U.S. Senator Roy Blunt (Mo.) participated in a press conference with GOP Senators in response to President Obama’s budget proposal on February 13, 2012.
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There is no doubt that our deficit spending will ruin us eventually. What kind of nation are we turning over to our kids and grandkids?
President Obama’s budget proposal was unveiled today, generating all sorts of conflicting statements from both parties.
Some of the assertions wrongly focus on red ink rather than the size of government. Others rely on dishonest Washington budget math, which means spending increases magically become budget cuts simply because outlays are growing at a slower rate than previously planned.
When you strip away all the misleading and inaccurate rhetoric, here’s the one set of numbers that really matters. If we believe the President’s forecasts (which may be a best-case scenario), the burden of federal spending will grow by $2 trillion between this year and 2022.
In all likelihood, the actual numbers will be worse than this forecast.
The President’s budget, for instance, projects that the burden of federal spending will expand by less than 1 percent next year. That sounds like good news since it would satisfy Mitchell’s Golden Rule.
But don’t believe it. If we look at the budget Obama proposed last year, federal spending was supposed to fall this year. Yet the Obama Administration now projects that outlays in 2012 will be more than 5 percent higher than they were in 2011.
The most honest assessment of the budget came from the President’s Chief of Staff, who openly stated that, “the time for austerity is not today.”
With $2 trillion of additional spending (and probably more), that’s the understatement of the century.
I’ve already pointed out that the budget could be balanced in about 10 years if the Congress and the President displayed a modest bit of fiscal discipline and allowed spending to grow by no more than 2 percent annually.
But the goal shouldn’t be to balance the budget. We want faster growth, more freedom, and constitutional government. All of these goals (as well as balancing the budget) are made possible by reducing the burden of federal spending.
Previewing tonight’s speech this past weekend, Mr. Obama said: “We can go in two directions. One is towards less opportunity and less fairness. Or we can fight for…building an economy that works for everyone, not just a wealthy few.”
The President must not understand that an economy based on free-enterprise with limited government involvement will, in fact, work for and benefit more than just the wealthy. His administration’s idea of an economy that works involves imposing heavy-handed government regulations and threatening tax increases at every turn. Right now, the country is experiencing the tremendous uncertainty that such policies breed. It is the bad kind of uncertainty, the kind that keeps employers from hiring and entrepreneurs from launching new businesses. It keeps the economy stuck in slow, instead of revving it up. In place of more regulation, higher taxes, and increased government spending, the President should propose to take the country in a new direction in tonight’s speech. A direction that leads to less onerous government regulation, fundamental tax reform, and a government that spends taxpayer dollars responsibly.
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The Free Market benefits everyone and somehow you don’t understand that. You should watch the film series “Free to Choose” by Milton Friedman and the first episode would talk a lot about this.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Rep. James Lankford (R-OK) responded to President Obama’s FY 2013 budget proposal that fails to cut the deficit in half by the end of his first term as promised. The budget also delayed the tough decisions to cut spending and reform entitlements that are needed to avoid a debt crisis.
The new federal budget includes a range of accounting maneuvers to cast the administration’s 10-year projections in the best possible light. Senate Republicans point out some of President Obama’s funky accounting here. But note that the George W. Bush administration also used tricks to make deficit forecasts look more optimistic.
That’s why it’s useful to look at a president’s spending numbers for the current year and next year, rather than the make-believe numbers for later years in the budget. The chart shows total federal outlays since 2000 and Obama’s estimated spending for 2012 and proposed spending for 2013. Data are for fiscal years. Also, I’ve excluded TARP spending because reestimates of TARP costs distort the data.
Spending has gone up from $2.98 trillion in 2008—the year before Obama came into office—to a proposed $3.80 trillion in 2013. That is a 28-percent increase in five years, which represents a compound annual growth rate of 5.0 percent. Because the economy has stagnated during this period, spending has increased as a share of GDP.
Note that the lack of an overall spending increase in 2013 is not a victory for frugality. For one thing, spending on the 2009 “stimulus” bill peaked at $235 billion in 2010 and is now falling. It will be roughly $30 billion in 2013.
Similarly, Iraq/Afghanistan war costs peaked at $163 billion in 2010 and are expected to fall to $97 billion by 2013. There have been similar drop offs in spending for recession-related programs such as unemployment insurance.
Thus, as stimulus, war, and recession-related costs are falling by hundreds of billions of dollars, President Obama is using the money to increase spending on other programs. We have run deficits greater than a trillion dollars four years in a row, and yet the president seems oblivious to the need for real spending cuts.
What’s Missing? Entitlement Reforms – Patrick Knudsen
Conspicuously absent from the President’s address was any acknowledgement of the government’s biggest challenge: the imperative of entitlement reform. This may not be surprising for a President who never tires of finding new ways to expand the federal government. But the omission reflects an unwillingness to face up to “the most predictable crisis we’ve ever had,” in the words of House Budget Committee Chairman Paul D. Ryan.
Runaway entitlements are the principal drivers of today’s record spending and debt. Over the next 10 years, entitlement spending will total about $26 trillion; and in2021, spending on all entitlements will total about $3.3 trillion, nearly the size of the entire budget today.
Spending on the three largest entitlements – Medicare, Medicaid, and Social Security – will outpace inflation and the growth of the entire economy; and by the middle of this century, those three programs alone will spend as much as the total annual average of tax revenue over the past 40 years – putting the squeeze on all other policies (such as national defense and low taxes).
But the President, who must lead the drive for a solution, ignores it. Indeed, his premier achievement – nationalizing health care – will worsen the problem.
Nor can the problem be solved with modest trims around the edges of these programs. They need to be fundamentally restructured. The President’s failure to recognize and speak forcefully to this challenge suggests, regrettably, that his budget will skip it as well.
Even More Spending – Patrick Knudsen
As he has done throughout his tenure, the President keeps finding ways to advocate more spending – just the opposite of what the country needs. He clings to the view that innovation and economic growth require Washington’s direct involvement – without the nurturing and guidance of his progressive politics. He simply does not trust entrepreneurs, investors, and free markets.
He wants to pour more Washington money into education; more into science and research, and high tech manufacturing; more roads, bridges, and high-speed rail such as the ever-more-costly boondoggle in California.
He believes that Keynesian-style deficit spending is still needed to generate more demand and boost the economy – despite overwhelming evidence to the opposite. His 2009 stimulus bill is a monument to this failed economic thinking.
Besides, this spending will have to be paid for, and since Obama has yet to propose a serious reduction to federal spending that means it would likely be through higher taxes or more debt – and both will further drain the economy.
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You got to take the bull by the horns and reform entitlements. There is no other choice.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
One of the disappointing aspects of President Obama’s speech was that the much hyped housing section was little more than a re-warmed proposal from last fall. And that was just a re-working of several earlier failed versions that failed to work. Sadly, this version is unlikely to be any more successful.
While details are lacking, the President promised to allow homeowners to refinance mortgages in a way that would reduce their payments by about $3,000 a year. Earlier, there had been speculation that he would announce a way for homeowners to have the amount of their loan reduced, but after the Federal Housing Finance Agency (FHFA) noted that such a plan would cost taxpayers an additional $100 billion in subsidies to Fannie Mae and Freddie Mac, that plan seems to have been dropped.
Housing remains a serious problem for our economy, but no matter what the President wishes, no federal program is likely to fix the problem.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
President Obama says that he wants even more fraud laws and penalties on the books for financial institutions. Even putting aside all the new crimes in Dodd-Frank, there are already numerous laws prohibiting fraud on the federal books. Indeed, back in 1999 Professor Ellen Podgor counted 92 uses of some form of the word “fraud” in federal criminal law! As Paul Larkin has noted, Congress continues to pile on criminal laws regarding fraud, going as far as to propose that there should be an additional fraud law just for maple syrup. Former Attorney General Ed Meese noted this in his Congressional testimony last month, asking “Will we, as a society, not be taken seriously about fighting fraud unless we double, triple, and quadruple the number of iterations of this crime?”
For Obama, the answer is a resounding, albeit ridiculous, “Yes.”
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More laws on the bank industry is not the answer.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
A Clean Energy Standard Would Throttle Economy – Romina Boccia
During last year’s SOTU, the President set a target for a Clean Energy Standard of 80 percent by 2035. This year, the President once again called for a CES, only this time, less ambitiously.
[…] there’s no reason why Congress shouldn’t at least set a clean energy standard that creates a market for innovation.
The issue is that a clean energy standard would throttle economic growth, and that is why Congress has rightly not put one in place. One way of converting existing shares of “dirty energy” into clean energy is by cutting energy from conventional sources. Environmental Protection Agency regulations are already well on their way to cut existing coal capacity by forcing the premature shutdown of older plants with burdensome compliance rules. No matter how many times the President lauds the supposed benefits of clean energy investments and green jobs, the truth remains that government-forced cuts in conventional energy use throttle economic growth and green jobs are a fallacy.
Instead of wasting taxpayer dollars by lavishing subsidies on select renewable energy sources and driving up energy prices by mandating their usage, Congress should reduce artificial barriers to domestic energy production and create a level playing field so that energy providers compete on their merits.
Costly New Regulations –James Gattuso
President Obama tonight made the startling claim that he had ”approved fewer regulations in the first three years of my presidency than my Republican predecessor did in his.” This claim is more than a little bit misleading. According to the Government Accountability Office, it is true that fewer total rules were issued during this Administration than during that of George W. Bush. But that counts many administrative actions of no real significance. When you look at major rules – those with $100 million or more in economic impact, a very different picture emerges. Some 189 of these costly rules have been adopted in the past three years, compared to 153 during George Bush’s first three years. That’s a 23 percent increase in red tape. So much for regulatory restraint.
This by the way, isn’t the first time that the Obama Administration has been caught playing with the numbers on regulation. As reported by FactCheck.org last year, Cass Sunstein, the president’s “regulatory czar,” presented a “distorted view” of this president’s regulatory record compared to his predecessor. In fact, the organization’s report concluded (citing research by Heritage among others) the Obama Administration has imposed far more in costs on the country than his precedessor had at the same point in his tenure.
The President also cited efforts to reduce unnecessary regulation, claiming some 500 reforms under his belt. That would be welcome news, if true, but the relief provided by these moves is only a small sliver of the new costs imposed. Virtually none are even considered “major.”
No one wants to abolish all regulation. But, as the president said again tonight, many are unnecessary and too costly. But the president has added to, not reduced, the problem.
Obama’s Policies Must Not Sting the Economy into Lethargy – J.D. Foster
The story goes that a scorpion once needed to cross a river, but had no way across. Along came a fox who was going to swim across and the scorpion asked if he could ride on the fox’s back. The fox said no, because the scorpion would sting him and they’d both die. The scorpion answered that he didn’t want to die, and so the fox was safe. Sufficiently assured, the fox let the scorpion on her back and she began to swim across.
At first, everything went well. But then, as they reached the midpoint of the stream, the scorpion suddenly tensed up and stung the fox on her back, just as she had feared. As she began to black out the fox cried out, “Why did you do that? Now we’re both going to die.” The scorpion sighed, “I know, but a scorpion’s got to do what a scorpion’s got to do”.
In listening to President Obama talk about the need for a stronger economy and more jobs in one breathe, and the need to raise taxes on saving, on investment, on job creators, and others of higher incomes, in his next breathe, one is reminded of the scorpion.
It is a simple and inescapable truth that one does not get more saving, more investment, more new businesses, more entrepreneurship, more economic growth, by taxing these things more. But this simple truth seems to lie outside the permissible realm of the President’s ideology. Fortunately, the economy is better protected against President Obama’s proclivity to sting the economy into sustained lethargy than was the poor fox. The President was largely unsuccessful in 2011 in pushing his job destroying agenda through the Congress, and all indications are he will be no more successful in 2012.
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Excessive regulations will hurt our businesses. Instead of bragging about the slow growth of regulations you should cut regulations to allow our companies to thrive.
Thank you so much for your time. I know how valuable it is. I also appreciate the fine family that you have and your committment as a father and a husband.
Sincerely,
Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733, lowcostsqueegees@yahoo.com
Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
In a town where bipartisan budget chicanery has been raised to an art form, President Obama’s latest budget proposal should be hailed as the da Vinci of fiscal obfuscation.
The president claims that his budget proposal reduces debt by $4 trillion over the next 10 years, combining $2.4 trillion in spending cuts with $1.6 trillion in tax hikes. Almost none of that is true.
Let’s start with the idea that the president’s budget would reduce the debt. That is true only using Washington math, under which a smaller increase is actually a decrease. In reality, the president’s budget adds $6.7 trillion to the national debt over the next 10 years, bringing it to nearly $25.5 trillion by 2022. That would be more than 100 percent of our GDP.
The president’s budget is dishonest and irresponsible.
And those spending cuts? The president actually counts $681 billion in cuts that were agreed to last year as part of the deal to raise the debt ceiling. Shouldn’t there be some sort of statute of limitations for how long you can claim credit for cuts that you have already made? And it should probably be shorter for cuts that you fought against every step of the way. The president also counts as a cut the $741 billion we will save from not occupying Iraq over the next 10 years, and from not being in Afghanistan a decade from now. Considering that we were never going to spend that money in the first place, that seems like slightly dishonest accounting. After all, think of all the savings we can claim by not invading Syria. And, finally, $595 billion of the claimed budget cuts is actually interest savings resulting from not having to borrow for the other phony cuts.
On the other hand, the president’s budget does include plenty of new spending. For example, there is $476 billion in new spending over 10 years for transportation projects, including the president’s favorite boondoggle, “high-speed rail.” There are also the usual bailouts for profligate state governments and teachers’ unions, including $30 billion to build more schools and $30 billion to hire teachers. Another stimulus anyone?
Overall, the president would increase federal spending from $3.8 trillion in 2013 to $5.82 trillion in 2022. That might not be as big an increase there might otherwise be, but in no way can it be called a cut.
The president isn’t even honest about his tax proposals. In the speech announcing his budget plan, President Obama devoted several paragraphs to a renewed push for the so-called Buffett rule, a new 30 percent minimum tax on the rich, based on the misleading claim that Warren Buffett pays a lower tax rate than his secretary. There is only one small problem: The president’s budget does not actually include any revenue from the Buffett rule. In fact, the budget provides no clue as to when or how such a tax might be implemented. The Buffett Rule isn’t even listed in the document’s summary of revenues and outlays. A cynic might believe that the Buffett Rule has more to do with campaign rhetoric than an actual budget plan.
Instead, what the budget does contain is a renewed call for tax increases on people and small businesses making as little as $200,000 per year. In addition, there’s the usual panoply of tax hikes on energy products, businesses, investment, and pretty much anything else the president can think of. The budget also helpfully points out that 2013 is the year in which most of the new taxes under Obamacare will take effect. Overall, the president would increase tax revenue to 20.1 percent of GDP. That’s a huge increase from the current 15.4 percent, and higher than the post–World War II average of 18.0 percent. Tax increases of that magnitude cannot help but slow economic growth and job creation.
But even if the president were to get every penny of the tax hikes he wants, his budget would never balance. The closest he would ever come would be in 2018, when the deficit would be only $575 billion. After that, deficits begin rising again, reaching $704 billion by 2022.
Fortunately for the president, he stops counting after 2022, about the time that the costs of entitlements such as Medicare and Social Security really begin to kick in, and his proposed budget does almost nothing to reform these troubled programs. One only has to look at the upward trajectory of both spending and taxes at the end of the budget window to see that president’s budget leaves us on the road to future bankruptcy.
Appearing last Sunday on Meet the Press, the president’s chief of staff — and former budget director — Jack Lew, declared that “The time for austerity is not now.” Judging by the president’s budget proposal, it’s not ever.
As discussed yesterday, the most important number in Obama’s budget is that the burden of government spending will be at least $2 trillion higher in 10 years if the President’s plan is enacted.
But there are also some very unsightly warts in the revenue portion of the President’s budget. Americans for Tax Reform has a good summary of the various tax hikes, most of which are based on punitive, class-warfare ideology.
In this post, I want to focus on the President’s proposals to increase both the capital gains tax rate and the tax rate on dividends.
Most of the discussion is focusing on the big increase in tax rates for 2013, particularly when you include the 3.8 tax on investment income that was part of Obamacare. If the President is successful, the tax on capital gains will climb from 15 percent this year to 23.8 percent next year, and the tax on dividends will skyrocket from 15 percent to 43.4 percent.
But these numbers understate the true burden because they don’t include the impact of double taxation, which exists when the government cycles some income through the tax code more than one time. As this chart illustrates, this means a much higher tax burden on income that is saved and invested.
The accounting firm of Ernst and Young just produced a report looking at actual tax rates on capital gains and dividends, once other layers of tax are included. The results are very sobering. The United States already has one of the most punitive tax regimes for saving and investment.
Looking at this first chart, it seems quite certain that we would have the worst system for dividends if Obama’s budget is enacted.
The good news, so to speak, is that we probably wouldn’t have the worst capital gains tax system if the President’s plan is enacted. I’m just guessing, but it looks like Italy (gee, what a role model) would still be higher.
Let’s now contemplate the potential impact of the President’s tax plan. I am dumbfounded that anybody could look at these charts and decide that America will be in better shape with higher tax rates on dividends and capital gains.
This isn’t just some abstract issue about competitiveness. As I explain in this video, every single economic theory — even Marxism and socialism — agrees that saving and investment are key for long-run growth and higher living standards.
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Six Reasons Why the Capital Gains Tax Should Be Abolished
The correct capital gains tax rate is zero because there should be no double taxation of income that is saved and invested. This is why all pro-growth tax reform plans, such as the flat tax and national sales tax, eliminate the capital gains tax. Unfortunately, the President wants to boost the official capital gains tax rate to 20 percent, and that is in addition to the higher tax rate on capital gains included in the government-run healthcare legislation. www.freedomandprosperity.org
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So why is he doing this? I periodically run into people who are convinced that the President is deliberately trying to ruin the nation. I tell them this is nonsense and that there’s no reason to believe elaborate conspiracies.
President Obama is simply doing the same thing that President Bush did: Making bad decisions because of perceived short-run political advantage.
John Podesta of the Center for American Progress had a column in Politico yesterday asserting that “closing the budget gap entirely on the spending side would require draconian programmatic cuts.” He went on to complain that there are some people who “refuse to look at the revenue side of the ledger – while insisting that we dig the hole $830 billion deeper over the next decade by extending the Bush tax cuts.”
Not surprisingly, Mr. Podesta is totally wrong. It’s actually not that challenging to balance the budget. And it doesn’t even require any spending cuts, though it would be a very good idea to dramatically downsize the federal government. Here’s a chart showing this year’s spending and revenue totals. It then shows the Congressional Budget Office’s estimate of how much revenues will grow, assuming all the 2001 and 2003 tax cuts are made permanent and assuming that the alternative minimum tax is adjusted for inflation. As you can see, balancing the budget is a simple matter of limiting the annual growth of federal spending.
So how is it that Mr. Podesta can spout sky-is-falling rhetoric about “draconian” cuts when all that’s needed is fiscal restraint? The answer is that politicians in Washington have concocted a self-serving budget process that automatically assumes that all previously-planned spending increases should occur. So if the politicians put us on a path to make government 8 percent bigger next year and there is a proposal to instead limit spending growth to 3 percent, that 3 percent increase gets portrayed as a 5 percent cut.
This is a great scam, at least for the political class. They get to buy more votes by boosting the burden of government spending, but they get to tell voters that they’re being fiscally responsible. And they get to claim that they have no choice but to raise taxes because there’s no other way to balance the budget. In the real world, though, this translates into bigger government and puts us on a path to a Greek-style fiscal nightmare.
The goal of fiscal policy should be smaller government, not fiscal balance. Deficits are just a symptom of a government that is too large, as I have explained elsewhere. But the good news is that spending discipline is the right answer, regardless of the objective. I explained this in more detail for a piece in today’s Philadelphia Inquirer. Here’s an excerpt.
According to the Congressional Budget Office, the federal government this year is spending almost $3.5 trillion. Tax receipts are estimated to be less than $2.2 trillion, which means a projected deficit of about $1.35 trillion. So can we balance the budget when there is that much red ink? And is it possible to eliminate deficits while also extending the 2001 and 2003 tax cuts? The answer is yes. …It’s a simple matter of mathematics. The Congressional Budget Office estimates that tax revenue will grow by an average of 7.3 percent annually over the next 10 years. Reducing the budget deficit is easy – so long as politicians increase overall spending by less than that amount. And with inflation projected to be about 2 percent over the same period, this is an ideal environment for some long-overdue fiscal discipline. If spending is simply capped at the current level with a hard freeze, the budget is balanced by 2016. If we limit spending growth to 1 percent each year, the budget is balanced in 2017. And if we allow 2 percent annual spending growth – letting the budget keep pace with inflation, the budget balances in 2020. …Interest groups that are used to big budget increases will be upset if spending growth is limited to 1 or 2 percent each year. It means entitlements will need to be reformed. It means we might need to get rid of programs and departments that are not legitimate functions of the federal government. You better believe that these changes will cause a lot of squealing by lobbyists and other insiders. But that complaining will be a sign that fiscal policy is finally heading in the right direction. The key thing to understand is that there is no need for tax increases. Politicians might not balance the budget if we say no to all tax increases. But the experience in Europe shows that oppressive tax burdens are not a recipe for fiscal balance either. Milton Friedman was correct many years ago when he warned that, “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.”
The Daily Hatch 