Freedom Line Blog

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?

15 Years and $13 Trillion in Debt Later, A Grassroots Campaign For ‘One More Vote’ Starts Anew

Washington, D.C. – The Center for Individual Freedom (CFIF) today announced the launch of the “One More Vote” campaign and its accompanying website OneMoreVote.org, designed as a grassroots-driven, online enlistment of activists across America focused on pressuring Congress and the administration to enact fundamental spending and budget reforms and change the wasteful tax, borrow and spend policies currently part of the culture in Washington, DC.

The One More Vote campaign is built on a foundation of both grassroots and legislative advocacy: activists become participants and supporters of the “Your Vote, Your Voice” coalition focused on registering spending and budget reforms as a top priority with lawmakers in Washington, while also presenting common-sense reforms that require a balanced federal budget and higher vote thresholds when raising existing taxes, imposing new taxes or raising the federal debt limit.

The One More Vote campaign name and concept is a nod to the last visible public battle over budget and spending reforms in Congress in 1995 and 1997: the Balanced Budget Amendment reform effort, a measure that fell just one vote short of passage.

“According to expert estimates, our nation’s debt of $13 trillion will skyrocket to more than $20 trillion by the year 2020, or sooner” said Jeff Mazzella, CFIF’s President.  “The fiscal policies being pursued by Congress and the administration only make matters worse.  President Obama’s budgets are projected to run up more debt than all other presidents in American history – from George Washington to George W. Bush – combined. Americans are angry with the status quo, ready to take action and ready to pressure Congress with budget principles that individual taxpayers already apply to themselves.”

The One More Vote effort lays the groundwork for real and meaningful legislation and allows voters and individual activists to become citizen cosponsors of the One More Vote agenda focused on reforming out-of-control spending policies and saving America from economic ruin.

The One More Vote agenda includes what CFIF is calling “The 60% Solution” reform package, which calls for a Constitutional Amendment requiring:

• A federal balanced budget annually;
• A 60% vote, in both the U.S. House and U.S. Senate, to raise the debt ceiling; and
• A 60% vote, in both the U.S. House and U.S. Senate, to increase taxes or impose new taxes.

Through OneMoreVote.org, individual Americans are participants in the reform process by learning more about The 60% Solution, signing on as a citizen cosponsors and contacting Congress to urge their support for The 60% Solution.

Read more here.

Join the effort here.

Follow on Twitter here. (@OneMoreVoteCFIF)

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.

The Tea Party movement is going viral.  As reported earlier, the City of Bell, CA is now Exhibit A in corrupt government.  Thousands of the majority Hispanic population in Bell protested outside city hall after it was revealed that the city council raised local property taxes 50% beyond the legal limit.

Here’s a spot-on analysis of how the Tea Party movement’s call for limited – and constitutional – government is starting to bubble up in a growing number of communities.

When people wonder why the Tea Party and other grassroots political movements start, this is a great example.  Government at any level that grows haughty, insular, and corrupt generates a reaction towards accountability and more modest models of governance.  I’m certain that the protesters in Bell don’t see themselves as part of the Tea Party movement, but the two have more similarities than differences.  They’re angry at the local model of big government arrogance and at having their pockets picked — especially considering the relatively low average household income in this Southern California community, at just under $30,000.

H/T: Hot Air Blog

The latest survey of 53 economists by The Wall Street Journal offers a clear message.  Namely, no more government “stimulus,” and extend the soon-to-expire Bush-era tax cuts for everyone, not just those earning under $250,000 annually.

Of 48 polled economists, 30 flatly rejected calls for any form of additional fiscal or monetary “stimulus.”  Only 6 economists encouraged more Obama-Reid-Pelosi style fiscal stimulus, only 5 suggested additional monetary stimulus from the Federal Reserve and just 7 suggested both.  On the issue of taxes, fully 32 of the polled economists called for extending all of the current lower tax rates, in a sharp rebuke to Obamanomics.  Only 3 economists supported an end to the Bush-era tax cuts, and only 11 agreed with Obama and Timothy Geithner in their campaign to raise taxes on those individuals and small businesses reporting income over $250,000.  Unlike Obama and Geithner, economists recognize the destructive effect that raising taxes on individuals and small businesses in the top income segments will have.

As Stephen Stanley of Pierpoint Securities summarized, “the economy needs government to get out of the way.”  Well said.

On this date in 1981, President Ronald Reagan signed the Economic Recovery Tax Act of 1981 at his Rancho del Cielo property in Santa Barbara, California.  Sponsored by Congressman Jack Kemp (R – New York) and Senator William Roth (R – Delaware), the bill amended the Internal Revenue Code in order “to encourage economic growth through reductions in individual income tax rates, the expensing of depreciable property, incentives for small businesses, and incentives for savings.”

Did it ever.

By reducing tax rates and unleashing American dynamism, the U.S. witnessed two consecutive years of remarkable growth.  For the eight quarters spanning 1982 and 1983, we saw gross domestic product (GDP) growth of 5.1%, 9.3%, 8.1%, 8.5%, 8.0%, 7.1%, 3.9% and 3.3%.  Compare that to our current cyclical recovery, in which the Obama-Pelosi-Reid agenda of higher spending, regulation and taxation has subdued our rebound to 1.6%, 5.0%, 3.7% and 2.4% (soon to be revised downward to an estimated 1%).  Obama, Pelosi and Reid like to claim credit for our inevitable cyclical recovery from the last downturn, but the truth is that they’ve only managed to stifle it while adding trillions to our debt.

They should instead take a trip down memory lane and correct course according to the crystal clear Regan example.

Already navigating a turbulent economic sea, Americans are bracing for the single largest tax increase in history this January 1.

Democrats fighting for their political lives believe they have a winner soaking “the rich,” but we’ve noted the destructive effect that raising taxes on the top bracket will have on the struggling economy.  Not only will they hit small businesses (which create most new jobs in America) particularly hard, but individuals in that bracket carry a disproportionate burden of consumer spending, which makes up 70% of our overall economy.   In this video clip from CNBC, even often left-leaning Don Peebles considers tax increases for the highest income bracket a destructive idea:

If we spend more money paying taxes, then we will have less money to invest, less money to employ workers…  We can’t take a bad situation and make it worse by taxing people more at a difficult time.”

Liberals cannot win this debate on the substance, so they instead hope to win on the rhetoric by framing the issue as “the Bush tax cuts.”  But Bush will have been gone from the White House for two full years by the time the tax increases hit.  We’re not debating new tax cuts, and Bush is long gone.  Rather, what we’re talking about are looming tax increases.  Namely, Obama’s tax increases.

Is there any periphery bounding the absurdity of the desperate political left?

The Obama Administration’s 2009 “stimulus” continues to prove itself a failure.  It promised that unemployment would peak in October 2009 at 8%, and would be down to 7.3% by now.  Instead, we remain mired near 10%.  Further, second quarter gross domestic product (GDP) was revised downward just last week to 2.4%, a slowdown from 3.7% in the first quarter and 5.0% from the fourth quarter of 2009.  Meanwhile, we’re $1 trillion deeper in debt, and the administration admitted last month that its second year deficit will reach an astounding $1.5 trillion, exceeding even its first deficit of $1.4 trillion.

Yet according to former Secretary of Labor Robert Reich, “the administration’s original sin was not spending enough.”  Commenting in today’s Wall Street Journal, Reich bizarrely adds that the Democrats’ 2009 filibuster-proof Senate supermajority somehow constituted “a fragile 60 votes” constraining Obama’s ambitions, and says that the problem with ObamaCare was that it was “not nearly large or bold enough.”  Not large enough?  Take a look at this ObamaCare flow chart, which looks more intricate than a nuclear reactor.

So how much would have been enough to satisfy Reich, anyway?  Two trillion?  Three trillion?  Ten?  It all recalls the popular bumper sticker – “Don’t Tell Obama What Comes After ‘Trillion.'”

It gets a little tiresome having to read columnist Fareed Zakaria’s senate floor speeches masquerading as opinion pieces in Newsweek every seven days. Dr. Z has a tendency to write columns with grandiose titles such as “How to Salvage Afghanistan” and “Defusing the Debt Bomb”.  While it’s admirable that he’s at least trying to offer solutions, most of Zakaria’s bigthink is pretty small — conventional Washington wisdom masquerading as divine revelation.

Zakaria’s gift for analysis is not nearly as deep as he thinks and nothing proves it more than his new piece in Newsweek, entitled “Raise My Taxes, Mr. President”. Taking a page out of the Obama playbook and fashioning himself a centrist who can rise above the fray, Zakaria writes:

[The Bush tax] cuts are set to expire this year. The Republicans say they want to keep them all, even for those making more than $250,000 a year (less than 3 percent of Americans). They say that higher taxes will hurt the recovery. But for months now they have been arguing that the chief threat to the economy is our gargantuan debt and deficit. That’s what’s scaring consumers, creditors, and businesses. Given a chance to address those fears by getting serious about deficit reduction, though, they run away.

Fareed is making a mistake that should be recognizable to anybody who’s ever watched an episode of “House”. He’s making a diagnosis based on symptoms rather than an underlying cause. Yes, America’s debt is horrible. But let’s keep one of Milton Friedman’s key insights in mind: all spending is a form of taxation — it has to be paid for sooner or later, one way or another.

Balancing the budget through tax increases only moves the government’s burden on the private sector from debt to taxation. Think of it this way: if you want to get your personal finances in order, does it make more sense to simply pay for your reckless spending with cash instead of a credit card or to actually buckle down and stop spending as much? If you realize that the first can save you a few bucks here and there, but only the second can provide financial salvation, you’re on the right track. You’re also smarter than Fareed Zakaria.

Seems like someone at the Associated Press read our commentary “Raising Taxes on ‘The Rich’ Will Harm the Economy” from last week’s Liberty Update.  Either way, we couldn’t help but note an AP headline “Economy Weakens as Wealthy Spend Less” released today.

The AP story begins, “Wealthy Americans aren’t spending so freely anymore.  And the rest of us are feeling the sqeeze.”  The story goes on to lament that the economy appears to be slowing as “the rich” spend less:

Think of the wealthy as the main engine of the economy:  When they buy more, the economy hums.  When they cut back, it sputters.  The rest of us mainly go along for the ride.”

Noting that the Obama Administration seeks to increase tax rates on that critical income segment, the AP report states ominously that, “the wealthy may be keeping some money on the sidelines due to uncertainty over whether or not they will soon face higher taxes.”

The good news is that there’s still time for the Obama Administration to wake up and smell the same coffee the AP is smelling.

We note in our Lunchtime Liberty Update this week that the Obama Administration’s class warfare campaign targeting “the rich” will inflict further harm on our economy.  Not only would such tax increases hit small businesses (which create most new jobs in America) particularly hard, it would also penalize the income segment that accounts for 1/3 of consumer spending, which itself accounts for 2/3 of the nation’s economy. Confiscating even more of those dollars may sound fine on a teleprompter, but it will bring destructive consequences in the real world.

Now, a new study by Barclays Capital highlights another potential harm.  According to their analysis, Obama’s plan will cause a 9% drop in the S&P 500 and a 900-point drop in the Dow Jones Industrial Average.  As noted in this morning’s edition of The Hill, that would result from the Obama Administration’s focus on taxing upper income segments:

The Barclays report attributes the potential stock drop to President Obama’s plans to increase taxes on wealthy individuals, who are the country’s chief investors.  The report claims high earners are likely to shift their investment strategies because of the coming tax increase.  ‘According to the Fed’s 2007 Survey of Consumer Finances, 75 percent of stock market wealth is held by families in the top percentile of income,’ the Barclays report states.  ‘From a behavioral standpoint, if the government follows through on its plan to raise dividend and capital gains taxes for the highest income earners, it could influence the asset allocation decisions of an important investor class and potentially bring about a shift away from equities, with negative knock-on effects for the economy.'”

Earlier this month, we noted the sad irony that leaders from welfare states like Germany now lecture President Obama about fiscal discipline.  At the recent G-20 summit in Toronto, Obama attempted to strongarm other industrialized nations into more of the deficit-inflating “stimulus” spending that has failed here, but to no avail. Germany has actually announced budget cuts, whereas Obama admitted that this year’s $1.5 trillion deficit will exceed even last year’s $1.4 trillion pit.

Yesterday, German labor market data provided additional evidence that they were right, and Obama was wrong.  For the thirteenth consecutive month, German unemployment fell, and Germany has now recovered its jobs lost during the recession.  Meanwhile, U.S. unemployment remains near its recessionary high at 9.5%, compared to Germany’s 7.6%.  Obama continues to employ his mindless “jobs saved or created” talking point, but Germany suggests that fiscal discipline and spending restraint are the better course.

Perhaps Obama can go on the German version of “The View” and explain to them why his agenda works better despite the stark evidence.

The Obama Administration now acknowledges that this year’s budget deficit will exceed last year’s.  Their 2010 $1.5 trillion deficit constitutes 10% of gross domestic product (GDP), up from 9.9% last year.   The administration also raised its 2011 deficit forecast to $1.4 trillion, up from its previous $1.267 trillion projection.

Barack Obama repeatedly – and falsely – seeks to escape blame by scapegoating his predecessor for last year’s $1.4 trillion deficit.  He promised as a candidate to address the deficit, but instead more than tripled it in his first year with such things as his failed $1 trillion “stimulus.”  So what will be his alibi for this year’s deficit?  And for 2011’s?

Is there no expiration date on “Blame Bush?”

Another falsehood that Obama advances is that he and Congressional Democrats were simply handed this deficit on January 20, 2009.  The truth, however, is that Nancy Pelosi, Harry Reid and Democrats recaptured Congress (which controls spending under the Constitution) in November 2006, when the deficit was merely $248 billion.  In just four years, they’ve managed to multiply that number by six.

Senate Majority Leader (for the time being, at least)  Harry Reid (D – Nevada) mistakenly believes that he’s got a winning card with his scheduled vote today on yet another unemployment benefit extension.  Reid, along with co-conspirators Nancy Pelosi and President Obama, predictably mischaracterize Republican opposition to the vote that will immediately follow the introduction of replacement West Virginia Senator Carte Goodwin.

But here are some facts.  First, Senate Republicans only request that unemployment benefit extensions be offset with cuts in other forms of runaway federal spending.  Second, Harry Reid’s proposed extension will add $30 billion to this year’s projected $1.4 trillion deficit.  Third, unemployment benefits already stretch for 99 weeks – almost two full years.  Fourth, there have already been seven extensions in unemployment benefits during the period in which Obama’s $1 trillion “stimulus” spending has instead managed to stifle what should be a robust cyclical rebound by this point.  Fifth, even Obama’s own economic advisers have proclaimed that jobless benefits actually perpetuate and exacerbate unemployment itself.

Here’s the better policy prescription:  prevent upcoming tax increases, slow the federal government’s breakneck spending expansion and reduce the threat of anti-growth regulatory uncertainty.  When we implemented those prescriptions during the Reagan Administration, we witnessed astounding two-year gross domestic product growth of approximately 7% over eight consecutive quarters in 1983-1984.  How much longer will it take Harry Reid, Nancy Pelosi and Barack Obama to finally learn that simple lesson?

America’s technology sector can provide a wellspring of economic dynamism and new employment.  As long as government doesn’t poison that potentially abundant font, that is.

At a seminar today entitled “Technology and Economic Recovery” hosted by Americans for Technology Leadership, panelists Shahin Kohan, Dr. Joseph Fuhr and Karen Kerrigan explained that our information technology (IT) sector offers a much-needed vehicle by which we can overcome economic stagnation.  Dr. Fuhr explained that IT spending is expected to grow 2.3% per year between today and 2013, compared to expected gross domestic product (GDP) growth of just 0.5% during that span, and that employment in the IT industry will grow by over 1 million jobs compared to expected employment shrinkage in other fields.

For her part, Ms. Kerrigan, who serves as President and CEO of the Small Business & Entrepreneurship Council and founded Women Entrepreneurs, explained the destructive consequences of federal overregulation and taxation for small enterprises that create most new jobs in America.  Ms. Kerrigan pointed out that the prospect of even more suffocating regulations and taxation on small business and technology entrepreneurs only discourages innovation, expansion and hiring.  Mr. Kohan, an apparel entrepreneur from Los Angeles who is CEO of Focal Technology Solutions, Inc., illustrated ways in which new technology can assist creative entrepreneurs in a highly competitive worldwide market, along with terrifying examples of how state, local and federal bureaucracy can destroy American jobs and businesses.

The message was simple:  give technology enterprises freedom, and innovation, and critical job growth will soon follow.

There is a strange element of humor when an international bureaucracy attempts to instruct the most prosperous and powerful nation in human history how to boost its economy.  The United States, after all, reached its status by maximizing economic freedom, not by following dynamism-sapping international norms.

Ignoring this reality, the International Monetary Fund (IMF) issued a statement yesterday instructing the U.S. to – you guessed it – raise taxes.  The IMF statement rightfully expressed concern over the nation’s debt that Obama is growing like a gigantic Chia Pet.  Unsurprisingly, however, the IMF failed to recognize this as an overspending problem, not an undertaxation problem.  More specifically, the IMF suggested “cuts in deductions, particularly for mortgage interest; higher taxes on energy; a national consumption tax; or a financial activities tax.”

Note how closely the IMF’s growth-killing prescription matches the Obama-Pelosi-Reid agenda, although at least the IMF didn’t take their “all of the above” position.  Regardless, the IMF (just like liberals in this country) apparently remains oblivious to the fact that incoming federal revenues actually reached their all-time high following the 2003 tax cuts, since lower taxes trigger economic growth, which in turn paradoxically increases revenues.  This is obviously a lesson that the “international community” still needs to learn along with Obama, Reid and Pelosi, but this episode provides yet another illustration why America is better off when it decides to be less like, rather than more like, the rest of the world.

Take a look at Table 2.1, “Receipts by Source: 1934-2015” here on the White House Office of Management and Budget website.  For the year 2009, the federal government took in $915 billion in income tax receipts.  Then take a look at this Congressional Budget Office report that the Obama “stimulus,” which was originally estimated to cost $787 billion, in fact cost $862 billion.

And to what effect?  The Obama White House promised that his “stimulus” would keep unemployment below 8%, but we’ve instead suffered months of approximately 10% unemployment.  Gross domestic product reports are tepid and often revised downward, and the Labor Department reported this week that unemployment claims increased just as Obama and Biden embarked on their “Recovery Summer” tour.

Obama’s “stimulus” has only succeeded in adding almost $1 trillion to our nation’s unsustainable debt, while failing in its stated goals.  For the same cost, we could have completely eliminated the income tax for an entire year.  That’s right – no income tax at all for 2009.  Imagine the real-world stimulative effect that would have had.  Unfortunately, Obama and liberals prefer more government spending and control of taxpayer dollars to the true stimulative effect that the income tax elimination would have instead provided.  They know that once Americans suddenly saw those dollars in their pockets, it would be nearly impossible to corral them back into Washington’s usual tax-and-borrow-and-spend ranch.

We all know that driving with one foot on the gas and the other  on the brake  just slows you down.  And that dieting by day while binging by night will negate your weight loss efforts.

Similarly, spending billions of taxpayer dollars to “stimulate” the economy and job growth, while simultaneously proposing tax increases that would stymie investments in new jobs, won’t help us get our economy back on track.

Unfortunately, that is just the proposal before the U.S. Congress, in the form of the so-called Baucus/Levin American Jobs and Closing Tax Loopholes Act. What’s doubly unfortunate is the rush by some Congressional leaders to hastily pass this legislation without any public debate.

Among the provisions in the bill is a tax increase on “carried interest,” which is the profit from a successful investment. Carried interest earnings are often used to spur further investment, and don’t fairly constitute regular job income because the return on investment isn’t guaranteed like a paycheck is. The proposed increase would take the tax from the current capital gains tax level of 15% (20% in 2011) to a punishing 40%.  Consequently, investment partnerships would not invest as much as they do now.

Even some Senate Democrats recognize the folly in discouraging job-creating investments with this sort of tax increase. Four Democrats—Patty Murray (WA), Mark Warner (VA), Bob Casey (PA), and Jeanne Shaheen (NH)—along with Scott Brown (R-MA) have said that taxing venture firms at higher rates would merely hurt job creation and “could not occur at a worse time.”

There are additional reasons the carried-interest tax hike is a bad idea:

• While President Obama has admitted that small businesses are responsible for 70 percent of the nation’s net new jobs in the last decade, this legislation would translate to an $11.2 billion tax increase on some of those same small businesses.   How can this be an engine of job creation?

• The tax hike would also discourage investment and take away money used to start, grow and rescue companies.

• Under such high tax rates, the United States would be at a severe global disadvantage in terms of attracting investment.  The winners would be countries such as India, China, and the U.K., with carried interest tax rates of 0%, 10% and 18%, respectively.  Why drive jobs and businesses to overseas competitors?

Senator Max Baucus (D-MT) and Representative Sander Levin (D-MI) just introduced their ill-advised legislation on May 20, yet they are driving for quick passage.  This rush only serves to deprive everyday constituents of the ability to weigh in with their elected representatives on the legislation.

Is it any wonder that with such stealth legislating, millions of Americans are losing their confidence and trust in Congress’s ability to boost the economy?

As the Center for Individual Freedom sees it, this is another case of government “help” we can’t afford.