Tag Archives: heritage foundation

Spending still going up

Great article from Heritage Foundation:

Super Failure: No Spending Cuts, and the Debt Keeps Rising

Emily Goff

November 22, 2011 at 2:15 pm

With the failure of the super committee to recommend at least $1.2 trillion in deficit reduction, Congress’s latest attempt at budget control has collapsed. There will be many analyses of why the process did not work, but it’s worth stepping back to recall what generated the need for this extraordinary procedure and what the exercise actually produced.

From early in the year, it was generally accepted that the divided Congress would be unable to agree on a budget through regular procedures. Republicans chose to use a necessary vote on the debt limit to force the Administration to face the need for spending reductions. After a summer-long debate, rife with hyperbole about a potential government “default,” the Budget Control Act of 2011 (BCA) was born, crafted in a way that at face value expressed the goal of fiscal prudence.

The BCA both imposed a set of discretionary spending caps to limit annually appropriated spending and established the super committee to recommend policies that would reduce the deficit by at least an additional $1.2 trillion through 2021. In return, the BCA included debt limit increases in three tranches: $400 billion, $500 billion, and then $1.2 trillion, as the chart below illustrates.

The debt limit hikes were ostensibly contingent on deficit reduction and a vote on a balanced budget amendment to the Constitution. But in fact, under the language of the BCA legislation, they could be blocked only if Congress passed a joint resolution of disapproval. If passed, such a resolution would be subject to a presidential veto, requiring the usual two-thirds vote of both houses to override. Thus these debt ceiling increases up to $2.1 trillion were all but assured from the beginning. (Article continued below chart)

The first two increases totaling $900 billion have already occurred, and the debt limit now stands at an astounding $15.124 trillion. It is up from the $14.29 trillion limit set in early 2010 and follows a history of frequent and growing debt limit increases, as shown in this Heritage Budget Chart Book chart(Article continued below chart)

The third increase of $1.2 trillion—projected to occur early in 2012 when the debt begins to again encroach upon the limit—would raise the debt limit to an unprecedented $16.324 trillion, or over 100 percent of GDP.

Thus, the debt limit will climb ever higher, accommodating the profligate spending of the President and Congress. As Heritage’s J. D. Foster wrote in January: “The need to raise the debt limit reflects an intention to continue deficit financing” and should signal to Congress that it should urgently reexamine its current policy decisions.

Policies that promote reckless spending—forcing the government to borrow about 40 cents of every dollar it spends, while pushing total debt past 100 percent of gross domestic product (GDP)—are flat-out irresponsible. This upward trajectory makes it crystal clear that the government’s spending priorities have deviated severely from what the Founders laid out in the Constitution.

Equally disappointing, both the existing spending caps and the automatic enforcement in the BCA are less than advertised. The caps contain flaws that may make them all but meaningless. The “sequester” mechanism that would impose spending cuts will not be triggered until January 2013, giving Congress plenty of time to rewrite or abandon it.

As The Heritage Foundation’s David Addington writes, “The overspending problem is still here. Congress must still act to get the federal spending under control, in a thoughtful, intelligent manner that meets the needs of the American people.” It should do this without succumbing to pressure to hike taxes on Americans and further weigh down an already struggling economy. Remember, the problem is Washington’s spending.

Congress should demonstrate that it is serious about tackling the problems of rising spending, debt, and deficits. That means reforms to Medicare, Medicaid, and Social Security; transforming the maddeningly complicated tax system; and reducing the size and scope of government. In Saving the American Dream, The Heritage Foundation offers the kinds of bold solutions needed to put America back on a path toward fiscal sustainability and economic prosperity.

Posted in EntitlementsFeatured

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 18 Thirsty Thursday, Open letter to Senator Pryor)

Dear Senator Pryor, why not pass the Balanced Budget Amendment? (Part 18 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.

Recently I read a great article from the Heritage Foundation on the Balanced Budget Amendment. Here is a portion of that article:

In the immediate term, Congress should address this problem by pursuing a reform path that drives down federal spending and borrowing and gets to a balanced budget. Saving the American Dream is Heritage’s plan to do just that: balancing the federal budget in 10 years and keeping it balanced in the future—without raising taxes or neglecting our national defense. Starting immediately, Congress should take every opportunity to cut and cap federal spending, and that includes addressing the unsustainable costs of America’s entitlement programs.

A part of the long-term agenda to rein in government is an appropriate and sound amendment to the Constitution that would keep federal spending under control in subsequent years. Indeed, the principal reason for adopting a balanced budget constitutional amendment is to limit the size and scope of the federal government by limiting its spending.

Proponents have long advocated this extraordinary step because other methods of controlling spending—by rule or statute—have broken down. What was once considered part of the nation’s “unwritten” constitution—that as a rule the government should not spend beyond its means—has been lost. A constitutional rule, if properly written and enforced, would have more power than any legislative mechanism for maintaining a limit on spending.

As Heritage’s David Addington has previously stated, a BBA should do three core things.

  1. First, it should control spending, taxation, and borrowing by capping annual spending and requiring Congress to act by supermajority votes if Members wish to raise taxes. These requirements are especially necessary under current circumstances—prior to having seriously reduced spending and reformed entitlement programs, the main drivers of the country’s debt.
  2. Second, it should allow Congress by supermajority votes to waive temporarily compliance with the balanced budget requirement when it is essential to national security—the one core function that is the federal government’s exclusive constitutional responsibility.
  3. Third, it should provide for its own enforcement, specifically excluding courts from any enforcement and preventing government from just borrowing more money to meet the BBA requirement.

A BBA without these provisions doesn’t address the underlying spending problem, puts pressure on Congress to increase taxes or issue more debt rather than cut spending or reform entitlements, and invites unelected judges to insert themselves even more in the policymaking process. Which is to say that, rather than simplifying matters, a weak BBA would likely make the situation much worse.

President Obama’s job speech reacted to by Heritage Foundation scholars (Part 6)

President Obama’s job speech reacted to by Heritage Foundation scholars (Part 6)

I love going to the Heritage Foundation website because of articles like this:

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.

– James Sherk

Letter to Senator Mark Pryor concerning debt ceiling debate July 26, 2011

Dear Senator Pryor,

The President asked us to contact those representing us in Washington and that is exactly what I am doing today. Let make a few points.

First, in the past few months I have responded to your request to provide SPECIFIC SPENDING CUT SUGGESTIONS to your office. I have done so over 100 times and I have also posted them one at a time on my blog www.HaltingArkansasLiberalswithTruth.com .

Second, I have also written many posts concerning your political views and many of these articles have got lots of hits on my blog. In fact, when I started in December of 2010 I was only getting a handful of hits every week, but now I have got over 60,000 hits in the first 7 months on my website and I have you to thank for a lot of those hits.

Third, Arkansas is turning conservative and I wonder if you will change with Arkansas. Just recently you went across the state saying that the Republicans wanted to push granny off the cliff. Does that sound like you are open to making changes to make sure that Medicare survives?

Fourth, you wanted me to give you specific suggestions to cut federal spending. I have an easy one for you: Eliminate the Dept of Education!! That would save over 100 billion right there!!!

Fifth, if you want to raise taxes on the job creators during this time then you will be guilty of  destroying the recovery. You have already been guilty of slowly down the recovery with the silly stimulus bill. Every prediction that President Obama made about the stimulus have proven to be incorrect!!! Everyone of them!!!

I have done my duty that my President asked me to do by contacting you. Below you will find a letter that says perfectly what I think about this current debt ceiling crisis. Recently I got to hear Ernest Istook the president of the Heritage Foundation speak in Little Rock. He did a great job.

Below is an excerpt from a letter that went out today from the Heritage Foundation:

Our nation is in the midst of a fiscal crisis, but it is one that has nothing to do with an August 2 “deadline” for a deal or President Obama and Secretary Geithner’s fear mongering over recent days and weeks. The crisis is one of over $62 trillion in unfunded obligations that are the loudest warning bell possible of the systemic problems plaguing our nation. Washington should not ignore or postpone dealing with this problem once again.

Twice already this year, the House of Representatives has voted for plans that would address our fiscal crisis and save our nation from a creditworthiness downgrade. In April, the House passed a bold budget, which would place our nation on a different, more sustainable and prosperous course. Last week, the House passed the Cut, Cap and Balance Act, which would force future Congresses to live within their means and rapidly bring down our nation’s debt-to-GDP ratio. Unfortunately, both of these responsible proposals were defeated by an ideological Senate, which has offered few ideas of its own.

Clearly, the most blame belongs to the President and the Senate – a President who comes up with no useful fiscal plan of his own and a Senate that refuses to pass meaningful legislation to save the American dream from a fiscal tsunami. We cannot, however, continue business as usual by raising the debt limit without substantively addressing our nation’s fiscal challenges. The entire purpose of the debt limit is to put an end to borrowing when it reaches a point that our nation finds unacceptable. There is no point in having a debt limit if the option of using it to address overspending and overborrowing is so intimidating that it is unilaterally taken off the table.


Speaker Boehner’s most recent proposal to raise the debt limit is regrettably insufficient to our times. Step one of the Speaker’s proposal would cut $1.2 trillion in discretionary spending. Assuming all of these cuts materialized, this would reduce our nation’s projected debt at the end of the decade from $24.9 trillion to $23.7 trillion. Step two would create a special committee, which has three major problems: (1) The “deficit reduction” of $1.8 trillion remains insufficient for our times; (2) “Deficit reduction” is a well-known codeword for “tax increases”; and (3) 17 blue-ribbon panels, commissions and the like since 1982 have gotten our nation into the mess we are in and there is no obvious reason as to why the 18th will get us out. Further, this proposal would outline a fast track proposal that unduly limits the rights of the congressional minority.

All in all, under a best case scenario where all of the cuts envisioned in the Boehner plan come to fruition, they would only reduce our nation’s projected debt-to-GDP ratio from 104% to 92% – a ratio far higher than its current 62 percent, which Moody’s has already said must come down to maintain our nation’s stable outlook.

Harry Reid’s proposal to raise the debt ceiling is equally unacceptable. It appears to be the latest in a line of proposals that began with the McConnell Proposal, morphed into the McConnell-Reid Proposal, further deteriorated into the Gang of Six Proposal, and has now resurfaced as the Reid Proposal. Each of these insufficiently bold ideas would lead to an increase in the debt limit in exchange for few, if any, actual cuts off existing spending levels. In normal times we might take these as one step toward a path of fiscal sanity.  But we do not have the luxury of taking that kind of small first step at this juncture.  The rating agencies are poised to downgrade us within months if we don’t pass something like the House of Representatives’ first two attempts . . .  The last thing our country needs is a clean debt limit increase with some fancy window dressing to try to fool the American people.

All in all, Heritage Action remains where we were at the start of the summer: absolutely convinced our nation is in fiscal crisis and certain that bold political leadership is necessary to save the American dream. Congress should drive down federal spending on the way to a balanced budget, while protecting America, and without raising taxes. Unfortunately, that does not appear to be what we will get from Washington, which has irresponsibly turned its back on the only real plans out there: The House Budget and the Cut, Cap and Balance Act. As such, Washington should be forced to live under the current debt limit until it’s ready to make tough choices – choices that it should make, and has time to make, this week.


Michael A. Needham
Chief Executive Officer


Thank you for your time. I know that you are very busy.

From Everette Hatcher

Alexander, AR 72002

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