Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 48)
This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but from a liberal.
Rep. Emanuel Clever (D-Mo.) called the newly agreed-upon bipartisan compromise deal to raise the debt limit “a sugar-coated satan sandwich.”
“This deal is a sugar-coated satan sandwich. If you lift the bun, you will not like what you see,” Clever tweeted on August 1, 2011.
Congressman Jim Jordan (R-Urbana) released the following statement regarding his vote against the debt limit deal agreed to by President Obama and Congressional leaders.
“At the beginning of the year, Democrats demanded a blank check increase in the debt limit with absolutely no spending cuts attached. When that didn’t work, they demanded an upfront agreement for huge tax increases on America’s job creators. Conservatives stood firm, and we succeeded in forcing Washington to begin addressing its spending-driven debt crisis.”
“When looking at the details of this deal, a few concerns in particular rise to the top. The framework opens the door to dangerous national security cuts and raises the possibility that six Democrats and one misguided Republican could put tax increases on the table.”
“The requirement that Congress vote on a Balanced Budget Amendment is a positive step. Unless we send a Balanced Budget Amendment to the states, however, promises to cut spending today can always disappear tomorrow. It happens year after year, and it will happen again unless Americans remain vigilant.”
“Our AAA credit rating remains at risk because President Obama and his fellow tax-and-spend liberals refused to support the Cut, Cap, and Balance plan that could actually solve our debt problem and prevent a credit downgrade. Supporters of the Balanced Budget Amendment have come a long way this year, but there’s still a lot of work to be done.”
Heritage’s experts watched President Barack Obama’s debt reduction and tax increase proposal. Here are their immediate reactions:
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Obama’s Plan Is More Bad News for Defense
President Obama’s approach to deficit reduction, which he outlined in a Rose Garden statement today, means additional bad news for the defense budget and the nation’s security. According to the fact sheet provided by the White House, accompanying his statement from the Rose Garden, the deficit reduction plan sees the continued application of $1.2 trillion in discretionary spending cuts already included in debt ceiling law that was enacted recently. Office of Management and Budget Director, Jack Lew, released a blog on August 4th that estimated that this provision will cut roughly $350 billion from the defense budget over ten years. The new deficit reduction plan would add $1.1 trillion in cuts from defense to come from funding for the military operations in Afghanistan and Iraq. Finally, it would impose an unspecified level of spending reductions in benefits for military personnel.
Today’s statement, however, ignores the fact that President Obama had already proposed an inadequate five-year (FY 2012 through FY 2016) defense budget in February. The news in this latest statement is the recommended cut in funding for the overseas operations. While it is unclear what baseline the White House is using in advancing this proposal, the President’s own budget estimates spending only a bit more than half the amount of proposed cuts to the budget for such operations over a similar timeframe. This not only repudiates a provision in the debt ceiling law to protect these operations through a special instrument for adjustments in the applicable spending ceiling, it implies that the President will apply additional cuts to the budget for the core defense program.
The greatest disappointment, however, is that the President’s deficit reduction proposal sidesteps the kind of structural reforms in the major entitlement programs that are necessary to avoid draconian cuts to the budget for the federal government’s most important constitutional obligation, which is to defend the nation and its vital interests.
Baker Spring
The President’s Disappointing Retreat on Medicare
During the Debt Ceiling negotiations, President Obama tentatively joined the large and growing consensus that the age of eligibility for Medicare enrollment should be raised from 65 to 67. Among serious advocates of entitlement reform, raising the age of normal eligibility has emerged as one of the few precious areas where there has been a broad consensus. It was a position endorsed by analysts at both the American Enterprise Institute and the New America Foundation, and by former Democratic CBO Director Alice Rivlin and Republican Budget Chairman Paul Ryan. It would also result in significant savings. The Congressional Budget Office (CBO) projected that budget savings from the proposal would amount to $124 billion over the period 2012 to 2021.
The Medicare age of eligibility change is long overdue. When Congress and the Johnson Administration enacted the Medicare program in 1965, the average life span had increased to 70.2 years. They made the decision to retain the normal retirement age at 65, which was enacted for enrollment in Social Security back in 1935. By 2009, the average life span had reached 78.2 years, and by 2030, when the Medicare population is projected to jump to approximately 80 million enrollees, the average life span is projected to top 80 years of age. At that time, there will be roughly 2 younger workers supporting each retiree. We’re doing it to the kids.
The President’s retreat is a disappointment. He must know that long-range structural reform of the Medicare program is necessary, since, in the estimate of the Medicare Actuary, it faces a long term unfunded liability of almost $37 trillion. In his deficit reduction program, he is proposing savings of $248 billion over ten years, and 90 percent of these savings will come from reducing “overpayments” in Medicare. These include a number of “cats and dogs” in Medicare’s complex payment system, relating to such items as changes in payments to rural providers, payments for post acute care, payments for advanced imaging, earmarking penalties ($500 million) for non-compliance to deficit reduction, applying the Medicaid rebate (kick-back, price control system) for drug payments to Medicare Part D (a terrible idea); and the old crackdown on Medicare waste, fraud and abuse, which is expected to save $5 billion over ten years. (According to a July 28, 2011 GAO report, there are estimated $48 billion in annual Medicare “improper” payments, representing about 38 percent of the total $125.4 billion estimate for the entire federal government.) The President wants to toughen Medicare payment caps to be enforced by the Independent Payment Advisory Board (IPAB), reducing the target from GDP plus 1 percent to GDP plus 0.5 percent.
The President is also proposing to increase Part B and D premiums for upper income retirees; increase the Part B deductible by $25 for new retirees; introduce a Part B “surcharge” for enrollees who buy Medigap coverage that provides “near first dollar” coverage. While these ideas have merit, they are substantially modest and don’t even kick in until 2017. In other words, the reform falls far short of what is needed, as embodied in Heritage’s Saving The American Dream, which delivers a balanced budget within ten years and guarantees the solvency of the Medicare program.
I recently discussed why the additional federal subsidies for state and local government that President Obama is proposing as part of his “job plan” are a bad idea. A new study from two Harvard economists suggests that the president’s affinity for these subsidies might have something to do with the fact that the aid would be particularly helpful to states with more left-leaning legislators and strong public sector unions.
The study from Daniel J. Nadler and Sounman Hong (see here) found that states with stronger public sector unions and a higher proportion of left-leaning state legislators face higher borrowing costs:
We find that, all things being equal, states with weaker unions, weaker collective bargaining rights, and fewer left-leaning state legislators pay less in borrowing costs at similar levels of debt and similar levels of unexpected budget deficits than do states with stronger unions and more left-leaning legislators. More practically, these findings suggest that the strength of public sector unions has become among the most important factors in bond market perceptions of a state’s risk of financial collapse.
Why do these states face higher borrowing costs? Nadler and Hong explain:
These “political” factors might signify to the bond market whether a state government has the willingness and capacity to initiate needed fiscal adjustments and austerity measures during the state fiscal crises that followed the financial crisis, and thus might provide some information to market participants about the likeliness that a given state government will choose to default on its debt instead of making politically difficult or undesirable budget cuts. Similarly, public sector labor environment variables, such as union strength, might signify to market participants the degree of organized political opposition state lawmakers would have to overcome to implement such austerity measures.
In a corresponding Wall Street Journal op-ed, Nadler and Paul E. Peterson, director of Harvard’s Program on Education Policy and Governance, do a nice job of explaining why the separation of responsibility between the federal government and the states has been crucial to the country’s economic rise:
Federal rescue of states is a dramatic departure from past practice. State bankruptcies date back to the 1840s when, amid a financial crisis, Pennsylvania, Michigan, Illinois and five other states discovered they had invested too heavily in infrastructure. The last state bankruptcy was in Arkansas during the 1930s. But overall the instances were few; in each case the federal government refused to come up with a fix.
Bankrupt states paid the price, but for the country as a whole, a system of fiscally sovereign states has proven incredibly beneficial to the nation’s economic well-being. Every state is responsible for its own police, fire, schools, transport and much more, and most of the time they do reasonably well. If they manage their affairs so as to attract business, commerce and talented workers, states prosper. If states make a mess of things, citizens and businesses vote with their feet, marching off to a part of the country that works better.
It is this exceptional federalist system that helped drive the rapid growth of the American economy throughout the first two centuries of the country’s history. Because state and local governments competed with one another for venture capital, entrepreneurial talent and skilled workers, governments generally had to be attentive to the needs of both citizens and commerce.
Unfortunately, the 20th century’s trend for the federal government to subsidize and manage more and more state and local affairs has worsened in the last 10 years as the chart in my blog post shows. If our bloated federal government is ever to be reined in, a return to fiscal federalism is a must. And if the states are to get their financial houses in order, state policymakers can’t be allowed to believe that a federal policy of “too big to fail” applies to them. (See this Cato essay for more on fiscal federalism.)
Ernest J. Istook Jr. brings extensive congressional experience to bear on public policy issues as a Distinguished Fellow at The Heritage Foundation.
Istook served 14 years in the U.S. House of Representatives before joining Heritage in 2007.
In Congress, representing Oklahoma’s 5th District, he engaged in a wide and robust range of issues as a member of the Appropriations Committee –where he chaired multiple subcommittees– and the Homeland Security Committee.
Istook delved into budget and spending issues in general as well as subjects such as transportation, trade, defense, health care, education, labor, financial services, homeland security and religious liberty. He was a founder of the re-established Republican Study Committee, the principal conservative caucus in the House.
In 2010, Istook was selected as a Fellow for the Institute of Politics at Harvard University’s Kennedy School of Government.
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In his talk on June 22, 2011 in Little Rock, he spent some time talking about how excited he was about the Tea Party. One person asked him what we should think about the Republicans that just want to make their total goal keeping the majority and not try to rock the boat. Istook said that the Tea Party was going to make sure that did not happen.
The biggest foreclosure yet may begin on November 2nd, as voters start foreclosure proceedings against big government. It’s run up more debt than we can afford to pay.
The paperwork has been validated. It’s found in the Declaration of Independence and the U.S. Constitution, duly approved and signed by our Founding Fathers.
Previous proceedings went awry. President Bill Clinton’s 1996 pronouncement that “The era of big government is over” proved to be empty words, as demonstrated by the subsequent free spending of Congress and Presidents George W. Bush and Barack Obama.
Tea partiers won’t go when fun ends
By: Ed Feulner and Sen. Jim DeMint
October 14, 2010 04:46 AM EDT
In only 21 months, the tea party has exploded from a handful of scattered, spontaneous rallies into a full-fledged national movement capable of throwing out incumbents. Challenging entrenched Washington habits, it is a force both parties must reckon with.Skeptics and opponents, however, continue to ask two basic questions. First, does the tea party have any real philosophical depth, a historical pedigree? Second, will its force dissipate after the elections?In short, critics accept that the tea party has a present — but they question whether it has a past and a future.Yes and yes. Yes, the tea party has a pedigree as old as our nation, and yes, we think it is likely to continue to play a significant role in politics after Nov. 2. People in both parties who hope to wish it away and continue business as usual had better think twice.Americans have been disappointed by leaders in both parties who campaigned to right past wrongs and then, after getting to Washington, cared more about power than promises. Tea party supporters care more about principle than party labels or politics.Tea party members voice the kinds of concerns that even some of President Barack Obama’s former supporters are beginning to raise. As one Obama voter asked the president at a recent town hall, “Is the American dream dead for me?”
These are the questions Americans are asking nationwide — in their kitchens, church halls and ballparks. These are the concerns expressed at tea party rallies everywhere.
The tea party seeks answers to such questions not in the dictates of Washington today but in our country’s founding principles. There, it finds a prescription for constitutional, limited government based on God-given rights — not a Utopian blueprint for bureaucratic-managed change.
The tea party, in other words, is that inner voice that speaks to us when things go wrong — the conscience of the nation at a crucial point in our history.
What has gone wrong is clear. The “stimulus” package has failed to get this country back on its feet. The latest unemployment figures show that we still have anemic growth and nearly 10 percent unemployment. As Americans suffered, Washington wasted its time on a gargantuan, unmanageable and unaffordable health care package. No wonder many Americans feel frustrated.
But underneath the frustration, the tea party has roots that are deeper and aim higher. Deeper because it is within the best tradition of popular movements in our history — from the Great Awakening that gave rise to the American Revolution to the conservative revival that helped elect Ronald Reagan. Higher because it aims to recover our moral compass, bequeathed by our Founders and preserved ever since.
The tea party also symbolizes Americans’ indomitable desire for a better life. It reminds us that we’re a country of free people who understand that liberty is fragile and must be vigilantly defended.
Some past grass-roots movements have succeeded, and others have failed. Success comes because the energy of the moment is translated into a lasting, governing philosophy consistent with the settled opinions of the American people.
On this score, prospects look good. The tea party isn’t about to go away after the November elections. Its powerful message of limited government is likely to remain a sharp thorn in the side of those in both parties who want to continue politics as usual.
Take Obama’s health care package, which tea partiers have labeled “Obamacare.” Obama and Democrats rammed this through Congress, against the wishes of a majority of the American people.
But the repealing legislation should not itself contain some new massive health care plan. Even if the legislation offers good policy, the tea party is here to remind Republicans that pushing large, unexamined bills through Congress is wrong. We need to repeal Obamacare immediately, then openly debate and pass conservative-drawn, sensible and broadly supported health care reform.
It’s no surprise that pollsters Scott Rasmussen and Doug Schoen found that more than “half of the electorate now say they favor the tea party movement, around 35 percent say they support the movement, 20 [percent] to 25 percent self-identify as members of the movement and 2 [percent] to 7 percent say they are activists.”
This means that all those protesters with their Constitutions at tea party rallies nationwide represent millions of fellow Americans. The answers they seek won’t be found in the thousands of pages of new legislation coming out of Washington.
They are in those documents that first defined this nation and provide the most just framework for a free people to work hard, play by the rules and succeed.
Ed Feulner is president of The Heritage Foundation. Sen. Jim DeMint is a Republican from South Carolina.
John Brummett asserts that liberals are right about the cause of the deficit. He asserts in his article “Harry let us down,” Arkansas News Bureau, April 4, 2011: He is right that the actual deficit is caused by direct government spending exceeding income, an imbalance mostly caused, he will tell you with some justification, by […]
U.S. Sen. Mark Pryor at the 2009 DPA J-J Dinner U.S. Sen. Mark Pryor at the 2009 Democratic Party Jefferson Jackson Dinner, Arkansas’s largest annual political event. (Did you notice that besides Mike Ross, EVERY OTHER DEMOCRAT THAT PRYOR MENTIONS DOING SUCH A GREAT JOB IN WASHINGTON IS NO LONGER IN OFFICE, SNYDER, LINCOLN, and BERRY)
“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beach is one of the finest papers I have ever read. Over the next few days I will post portions of this paper, but […]
The problem with social security David John, a Senior research Fellow at the Heritage Foundation, explains his position on Social Security as it relates to taxes and health care. He suggests it would be a good solution for the government to raise the age of retirement. “Saving the American Dream: The Heritage Plan to […]
Arnold Schwarzenegger did the opening introduction to the film series “Free to Choose” by Milton Friedman, but then Arnold abandoned the principles of Friedman!!!! Ep. 4 – From Cradle to Grave [4/7]. Milton Friedman’s Free to Choose (1980) Many people want the government to protect the consumer. A much more urgent problem is to protect […]
What is the future of Social Security and Medicare? Congresswoman Virginia Foxx talks with Alison Fraser of the Heritage Foundation about the state of Social Security and Medicare. “Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by Stuart Butler, Ph.D. , Alison […]
The Laffer Curve, Part I: Understanding the Theory The Laffer Curve charts a relationship between tax rates and tax revenue. While the theory behind the Laffer Curve is widely accepted, the concept has become very controversial because politicians on both sides of the debate exaggerate. This video shows the middle ground between those who claim […]
The liberal Pat Lynch in his article “Worry Inc.” Arkansas Democrat- Gazette, April 4, 2011 commented: While the budget cutters are busy going after programs that help mere citizens, any notion of bringing taxrates for the wealthy back to the levels of the Clinton era, when there was a federal surplus, is off the table. […]
John Brummett asserts that liberals are right about the cause of the deficit. He asserts in his article “Harry let us down,” Arkansas News Bureau, April 4, 2011: He is right that the actual deficit is caused by direct government spending exceeding income, an imbalance mostly caused, he will tell you with some justification, by […]
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 47)
This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but from a liberal.
Rep. Emanuel Clever (D-Mo.) called the newly agreed-upon bipartisan compromise deal to raise the debt limit “a sugar-coated satan sandwich.”
“This deal is a sugar-coated satan sandwich. If you lift the bun, you will not like what you see,” Clever tweeted on August 1, 2011.
WASHINGTON, D.C. – This week Congressman Walter B. Jones voted against S. 365 – the bill negotiated between President Barack Obama and House and Senate Leadership which would allow the President to raise the debt ceiling by up to $2.4 trillion. That increase in the debt limit would be the largest in U.S. history. The bill is expected to pass the Senate and be signed into law by President Obama later today. Congressman Jones is the only member of Congress to have voted against final passage of every single increase in the debt limit over the last seven years.
While Congressman Jones was pleased that the Speaker of the House was able to overcome the President’s original request for a blank check to increase deficit spending without cuts, and then his insistence that a debt limit increase be paid for with tax increases and phantom spending reductions, the Congressman had serious concerns with the final deal.
The bill allows the President to increase the debt limit by $2.4 trillion over the next 6 months, while the promised spending reductions would take place over the next 10 years – assuming no future Congress undoes those cuts. Further – even if the reductions stay in effect – the Congressional Budget Office projects that federal spending will still go up each and every year of the ten year agreement, with the government adding at least another $4 trillion in deficit spending over those ten years.
Congressman Jones is also troubled by the unbalanced reductions required by the bill, and the impact they could have on Eastern North Carolina. While defense spending constitutes roughly 1/6th of current federal spending, the bill would require that half of future cuts come from defense. That could have serious consequences for America’s ability to defend itself, and for Eastern North Carolina’s military bases. The bill would also leave veterans funding open to cuts. And while funding for Eastern North Carolina veterans and military bases would be on the chopping block, the bill protects overseas spending in Iraq and Afghanistan from cuts. The bill also allows spending on optional “discretionary programs” to rise by over $200 billion dollars, yet subjects Eastern North Carolina hospitals, doctors and seniors to Medicare cuts.
“Cutting funding for Eastern North Carolina bases and our veterans while expanding funding for overseas wars is an unacceptable proposition,” said Congressman Jones. “Allowing increases in spending on discretionary programs at the same time you are cutting medical benefits just makes no common sense. There is no doubt that federal spending must be cut dramatically if this nation hopes to get back on its feet. But under this legislation total spending and debt continue to rise, and the cuts that actually are made are unbalanced. This bill unfortunately missed the mark.”
Alexis Garcia reports on America’s exploding debt. Experts blame entitlements like Social Security and government spending. But what is the solution? Can we raise taxes without crushing the economy and the middle class? Does Obama really want to lower the debt, or does he support continued deficit spending? See interviews with Douglas Holtz-Eakin, Brian Riedl, Jason Peuquet and former Congressman Ernest Istook (R-OK).
Senator Mark Pryor wants our ideas on how to cut federal spending. Take a look at this video clip below:
Senator Pryor has asked us to send our ideas to him at cutspending@pryor.senate.gov and I have done so in the past and will continue to do so in the future.
On May 11, 2011, I emailed to this above address and I got this email back from Senator Pryor’s office:
Please note, this is not a monitored email account. Due to the sheer volume of correspondence I receive, I ask that constituents please contact me via my website with any responses or additional concerns. If you would like a specific reply to your message, please visit http://pryor.senate.gov/contact. This system ensures that I will continue to keep Arkansas First by allowing me to better organize the thousands of emails I get from Arkansans each week and ensuring that I have all the information I need to respond to your particular communication in timely manner. I appreciate you writing. I always welcome your input and suggestions. Please do not hesitate to contact me on any issue of concern to you in the future.
Therefore, I went to the website and sent this email below:
Office of Personnel Management
Agency/Program Funding Level Savings % Decrease
OPM $2.924 B $9.070 B 12.3%
The Office of Personnel Management is notorious for its red tape. Responsible for hiring federal employees – who earn double the salaries of their private sector counterparts (USA Today, March 3, 2010) – the agency has a reputation of poor performance in hiring, which even President Obama has scolded and sought to reform. However, more has to be done to streamline the processes of this behemoth of an organization that is a perfect example of government growth and waste.
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 46)
This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but from a liberal.
Rep. Emanuel Clever (D-Mo.) called the newly agreed-upon bipartisan compromise deal to raise the debt limit “a sugar-coated satan sandwich.”
“This deal is a sugar-coated satan sandwich. If you lift the bun, you will not like what you see,” Clever tweeted on August 1, 2011.
Washington — Two of Central New York’s representatives in Congress — a Republican and Democrat – voted Monday to increase the national debt limit and avoid an unprecedented financial default by the U.S. government.
But a third local member of Congress, U.S. Rep. Ann Marie Buerkle, R-Onondaga Hill, voted against the bill, which easily passed the House of Representatives 269 to 161.
Buerkle reviewed the legislation throughout the day, and remained undecided on her vote even as she left her office to vote on the House floor, aides said.
She was the only Republican in New York’s House delegation to vote against the compromise bill. The congresswoman said she made her decision after “careful consideration and reflection.”
“There were some good aspects to the bill, but this version also creates several new problems,” Buerkle said in a statement. “At the end of the day, I was not satisfied that all my questions and concerns had been answered as to potential negative affects of this bill on the people in my district.” She did not elaborate.
Heritage’s experts watched President Barack Obama’s jobs speech delivered to a joint session of Congress. Here are some of their immediate reactions:
Obama Calls for Reviving Failed Hiring Tax Credit
What to make of President Obama’s plan in his speech tonight to revive a tax credit for businesses hiring new workers? In March 2010, the President signed into law an almost identical credit.
It was a credit he pushed for Congress to pass. The credit lasted from March through the end of December. It had no beneficial impact on job creation and added billions to the national debt. There is absolutely no good reason for trying it again.
As we argued before the first hiring credit became law, such a policy won’t spur permanent hiring because it only temporarily reduces the costs of employing new workers. Businesses only hire new workers when they anticipate those new workers will increase their profitability over the long haul.
A credit of a few thousand dollars, a mere fraction of the cost of hiring a worker, does nothing to change that calculation. The only positive effect on hiring the credit could have would be on temporary positions if it makes adding a few new temps profitable in the short term. But once the credit expires businesses will let those workers go.
To get the true picture of the credit’s effectiveness, however, you can’t just look at the few temporary jobs it might create. You also need to subtract the jobs foregone because the government took the money for the credit out of the hands of the private sector by taxing or borrowing to give it to the businesses that qualify. In the end it is more likely the hiring credit will actually destroy jobs on net.
– Curtis Dubay
Extending Unemployment Benefits
Today, Senate Minority Leader Mitch McConnell (R-KY) quoted Albert Einstein who he said once defined insanity as doing the same thing over and over again and expecting different results. By that measure President Obama’s plan to boost the economy by spending more on unemployment benefits is insane. Unfortunately, the President isn’t joking.
Congress has expanded unemployment insurance (UI) dramatically since the recession began. Laid off workers can now collect up to 99 weeks of benefits in some states. It isn’t hard to see why Congress did so. Normally workers can collect benefits for to up to six months. But the average unemployed worker has now been out of a job for nine months.
For welfare reasons Congress wants to help workers who cannot find jobs. This is understandable. That doesn’t mean it will help the economy, no matter how much the President wants it to.
The stimulus bill extended UI benefits. Congress has kept them in place several times since then. All told the government has spent over $300 billion on unemployment benefits since Obama took office. All that spending has done nothing to boost the economy. Unemployment is higher than the Administration projected if Congress did nothing. This failure was predictable.
The studies that show that UI spending stimulates the economy are based on macroeconomic models programmed to show large “multiplier effects” from government spending. These models assume that each dollar of government spending creates more than a dollar of economic growth. They essentially assume their conclusion. Actual empirical research shows that UI payments do not boost GDP. This is exactly what economic theory predicts.
One of the most thoroughly established findings of labor economics is the fact that extended unemployment benefits cause workers to remain unemployed longer. Even Alan Krueger, President Obama’s nominee to chair the Council of Economic Advisors, agrees. Studies show that raising benefits to 99 weeks during the recession has increased the unemployment rate by 0.5 to 1.5 percentage points. Extended benefits come at an economic cost.
There are understandable reasons for wanting to extend UI benefits despite this cost. But as much as it would be wonderful if doing so also boosted the economy, it does not. It would be similarly wonderful if an all you can eat bacon and ice-cream diet helped shed pounds. Wishing does not make it so.
If Congress thinks that keeping extended benefits is good policy then Congress should pay for it by reducing spending on less important programs. But spending tens of billions more on unemployment insurance will not stimulate the economy any more than the last extensions did.
Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 45)
This post today is a part of a series I am doing on the 66 Republican Tea Party favorites that resisted eating the “Sugar-coated Satan Sandwich” Debt Deal. Actually that name did not originate from a representative who agrees with the Tea Party, but from a liberal.
Rep. Emanuel Clever (D-Mo.) called the newly agreed-upon bipartisan compromise deal to raise the debt limit “a sugar-coated satan sandwich.”
“This deal is a sugar-coated satan sandwich. If you lift the bun, you will not like what you see,” Clever tweeted on August 1, 2011.
Washington, DC (August 1, 2011) Today,Congressman Steve Pearce voted against S. 365, the Budget Control Act Agreement.
“While today’s proposal isn’t the solution we need, it does show that the people are beginning to make their voices heard,” said Pearce. “For years, Washington has tried to spend our way out of debt through tax and borrow bailout schemes. The discussion in Washington this week has shown that those days are drawing to a close. The American people said in November that they want a new direction, and they are successfully holding Congress accountable. Still, the down payment on our national debt that was proposed today was simply not enough.”
“Job creation, not temporary cuts, will be the key to truly solving our national debt problem,” Pearce continued. “We need to reform the burdensome taxes and unnecessary regulations that are preventing small businesses across America from creating the jobs we need. Only by putting Americans back to work can we hope to truly solve our debt crisis.”
While Rep. Pearce has always hoped to avoid default, he will not support a debt limit increase that does not include fundamental, lasting solutions to America’s economic turmoil. In recent weeks, he joined colleagues in the House from both sides of the aisle to pass the “Cut, Cap, and Balance Act of 2011,” and the “Budget Control Act of 2011.”
Heritage’s experts watched President Barack Obama’s jobs speech delivered to a joint session of Congress. Here are some of their immediate reactions:
Obama Calls for Tax Hikes on Job Creators – In Jobs Speech
It was expected that President Obama would rehash and recycle a litany of policies that have no hope of stimulating job creation in his big speech tonight. What comes as a surprise is that he called for offsetting the costs of his sure-to-be-ineffective policies with tax hikes. On job creators.
The President has said himself that tax hikes slow economic growth and deter job creation. That was the justification he gave in December for extending the Bush tax cuts through 2012. It seems he has forgotten what he himself said less than a year ago.
The President called for raising taxes on investors, businesses, and entrepreneurs in his speech. These are the job creators he so desperately needs to help revive the economy. Raising their taxes will reduce the already limited incentives they have to invest and add new workers right now.
This is akin to bailing water into an already-sinking ship.
If Congress foolishly passed the President’s ill-advised plan the tax hikes would be permanent and the jobs policies permanent. The American people would get a permanently enlarged federal government for temporary jobs policies that won’t create any jobs.
Uncertainty is the major factor causing businesses to hold back on new investment and refrain from adding workers. One of the biggest sources of that uncertainty is the President’s never-ending crusade to raise taxes. As long as their taxes might go up, job creators will be hesitant to add new workers.
If the President stopped incessantly demanding higher levies it would relieve some of the uncertainty. That alone won’t cure all that ails the economy, but it would be a big help.
C’mon Mr. President, surprise us in your next major speech by not calling for tax hikes.
– Curtis Dubay
Unsurprisingly, Obama Ignores Energy Exploration as a Solution
Increasing energy supply should have been a no-brainer for President Obama. It’s a policy that can lower energy prices, create jobs and generate hundreds of billions in revenue from more royalties, leases, and rent. And it’s a massive revenue raiser that occurs without raising taxes. Instead, the president used the opportunity to take a jab at oil companies and the “tax loopholes” they receive.
The reality is the economy is weak and steep energy prices will hurt the economic recovery. Despite the fact that oil settled at $89 per barrel, gas prices remain high and the economic pain as a result of higher gas prices spreads far beyond the pump. Higher energy prices also drive up production costs, which must be reflected in product prices, especially for goods reliant on transportation. Since higher prices reduce quantities sold, producers produce less. In turn, this drives wages down and incomes decline.
At least the people of Louisiana have the Saints to watch, because they don’t have jobs. Despite the fact that the administration lifted the official moratorium on deepwater drilling, the molasses-like permitting process is impeding the Gulf’s economic recovery; 20 rigs are in jeopardy of leaving the Gulf.
But it’s not just the Gulf that would benefit from allowing access for energy exploration and creating an efficient regulatory process that allows energy projects to move forward in a timely manner. Colorado, Montana, New Mexico, North Dakota, Utah, and Wyoming have all suffered from a slower permitting process would see tremendous economic benefits if companies could explore and drill in a more timely manner. Alaska has 19 billion barrels of oil of its coasts and another 10.4 billion in the Arctic National Wildlife Refuge (ANWR). Increased proven natural gas reserves increased states like Pennsylvania, New York, Texas, Oklahoma, Arkansas and Louisiana has increased regional interest.
Increasing access to oil and natural gas reserves in the United States both onshore and offshore, would help offset rising demand, increase jobs and revenue, and provide the real economic boost our country needs rather than more the same tried-and-failed government spending programs.
The Daily Hatch 