Tag Archives: budget control

Cato Institute:Spending is our problem Part 4

March 13, 2012 – 2:18 pm

Should we spend more federal money to help the poor?

Uploaded by on Oct 3, 2011

The so-called War on Poverty has failed. Making government bigger and creating more federal redistribution programs has been bad news for taxpayers. But the welfare state also has been a disaster for the less fortunate, creating a flypaper effect that makes it difficult for people to lead independent and self-reliant lives. This Center for Freedom and Prosperity Foundation video shows how the poverty rate was falling after World War II — but then stagnated once the federal government got involved. www.freedomandprosperity.org

People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

Baseline Projections Are Optimistic

In support of building a large “fiscal buffer,” policymakers should recognize that both short-term and long-term CBO projections are optimistic in various ways. Perhaps the future will include some positive budget surprises, but the big risk factors seem to be on the negative side.

In CBO’s baseline, federal deficits fall substantially over the coming decade, partly due to changes under the recent Budget Control Act. However, spending will be higher than projected if:

  • Policymakers lift caps in the Budget Control Act.
  • Policymakers launch new spending programs or respond to unforeseen crises or wars.
  • Higher interest rates push up interest costs, which is a risk that gets magnified as federal debt grows larger.
  • A major recession causes large cost increases in programs sensitive to economic cycles, such as unemployment insurance.
  • Policymakers respond to another recession with costly new “stimulus” plans. The persistence of Keynesian policy ideas in Washington is an important risk to the outlook for federal debt.

There are likely to be negative shocks in coming years that we don’t foresee. Consider that in its January 2008 budget outlook, CBO projected that U.S. economic growth would slow in 2008 but then rebound fairly strongly in subsequent years.15 CBO discussed the risk of a recession, but didn’t foresee the calamity that was already starting. The upshot is that policymakers should take a conservative approach and build a “fiscal buffer” with large spending cuts now before another recession causes the deficit to soar again.

CBO’s long-range projections — such as the “alternative fiscal scenario” (AFS) shown in Figure 1 — are also optimistic. In its basic projections, CBO does not factor in the negative effects of rising spending, debt, or taxes on GDP after 2021, but it does do that in a separate analysis.16 If spending actually followed the course shown in Figure 1, CBO estimates that GDP in 2035 would be up to 10 percent less than shown in the AFS, and GNP would be up to 18 percent less. In turn, spending-to-GDP and debt-to-GDP ratios would be worse than usually shown in long-range budget charts.

Under the AFS, rising deficit spending could reduce American incomes. The CBO finds that real GNP per capita could stop growing in the late 2020s, and then start falling after that. In a historic reversal, future generations of Americans would become successively poorer.

The way to ensure our continued prosperity is to cut federal spending and reduce debt. In a 2010 analysis, the CBO compared the high-spending AFS with Rep. Paul Ryan’s “Roadmap” plan.17 The Ryan plan would restrain federal spending to roughly current levels for the next few decades, and then start reducing it. By the late 2020s, GNP per capita under the Ryan plan would begin rising above the flat and then falling levels under the AFS. By the late 2050s, GNP per capita would be 70 percent higher under the Ryan plan than under the AFS.18

15 Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2008 to 2018,” January 2008, Chapter 2.
16 See Chapter 2 in Congressional Budget Office, “Long-Term Budget Outlook,” June 2011.
17 Congressional Budget Office, Douglas Elmendorf letter to Paul Ryan, January 27, 2010, http://www.cbo.gov/ftpdocs/108xx/doc10851/01-27-Ryan-Roadmap-Letter.pdf.
18 Congressional Budget Office, Douglas Elmendorf letter to Paul Ryan, January 27, 2010, p. 16.

By Everette Hatcher III | Posted in Cato Institute, spending out of control | Also tagged , , , , , , , | Comments (0)

Cato Institute:Spending is our problem Part 3

March 12, 2012 – 11:26 pm

Uploaded by on Feb 15, 2011

Dan Mitchell, Senior Fellow at the Cato Institute, speaks at Moving Forward on Entitlements: Practical Steps to Reform, NTUF’s entitlement reform event at CPAC, on Feb. 11, 2011.

____________________

People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

Harmful Effects of Deficit Spending

Federal deficit spending has exploded. Even with the recent passage of the Budget Control Act, the deficit is still expected to be about $1 trillion next year. The damage caused by this spending includes:

1. Transferring resources from higher-valued private activities to lower-valued government activities. With government spending already at 41 percent of GDP, new spending will likely have a negative return, which will reduce output.
2. Creating pressure to increase taxes in the future, which would reduce growth. Higher taxes impose “deadweight losses” on the economy of at least $1 for every $2 of added revenues, as discussed below.
3. Increasing federal debt, which creates economic uncertainty and a higher risk of financial crises, as Europe’s woes illustrate. Research indicates that economic growth tends to fall as debt rises above about 90 percent of GDP, as discussed below.

Economists in the Keynesian tradition dispute the first point. They believe that the demand-side “stimulus” benefits of spending are so important that they outweigh the problems of microeconomic distortions and misallocations caused by federal programs. However, it is very difficult to see any economic boost from the huge deficit spending of recent years.

The total Keynesian stimulus in recent years includes not only the 2009 stimulus package of more than $800 billion, but the total amount of federal deficit spending. We’ve had deficit spending of $459 billion in fiscal 2008, $1.4 trillion in fiscal 2009, $1.3 trillion in fiscal 2010, and $1.3 trillion in fiscal 2011. Despite that huge supposed stimulus, U.S. unemployment remains at high levels and the current recovery has been the slowest since World War II.5

The Obama administration claimed that there are large “multiplier” benefits of federal spending, but the recent spending spree seems to have mainly just suppressed private-sector activities.6 Stanford University’s John Taylor took a detailed look at GDP data over recent years, and he found little evidence of any benefits from the 2009 stimulus bill.7 Any “sugar high” to the economy from spending increases was apparently small and short-lived. Harvard University’s Robert Barro estimates that any small multiplier benefits that the stimulus bill may have had is greatly outweighed by the future damage caused by higher taxes and debt.8

John Taylor recently testified that deficit-spending stimulus actions “have not only been ineffective, they have lowered investment and consumption demand by increasing concerns about the federal debt, another financial crisis, threats of inflation or deflation, higher taxes, or simply more interventions. Most businesses have plenty of cash to invest and create jobs. They’re sitting on it because of these concerns.”9

As federal debt grows larger, the problems caused by fiscal uncertainty will get magnified. The CBO notes that “growing federal debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would . . . probably have a very significant negative impact on the country.”10

Research by economists Kenneth Rogoff and Carmen Reinhart found that government debt burdens above 90 percent of GDP are associated with lower economic growth.11 After examining data on dozens of countries, they concluded that “high debt is associated with slower growth; a relationship which is robust across advanced and emerging markets.”12 High debt can also be associated with inflation crises, “financial repression,” and other problems. Furthermore, high public and private debt acts as a “contagion amplifier” in the globalized economy.

A new paper by economists at the Bank for International Settlements (BIS) similarly found that when government debt in OECD countries rises above a threshold of about 85 percent of GDP, economic growth is slower.13 As debt rises, borrowers become increasingly sensitive to changes in interest rates and other shocks. “Higher nominal debt raises real volatility, increases financial fragility, and reduces average growth,” the authors note.14

The BIS economists conclude that countries should build a “fiscal buffer” by keeping its debt well below the danger threshold. They note that without major reforms, debt-to-GDP levels will soar in coming decades in most advanced economies due to population aging. Thus, one more reason for the United States to cut its spending and debt is to help it weather future financial crises spilling over from countries that are in even worse shape than we are.
5 See Joint Economic Committee, “Uncharted Depths: Welcome to Barack Obama’s ‘Recover Bummer,'” Republican Staff, June 23, 2011. And see the comments of economists Robert Gordon and Robert Hall at http://www.cato-at-liberty.org/biggest-keynesian-stimulus-slowest-recovery.
6 See Robert J. Barro, “Government Spending Is No Free Lunch,” Wall Street Journal, January 22, 2009; John F. Cogan and John B. Taylor, “The Obama Stimulus Impact? Zero,” Wall Street Journal, December 9, 2010; John H. Cochrane, “Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies,” University of Chicago Booth School of Business, February 27, 2009.
7 John Taylor, Testimony to the House Committee on Oversight and Government Reform, Subcommittee on Regulatory Affairs, Stimulus Oversight, and Government Spending, February 16, 2011.
8 Robert J. Barro, “The Stimulus Evidence One Year Later,” Wall Street Journal, February 23, 2010.
9 John Taylor, Testimony to the Senate Finance Committee, Subcommittee on Fiscal Responsibility and Economic Growth, September 13, 2011.
10 Congressional Budget Office, “Long-Term Budget Outlook,” June 2011, p. 22.
11 The authors summarize their findings in Carmen Reinhart and Kenneth Rogoff, “A Decade of Debt,” National Bureau of Economic Research, Working Paper 16827, February 2011.
12 Carmen Reinhart and Kenneth Rogoff, “A Decade of Debt,” National Bureau of Economic Research, Working Paper 16827, February 2011, p. 5.
13 Stephen Cecchetti, M.S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Bureau for International Settlements, September 2011.
14 Stephen Cecchetti, M.S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Bureau for International Settlements, September 2011, p. 4.

By Everette Hatcher III | Posted in Cato Institute, spending out of control | Also tagged , , , | Comments (0)

Suggestions from a conservative to the Super Committee

November 22, 2011 – 8:32 am

I love the Heritage Foundation.

THE SUPER COMMITTEE: Deficit-Reduction Solutions

November 16, 2011

America’s Spending and Debt Crisis

  • It’s the Spending: Washington has a spending problem. While tax revenue is projected to climb above its historical average level of 18.4% of gross domestic product (GDP) by 2021, government spending is projected to increase to 26.4% in the same period. Driven by the three largest entitlement programs—Social Security, Medicare, and Medicaid— total federal spending will explode from 24% of GDP in 2011 to nearly 35% by 2035.
  • Government Debt Growing at Unsustainable Levels: Publicly held debt more than doubled from $5 trillion at the end of fiscal year (FY) 2007 to a staggering $10.1 trillion in FY 2011. Today it’s nearly 70% of GDP and is on track to hit 185% of GDP by 2035.
  • Our National Defense Is at Risk: Defense spending, excluding war costs, is only 3.7% of GDP—under the 60-year average—and will be cut further under the Budget Control Act, exacerbating our readiness crisis.

Revenue and Spending Projections

Solutions for the Super Committee

  • Set Priorities and Make Bold Decisions:Whether it reaches its $1.5 trillion target or goes beyond it, the super committee should be bold. At the same time, it should avoid flawed policies that will do more harm than good. Federal spending and revenue should be balanced at the level of tax revenues to avoid deficits adding to national debt.
  • Fully Fund National Defense:Providing for America’s national defense is the primary duty of the federal government. The super committee should ensure full funding for America’s armed forces rather than making additional cuts.
  • Transform Entitlements:Social Security, Medicare, and Medicaid are the largest drivers of medium- and long-term deficits and debt. These programs should be structurally reformed to make them financially sustainable while also assuring economic security for the nation’s seniors and younger generations.
  • Do Not Raise Taxes: Tax hikes should be a nonstarter to any deficit reduction plan. They harm the economy and keep government spending high. Merely discussing the prospect of tax hikes makes America’s businesses less willing to take risks, buy new equipment, expand, and hire new employees.

How to Rein in Long-Term Spending

  • Repeal Obamacare: The health care law’s Medicaid expansion and costly new health care entitlement are partially offset by unwise cuts to Medicare provider reimbursement rates and new taxes, but it will nevertheless add to deficit spending. These flawed policies will exacerbate existing concerns in health care entitlement programs.
  • Reform Medicare: Medicare should be transformed from an unsustainable, open-ended, defined-benefit program to a premium-support program that allows retirees to select health plans that best suit their needs in a competitive market. This will spur better care at lower cost.
  • Reform Medicaid:Medicaid should be converted to provide direct support to low-income families to purchase their own private health insurance, and states should be given greater latitude to administer the program to better serve the most vulnerable members of society: the elderly and disabled.
  • Reform Social Security: Social Security benefits should be preserved for today’s seniors, and the program should be transformed to real insurance by moving away from a stream of benefits for every single American to a flat benefit above poverty targeting those who need it the most.

For more information, please visit http://SavingTheDream.org.

By Everette Hatcher III | Posted in spending out of control, Taxes | Also tagged , , , | Comments (0)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 17 Thirsty Thursday, Open letter to Senator Pryor)

October 24, 2011 – 12:29 am

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 17 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor,

Why not pass the Balanced  Budget Amendment? As you know that federal deficit is at all time high (1.6 trillion deficit with revenues of 2.2 trillion and spending at 3.8 trillion).

On my blog www.HaltingArkansasLiberalswithTruth.com I took you at your word and sent you over 100 emails with specific spending cut ideas. However, I did not see any of them in the recent debt deal that Congress adopted. Now I am trying another approach. Every week from now on I will send you an email explaining different reasons why we need the Balanced Budget Amendment. It will appear on my blog on “Thirsty Thursday” because the government is always thirsty for more money to spend.

Hultgren Statement On Opposition To Budget Control Act

Monday August 01, 2011

Washington, D.C. – U.S. Rep. Randy Hultgren (IL-14) released the following statement after voting against the Budget Control Act.

“Tonight, I voted against a flawed bill that doesn’t go far enough,” said Hultgren. “I’ve been clear from the very beginning I would not support any effort to increase our nation’s debt ceiling if the proposal does not hold true to the values of Cut, Cap, and Balance, as well as enact serious structural changes.

“It is my opinion that the proposal approved by the House tonight falls short of what we need to do to put our country back on the right track. By failing to require Congress to approve a Balanced Budget Amendment (BBA) prior to any further increases in the debt ceiling, this bill does not provide the structural changes that I stated were necessary to earn my support.

“When leadership changed the bill on Thursday night to strengthen the BBA provision, that change earned my support; in failing to keep that strong language, I could not, in good conscience, support this bill.”

By Everette Hatcher III | Posted in spending out of control | Also tagged , , | Comments (0)

Cato Institute:Spending is our problem Part 4

October 19, 2011 – 12:55 am

Cato Institute:Spending is our problem Part 4

Should we spend more federal money to help the poor?

Uploaded by on Oct 3, 2011

The so-called War on Poverty has failed. Making government bigger and creating more federal redistribution programs has been bad news for taxpayers. But the welfare state also has been a disaster for the less fortunate, creating a flypaper effect that makes it difficult for people to lead independent and self-reliant lives. This Center for Freedom and Prosperity Foundation video shows how the poverty rate was falling after World War II — but then stagnated once the federal government got involved. www.freedomandprosperity.org

People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

Baseline Projections Are Optimistic

In support of building a large “fiscal buffer,” policymakers should recognize that both short-term and long-term CBO projections are optimistic in various ways. Perhaps the future will include some positive budget surprises, but the big risk factors seem to be on the negative side.

In CBO’s baseline, federal deficits fall substantially over the coming decade, partly due to changes under the recent Budget Control Act. However, spending will be higher than projected if:

  • Policymakers lift caps in the Budget Control Act.
  • Policymakers launch new spending programs or respond to unforeseen crises or wars.
  • Higher interest rates push up interest costs, which is a risk that gets magnified as federal debt grows larger.
  • A major recession causes large cost increases in programs sensitive to economic cycles, such as unemployment insurance.
  • Policymakers respond to another recession with costly new “stimulus” plans. The persistence of Keynesian policy ideas in Washington is an important risk to the outlook for federal debt.

There are likely to be negative shocks in coming years that we don’t foresee. Consider that in its January 2008 budget outlook, CBO projected that U.S. economic growth would slow in 2008 but then rebound fairly strongly in subsequent years.15 CBO discussed the risk of a recession, but didn’t foresee the calamity that was already starting. The upshot is that policymakers should take a conservative approach and build a “fiscal buffer” with large spending cuts now before another recession causes the deficit to soar again.

CBO’s long-range projections — such as the “alternative fiscal scenario” (AFS) shown in Figure 1 — are also optimistic. In its basic projections, CBO does not factor in the negative effects of rising spending, debt, or taxes on GDP after 2021, but it does do that in a separate analysis.16 If spending actually followed the course shown in Figure 1, CBO estimates that GDP in 2035 would be up to 10 percent less than shown in the AFS, and GNP would be up to 18 percent less. In turn, spending-to-GDP and debt-to-GDP ratios would be worse than usually shown in long-range budget charts.

Under the AFS, rising deficit spending could reduce American incomes. The CBO finds that real GNP per capita could stop growing in the late 2020s, and then start falling after that. In a historic reversal, future generations of Americans would become successively poorer.

The way to ensure our continued prosperity is to cut federal spending and reduce debt. In a 2010 analysis, the CBO compared the high-spending AFS with Rep. Paul Ryan’s “Roadmap” plan.17 The Ryan plan would restrain federal spending to roughly current levels for the next few decades, and then start reducing it. By the late 2020s, GNP per capita under the Ryan plan would begin rising above the flat and then falling levels under the AFS. By the late 2050s, GNP per capita would be 70 percent higher under the Ryan plan than under the AFS.18

15 Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2008 to 2018,” January 2008, Chapter 2.
16 See Chapter 2 in Congressional Budget Office, “Long-Term Budget Outlook,” June 2011.
17 Congressional Budget Office, Douglas Elmendorf letter to Paul Ryan, January 27, 2010, http://www.cbo.gov/ftpdocs/108xx/doc10851/01-27-Ryan-Roadmap-Letter.pdf.
18 Congressional Budget Office, Douglas Elmendorf letter to Paul Ryan, January 27, 2010, p. 16.

By Everette Hatcher III | Posted in Cato Institute, spending out of control | Also tagged , , , , , , , | Comments (0)

Cato Institute:Spending is our problem Part 3

October 18, 2011 – 6:47 am

Cato Institute:Spending is our problem Part 3

Uploaded by on Feb 15, 2011

Dan Mitchell, Senior Fellow at the Cato Institute, speaks at Moving Forward on Entitlements: Practical Steps to Reform, NTUF’s entitlement reform event at CPAC, on Feb. 11, 2011.

____________________

People think that we need to raise more revenue but I say we need to cut spending. Take a look at a portion of this article from the Cato Institute:

The Damaging Rise in Federal Spending and Debt

by Chris Edwards

Joint Economic Committee
United States Congress

Joint Economic CommitteeUnited States Congress

Added to cato.org on September 20, 2011

This testimony was delivered on September 20, 2011.

Harmful Effects of Deficit Spending

Federal deficit spending has exploded. Even with the recent passage of the Budget Control Act, the deficit is still expected to be about $1 trillion next year. The damage caused by this spending includes:

1. Transferring resources from higher-valued private activities to lower-valued government activities. With government spending already at 41 percent of GDP, new spending will likely have a negative return, which will reduce output.
2. Creating pressure to increase taxes in the future, which would reduce growth. Higher taxes impose “deadweight losses” on the economy of at least $1 for every $2 of added revenues, as discussed below.
3. Increasing federal debt, which creates economic uncertainty and a higher risk of financial crises, as Europe’s woes illustrate. Research indicates that economic growth tends to fall as debt rises above about 90 percent of GDP, as discussed below.

Economists in the Keynesian tradition dispute the first point. They believe that the demand-side “stimulus” benefits of spending are so important that they outweigh the problems of microeconomic distortions and misallocations caused by federal programs. However, it is very difficult to see any economic boost from the huge deficit spending of recent years.

The total Keynesian stimulus in recent years includes not only the 2009 stimulus package of more than $800 billion, but the total amount of federal deficit spending. We’ve had deficit spending of $459 billion in fiscal 2008, $1.4 trillion in fiscal 2009, $1.3 trillion in fiscal 2010, and $1.3 trillion in fiscal 2011. Despite that huge supposed stimulus, U.S. unemployment remains at high levels and the current recovery has been the slowest since World War II.5

The Obama administration claimed that there are large “multiplier” benefits of federal spending, but the recent spending spree seems to have mainly just suppressed private-sector activities.6 Stanford University’s John Taylor took a detailed look at GDP data over recent years, and he found little evidence of any benefits from the 2009 stimulus bill.7 Any “sugar high” to the economy from spending increases was apparently small and short-lived. Harvard University’s Robert Barro estimates that any small multiplier benefits that the stimulus bill may have had is greatly outweighed by the future damage caused by higher taxes and debt.8

John Taylor recently testified that deficit-spending stimulus actions “have not only been ineffective, they have lowered investment and consumption demand by increasing concerns about the federal debt, another financial crisis, threats of inflation or deflation, higher taxes, or simply more interventions. Most businesses have plenty of cash to invest and create jobs. They’re sitting on it because of these concerns.”9

As federal debt grows larger, the problems caused by fiscal uncertainty will get magnified. The CBO notes that “growing federal debt also would increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget and the government would thereby lose its ability to borrow at affordable rates. Such a crisis would . . . probably have a very significant negative impact on the country.”10

Research by economists Kenneth Rogoff and Carmen Reinhart found that government debt burdens above 90 percent of GDP are associated with lower economic growth.11 After examining data on dozens of countries, they concluded that “high debt is associated with slower growth; a relationship which is robust across advanced and emerging markets.”12 High debt can also be associated with inflation crises, “financial repression,” and other problems. Furthermore, high public and private debt acts as a “contagion amplifier” in the globalized economy.

A new paper by economists at the Bank for International Settlements (BIS) similarly found that when government debt in OECD countries rises above a threshold of about 85 percent of GDP, economic growth is slower.13 As debt rises, borrowers become increasingly sensitive to changes in interest rates and other shocks. “Higher nominal debt raises real volatility, increases financial fragility, and reduces average growth,” the authors note.14

The BIS economists conclude that countries should build a “fiscal buffer” by keeping its debt well below the danger threshold. They note that without major reforms, debt-to-GDP levels will soar in coming decades in most advanced economies due to population aging. Thus, one more reason for the United States to cut its spending and debt is to help it weather future financial crises spilling over from countries that are in even worse shape than we are.

 
5 See Joint Economic Committee, “Uncharted Depths: Welcome to Barack Obama’s ‘Recover Bummer,'” Republican Staff, June 23, 2011. And see the comments of economists Robert Gordon and Robert Hall at http://www.cato-at-liberty.org/biggest-keynesian-stimulus-slowest-recovery.
6 See Robert J. Barro, “Government Spending Is No Free Lunch,” Wall Street Journal, January 22, 2009; John F. Cogan and John B. Taylor, “The Obama Stimulus Impact? Zero,” Wall Street Journal, December 9, 2010; John H. Cochrane, “Fiscal Stimulus, Fiscal Inflation, or Fiscal Fallacies,” University of Chicago Booth School of Business, February 27, 2009.
7 John Taylor, Testimony to the House Committee on Oversight and Government Reform, Subcommittee on Regulatory Affairs, Stimulus Oversight, and Government Spending, February 16, 2011.
8 Robert J. Barro, “The Stimulus Evidence One Year Later,” Wall Street Journal, February 23, 2010.
9 John Taylor, Testimony to the Senate Finance Committee, Subcommittee on Fiscal Responsibility and Economic Growth, September 13, 2011.
10 Congressional Budget Office, “Long-Term Budget Outlook,” June 2011, p. 22.
11 The authors summarize their findings in Carmen Reinhart and Kenneth Rogoff, “A Decade of Debt,” National Bureau of Economic Research, Working Paper 16827, February 2011.
12 Carmen Reinhart and Kenneth Rogoff, “A Decade of Debt,” National Bureau of Economic Research, Working Paper 16827, February 2011, p. 5.
13 Stephen Cecchetti, M.S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Bureau for International Settlements, September 2011.
14 Stephen Cecchetti, M.S. Mohanty, and Fabrizio Zampolli, “The Real Effects of Debt,” Bureau for International Settlements, September 2011, p. 4.

By Everette Hatcher III | Posted in Cato Institute, spending out of control | Also tagged , , , | Comments (0)

Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 49)

September 21, 2011 – 7:32 am

Sixty Six who resisted “Sugar-coated Satan Sandwich” Debt Deal (Part 49)

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.

National Security Cuts a Cause for Concern in Final Debt Deal

Representative Michael Turner of Ohio

 
 

Washington, Aug 2 –

For months, Congress has been debating how to deal with the economic questions surrounding an increase in our debt limit. At a time when foreign nations own nearly $4.5 trillion of our $14.2 trillion debt – proposed cuts in the recently passed deal could have serious implications for our national security.  That’s why I was concerned that national security funding would be subject to an initial $175 billion cut in the final version of the Budget Control Act of 2011 that has been passed by Congress and signed by the President.

Throughout this debate I have advocated for our government to cut current spending and cap it at a responsible level so that we may balance our budget. We must remember though that in Article I, Section 8 of the U.S. Constitution, the founding fathers empowered Congress to: “Provide for the common Defense… To raise and support Armies … (and) To provide and maintain a Navy.” Fulfilling that obligation and meeting our budgetary responsibilities are not mutually exclusive. As a nation we should be able to provide for our defense and balance our budget. One should not come at the expense of the other.

This is a critical moment for both our nation and our armed forces. We have servicemembers deployed overseas in support of a number of military and humanitarian operations including Iraq, Afghanistan and Libya. Those operations over the past 10 years have taken a toll on our forces. Currently, the Army needs $25 billion to reset its force right now, while the Marines need $12 billion. Our men and women in uniform are not only being asked to make further sacrifices with additional deployments, but in some cases they’re relying on equipment which is often older than they are. For example, Navy ships and light attack vehicles, on average, were built 20 years ago. In addition the Air Force is relying on bombers averaging 34 years in age and is refueling aircraft with tankers that are nearly 50 years old. 

An additional point of concern is that further cuts to defense are being used as a bargaining chip in a yet to be named Congressional “super-committee.” Twelve members of Congress from the House and Senate, both Democrats and Republicans, are required to find an additional $1.8 trillion in cuts. If the committee deadlocks on an agreement, or fails to complete its work by November 23rd of this year – then $281 billion in additional defense cuts automatically take effect. These cuts are unspecified and are an arbitrary number chosen to pressure the “super-committee” members into crafting an inadequate deal in fear of these cuts being enacted. I voted against this bill because I could not support a process which circumvents the normal legislative process and gambles with our national security.

Our military remains strong and morale among servicemembers remains high, but we cannot continue to operate with a strained force or we will not be able to meet the obligations of the future. In fact, the Vice-Chiefs of Staff of each of our braches of the military echoed this same sentiment at a hearing before the House Armed Services Subcommittee on Readiness. General Philip Breedlove, Vice Chief of Staff of the Air Force stated that some components of the Air Force “are right at the ragged edge.”  Furthermore, additional proposed cuts of $281 billon in the bill would result in a “fundamental restructure of what it is our nation expects from our Air Force.”

Our national defense has always been a bipartisan issue in the halls of Congress. Members from both sides of the aisle recognize the role our military plays in both protecting this nation, and advancing the goals of our foreign policy. Subjecting this integral piece of our government to cuts, without thorough debate in committee and on the House floor, sets a dangerous precedent.

By Everette Hatcher III | Posted in President Obama, spending out of control | Also tagged , , | Comments (0)

Heritage foundation on debt deal

August 15, 2011 – 2:17 pm

It was a sad day when this dumb debt deal was signed.

Ed Feulner

August 2, 2011 at 9:30 am

My fellow conservatives,

Americans are disappointed. They are disappointed that the debate over our debt limit was about the needs of politicians instead of the needs of the country. They are disappointed with a broken government that refuses to fix itself. And they are disappointed that the Budget Control Act that passed the House last night and is likely to pass the Senate today does not make the transformative changes this nation requires.

There are several elements of this plan that are simply unacceptable, even when framed inside the narrow political confines that limited a better outcome (i.e., the White House and Senate are still controlled by spend-tax-and-borrow liberals).

No AAA Reassurance: This plan is insufficient to protect our nation’s AAA credit rating. On Friday, Moody’s stated that neither the Boehner nor Reid proposals would restore our solid credit footing. This plan did not improve upon those. Economists from Barclays Capital in London said of the deal: “Overall, our first impression is that the agreement by itself is unlikely to be sufficient to cause S&P to remove the U.S. from being on ratings watch for possible downgrade.” Ajay Rajadhyaksha, head of U.S. fixed-income strategy at Barclays, was blunter: “The chances of a downgrade after this deal remain substantially high.”

Irresponsible Defense Cuts: There are two rounds of defense cuts that risk our national security. If all are imposed, we will have a trillion dollars less than we need to protect our nation and defend its interests. Despite increased risks from Iran and North Korea and ongoing wars in Afghanistan, Iraq, and Libya, this deal further cripples a defense budget already sized for peacetime and ignores the real problem—runaway entitlement spending.

More Tax Hikes: Yesterday, White House officials took to the airwaves to assure their liberal base that the new “special” committee would recommend tax hikes. This is one White House assurance you can take to the bank. This deal sets the conditions for a massive tax increase from expiring lower rates and committee horse-trading. Even President Obama agreed in December 2010 that raising taxes to discourage job-creating investments in the middle of a recession was a bad idea. It’s still a bad idea.

An Unclear Balanced Budget Approach: Conservatives are united behind the idea that Congress should balance its budget year-in and year-out, but the devil is in the details. The debt limit deal is a missed opportunity to drive spending down toward a balanced budget. Moreover, the debt limit deal does little to advance the cause of a balanced budget amendment to the Constitution. Not all balanced budget amendments are created equal. We need an amendment with proper taxpayer protections so that Congress can’t simply hike taxes to balance the budget.

Punting Responsibility: The American people don’t send politicians to Washington in order to appoint special committees and duck responsibility. They must make tough choices to reform entitlements. We’ve had enough commissions be ignored. This half-Democrat, half-Republican committee will probably deadlock, too (or worse, push a tax hike), so we’ll get little out of it.

These are just some of the problems identified in the $2.5 trillion debt deal. There are others.

Conservatives put up a good fight for the non-defense spending cuts needed to reduce the size and cost of government. While Senate Democrats sat on their hands for 800-plus days, doing nothing, House conservatives introduced and passed the Ryan budget plan and the Cut, Cap, and Balance Act, each of which was a step in the right direction.

The debt limit deal is a disappointment, but conservatives have made a real difference. We can be proud of the progress we made changing the dialogue in Washington. Just as with the Ryan budget plan, we are talking in terms of spending cuts for a smaller, less costly government, not spending increases. Popular opinion is with the conservative philosophy of limited government.

But this debt increase was the highest in history. This is not surprising, given the record spending increases and deficits we’ve witnessed over the past two years. We cannot maintain this course and keep our creditworthiness or create jobs and economic growth.

Given the framework we are now living under, and the water that has passed under the proverbial bridge, it is now up to conservatives to:

Pursue Entitlement Reform: Social Security is operating in the red and faces a long-term deficit of nearly $8 trillion. Medicare is the most costly, and least efficient, federal program. Obamacare is simply an abomination that must be repealed. Congress must move to make significant reforms to entitlement programs. We can no longer accept weak recommendations and a lack of political courage. There can be no more budget-related debates in Washington that ignore this looming and preventable crisis.

Pursue Revenue-Neutral Tax Reform: The current tax system is too complex and penalizes productive work. Lawmakers see job creators and entrepreneurs as easy targets to soak so that they can spend more. It’s a terrible cycle that is costly to our economy. The committee set up by the debt framework should take up tax “reform” rather than simply tax “hikes.” Creating a simple, flatter system that protects low-income workers, encourages investment, and fuels business growth would be a major step on the road to economic recovery.

Maintain a Strong Military to Defend America: With nearly a trillion dollars in cuts to our military on the table during a period of heightened risk and global operations, it is imperative that Congress ensure that these cuts do not eliminate badly needed resources for our fighting men and women and that they have the best equipment and technology to keep America safe. As Heritage Vice President Kim Holmes stated: “America is different from other countries for a lot of reasons, but surely one of the biggest is that we are masters of our fate. We are fortunate to have an armed force that not only defends us but keeps us from being at the mercy of other countries, many of whom wish us ill.”

Get Serious About Spending and Regulation: Washington has a unique way of taking one step forward and three steps back. We must remain vigilant about preventing new spending and regulations that hinder economic growth, stifle job creation, and grow the federal government.

To drive spending down toward a balanced budget, reduce the share of the economy devoted to public debt, preserve America’s ability to protect the nation, and shift to a job-creating tax system without raising taxes, The Heritage Foundation has published “Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity.” The Heritage plan does what Congress should have done and failed to do. Conservatives: Continue to fight for what is right for America.

Onward!

Edwin J. Feulner
President, The Heritage Foundation

By Everette Hatcher III | Posted in spending out of control | Also tagged , , , | Comments (0)