Freedom Line Blog

Sign of the times from today’s New York Daily News:  “Federal Workers Rage Over President Obama’s Two-Year Wage Freeze.”

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.

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

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

H/T: Politico

Today, the Labor Department announced that the unemployment rate remained at 9.6% for the third consecutive month.  When President Obama signed his nearly $1 trillion “stimulus” in February 2009, the unemployment rate stood at 8.2%.  In the 20 months since that date, the rate has increased to 9.6% despite White House projections that it would top out at 8% fully one year ago.

Once again, a comparison to the Reagan recovery is profoundly instructive.  In the same 20 month span following the effective date of the Reagan tax cuts in January 1983, unemployment plummeted from 10.4% to 7.3%.  Also instructive is the following headline from today’s Wall Street Journal:  “European Central Bank Parts Ways With U.S. on More Stimulus.” It is a sad state of affairs when even the spendthrift Europeans are providing economic guidance to Obama.

Liberal Keynesians have had almost two years to prove the validity of their economic agenda.  It has failed, their rationalizations have grown stale, and their desperate efforts to resist corrective action will only prolong the nation’s misery.

Dwight M. Jaffee, professor of finance and real estate at the University of California, Berkeley, points out in The Wall Street Journal that “Today 90% of the $14 trillion in outstanding residential mortgages is controlled by the Federal Housing Administration (FHA), the Department of Veterans Affairs, or Fannie Mae and Freddie Mac – with the latter two under government conservatorship.”

Ninety percent?  Wait a minute…  Doesn’t every dizzy big-government leftist from Barack Obama to Paul Krugman tell us that “deregulation” of the housing sector caused our economic difficulties?  The fact is that the housing finance market is one of the most regulated, not least regulated, sectors of the entire economy.  Thanks to Professor Jaffee, we are reminded of the sheer scale of that regulation, as well as the left’s efforts that fed the housing bubble.

Today’s New York Times draws out an helpful distinction between British and French notions of liberty.  The context is each country’s reaction to the growing public sector spending crisis.

“France’s problem is that, for too long, the economy has been run as a kind of job club for French workers,” said an editorial in The Spectator, a conservative British magazine. “Britain and France believe in liberty, but have different definitions of it.”

While the British believe in “liberty from government,” the editorial said, the French “still like the big state and squeal at the prospect of being removed from its teat.”

The French also pay higher club dues and expect commensurate rewards. French pensions can reach three-quarters of a working wage, compared with just over two-fifths in Britain. So, if French workers and teenagers strike over their pensions, there’s plenty to protest about.

One of the consequences of France’s keener devotion to socialism is a reduced sense of class conflict.  Not so in Britain.

If Britain falls prey to protest, there will be sharper overtones of class struggle than solidarity. Britain is a more divided society than France. Wealth is more ostentatious, poverty more visible. People in Britain have learned to have sharper elbows in pursuit of individual gain, while France prides itself on a broader concordat.

“Social confrontation is part of our democracy,” said Prime Minister François Fillon, “but social consensus is, as well.”

How each country’s government handles the coming backlash to ‘austerity’ in public spending will do much to define the future of freedom for their respective citizens.  Hopefully, they can make a credible argument that limited government and greater individual opportunity go hand-in-hand instead of coming to blows.

Check out this new and powerful ad from our friends at Citizens Against Government Waste, which is “a chilling look at one potential future scenario” if the United States continues on its destructive fiscal path.

Learn more about this ad and CAGW’s inspiration for doing it here.

In another fascinating article from Reason Magazine, three policy experts explain how governments in Canada, New Zealand and post-WWII America slashed government spending and spurred economic growth.  Each expert highlights the strategies used to achieve the respective financial miracles, but one from Canada deserves special mention:

In assembling these cuts, (Canadian Finance Minister) Paul Martin didn’t follow the usual pattern of consulting interest groups one by one. Instead, he held four televised regional consultations in which various lobbyists, experts, and ordinary citizens contended with one another. Martin also spoke directly to the public about what was needed to turn Canada’s budget around. In October 1994, his Department of Finance published a report, A New Framework for Economic Policy, showing that in order to keep the ratio of debt to GDP from rising, government had to run a substantial surplus on its program budget—that is, have revenues significantly exceeding state expenditures.

Public debates used to be a spectator sport in the civilized world.  (Remember reading about the Lincoln-Douglas debates?)  If Republicans win back control of at least one house of Congress, it would behoove their leadership to find ways to nationalize spending issues with public debates.  And, if members of Congress are too afraid to step forward and defend principles, they should consider sponsoring debates featuring lobbyists, policy wonks and activists.

We all know who votes for whom.  Let’s get them in the same room, on camera and hear their pitch.

Throughout the ObamaCare debate, President Obama promised that, “If you like your healthcare plan, you can keep your healthcare plan.”  Nearly every single day, however, it seems that yet another healthcare plan becomes a casualty of ObamaCare.

Last week, McDonald’s made headlines when it revealed that a low-cost “mini-med” healthcare plan for 30,000 employees may now be “economically prohibitive” due to ObamaCare.  Now, we receive news that 3M will discontinue a group healthcare plan for retirees not old enough to receive Medicare by 2015.  The reason?  “Health care reform has made it more difficult for employers like 3M to provide a plan that will remain competitive.”

The White House continues to wage a Soviet-style campaign against private enterprises that dare deliver the inconvenient news that ObamaCare is already destroying the healthcare marketplace, but killing messenger after messenger won’t change simple reality.

Interview with CFIF Senior Fellow Troy Senik on CFIF’s “One More Vote” grassroots campaign to force Washington to balance the federal budget annually without leaving a back door open to tax increases.

Listen to the interview here.

According to a report entitled “The Impact of Regulatory Costs on Small Firms” just produced by Nicole V. Crain and W. Mark Crain for the Small Business Administration, the annual cost of federal regulations alone has reached $1.75 trillion.  That excludes the annual cost of taxes.  And that was as of 2008.

Combined, taxes and regulatory costs consumed a staggering 35% of America’s income in 2008, or $37,962 per household .  Alarmingly, that was the number before such new fiascoes as ObamaCare, “stimuli” and bailouts increased the burden.  Small businesses create most new jobs in America, but the authors highlight that regulatory costs hit them disproportionately hard relative to larger businesses (due primarily to economies of scale in dealing with regulatory compliance costs).  The authors found that businesses with fewer than 20 employees incur regulatory costs 42% greater than firms of between 20 and 499 employees, and 36% greater than firms with over 500 employees.  Per employee, small businesses face $10,585 in compliance costs versus $7,454 per employee for medium-sized firms, and $7,755 for larger firms.

As government gets bigger and bigger, the regulatory compliance costs only get more and more oppressive.  We needn’t search far to understand why the economy isn’t recovering and businesses aren’t hiring.

Conservative reaction to the House Republicans’ “Pledge to America” varies.  Whatever one’s views toward the plan, however, it did omit an item high on conservatives’ agenda:  a proposed Constitutional balanced budget amendment.  Enter CFIF’s “One More Vote,” which refers to the fact that Congress fell just one vote short in the 1990s of passing a balanced budget amendment and sending it to the states for ratification.  Our “One More Vote” initiative, which readers are urged to sign, would not only require a balanced budget, but prevent that from becoming a convenient excuse to raise taxes by requiring a 60% supermajority to create or increase taxes, or to raise the nation’s debt ceiling.

Party change won’t be enough this time around.  With “One More Vote,” we can collectively create something more lasting for America’s future generations.

Happy semi-anniversary, ObamaCare!  Just six months ago, your proud papa proclaimed you the vehicle for lasting American voter compliance, errrr, contentment.  Your Uncle Joe Biden elegantly pronounced that you were “a big f***ing deal.” Don’t let the fact that you’re now sinking their party’s majority get you down, though.  To celebrate, why don’t we go out and deny private health insurers the requested premium increases that they’ll need to accommodate their collective new costs of feeding your voracious appetite?  Making them run their businesses at a loss will be great for celebratory laughs!

Many have already chronicled the supreme selfishness and sense of entitlement exhibited by current Alaska Senator Lisa Murkowski, who was appointed to her seat but recently defeated in the Republican primary by West Point and Yale Law School graduate and war veteran Joe Miller.

As if striving to degrade herself even further, Murkowski offered one of the strangest rationales for her vindictive write-in candidacy:  defense of earmarks.  Yes, earmarks, those symbols of what is wrong with our irresponsible tax-and-borrow-and-spend ruling class in Washington, D.C.  Appearing on CNN’s “State of the Union,” Murkowski accused Mr. Miller of supporting what she called “some pretty radical things,” including earmarks:

He is suggesting to us … some pretty radical things.  You know, we dump Social Security.  No more Medicare.  Let’s get rid of the Department of Education.  Elimination of all earmarks.”

Senator Murkowski’s obvious sense of personal entitlement is unsavory enough.  The same goes for her defense of a a Department of Education that has only witnessed a deterioration in American scholastic achievement during its existence.  But really, Senator Murkowski?  A defense of earmarks?

Over and over again, President Obama and other defenders of trickle-up stimulus labeled 2009’s “Cash for Clunkers” a positive example of federal spending and market manipulation.  Obama himself eagerly called it an “overwhelming success,” and Nancy Pelosi curiously professed that it “has been successful beyond our wildest dreams.”

Economists’ verdict?  Not so much.

Writing for the National Bureau of Economic Research, economists Amir Sufi from the University of Chicago and Atif Mian of the University of California Berkeley report that Cash for Clunkers had no substantive net positive effect:

A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 “Cash for Clunkers” program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of “clunkers” in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.”

This is Obamanomics and “stimulus” policy in a nutshell:  Billions in spending, but no positive effect.  Future generations forced to pay for it will not be retrospectively amused.

Wall Street Journal columnist Peggy Noonan gives one of the best descriptions of the motivation behind the Tea Party movement to date.

For conservatives on the ground, it has often felt as if Democrats (and moderate Republicans) were always saying, “We should spend a trillion dollars,” and the Republican Party would respond, “No, too costly. How about $700 billion?” Conservatives on the ground are thinking, “How about nothing? How about we don’t spend more money but finally start cutting.”

That laser-like focus, to Noonan, is what connects all Tea Party-backed candidates this election cycle:

That is the context. Local tea parties seem—so far—not to be falling in love with the particular talents or background of their candidates. It’s more detached than that. They don’t say their candidates will be reflective, skilled in negotiations, a great senator, a Paul Douglas or Pat Moynihan or a sturdy Scoop Jackson. These qualities are not what they think are urgently needed. What they want is someone who will walk in, put her foot on the conservative end of the yardstick, and make everything slip down in that direction.

A vast swath of the American people understand the danger our country’s finances – and by extension, our experiment in self-rule – face.  The Tea Party movement is an important element in righting the ship of state before it’s too late.  Hopefully, congressional members owing the movement their election victories will display the fortitude necessary to say no to more spending.

In his weekly Wonder Land column entitled “It’s the Spending, Stupid,” The Wall Street Journal’s Daniel Henninger describes how “concern” over out-of-control federal spending has reached the boiling point:

They, the voters, are not ‘concerned’ about Uncle Sam’s spending floating toward the moon.  They are enraged, furious, crazed and desperate.”

Heninger rightfully points out that it won’t be enough for voters to simply return Republicans to House and Senate majorities this November.  Rather, something more lasting, tangible, and assuring is needed:

If voters give control of the House to the GOP, the party desperately needs to establish credibility on spending.  Absent that, little else is possible.  Independent voters now know that the national Democratic Party, hopelessly joined to the public-sector unions, will never stabilize public outlays.  In a sense, the GOP’s impending victory is meaningless, a win by default.  If the Republican rookies entering Congress next year don’t do something identifiably real to stop the federal spending balloon, voters two years from now will start throwing the GOP under the bus.”

Enter CFIF’s new “One More Vote” citizen activist campaign.  “One More Vote” refers to the fact that Congress fell just one vote short in the 1990s of passing a constitutional amendment requiring a balanced budget, and sending it to the states for ratification.  Echoing Daniel Henninger’s commentary this week, the “One More Vote” homepage states that, “Currently, there are several worthy ideas proposed in Congress.  But we need more than ideas.  We need a solution.”  Accordingly, “One More Vote” proposes a Constitutional amendment requiring (1) a federal balanced budget annually, (2) a 60% majority of both houses of Congress to raise the debt ceiling, and (3) a 60% vote of both houses of Congress to increase or create new taxes.

It’s precisely the type of real, lasting and tangible change that enraged American voters described by Henninger demand.  Click on “One More Vote” now, and join the movement.  This time, let’s make sure the change is real.

This week, the Congressional Budget Office announced that the nation’s budget deficit has already reached $1.3 trillion, with another month to go in the 2010 fiscal year.  At 9.1% of gross domestic product (GDP), that makes it the second-largest deficit outside the World War II years, second only to last year’s deficit that reached 9.9% of GDP (mainly because GDP was lower in 2009 than 2010).  In a generous act of understatement, the CBO attributed this mind-boggling amount to lower revenues and “elevated spending associated with the economic downturn and the policies implemented in response to it.”  Another round of “stimulus,” anyone?

To put that in perspective, take a look at this straightforward bar graph.  President Bush’s final deficit was approximately $450 billion, which Obama tripled in his first year alone.  Now, Obama’s second deficit continues that unbearable amount.  Furthermore, efforts to scapegoat Bush for Obama’s first deficit fail, because such things as the $800 billion “stimulus” was Obama’s initiative, not Bush’s.

So President Obama brought us a crippling $814 billion “stimulus,” and now his promised “Summer of Recovery” has come and passed.

Undeterred, he nevertheless instructs us that what America needs is another $50 billion, or 1/16th the original stimulus amount, in new highway, airport runway and rail construction.  Obama proclaims that “this will not only create jobs now, but will make our economy run better over the long haul.”  So let us get this straight.  Obama turned the $450 billion deficit that he inherited into consecutive $1.4 trillion and $1.3 trillion deficits for his first two years in office, commenced a regulatory onslaught against the private sector, threatened growth-killing regulations like “Net Neutrality” and union card-check, demonized the business community that creates jobs, signed stifling new burdens like ObamaCare into law and appears ready to oversee the largest tax increase in history this January 1.

But according to him, the basis of our economic malaise is…  lack of pavement?

Moments ago, the Department of Labor reported that the nation’s unemployment rate jumped again to 9.6%.

As we reference in today’s Liberty Update commentary, this means that unemployment has now risen from 8.2% to 9.6% since Obama signed his $1 trillion “stimulus” bill in February 2009 (with the promise that unemployment would not exceed 8% under his spending plan).  By contrast, unemployment plummeted from 10.4% to 7.2% during the same timespan following the Reagan tax cuts.

This reconfirms what works:  more individual freedom, lower taxes, lower spending, less government.  It also reconfirms what doesn’t work:  more government control, higher taxes, more spending and more regulation.

In CFIF’s Liberty Update last week, we highlighted how President Obama isn’t so much “pulling us out of the ditch,” but rather setting our nation’s car on fire.  Instead of spending his time claiming credit for our inevitable cyclical rebound, Obama should recognize that his policies of higher spending, taxation, regulation and debt are only subduing it. To illustrate, we contrast the remarkable gross domestic product (GDP) growth during the Reagan recovery delivered by tax cuts, reduced regulation and a stronger dollar versus our current stagnation and possible “double-dip” recession.

Comparing unemployment trends then versus now provides another vivid illustration of the toxic effect of the Obama-Pelosi-Reid economic agenda.  From December 1982 to June 1984 – the first 18 months of the Reagan recovery – U.S. unemployment plummeted rapidly from 10.8% to 7.2%.  In contrast, over 13 months since our current economic rebound commenced in July 2009, U.S. unemployment has stagnated from 9.4% to its current 9.5%.  Of course, it is theoretically possible that unemployment will plummet by three percentage points over the next five months to match the Reagan recovery, but not even Joe Biden is silly enough to predict that.

It’s no mystery how to unleash America’s economic vigor and bring recovery:  less government and more economic freedom.  It’s just a matter of electing leaders who will actually pursue it.