Freedom Line Blog

City Journal has a piece by Pacific Research Institute’s Steve Greenhut praising the California Assembly’s GOP leadership for proposing a series of small fixes that would result in dramatic savings for the state budget:

But much more encouraging is that the Republican plan suggests how simple reforms can save serious dollars. Take the provision of medical care for prison inmates. According to the Assembly GOP’s budget white paper, “The cost of providing health care to state prisoners has been the fastest growing part of the corrections budget. After the [federal] receiver took control of the system in 2006, medical costs skyrocketed. They reached $2.5 billion a year, including mental health care. The cost of health care for each inmate per year in California is approximately $11,600, while prison healthcare costs $5,757 in New York; $4,720 in Florida; $4,418 in Pennsylvania; and $2,920 in Texas. While costs have increased dramatically, it has not improved the quality of care enough to take the system out of federal court receivership.” Under the Republican plan, the state would contract out the correctional health-care system, saving $400 million. But that would mean taking on the powerful California Correctional Peace Officers Association, the prison-guard union that just won an absurdly generous contract from the governor.

Other budget cuts in the Republican blueprint include $3.7 billion from programs related to early childhood, mental health, the poor, and the elderly, as well as $1.1 billion from the state payroll. The plan also includes $2.8 billion in other savings from a bill that has already passed the Assembly but hasn’t become law. It doesn’t go far enough toward addressing the size and scope of California’s government, since the state faces even bigger fiscal problems down the road. But Republicans have made their point: California can fix at least its short-term budget problem if Democrats truly want to.

The Assembly GOP’s white paper on their budget proposal balances the state’s remaining $15 billion budget deficit without raising taxes.  Greenhut points out that although the proposal doesn’t fix the structural issues plaguing California’s chronically dysfunctional governing process, it does show that there are at least a few Republicans able to offer a serious solution to the state’s most troubling problem.

Rep. Paul Ryan (R-WI) owes a lot to the late Jack Kemp, Ryan’s former boss at Empower America.  In a published remembrance of Kemp, Ryan said that while Ronald Reagan motivated him to get into politics, Kemp inspired him.

Indeed, Ryan’s “Roadmap to America’s Future” and “Path to Prosperity” budget resolution are models of Kemp’s supply-side thinking about incentivizing economic growth through government policies.  It was thought that, at most, Ryan might entertain becoming the 2012 GOP presidential nominee’s running mate if the right candidate asked.  Much like Senator Marco Rubio (R-FL), Ryan is a methodical politician of substance who is purposefully navigating his career trajectory.  Unlike others, Ryan and Rubio seemed committed to establishing a real record before running for higher offices.

But reality may be pushing up Ryan’s time frame.  With the surprise announcement that Senator Herb Kohl (D-WI) will not seek reelection next year, Ryan has an opportunity not unlike Jack Kemp faced as a rising New York congressman in the late 1970’s.  Then, Kemp decided not to challenge liberal Republican incumbent Jacob Javits in the 1980 GOP primary.  Had he done so and won, Kemp would have significantly increased his national profile by holding a statewide office at the beginning of the Reagan era.

Of course, to run Kemp would have had to split time between promoting his Senate candidacy and his landmark Kemp-Roth tax cuts – the soon-to-be centerpiece of Reagan’s economic recovery plan.  Like Kemp, Ryan has a game-changing economic program to fight for this next cycle, but unlike his former mentor, I think the odds are very good that Ryan will decide to run for the Senate.  If Democrats are going to make Ryan’s “Path to Prosperity” a major campaign theme next year, why not see if Wisconsin voters are ready to promote their state’s best presidential contender to statewide status?

Tim again hits a crucially important issue  in his column that ran yesterday. When fewer than half of the population pays income taxes, the balance tips in favor of freeloading. The Washington Times editorial Wednesday laments that half of the equation: Welfare, of various sorts, is out of control.

It’s no wonder that the latest Agriculture Department figures shows one out of every five households received food stamps in February. The assistance provided to 20.8 million homes – up 20 percent in the past year-and-a-half – came at an annual cost of $68 billion. Free lunches were handed out to another 18.4 million, leaving taxpayers with a bill for $12.8 billion…. Instead of punishing enterprise and subsidizing poverty, the country needs to restore the conditions that promote prosperity. America’s corporate tax rate – currently the second highest in the world – needs to be cut. We need to restrain federal spending by scaling back the freebies doled out to far too many people. That’s the best way to restart our economic engine.

Only policies that promote growth will put more people above the income line at which they pay income taxes. Taxes are not a good thing, but making enough money to pay taxes is. Unless people are paying at least a nominal rate of taxes, they will feel no compunction to support the sorts of policies that reduce the need for taxes in the first place. From what they can see in the immediate horizon, at least, they are not at all invested in the health of the private economy, but instead are invested in the idea of bigger government — because bigger government now costs them nothing, and probably subsidizes them directly.

Tim’s quote from Orrin Hatch was good:

“An increasingly smaller group of Americans is shouldering the burden for an increasingly larger group of Americans.”

This is a recipe for ultimate economic collapse.

Veronique de Rugy adds more at NRO. She notes massive empirical research that shows high levels of publicly held debt have the effedct of consistently lowering economic growth. She ends with a quote that itself contains a link to this paper. In that paper comes a line that restates my point: “What is fleeting in economics is politically popular, while what is enduring in economics is politically unpopular.” The author descrivbes this phenomenon as the “shortsightedness bias” inherent in politics. When a majority of the public freeloads, their short-sightedness bias will be in favor of more freeloading, more debt — and, against their long-term interest, less growth. That’s why tax rates should not be raised, but why the tax base must be widened.  Counterintuitively, the way to widen the base is to keep the rates low enough to promote the economic growth that lifts more people into income levels at which they pay taxes. And as more people pay taxes, deficits and debt start to decline. A government that encourages economic growth can therefore be a more stable government than one that tries to soak the rich. A broad tax base thus supports ordered liberty. High tax rates undermine it.

This week’s edition of the Liberty Update, CFIF’s weekly e-newsletter, is out. Below is a summary of its contents:

Hillyer:  To Run DNC, Wasserman Schultz Be Illin’
Ellis:  Gunrunner Scandal Beating a Path to AG Holder’s Door
Lee:  U.S. Tipping Point: 51% of Households Now Pay No Income Taxes
Senik:  Bin Laden and “The End of the Beginning”

Freedom Minute Video:  Justice, At Last
Podcast:  Early Predictions on the 2012 Presidential Field
Jester’s Courtroom:  Momentary Baby Switch Not Grounds for Lawsuit

Editorial Cartoons:  Latest Cartoons of Michael Ramirez
Quiz:  Question of the Week
Notable Quotes:  Quotes of the Week

If you are not already signed up to receive CFIF’s Liberty Update by e-mail, sign up here.

Mark Steyn puts federal spending into yet another helpful perspective:

Under the 2011 budget, every hour of every day the government of the United States spends a fifth of a billion dollars it doesn’t have.

Your (future) tax dollars at work.

Here’s more encouraging news:  Americans are “getting it” on the issue of federal deficits and debt.  According to a new Gallup survey, an overwhelming 73% to 22% majority blames excess spending for the deficit, not insufficient taxation.  Barack Obama and his liberal apologists seek to blame “tax cuts for the rich” and insufficient revenues as the problem.  But as illustrated by the Heritage Foundation’s newly-released 2011 Budget Chart Book, our budget would still be approximately balanced if spending merely returned to early 2000s levels.  Does any serious person contend that government was too small in the first half of the 2000s, that government didn’t spend enough, that the poor and hungry were somehow cast out on the cold streets, that bureaucrats went unpaid?  Of course not.  The problem is explosive spending growth.  Obama oversaw an 84% increase in domestic discretionary spending, including his failed “stimulus,” in just his first two years.

Fortunately, Americans see through his attempt to demand even more taxpayer dollars to feed the insatiable leviathan he hopes to enlarge.

Below is one of the latest cartoons from two-time Pulitzer Prize-winner Michael Ramirez.

View more of Michael Ramirez’s cartoons on CFIF’s website here.

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.

The Economist explains how “The Party of No” is most unified around the theme of being anti-Keynesianism.  Keynesianism teaches that government can grow the economy by spending tax dollars to stimulate consumption (i.e. demand).

Rep. Paul Ryan (R-WI) and other Republicans supporting his “Path to Prosperity” budget argue that cutting taxes gives individuals more money to save and invest in production (i.e. supply), the increase of which creates more jobs.

Not all GOP-ers are sold on Ryan’s revived supply-side theory.  Instead, they prefer to focus on spending cuts as a matter of principle.  Come election season, it isn’t likely that voters will support merely cuts.  They’ll want a vision of what the extra money in their pockets can do.

If recent history is any guide, I suspect Paul Ryan will emerge as the main spokesman for the positive vision of limited government.

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?

Roll Call reports deposed congressman Alan Grayson (D-FL) sent out a characteristically inflammatory email to supporters yesterday accusing Republican budget cutters of murder:

Grayson complained in his email that Republican budget cuts would “kill” 70,000 children by cutting immunization programs that could put children at risk. Of course, Grayson became infamous for extreme rhetoric in general and specifically for suggesting the GOP health care plan was for citizens to “die quickly.”

“I would very much prefer to see these children alive,” Grayson wrote.

The voters of Florida’s 8^th District mercifully substituted state legislator Daniel Webster for the toxic Grayson.  If the latter gives Orlando residents another chance, let’s hope they make the same decision in 2012.

Two-time Pulitzer Prize-winning cartoonist Michael Ramirez sums up Obama’s deficit reduction plan.

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.

The Wall Street Journal reports that President Barack Obama’s upcoming speech about how to balance the budget will include tax increases along with cuts to programs like Medicare and Medicaid.

The call for higher taxes on America’s job creators will solidify the decision facing voters next year.  The Democrats want more money, while the Republicans want less government.

If there is a positive aspect about the president showing his true tax-and-spend colors, it’s that ideology – how serious people frame reality and their decisions about it – is now front and center in politics.

Rep. Paul Ryan (R-WI) and the GOP want lower taxes and private sector growth.  President Obama and the Democrats want to spend taxpayer money into an ever-growing share of GDP.

Let the debate begin.

Larry Kudlow has the best summary thus far on the importance of Rep. Paul Ryan’s (R-WI) pro-growth budget proposal:

The key point is not the actual numbers, but the direction of the numbers. Spending is coming down.

Trend lines are important in politics and in finances.  With Ryan’s budget plan, Tea Partiers may have found the details guy they need to make their rhetoric into reality.

Shouldn’t America ensure that its military personnel and their families continue to receive paychecks, regardless of whether budget negotiations result in a deal or a federal shutdown? Barack Obama apparently doesn’t think so.

As bargaining continued yesterday, House Speaker John Boehner (R – Ohio) introduced legislation that would keep the government open one additional week and maintain military funding through the end of 2011 so that members of the armed forces would continue to be paid.  The House quickly passed that bill, including 15 Democratic votes.  Obama, however, grotesquely promised a veto, bizarrely labeling it a “distraction.”

Frankly, this entire debate wouldn’t be necessary if the preceding Congress overwhelmingly controlled by Obama’s own party had simply passed a 2011 budget.  But for the first time since the inception of the Budget Act, they simply abdicated that basic responsibility.  Regardless, our military is stretched thin across the globe, and many families live paycheck-to-paycheck.  This obviously isn’t of paramount concern to a president who clearly seems to welcome a government shutdown.

This is one of the most shameful and pathetic episodes in an already shoddy presidency.

Two bills before the Texas legislature, H.B. 259 and H.B. 3675, propose new and unwarranted taxes on satellite television providers.  This period of high unemployment and economic uncertainty is no time to be raising taxes in the first place.  But here’s the kicker:  those two bills would essentially tax thin air.

H.B. 259 and H.B. 3675 would impose taxes on something satellite television providers don’t even use – the physical public right of way.  Obviously, reasonable people could understand why entities that actually use the public right of way under city streets or along physical power lines must help maintain those rights of way.  Since satellite video doesn’t even traverse any physical right of way, however, H.B. 259 and H.B. 3675 constitute a tax on thin air.  Moreover, Texas already taxes video services, so imposing yet another entirely new tax upon physical rights of way that satellite providers don’t even use makes these two bills even more manifestly unfair.  Additionally, it is estimated that only 10% of right of way taxes actually go to maintenance, with 90% of collected revenues diverted to general city funds.  In other words, these two proposed bills are a transparent money grab.

We at CFIF have therefore sent a letter of to the House State Affairs Committee to assert our opposition on behalf of 17,000 activists and supporters in the state of Texas.  But you can also help by contacting them as well via this link. 

Make it clear to these legislators that now is not the time to raise taxes, especially when what’s being taxed is nothing more than thin air.

In the must-watch video below, House Budget Committee Chairman Paul Ryan lays out his 2012 budget proposal and the consequences should Congress fail to act now to restore the nation’s  fiscal sanity.

Today,  Budget Committee Chairman Paul Ryan and the House Republican majority are introducing their much-anticipated 2012 budget plan.  The bold proposal — “The Path to Prosperity” — is refreshingly comprehensive in addressing the nation’s debt crisis and promoting economic prosperity.  According to Congressman Ryan:

For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade. It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage’s analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year.

Furthermore, Ryan’s budget cuts taxes and strengthens to the social safety net with commonsense reforms to Medicare and Medicaid and by advancing the discussion to sure up Social Security for future generations.

Simply put, the proposal is a real and comprehensive solution to a grave spending and debt crisis that threatens America’s future.  Failure to act to right the nation’s fiscal ship, and now, is no longer an option.  The Path to Prosperity budget deserves serious consideration, not the partisan politics as usual that has already begun.

Read more details on Ryan’s budget plan here.  For the complete plan, click here (.pdf).

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.