Category Archives: spending out of control

Obama’s phony cuts will not help, Cut, cap and balance would help

July 18, 2011 – 4:07 pm

It appears the USA will become Greece. Even the Republicans are not willing to offer major cuts in spending. Ted Dehaven hits the nail on the head.

Washington is the only town where the circus never leaves. Elephants, donkeys, clowns and a ringmaster residing at 1600 Pennsylvania Avenue — our nation’s capital has it all. And what a show they’re putting on for the American people over raising the debt ceiling for the umpteenth time in recent years.

On one side we have a president whose surrogates warn of economic Armageddon if the debt ceiling isn’t raised, despite the fact that he himself voted against raising the limit in 2006 as the junior senator from Illinois. On the other side are congressional Republicans, tasked with negotiating spending cuts in exchange for raising the debt ceiling — the same guys who happily voted for big-spending legislation when it was their guy in the White House.

In short, the two sides have a credibility gap on debt reduction that makes the Grand Canyon look like a pothole. That begs the question: What sort of deal will they ultimately agree to?

Tad DeHaven is a budget analyst at the Cato Institute and co-editor of Downsizing Government.org.

 

More by Tad DeHaven

The president doesn’t want to have to rehash this debate before the November 2012 election. That means that the debt ceiling will have to be increased by $2 trillion in order to create enough space through the end of next year. House Speaker John Boehner has drawn his line in the sand: Republicans will only agree to increase the debt ceiling if spending is cut by at least as much. Thus, it is generally assumed that the two sides will have to negotiate a deal to cut spending by $2 trillion.

Here’s the problem: The $2 trillion in cuts would be over ten years, or about $200 billion a year. Suddenly, $200 billion in annual spending cuts in exchange for increasing the debt ceiling by $2 trillion through the end of 2012 doesn’t sound so great — especially when one considers that lawmakers have a storied history of changing their minds about promised future cuts. Therefore, it is imperative that any debt ceiling deal contains real spending cuts.

“Real spending cuts” means terminating programs or reducing entitlement benefits — for example, eliminating programs at the Department of Education and repealing the underlying program authorizations, or changing entitlement laws to reduce the benefit levels of programs such as Medicare. Future policymakers could reverse these cuts, but it wouldn’t be easy given that the government’s finances will probably remain in a precarious state.

Unfortunately, there’s little evidence to suggest that real spending cuts are on the table. Were that the case, we would probably be reading countless articles on the consequent suffering of those who would be separated from the federal teat. Instead, there is a growing indication that the cuts will merely be amorphous reductions against the Congressional Budget Office’s spending baseline, which projects spending over the next 10 years based on current law with an adjustment for inflation.

For example, negotiators could agree to freeze discretionary non-security spending for 10 years, which would “save” about $1 trillion compared to the baseline. However, making sure that future policymakers adhered to the freeze would require a strict budget enforcement mechanism. Such mechanisms haven’t held up well in the past for the simple reason that when it comes to spending, the legislative fox is guarding the budgetary henhouse.

Even if we knew for certain that a $2 trillion reduction in spending compared to the baseline would be achieved, again, we’re still looking at a relatively small sum of money. According to the CBO’s latest baseline, the federal government is projected to spend $46 trillion over the next decade. Regardless of whether the federal government proceeds to spend $44 trillion or $46 trillion, the government will remain on an unacceptable spending trajectory.

Unfortunately, the current state of the debt ceiling negotiations indicates that the stakes holding up the big tent in Washington aren’t going to be pulled anytime soon. On the bright side, perhaps this latest spectacle will cause more of the electorate to question why we’ve allowed so much of our collective well-being to be placed in the hands of so few. If so, there’s a chance we can at least get the animals back in their cages before it’s too late.

By Everette Hatcher III | Also posted in President Obama | Tagged , , , , | Comments (0)

McConnell plan stinks

July 18, 2011 – 10:23 am

In this speech above by Mitch McConnell, I agree with everything he says. However, his actions of late have been deplorable.

David Addington lets it rip on McConnell below:

Shame on the Politically Motivated McConnell Plan to Hike Borrowing With No Spending Cuts

The McConnell Plan to hike the debt limit has only one thought behind it — fade the political heat.  The Plan purportedly makes the Democratic President bear the political burden for increases in the debt limit to the benefit of Republicans, but the Plan does nothing for the good of the country.

The McConnell Plan, if enacted, would immediately raise the amount of money the government can borrow by $100 billion above the current debt ceiling of $14.294 trillion.  The McConnell Plan would then allow the President to make this year and in the coming year a total of three requests for further increases of $700 billion, then $700 billion more, and finally $900 billion more.  Each of those presidential requests would take effect automatically, unless a law is enacted to reject the presidential request.  Because President Obama is highly likely to retain the support of at least one-third of one House of Congress (the number of votes it takes to sustain a presidential veto of legislation), the real effect of the McConnell Plan is to raise the debt limit by more than $2 trillion.

The McConnell Plan would put America deeper into debt and achieves nothing toward the vitally important objective of getting federal overspending and overborrowing under control.  All the McConnell Plan requires the President to do is submit a list of suggested spending cuts that exceeds the dollar amount of the requested hikes in the debt ceiling.  The McConnell Plan does not give those spending cut ideas or any alternative ideas any legal effect or even specify an accelerated procedure for congressional consideration of such ideas — the McConnell Plan just requires the President to submit a piece of paper.

If the outcome of the current presidential-congressional negotiations over how to get spending under control is the McConnell Plan of just letting the President have the freedom to go on borrowing another $2 trillion, then Senator McConnell and every congressional Republican who votes for it will bear as much political responsibility for this action as President Obama and the Democrats.

Senator Jim DeMint was right to describe the McConnell Plan to the newspaper The Hill as “like leaving the jail door open and looking the other way, then saying it’s not our fault.”  And Representative Jim Jordan was even more succinct with his view on the McConnell Plan on the website Politico.com: “I’d say ‘no way.’”  Conservatives should follow their lead.

Conservatives in Congress need to focus on what is good for the country.  That starts with a clear understanding that this is the moment to put the country on the path toward getting federal overspending and overborrowing under control.  The guiding principle is simple:  Don’t raise the debt limit, without getting spending under control.  Use the legislation on the debt limit to put America on the path to driving down federal spending and borrowing, while preserving our ability to protect America, and without raising taxes.

By Everette Hatcher III | Also posted in President Obama | Tagged , , , , | Comments (0)

Regrettable Compromise coming on debt ceiling

July 18, 2011 – 8:40 am

I am not happy at all with developments on this latest compromise. It appears we are not going to get true meaningful cuts to this 1.6 trillion deficit.

Geithner: Sides are moving closer on debt deal
By: Jennifer Epstein
July 18, 2011 08:51 AM EDT

Treasury Secretary Timothy Geithner said on Monday there’s progress on the debt talks and he is “absolutely” certain that President Barack Obama and congressional Republicans will be able to reach a deal to raise the ceiling ahead of the August 2 deadline.

“Despite what you hear, and this is a complicated place, Washington, people are moving closer together,” Geithner said in a morning interview on CNBC.

Though there were no meetings between the president and congressional leaders over the weekend, he stressed that there’s “a lot happening” to push both sides toward a deal.

“You’ve seen the leadership of the Republican Party, in the Senate and the House, definitively take default off the table as leverage for a deal — that’s encouraging,” Geithner said.

Geithner noted that House Speaker John Boehner (R-Ohio), House Majority Leader Eric Cantor (R-Va.), Senate Minority Leader Mitch McConnell (R-Ky.) and Senate Minority Whip Jon Kyl (R-Ariz.) have all individually said “default is not an option.”

But, he added, “It’s not enough, because we still need to find some way to make progress” and reach a deal.

Though the Treasury Department has looked for ways to stay on top of its bills beyond August 2, Geithner said there are “no other options available to give Congress more time” to raise the debt ceiling “and they understand that.” Republican leaders, he said, “are not going to play around” on this issue.

Some Republicans – particularly tea party-affiliated House members – have said that the United States could keep operating without raising the debt ceiling, but Geithner cautioned that “there’s no plausible way to run a country … for an extended period of time” without raising the credit limit.

“We’re not paying our obligations — it’s not feasible. Everybody that had my job before looked at this question and reached the same conclusion. That’s why you’ve seen the leadership of the Republican Party take that opening off the table, take default off the table.”

Geithner said there is no backup plan. “We looked to see all the feasible options” but there aren’t any, he added.

And, as he has for months, Geithner issued warnings. “If the United States of America were to default, it would be catastrophic for the American economy, for the American financial system for the average American people,” he said.

“It would be a substantial, unfair tax on all Americans, and it would bring the world economy, again, because of the critical role we play in the global economy to the edge of recession again,” he continued. “Again, it’s not an option we can consider. There’s no alternative for congress to raising the debt limit. Again, that’s why you’ve seen Republicans as well recognize that reality and take default off the table.”

Meanwhile, Geithner wouldn’t offer more details on rumors that he’s getting ready to leave his job.

“I’m not going to make any news for you on that today,” he said. “And it won’t surprise you to hear I’ll be doing this for the foreseeable future. I’ve got a lot on my plate.”

Asked if he’d be there through the end of the year, he repeated: “For the foreseeable future.”

By Everette Hatcher III | Also posted in President Obama | Comments (0)

Is President Obama willing to present real or phony cuts in debt ceiling crisis?

July 17, 2011 – 12:17 pm

In the press the Republicans are getting hit over the head constantly with the popular explanation that President Obama is ready to compromise and provide real deep budget cuts. However, is that the truth? Michael Tanner exposes the real proposal by President Obama.

“The Intransigent Meet the Unserious,” by Michael D. Tanner

Democrats go hardball on tax hikes while Republicans play softball.

Last Friday, House minority leader Nancy Pelosi held a press conference to announce that House Democrats should oppose a debt-ceiling agreement that included any cuts in Medicare or Social Security. Meanwhile, over in the Senate, Sherrod Brown (D., Ohio) and Bernie Sanders (I., Vt.) announced that they would filibuster any deal that included changes to those programs, and possibly Medicaid as well.

So, of course, you saw the deluge of media stories blaming Democratic intransigence for threatening to throw the country into default. Neither did I.

Republicans have clearly drawn a line in the sand, opposing any tax increase. But Democrats have been even more unbending, resisting any serious structural reform of entitlements or deep spending cuts, while insisting on huge tax hikes as part of any deal.

Why the insistence on tax hikes? Democrats know that, according to the Congressional Budget Office, tax revenues will return to their historic average of 18 to 19 percent of GDP by the end of the decade. They know this will happen even if the Bush tax cuts are extended and the alternative minimum tax is fixed. The only reason, therefore, for tax increases would be to enable more government spending.

The president is now calling for a “big” deal that would reduce the debt by $4 tillion over ten years, while we’ll borrow more than a third of that this year.  In fact, over those ten years, we are expected to run up more than $13 trillion in new debt.

It’s also important to remember that the president is not offering $4 trillion in spending cuts. The deal he has proposed includes more than $1 trillion in tax hikes. Another $1 trillion is assumed savings on interest payments. Thus, what is really on the table is barely $2 trillion in actual spending reductions. What the president is really offering is closer to $2 in spending reductions for every $1 in tax hikes, not the 4:1 ratio reported by the media. Moreover, that is over ten years, meaning the cuts would actually be just $200 billion per year. We will pay more than that this year in interest on what we have already borrowed.

As minimal as these cuts are, they are actually even less than they appear. Most people assume that a spending cut means spending less next year than we spend this year. Then again, most people don’t understand Washington. Washington operates under “baseline budgeting,” meaning that if Congress plans to spend $2 billion more on a program than it spent this year, but only spends $1 billion more, that is a $1 billion “cut.” Thus, the $2 trillion in spending “cuts” currently being discussed would actually allow government spending to increase by $1.8 trillion.

Of course, the president also has expressed a willingness to put Medicare and Social Security on the table, despite opposition from the Democrats in Congress. But here too the proposals are far less than they appear. They would do nothing to change the structure of these programs, instead offering a grab bag of future benefit trims that may or may not ever occur, such as further squeezing reimbursements to hospitals and physicians.

So the deal that the Republicans are currently offering would actually allow federal revenue, federal spending, and the national debt all to increase over the next decade. They have abandoned structural changes to entitlement programs — anything like Paul Ryan’s Medicare reform is off the table — and appear to have dropped calls for a balanced-budget amendment or a spending cap.

This is radical? This is intransigence? If only.

By Everette Hatcher III | Also posted in Cato Institute, President Obama | Comments (0)

Mike Huckabee’s solution to debt ceiling crisis: Let the Democrats have their way

July 17, 2011 – 10:23 am
Cut Cap Balance Debt Ceiling Republicans

On Saturday’s Huckabee Show (July 16, 2011) Mike Huckabee opened up the show with the following statement: 

The Republicans ought to put forth their plan and advance it as far as it will go and then make clear where they stand. If they can’t get the “Cut, Cap and Balance” through the Senate and the White House, then at least they have made their stand. Then it is going to be up the the President and the Democrats to put a real plan on the table. Let them propose it and support and send it to the House.The House ought to pass it, not because they like it, but to give the Democrats full ownership of their plan.The government will then operate and we will not lose our credit rating, but then the constrast is set between two very clear directions for the next eletions. Spend and tax more or “Cut, Cap and Balance”. As a Republican I would glad to run on that platform instead of spend and tax anyday. What do you think? Well you can let me know at MikeHuckabee.com

I did take Mike Huckabee’s suggestion and email my thoughts on his statement. Below is the email. 

Dear Governor Huckabee,

I have supported you since 1992 when you ran for Senator in Arkansas against Dale Bumpers. My close friends and relatives of mine have been on the street campaigning for you even to following you to Iowa in 2008 and going door to door for you. 

Since 2008 we have been tuning in to see your show every week and have been telling our friends about that. I have especially enjoyed the first part of every program where you give your take on the current political talk of the day. Occasionally I do disagree with you on some things and today I find it is one of those days. 

The problem with your suggestion that Republicans vote for the Democrat plan in the House is what I would consider an “epic cave in.” There are two reasons this would not be a good course of action.

First, Republican primary voters will hold Republicans accountable for voting to hand over our future to the Democrats. How can a Democrat or a Republican turn their back on their core beliefs just to allow the other side the opportunity to mess up? 

Second, if Republicans hold firm then the Democrats will come to deal concerning serious budget cuts. I do admit that they may instead try McConnell’s alternative where President Obama becomes basically a dictator. If that does occur then it will truly become the election issue that you talk about. That is much different than caving into what they want by voting for it.  Chris Edwards of the Cato Institute had an excellent article along these lines. 

McConnell’s Cave-In and Boehner’s Opportunity

Posted by Chris Edwards

Senate Minority Leader Mitch McConnell has offered the president a way to raise the debt ceiling by $2.5 trillion without having to cut spending. The WaPo reports that “McConnell’s strategy makes no provision for spending cuts to be enacted.”

This appears to be an epic cave-in and completely at odds with McConnell’s own pronouncements in recent months that major budget reforms must be tied to any debt-limit increase.

House Republicans should obviously reject McConnell’s surrender, and they should do what they should have done months ago. They should put together a package of $2 trillion in real spending cuts taken straight from the Obama fiscal commission report and pass it through the House tied to a debt-limit increase of $2 trillion. Then they shouldn’t budge unless the White House and/or the Senate produce their own $2 trillion packages of real spending cuts, which could be the basis of negotiating a final spending-cut deal.

For those who say that House tea party members won’t vote for a debt increase, I’d say that $2 trillion in spending cuts looks a lot better than the alternative of having Democrats and liberal Republicans doing an end-run around them with McConnell’s no-cut plan.

For those who say that House members are scared of voting for specific spending cuts, I’d say that they’ve already done it by passing the Paul Ryan budget plan. I’d also say that you can’t claim to be the party of spending cuts without voting for spending cuts.

Obama’s Fiscal Commission handed Republicans ready-made spending cuts on a silver platter—Republicans will never get better political cover for insisting on spending cuts than now.

By Everette Hatcher III | Also posted in Cato Institute, Mike Huckabee, President Obama | Comments (0)

Dan Mitchell discusses Republican’s possible responses to Debt Ceiling Crisis

July 15, 2011 – 11:58 am

House Republican Leaders gather after a GOP Conference meeting to discuss the growing need for a resolution to the continued debt crisis that America is facing. The president and previous Congress have been on a spending binge and House Republicans are putting forth a plan- “Cut, Cap and Balance” in order to save our economy for future generations.

_____________________________________

I am really upset that the Republicans seem to be suggesting stupid alternatives like the one that Mitch McConnell suggested. Dan Mitchell of the Cato Institute seems to hold the same negative views that I do. Take a look at the article below:

I Hope I’m Wrong, But Here’s Why Republicans Will Lose the Debt-Limit Fight

Posted by Daniel J. Mitchell

There are three reasons why I’m not very hopeful about the outcome of the debt-limit battle.

1. There is no unity in the GOP camp.

Republicans have been all over the map during this fight. Some of them want a balanced budget amendment. Some want a one-for-one deal of $2 trillion of spending cuts in exchange for a $2 trillion increase in the debt limit. Others want some sort of spending cap, akin to Senator Corker’s CAP Act. Some want to mix all these ideas together in a cut-cap-balance package. Others want Obamacare repeal.  And the latest proposal is Sen. McConnell’s proposal to let Obama unilaterally raise the debt limit.

These are mostly good ideas, but the failure to coalesce around one proposal – preferably one that is easy to understand – has made the Republican position difficult to define, defend, or advance.

2. The fear of demagoguery is high.

As I explained months ago, Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner are trying to spook financial markets with hyperbolic warnings about a risk of default. This is blatant dishonesty and demagoguery, but Republicans are nervous that this tactic might be successful if there is a high-stakes showdown as the government’s borrowing authority runs out.

For those with short memories, this is what happened with TARP back in 2008. The initial bailout proposal was rejected, leading to short-run market gyrations, and many Republicans panicked and switched their votes to yes.

3. Republicans don’t control the Senate or the White House.

I’m stating the obvious, of course, but people seem to forget that any debt limit increase will need to get through the Senate and get signed by Obama.

Imagine you are Harry Reid or Barack Obama. Is there any reason why you would acquiesce to Republican demands? Yes, you need to at least pretend to care about big government, wasteful spending, and red ink, but why not hold firm and then strike a deal based on make-believe spending cuts? That’s exactly what happened during the “government-shutdown” debate earlier this year.

This post, incidentally, is not an attack on Republicans. I’m very willing to attack GOPers when they do the wrong thing, but I’m not sure they deserve to get hammered in this case.

Simply stated, I don’t think there’s a winning strategy, so I don’t see any point in going nuclear.

If nothing else, at least Republicans resisted the siren song of tax increases, which is not a trivial achievement since Democrats clearly were hoping to trick GOPers into giving up one of their strongest political positions.

By Everette Hatcher III | Also posted in Cato Institute, Current Events, President Obama | Comments (0)

What does the Heritage Foundation have to say about the saving the American dream project released May 10, 2011? (Part 1)

July 15, 2011 – 5:39 am

Limiting Government …and Cutting What It Can’t Do Well — Saving the American Dream

“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 Beachis one of the finest papers I have ever read. Over the next few days I will post portions of this paper, and today are some of the conclusions of this study.

Economic and Fiscal Results

Scoring Fiscal Plans

The Heritage plan produces strong economic growth by reducing burdens on
taxpayers and businesses, reducing the government debt, increasing investment,
and encouraging competition. It also brings federal spending into balance and
maintains revenues over the next decade at the average historical level of 18.5
percent of GDP, which as noted earlier is the upper limit that Americans have
indicated a willingness to pay. The economy typically has grown quite well under
this average level of taxation. Taxes above this level often have had a negative
impact on the economy.

With the expansion of the federal government not just slowed but reversed,
the economy grows swiftly, creating new jobs and raising incomes for Americans.
A stronger economy strengthens the tax base and helps to achieve the plan’s
revenue targets. When combined with sharp reductions in spending, the Heritage
plan’s revenues are sufficient to reduce deficits and, thus, the debt.

As a part of its Solutions Initiative,[4] the Peter G.
Peterson Foundation asked Heritage and the five other organizations to prepare
their own solutions to the long-term budget crisis and to score their plans
using the same baseline. Thus, The Heritage Foundation’s Center for Data
Analysis (CDA) modeled the Heritage plan using a “static” scoring against a
close approximation of the Congressional Budget Office’s (CBO) extended baseline
that was developed by the Peterson Foundation.[5]

A static score assumes some behavioral changes by
individuals and markets, but leaves the overall economy unchanged. A dynamic
model assesses the economic effects of policy changes, and the CDA will
separately publish a dynamic scoring of the Heritage plan, using the CBO’s
alternative fiscal scenario as the baseline.[6] This alternative scenario, widely used in
budget discussions and comparisons, assumes that Congress will continue its
current policy and thus practices, such as adjusting the unindexed Alternative
Minimum Tax (AMT) threshold, suspending payment reductions to Medicare
physicians (the “doc fix”), and extending the 2001 and 2003 tax relief.

When available, the CDA used and updated reform proposals analyzed by the
CBO, such as the effect of some policy changes to Medicare. For analysis of the
impact of tax changes, the CDA used its tax and health care models.

A number of important insights into the fiscal effects of the Heritage plan
can be obtained by examining the static, or conventional, changes in federal
revenues and outlays resulting from fully implementing the Heritage plan under
this Peterson/CBO baseline. However, the methodology for static scoring does not
account for macroeconomic changes that result from changes such as higher tax
rates or lower spending. These economic changes can significantly affect fiscal
items, including revenue, because in reality more economic growth will increase
the tax base. Thus, policies that create more economic growth also generate more
tax revenue than a static model would indicate. To show the full benefits of the
Heritage plan, the CDA will publish a separate dynamic analysis of the plan to
supplement the static analysis presented in this report.

By Everette Hatcher III | Comments (0)

Mitch McConnell’s alternate plan on debt ceiling not going to work

July 13, 2011 – 7:40 am

Rory Cooper of the Heritage Foundation took McConnell to task on July 12, 2012:

Earlier today, Senate Minority Leader Mitch McConnell floated a proposal that, essentially, cedes the authority for raising the debt limit from the Congress to the president.

Under McConnell’s plan, President Obama would propose three incremental debt limit increases between now and the end of 2012.  Congress could only vote to disapprove these requests, which President Obama could then veto. Without a 2/3 majority in Congress to override that veto, which is very unlikely, the debt limit increase would become automatic.

This plan is insufficient and is obviously a non-starter. At a time of record deficits and an ever-worsening economy, it would be the height of irresponsibility to raise the federal debt ceiling $2.5 trillion without at the same time implementing sweeping systemic reforms that would restore our nation’s economy.

First, this plan effectively eliminates Congress’ authority and responsibility for the federal budget.  We won’t know if real cuts will even exist, rather than the smoke and mirrors Americans have been suckered by in the past.

It’s obvious the President’s has very liberal spending priorities, meaning defense would be cut while Obamacare and stimulus projects continued to be fully funded.

But the plan is also based on small hopes for future cuts in spending, with no hope for systemic reform and virtually guarantees $2.5 trillion will be added to our federal deficit.

Regardless, this proposal raises several serious constitutional concerns.  Depending on exactly how the legislative language is drafted, it well might violate the Bicameralism and Presentment Clauses for the making of law, the separation of powers regarding Congress’s control over the budget and spending, the legislative Recommendations Clause, and it might also be struck down as an attempt to grant the President the equivalent of a line-item veto.  It is also unclear whether the unconstitutional portion would be struck down by the courts and severed from the rest of the statute (which would eliminate Congress’s ability to veto the cuts) or if the entire scheme would be struck down.  But, at a minimum, the proposal is highly dubious as a matter of constitutional law.

The American people sent this Congress to Washington last November with a mandate to get government under control, not do their best to place blame for its insolvency. We cannot kick this problem down the road, and we cannot spend time developing escape hatches rather than solutions.

The only bipartisan agreement in Washington right now is that the debt ceiling cannot be raised without real and tangible spending cuts. Let’s not retreat from that important position.

We understand that the plan, by design, puts the onus on liberals in Washington to finally propose some way to address out of control spending. They have not passed a budget in more than 800 days.  Unfortunately  political maneuvering in a time of such high stakes is not sufficient.

Jason Tolbert noted:

Arkansas Republican Sen. John Boozman’s office spokesman tells the Tolbert Report that he has “yet to see a plan” and declined to comment specifically whether Boozman may ultimately support McConnell’s proposal.  Spokesman Patrick Creamer said that Boozman is committed to only supporting a compromise that includes spending cuts and will oppose any tax increases. 

“Boozman’s position continues to be that Washington does not have a revenue problem, but a spending problem,” said Creamer

By Everette Hatcher III | Also posted in President Obama | Comments (0)

Brummett: Republicans don’t want to protect poor but take care of rich?

July 12, 2011 – 10:19 am

John Brummett is an excellent writer and I have always enjoyed his articles. He is a liberal and I am a conservative. Therefore, there are philosophical differences.

In his article, “Read their lips: No new taxes,” Arkansas News Bureau, July 12, 2011, he asserts:

I must rise today in newly invigorated resistance to this prevailing modern extremist Republican assault both on government and our time-honored principle by which the fortunate are taxed to help the less-fortunate.

At its benign best, this assault is based on a genuine conservative belief that we’ll all be better off if government is pared and people are left to the natural devices of a market economy. At its malignant worst, it is based on a conspiracy against the idea that we should seek a better society through government via progressive taxation to ensure that basic human needs never go unattended in such a wealthy, powerful and compassionate nation.

___________________________

When you start to talk about what this nation is all about then you must take a close look at what the founders have to say about all this spending. I think they would be shocked if they came back now and they would not be taking the position that Brummett is taking. Instead they would be wanting ALL OF THE WELFARE CUT OUT AND THAT RESPONSIBILITY GIVEN BACK TO THE CHURCHES!!!

Take a look at this article below.

Forty-four million Americans are on food stamps — up from 26 million in 2007. Spending on the program has more than doubled as well, to $77 million. Meanwhile, reports of abuse have skyrocketed.

It’s not the only anti-poverty program that seems to be growing like Topsy while accomplishing little. The federal government currently runs over 70 different means-tested programs providing cash, food, housing, medical care and social services to poor and low-income persons. They cost nearly $1 trillion per year — more than the 2009 stimulus package and no more successful.

Adjusted for inflation, welfare spending is 13 times higher today than it was in 1965, when Washington launched the War on Poverty. Yet the proportion of people living in poverty remains essentially unchanged.

In Vindicating the Founders, Thomas West notes that:

In 1947, the government reported that 32 percent of Americans were poor. By 1969 that figure had declined to 12 percent, where it remained for ten years. Since then, the percentage of poor Americans has increased to about 15 percent. In other words, before the huge growth in government spending on poverty programs, poverty was declining rapidly in America.

So what was driving down poverty rates before LBJ declared “war”? Let’s go back to the beginning.

Our nation’s founders recognized the need to take care of the sick and indigent who couldn’t help themselves. Quoting natural rights philosopher John Locke, West writes that “[T]he law of nature teaches not only self-preservation but also preservation of others, ‘when one’s own preservation comes into competition.’” In other words, society is organized for the security of its members as well as their liberty and property. A society that fails to respond to those in need jeopardizes its own preservation.

In the early days of the American experiment, local governments — not the feds — assumed this responsibility. But there was careful emphasis that “poor laws not go beyond a minimal safety net,” West notes, and that aid be provided only on the condition of labor. Only the truly helpless, those “who had no friends or family to help, were taken care of in idleness.”

The founders saw a great danger in overly generous welfare policy — that it would promote irresponsible behavior. That, in turn, would threaten the inherent natural right of every individual “to liberty, including the right to the free exercise of one’s industry and its fruits.”

Contrast that with today’s anti-poverty measures. Of 70 federal welfare programs, only one — Temporary Assistance for Needy Families (TANF) — actively encourages greater self-reliance. The remaining 69 encourage irresponsible behavior. Unsurprisingly, abuse of the system is rampant. Food stamp recipients sell benefit cards on Facebook, then falsely report lost cards. And recipients include prison inmates as well as millionaire lottery winners.

Our founders would not be surprised. While living in Europe in the 1760s, Franklin observed: “in different countries … the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Similarly, Jefferson argued that “to take from one … in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it.”

This is why the founders encouraged reliance upon family, private charity and community. This approach ensured that aid to the needy was provided as personally as possible. Family and community can make crucial distinctions between the deserving and undeserving poor, whereas government cannot. Many individuals, for example, need a government handout far less than they need moral guidance and correction, which church groups and family can provide.

Throughout the latter half of the 20th century, however, the War on Poverty turned these concepts on their head. Incentives for self-reliance, industry and hard work were reversed. Programs offering financial aid and child care to single women incentivized single-parent households while discouraging marriage. By 1995, a non-working, single mother of two was eligible for benefits equivalent to a job paying close to (and in some states, even more than) the average salary. Small wonder the decline in poverty rates was checked.

America needs to return to the principles that worked so successfully before Washington embraced the European welfare state model. As Benjamin Franklin wrote, with sound poverty policy, “industry will increase … circumstances [of the poor] will mend, and more will be done for their happiness by inuring them to provide for themselves.”

David Weinberger is communications coordinator at The Heritage Foundation

By Everette Hatcher III | Also posted in Taxes | Comments (0)

The Stimulus Failed, (Part 5), Do you want your grandchildren to pay for your walking bridge?

July 12, 2011 – 6:38 am

Heritage Foundation: Stimulus Will Fail

TWO RIVERS BRIDGE: Opening nears.

People just don’t understand how wasteful government can be and how giving government more control of our lives destroys much of the freedom that we should have. This series on the stimulus demostrates these points. This whole series started because of a post I did on July 6, 2011 about an post in the Arkansas Times Blog.

On July 6, 2011 on the Arkansas Times Blog I posted concerning the walking bridge in Little Rock that stimulus funds help build:

Tim Griffin spoke in Central Arkansas recently at a townhall meeting and mentioned that a couple of million of stimulus money went to build the walking bridge in Little Rock that will be opening this summer. Then he went on to show how it was silly for our government to try to stimulate the economy with our national credit card.
Steve Chapman rightly noted in his article “Stimulus to Nowhere” noted:

The federal government took out loans that it will have to cover with future tax increases … so states don’t have to. It’s like paying your Visa bill with your MasterCard.

The person using the username “Arkansas Panic Fan” responded:

Bridge = good stuff for Central Arkansas. Not sure why it is a bad thing. It is your money at work here being used for your benefit. I applaud this type of government activity. This is the type of project and progress you can see, touch, smell, hear.

That being said, Saline Republican, is this a waste of your money? You can use it as you wish.

_________________________

I do not applaud this type of government activity because it is a waste of my tax dollars to pretend that you are creating employment that will get us out of a recession when in fact it was so simply then why don’t eliminate the private part of our society completely and allow us all to have public jobs. I understand Greece have over 50% of the people working for the government.

J.D. Foster’s testimony on Feb 16, 2011 before Congress shows how stupid the spending stimulus was:

My name is J.D. Foster. I am the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy at The Heritage Foundation. The views I express in this testimony are my own, and should not be construed as representing any official position of The Heritage Foundation.

Signs of Taking the Wrong Road

The heart of the Administration’s approach to stimulus is the equivalent of fiscal alchemy. Alchemy, “the art of transmuting metals,” refers specifically to turning base metals like lead into gold. Fiscal alchemy is the attempt to turn government deficit spending—whenever, wherever, and on whatever—into jobs. Regarding near-term stimulus, it is not a matter of how wisely or foolishly the money is spent. It is not a matter of how quickly or slowly the money is spent. It is not a matter of whether some is saved or not—any more than the phase of the moon or adding a bit more wolfsbane or a stronger electric current enhances the prospects for lead to become the substance of an alchemist’s dreams.

The basic theory of demand-side stimulus is beguilingly simple. The theory observes that the economy is under performing and total demand is too low, and thus total supply needed to meet that demand is too low. It would appear obvious enough, then, that a solution is to increase demand by deficit spending and rising supply will naturally follow. The net of government spending over tax revenues adds to total demand. Increase the deficit and you increase demand, supply naturally follows, and voila: the economy is stronger and employment is up. One wonders then why government should not simply increase spending much, much more and create instant full employment.

Why, indeed. The answer, as is now obvious, is that this policy does not work for the simple reason that government must somehow fund this additional spending, and it does so by borrowing. Suppose you take a dollar from your right pocket and transfer it to your left pocket. Do you have a new dollar to spend? Of course not.

Or suppose you pour a bucket of water into a bathtub. You would expect the level of the water to rise. But where did the water in the bucket come from? It came from dipping it into the bathtub. You may make a splash, but when the water settles, in terms of the water level nothing will have changed.

An increase in government borrowing to finance an increase in deficit spending produces one of two ensuing events, either of which (or in combination) leaves total demand unchanged. First, the increase in government borrowing can mean a reduction in the amount of saving available for private consumption and private investment. Government demand goes up, private demand goes down, total demand is unchanged.

Alternatively, the increase in government borrowing may be financed not by reducing private borrowing but by an increase in net inflows of foreign saving—either a reduction in the gross outflows of U.S. saving or an increase in the gross inflows of foreign-sourced saving. Total demand remains unaffected, however, because the balance of payments still balances, and so the increase in net inflows of saving is matched by an increase in the net inflows of goods and services—the increase in the trade deficit offsets the increase in deficit spending.

Underlying this simple confusion surrounding demand-side stimulus is that the theory ignores the existence of a well-developed financial system, the job of which fundamentally is to direct private saving into private consumption, private investment, or government deficit spending. Even in the past few years, when the financial system has worked poorly in the sense that institutions have failed, markets struggled, and the direction of investment dollars has been less than stellar, the markets still managed to take every dollar of saving and direct it toward a borrower willing to take it and use it. Demand-side theory presumes the existence of financial markets, as government must rely on those markets to issue debt to finance deficit spending, but then ignores that absent the additional government borrowing, markets would have directed the saving to other purposes, which would have added to total demand in the same amount.

These economic relationships are analogous to the law of conservation of energy, which says that energy can be neither created nor destroyed in a closed system, but can only be transformed from one state to another. If we exclude the possibility of cross-border capital flows, then the closed system is the domestic economy and the energy conserved is the amount of saving available. If we allow for the possibility of cross-border capital flows, then the closed system is the global economy and the energy conserved is the amount of domestic saving augmented or diminished by the second closed system of the balance of payments.

 

By Everette Hatcher III | Also posted in Taxes | Comments (0)