another round, just like what Europe is going through now. We will have chosen to go on the path to decline and we’ll have a lost decade,” Ryan explained. “We see the president and his party are basically practicing lost decade economics,” he finished.

Moving to the Republican alternative, Ryan explained, “We think we have one more great chance, if the elections go the right way, to turn this thing around once and for all. And address it, the right way, up front. With real entitlement reform, restructuring these programs. Real tax reform to get back to growth. We want growth we want opportunity, we want reform, so that we fix this the American way.”

In terms of jobs and economic opportunity, it certainly has been a lost half-decade under President Obama.  Doubling down on more of the same for another presidential term would likely consign an entire generation of workers to a lifetime earnings amount much lower than their parents.

President Obama may be willing to tolerate being the first leader to see a generation of kids live below their parents’ standard of living since World War II.  (What else explains his campaign’s “Life of Julia” foolishness?)  However, my suspicion is that a majority of voters are not interested in either Lost Decade Economics or much less a lost generation of opportunity.

Good sound bites convey truth in a memorable way.  Kudos to Ryan for correctly identifying the likely result of Obama’s wasteful policies.

Michelle Malkin says that while the million-dollar junkets enjoyed by General Services Administration officials at taxpayer expense deserve outrage, the real scandals are the $25 million+ paydays the GSA gives to Big Labor thanks to a rule implemented by President Barack Obama.

As I’ve reported previously, the linchpin is E.O. 13502, a union-friendly executive order signed by Obama in his first weeks in office. It essentially forces contractors who bid on large-scale public construction projects worth $25 million or more to submit to union representation for its employees. The blunt instrument used to give unions a leg up is the “project labor agreement,” which in theory sets reasonable pre-work terms and conditions. But in practice, it requires contractors to hand over exclusive bargaining control, to pay inflated, above-market wages and benefits, and to fork over dues money and pension funding to corrupt, cash-starved labor organizations.

One analyst told Congress that “the adoption of a PLA amounts, in effect, to a conferral of monopoly power on a select group of construction unions over the supply of construction labor.”

Since 85 percent of construction laborers are non-union, Obama’s GSA-enforced PLA is a financial boon to the shrinking unionized sector.

Echoing Malkin, the GSA administration’s luxuriant trips to Las Vegas and other locales should be prosecuted fully, but let’s not be distracted from the crony capitalism wasting several times those amounts just about every time a new federal building gets constructed.

If there’s going to be oversight – and there should be – let’s hope the bulk of it zeroes in on unwinding President Obama’s disastrous PLA.

Politico has a great article grappling with the question, What happens to all the agencies and personnel funded by ObamaCare if the Supreme Court rules the health care reform bill unconstitutional?

Unless the Court spells out in great detail how to unwind a bureaucratic behemoth that has already created 500 new positions in 2 new agencies – with another 3,000 new jobs in the Office of the Health and Human Services Secretary alone – it seems the answer is, no one knows.

Realistically, the issue will boil down to which party has control of the public’s purse:

“The issue you’re looking at here is cash flow,” said Jim Dyer, a former Republican staff director of the House Appropriations Committee, who is now a principal at the Podesta Group.

The federal spending pipeline is complex and secretaries have a lot of tricks up their sleeves. Even if the courts strike down the health reform law, Dyer said, the onus will still be on Congress to fully shut off the tap.

“If I’m an appropriator, … I would want to draw a hard line in the sand,” he said. The committee could immediately demand HHS stop its spending if the court strikes down the law so that it can exert tight control over how it winds the program down. Exactly how that would shake out if a Republican-controlled House committee wanted HHS to stop the spending but a Democratic-controlled Senate did not would be part of the uncertain political terrain.”

Here’s one more reason to ensure that next year’s budget process is dominated by fiscal conservatives.

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

Some of the book’s findings are startling:

• By the end of this decade India will surpass China as the most populous nation.

• Japan will lose 1 million people a year by 2060, contracting from 127 million to less than 87 million.

• Europe’s expensive social welfare model and aging populations will increasingly spur governments to scale back military spending in order to fund burgeoning entitlement program.

• Even though America’s current rate of replacing itself gives it a demographic advantage, unless serious reforms are instituted to entitlement spending, it too will continue to cut military expenditures to pay for rapidly expanding benefits for the elderly.

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

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

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

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

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

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

The Heritage Foundation breaks down the numbers of what ObamaCare was promised to save, and what it actually costs:

Combine this spending monstrosity with the $787 billion stimulus bill and you’ve got nearly $1.5 trillion added to the federal deficit before any other Obama Era policy has been discussed.  Lard on the costs of EPA regulations, the uncertainty of Dodd-Frank’s implementation, and the specter of all the Bush tax cuts vanishing next January and it’s no wonder the American economy is stagnant.  The liberals in Washington, D.C. are spending and regulating us into oblivion.

It’s been said by some supporters of President Barack Obama’s $787 billion stimulus spending spree that we can’t really know if it failed because we can’t ‘re-run’ the last three years to see if something else might have worked.

But according to economist John Lott, we don’t have to.

In a wide-ranging interview with The Daily Caller about his new book, , Lott compares the different approaches by the liberals in Debacle: Obama’s War on Jobs and Growth and What We can Do Now to Regain Our Future the Obama White House and the conservatives running Canada’s government.  The results aren’t pretty.

How do we know the stimulus package made the economic situation worse?

Compare the U.S. and Canada. Their unemployment rates increased in lock step from August 2008 until six months later, in February 2009, when the stimulus was passed in the United States. During those six months, the U.S. unemployment rate rose by 2.1 percentage points, from 6.1 percent to 8.2 percent, and the Canadian rate grew by 1.9 percentage points, from 5.1 percent to 7 percent (using the BLS [Bureau of Labor Statistics] measure to make the Canadian measure of unemployment comparable to the U.S. rate). The graph that we have showing this is actually stunning.

Canada adopted a much smaller and quite different “stimulus” program that emphasized cutting tax rates and regulations and that produced dramatically smaller deficits. On a per-capita basis, Canada’s stimulus was about a third that of America’s, costing $979 per person compared to our $2,730. The conservative Canadian government chose not to introduce any big programs.

Obama, meanwhile, adopted big-ticket Keynesian programs, believing that government spending for its own sake creates wealth. But Democratic emphasis on “green” energy, government-approved investments and technology and higher salaries for public-school teachers merely moved money away from where Americans and companies would have otherwise spent it.

Obama’s stimulus also raised the effective marginal tax rates that some individuals face, discouraging work; Canada, by contrast, cut some marginal rates. Obama kept the corporate tax rate stuck at 35 percent, while Canadians cut their corresponding rate from 21 percent in 2007 to 16.5 percent this year — with a further cut to 15 percent planned for next year. By last year, Canada had the lowest overall tax rate on business investment of any major industrialized country.

Canada also didn’t run the huge stimulative deficits that we ran here in the U.S. They didn’t saddle their kids with a huge debt that they were going to have to pay off.

But if Obama’s program — including a massive 21 percent hike in spending from 2008 to 2011 and corresponding massive deficits — worked so well, why has our unemployment rate risen more since those policies were adopted than have the rates of the European Union, South America, Japan, Australia or New Zealand?

The Daily Caller makes hilarious use of Karl Rove’s analysis comparing the spending rates for the Bush and Obama reelection campaigns.

But there’s plenty of evidence that the campaign isn’t bringing in as much money as it wants.

For example, data from the campaign’s earlier quarterly reports to the Federal Election Commission show that Obama’s spending is growing faster than revenues.

“The Obama campaign’s high burn rate doesn’t come from large television buys, phone banks or mail programs that could be immediately stopped … [but] from huge fixed costs for a big staff and higher-than-expected fund-raising outlays,” according to a March 14 article by Karl Rove, chief political strategist for George W. Bush.

In the second quarter of 2011, Obama’s “campaign spent 25% of what it raised… while Mr. Bush’s campaign spent only 9% in the second quarter of 2003,” Rove said. Since then, the spending pace has accelerated, he said, pointing out that in January “the Obama campaign spent 158% of what it raised, while the Bush campaign spent 60% in January 2004.”

Also, his supporters initially predicted a $1 billion reelection fund, but campaign staffers are quick to deny that is a goal.

Rove argues that one reason the re-election campaign might be running lighter-than-expected on cash is that many of Obama’s 2008 supporters are not opening their checkbooks this time around.

Spending growing faster than revenues (158%!).  Huge fixed costs triggering obscene debt.  An unsustainable burn rate.  Grandiose predictions cratering on fiscal reality.  Contributors unwilling or unable to pony up more cash.

Whether it’s managing the federal government or his own campaign, Barack Obama is as unbalanced with money as he is with policy.

Mark Steyn puts the federal government’s spending spree in a global perspective:

When you’re spending on the scale Washington does, what matters is the hard dollar numbers. Greece’s total debt is a few rinky-dink billions, a rounding error in the average Obama budget. Only America is spending trillions. The 2011 budget deficit, for example, is about the size of the entire Russian economy. By 2010, the Obama administration was issuing about a hundred billion dollars of Treasury bonds every month – or, to put it another way, Washington is dependent on the bond markets being willing to absorb an increase of U.S. debt equivalent to the GDP of Canada or India – every year. And those numbers don’t take into account the huge levels of personal debt run up by Americans. College debt alone is over a trillion dollars, or the equivalent of the entire South Korean economy – tied up just in one small boutique niche market of debt which barely exists in most other developed nations.

The Wall Street Journal reports that of the 32 loans made under the Energy Department’s renewable energy loan program, 10 have been put on an internal watch list for being “high risk investments”.  Though the Department redacted the identities of the companies on the list, at least one is Solyndra, the failed California solar panel company that went bankrupt last year, and left taxpayers with over $535 million in losses.

The Journal indicates that another member of the watch list may be Prologis Inc., a company approved for $1.4 billion in federal loans about six months ago.  Now, the firm says it won’t meet an upcoming deadline.

Here’s why:

Prologis originally intended to use Solyndra’s solar panels. Energy Secretary Steven Chu intervened last summer to help move the loan forward and called the Prologis project “remarkable” when it closed Sept. 30.

What’s remarkable is that Chu’s name isn’t on a White House watch list for seriously mismanaging billions in taxpayer money on failed ventures.

With the Supreme Court getting ready to hear arguments about the (un)constitutionality of ObamaCare, House Republicans yesterday voted to repeal the Independent Payment Advisory Board (IPAB), one of ObamaCare’s provisions that may be left unaffected by the Court’s decision.

As the Washington Times reports, this is “the 26^th time the House has voted to partially or completely repeal the sweeping overhaul” of the health care industry.

Like the other 25 times, this House vote won’t be seconded by the Democratic controlled Senate.  But in an election year that’s hardly the point.  What matters right now is that House Republicans continue to highlight how elements like IPAB destroy freedom and choice in health care by letting 15 unelected bureaucrats instead of the free market decide the price of services.

On to number 27!

It’s been a bad week for Office of Management and Budget Director Jeff Zients, the man tasked with defending President Barack Obama’s 2013 budget proposal.

In testimony before the House Budget Committee Zients told Rep. Scott Garrett (R-NJ) that the penalty for not complying with ObamaCare’s mandate to buy health insurance is not a tax increase.  (Subscription wall.)  In response, Rep. Garrett said, “Okay.  I just want to be clear on that because that’s not the argument the Administration is making before the Supreme Court.”

Before the Senate Budget Committee Zients was even more out-of-touch.  Under questioning from Senator Jeff Sessions (R-AL), Zients claimed that Obama’s 2013 budget contained spending cuts – a distortion Sessions would not tolerate:

Mr. Zients, there are no spending cuts in this budget. This budget increases spending. Surely you know that. It increases taxes. So to say you cut $2.50 in spending for every dollar in tax increase is beyond the pale.

So too is the entire shell game about ‘deficit reduction’ when what liberals like Obama really mean is tax increases to pay for spending increases.  If the President won’t admit it at least his budget director will be made to.

In a letter (pdf) to California legislators, State Controller John Chiang summarizes the Golden State’s fiscal problems with deft understatement:

As of December 31, 2011, total receipts are coming in $2.6 billion less than forecasted, and expenditures are $2.6 billion more than assumed.  Together, both of these components translate into a $5.2 billion reduction in cash resources.

At least someone in California can still do math.  Will it matter?

When Barack Obama entered office and proposed his nearly $1 trillion spending “stimulus” bill, his administration promised that unemployment would peak at 8% in the fall of 2009 if we passed his plan.  They also predicted that unemployment would be down to approximately 6% by now.

Instead, following today’s latest report from the Department of Labor, unemployment has now exceeded Obama’s promised 8% ceiling for a record 34th consecutive month.  Although some will focus on the decline from 9.0% to 8.6%, most of that statistical decline is due to people giving up and dropping out of the labor force, rather than from sudden job creation.  That is illustrated by the fact that only 120,000 net jobs were added, less than the anticipated number.  That’s also fell far below the 200,000 new jobs needed each month to reduce the unemployment rate by just 1% over the span of a year. Additionally, the broader labor participation rate again declined and now stands at 64%.

In contrast to the destructive effects of Obama’s borrow-and-tax-and-spend agenda, Ronald Reagan’s tax-cutting agenda saw unemployment plummet from 10.4% to 7.1% over the same period of time.  As the old Latin saying goes, “res ipsa loquitur” – the fact speaks for itself.

It’s an old trope that Democrats are the Santa party while Republicans play Scrooge.  But if the experience of this group of veteran Santa Claus impersonators is any guide, it looks like Old Saint Nick is learning the value of managing (economic) expectations.

Fred Honerkamp, a Santa graduate who also lectures at the school, said that he had come up with his own story of an errant elf to in the North Pole explain why children can’t have everything.

He said: ‘It’s hard to watch sometimes because the children are like little barometers, mirrors on what the country has been through.

‘In the end, Santas have to be sure to never promise anything.’

The school has also been advising its pupils on how to deal with such questions as: ‘Can you bring my daddy a job?’

Santa student Tom Ruperd told the New York Times that he tends to guide children towards more realistic gifts and tells them that ‘Santa’s been cutting back too’.

Faced with an impossible question, such as finding a job for a parent, his reply is: ‘Santa specializes in toys, but we can always pray on the other’.

Pray, and work hard to elect government officials who know that the truth told with respect for another’s dignity is a much better gift than empty promises.

H/T: Daily Mail

The nation’s unemployment remained at or above 9% again last month, and has now exceeded 8% for 33 consecutive months since February 2009.  That’s the longest stretch since the federal government began issuing monthly reports in 1948.

Here’s why that 8% benchmark and February 2009 are important.  When Obama passed his nearly $1 trillion “stimulus” bill that same month, his administration projected that unemployment would never exceed 8%, and be all the way down to approximately 6% today.  Instead, unemployment quickly climbed to 10.1%, and has remained above 9% for all but four months during that record 33-month span.  Moreover, the economy only added a disappointing 80,000 jobs for September, less than the expected 100,000 and far below the estimated 200,000 necessary each month to reduce the rate by just 1% over the course of a year.

It’s instructive to compare the real-world results of Obama’s economic agenda with Ronald Reagan’s.  In the same 33-month stretch following the effective date of Reagan’s tax cuts, unemployment plummeted from 10.4% to 7.1%.  The comparison speaks for itself, yet now Obama tells the nation that what we need is more of the same – more “mini-stimulus” government spending.  Obama’s agenda has demonstrably failed, and it’s time to return to what demonstrably works.

So the government reported tepid 2.5% gross domestic product (GDP) third quarter growth yesterday, and the market celebration it triggered says a lot about the bleak nature of the Obama economy.

First of all, that reading fell below consensus expectations of 2.7% growth.  Second, 2.5% falls almost a full percentage point below the post-war historical average of 3.3% quarterly growth.  Third, GDP should be growing even faster than that 3.3% long-term average during a period of so-called “recovery” – recall that the most recent recession officially ended nine quarters ago in June 2009.  At a similar point during the Reagan recovery in 1984, GDP grew at a 7.1% rate following consecutive quarters of 9.3%, 8.1%, 8.5% and 8.0% growth.  And at the same point during the Bush recovery from the Clinton/Gore tech bubble downturn and 9/11, GDP grew 3.7% following a previous quarter of 6.7% growth.  Fourth, 2.5% growth is insufficient to significantly improve the nation’s festering unemployment problem.

A 2.5% rate certainly beats the 0.4% and 1.3% readings for the preceding two quarters of 2011, but America’s desperate need for new economic leadership becomes clear when such a lackluster result is seen as “good” news.

In an ominous sign, the nation’s consumer confidence plummeted in October to lows not seen since March 2009, three months before the last recession officially ended.  After improving to 46.4 in September, the measure fell 7 points to 39.8, well below what economists expected.  That reading is also far below the 90 level that economists generally agree indicates a healthy economy.

So along with the cyclical recovery following the last recession, consumer confidence rose but has now returned to lows not seen since that time.  It will therefore be interesting to watch Barack Obama and liberals attempt to once again scapegoat the Bush Administration for this, almost three years since Bush departed office, and five years since his party last controlled Congress.

In our commentary this week entitled “While Federal Spending Hit New Record in 2011, Washington, D.C. Became America’s Wealthiest City”, we highlight the interrelation between federal spending reaching a new record high in 2011 and the Washington, D.C. metropolitan area becoming the nation’s wealthiest.   Among other facts, we pointed out that wages of federal employees themselves are over 1/5 higher than comparable private-sector employees, and that federal benefits stand 20%-40% higher than those of private counterparts.

Today, Senators Jeff Sessions and Olympia Snowe sustain our point in their commentary within The Wall Street Journal entitled “An End to Budgetary Trickery.”  Advocating the Honest Budget Act they’ve introduced to end “the most blatant and dishonest” overspending gimmicks, they highlight “Fake Federal Pay Freezes”:

In November 2010, the president promised to institute a ‘two-year pay freeze for all civilian federal workers.’  He explained that ‘getting this deficit under control is going to require broad sacrifice.’  But 70% of civilian federal workers have continued to receive 2%-3% automatic ‘step’ increases just for showing up – costing taxpayers an extra billion dollars every year.  The Honest Budget Act, in keeping with the president’s pledge, would simply make the federal pay freeze real by legislative mandate.”

Senators Sessions and Snowe also seek to end false “emergency” spending, phony “rescissions” and timing shifts in their legislation.  As they summarize, “No more gimmicks, tricks or shell games.”  We agree, and urge you to take a quick moment to contact your two Senators in support of the Honest Budget Act.   Let’s get this done.

One way to think of a presidential campaign is as a nationally followed negotiation.  Each political party provides players who in turn generate ideas for public consumption.  Some proposals change the national consensus (e.g. Ronald Reagan’s tax cuts), while others fall flat (Walter Mondale’s “I will raise your taxes” pledge). 

If we look at what leading Republicans have proposed this cycle, it’s an impressive range of serious fiscal ideas.  Paul Ryan has his “Path to Prosperity” budget, Rick Santorum his tax cuts. Mitt Romney has 59 points to get America working, and Herman Cain has “9-9-9”.  Now, Ron Paul says we should cut $1 trillion dollars by eliminating entire federal cabinet departments and going back to 2006 funding levels for those that survive. 

My suspicion is that Paul’s plan will get the most criticism because it is the most radical.  But might it also be the most helpful in a sense, since it probably represents the least government that any major Republican will put his or her name to this year?  And if that’s the case, then isn’t Paul doing the electorate a favor by clearly articulating what the most radical version of reform would look like so voters can weigh the differences fully? 

If Quin, Tim, or Troy has anything to add, I’d like to read it.  Is Ron Paul’s plan bold, crazy, or something in between?

The Heritage Foundation has a masterful indictment of Senator Harry Reid’s (D-NV) ham-handed attempt to use a FEMA budget bill to score political points.  Last week, Reid deliberately killed a House-passed continuing resolution funding FEMA for $3.5 billion while cutting $200 million in subsidies similar to the Solyndra loan fiasco.  Angry at the cuts, Reid sidelined the House bill and introduced his own with no cuts and more spending.

Yet when the Senate sensibly defeated Reid’s proposal, he chastised the chamber in a bizarre floor speech that tried to pin blame on Republicans for leaving disaster victims out in the cold.

Besides refusing responsibility for holding victims hostage so more green jobs could be subsidized, Reid’s implication was that without billions in taxpayer money, citizens would be left to fend for themselves.

As Heritage shows, Reid’s argument is simply not so.  With just a bit of calling around, the think tank found that disaster victims in Pennsylvania were being assisted by the Wyoming County United Way, the Seven Loaves Soup Kitchen and the Weinberg Regional Food Bank.  Each of these private voluntary groups reported record numbers of donations and applications to assist.

As with any disaster, everyday Americans don’t wait for the government to mobilize.  Instead, they roll up their sleeves, stuff sand bags, serve hot food and help the devastated rebuild their lives and communities.  For statists like Harry Reid, people die without the government.  For those living in the real world, it’s people – not bureaucracies – that make recovery possible.