Google+

Tags: Deficit

Scalise: No Government Shutdown



Text  



The federal government will not run out of money until October 1, but new House majority whip Steve Scalise (R., La.) has already announced Republicans’ intention to surrender to President Obama and the Democrats on the issue of rising debt and continuous deficit spending.

Scalise, described by host Chris Wallace as a “tea-party favorite,” announced on Fox News Sunday that the GOP will not play spending hardball this fall, instead boasting that House Republicans have actually been more eager than the Democratic-controlled Senate to pass spending bills.

“The government runs out of money on October 1,” Wallace asked Scalise. “Will you support a continuing resolution to keep the government going at current levels; or are you willing, in an effort to cut spending, to risk another government shutdown?”

“We’re going to keep the government running at current levels,” Scalise responded. “In fact, we’ve passed a majority of the spending bills out of the House already. Not one of them’s been taken up by the Senate. But look, shouldn’t the Senate at least be able to agree a bill to fund our troops? That’s a bill that got over a hundred Democratic votes when it passed out of the House.”

“But no government shutdown?” Wallace asked.

“No.”

The federal government experienced a partial shutdown of non-essential services in October 2013, which had no negative impact on the well-being of the vast majority of Americans and did not even hurt the finances of federal employees, who were all paid in full for the time they were (officially) not working. Nevertheless, the shutdown was given non-stop media coverage, which frightened conservatives. Republicans remain extremely sensitive to the mainstream media’s narrative that previous shutdowns and “fiscal cliff”–style showdowns severely damaged the GOP’s election prospects, though there is virtually no evidence that previous shutdowns damaged the economy and there seems to have been no polling in the last nine months to indicate whether voters even remember the 2013 shutdown, let alone consider it a front-burner issue.

Although the vocabulary of budgeting includes terms such as “continuing” and “current levels,” federal budgets are based on baseline budgeting, which assumes regular increases in spending and treats any reduction to the rate at which spending increases as a “cut.”

Tags: Deficit , Debt Ceiling , National Debt , Debt , Government Shutdown , Sunday Shows July 27 2014

Why the Debt Won’t — and Shouldn’t! — Go Away as a Campaign Issue



Text  



A few posts below, you’ll see that Republican representative Steve Daines of Montana, running for Senate, pledges he’s “fighting for more jobs and less government,” and he touts his bill that says if members of Congress can’t balance the budget, they won’t get paid.

On the trail in the coming year, incumbent Democrats will probably brag, “we’ve cut the deficit in half!” hoping that enough people mix up the terms “deficit” and “debt” in their heads. Deficit measures how much more we spend than we take in each year; debt represents everything the U.S. government owes, and that sum goes up, year in, year out. We had a surplus during the late-1990s dot-com boom, eliminating the deficit, but the debt still increased a bit each year, because the excess funds were “invested in interest-bearing securities backed by the full faith and credit of the United States” as required by law. (More on this here.)

The new numbers:

The Congressional Budget Office (CBO) projects the 2014 ”baseline” federal budget deficit will be $514 billion, $166 billion lower than in 2013 ($680 billion). If the 2014 deficit projection is achieved, it would mark the fifth straight year of deficit declines since the deficit reached $1.4 trillion in 2009.

Democrats will hope that reducing the federal government’s annual deficit from the worst-ever to sixth-worst-ever counts as a major achievement in the electorate’s mind.

If Republicans want to remind the electorate of the consequences of ever-increasing debt on the here and now, perhaps they can emphasize the amount of money the federal government pays in interest on that debt:

In fiscal 2013, which ended Sept. 30, net interest payments on the debt totaled $222.75 billion, or 6.23% of all federal outlays. (The government paid out an estimated $420.6 billion in interest, but that included interest credited to Social Security and other government trust funds, as well as a relatively small amount of offsetting investment income.)

That’s $223 billion that could have been spent on anything else the federal government does: schools, fighter jets, veterans’ benefits, border security, Interstate highway repair, medical research. Or it could have been returned to taxpayers! For perspective, $223 billion represented the total sum of all individual contributions to charity in the United States in 2012. You could build 17 new aircraft carriers with that sum. Every penny the U.S. pays in interest on the debt is a penny not spent on actual, tangible stuff that even the lowest of low-information voters appreciates.

The amount the federal government will spend on interest on the debt will look much worse if interest rates go up. Here’s what the CBO projected on that front:

We pay for our borrowing, which is why we have to spend less.

Tags: Debt , Deficit , Steve Daines , Congressional Republicans , Congressional Democrats

How Democrats Need You to Misunderstand ‘Deficit’ and ‘Debt’



Text  



Apparently the Democrats’ new dodge on the runaway national debt is to claim that the deficit is going down.

This argument relies on the public not knowing the difference between the deficit and the debt.

The deficit is a one-year figure– how much money we spent in the past year, after we had spent every last cent that came in through taxes, fees, fines, and other payments to the government. Last year it was $1.1 trillion; this year we’re supposed to be breaking out the party hats because it might be “only” $900 billion or so.

The debt is the total amount we owe, based on all of the annual deficits adding up, year after year. That figure is $16.7 trillion – $16,708,225,460,175.14, if you want the precise figure.

Looking at the inflation-adjusted numbers for our annual deficit, year by year . . . $500 billion used to be considered a really big annual deficit. We hit that in 2004; unadjusted for inflation, it came in at $413 billion. Back in 1991, the year’s deficit came in at $453 billion. So a half a trillion was the pre-Obama all-time high.

Now look at the Obama era:

2009: $1.5 trillion

2010: $1.36 trillion

2011: $1.32 trillion

2012: $1.1 trillion

In other words, the best Obama has done is twice as bad as it’s ever been.

Sure, some of this is because tax payments are down as the Great Recession stretches on and on… but a lot of it is because the federal government went on a spending spree starting with TARP and the stimulus, a spree that has only slowed slightly.

But Sen. Dick Durbin and other Democrats will continue to cry, “The deficit is going down, all is well! All is well!”

Tags: Debt , Deficit , Democrats

Romney, RNC Kick Off Debt & Deficit Week



Text  



As mentioned below, this is “Debt and Deficit Week” for the Romney campaign. It’s the rhetorical equivalent of fish in a barrel.

This morning, the Republican National Committee takes batting practice on President Obama’s big promises, bigger disappointments, and biggest deficits.

It is a bit maddening how the debt comes and goes as a resonant issue… but it just grows, bigger and bigger.

As of May 10, the debt is $15.67 trillion. The day President Obama took office, it was $10.62 trillion. So Obama has now run up roughly $5.05 trillion in debt in less than four years. For comparison, the national debt increased $4.9 trillion during the eight-year presidency of George W. Bush.

Remember, on the campaign trail, Obama said that adding $4 trillion in debt over Bush’s eight years was “irresponsible” and “unpatriotic.”

And of course, while discussing his budget plan in 2008, Obama “I am cutting more than I am spending.”

 

But perhaps the best illustration of spending under Ronald Reagan, George H.W. Bush, Bill Clinton, George W. Bush, and Barack Obama comes from PoliticalMath.com:

Tags: Barack Obama , Debt , Deficit , RNC

Back-of-the-Envelope Balanced Budget



Text  



In one of the most awkward and vapid performances I can remember his having given, Pres. Barack Obama yesterday made it clear that he has learned absolutely nothing from the debt-ceiling debate — that he may be incapable of learning. He continued to talk nonsense about government “investing” in this, that, and the other, and said that was how the nation creates jobs. It was a self-discrediting performance.

He also promised to raise taxes. For Obama, taxes plainly are not in the main a fiscal issue, but an emotional one. He remains fixated on general-aviation consumers and energy companies, and he promises to stick it to them. (Economic reality: Oil is scarce, speeches are plentiful.)

“You can’t close the deficit with just spending cuts,” he declared. And he’s almost right about that. John Boehner can’t close the deficit with just spending cuts. Paul Ryan can’t do it. Senate Republicans can’t do it. President Obama can. That is because Barack Obama is at present the most important reason why you can’t close the deficit with just spending cuts.

The Congressional Budget Office estimates that the 2012 deficit will amount to 7 percent of GDP, or about $1.1 trillion. At 16.6 percent of GDP, federal tax revenue is 1.3 percentage points off its historical average of 17.9 percent of GDP; spending, at 23.6 percent of GDP, is significantly farther off the trendline, 2.9 percentage points more than its historical average of 20.7 percent of GDP. Spending, not revenue, is the real outlier.

What would a cuts-only balanced budget look like? There are lots of options. Eliminating Social Security would almost get you there by itself. Eliminating Social Security and Medicare would put you well into the black. But that isn’t going to happen. Neither is what I’m going to propose, but here’s my back-of-the-envelope balanced budget, with no tax increases:

1.      Social Security: Yeah, they’ll say you’re throwing Granny off the cliff. But it’s her or the grandkids. So implement aggressive means-testing and other reforms to cut 20 percent of spending for $150 billion in savings.

2.      Medicare: Ditto, for $100 billion in savings.

3.      Keep on going and reduce Medicaid and other health-care services spending by 10 percent: $33 billion.

4.      National defense: Republicans will howl, but there’s room for a 10 percent cut to all national-defense spending, including non-DoD activities such as DoE’s work maintaining our nuclear arsenal. That nets $74 billion in savings. Surely we can slaughter hapless desert barbarians more cheaply.

5.      “Other income security.” That’s the welfare state bits and pieces not included in Medicare, Medicaid, Social Security, food stamps, etc. Welfare of the checks-from-Uncle variety. Eliminating it entirely saves $159 billion. 

6.      Welfare for bureaucrats: Making federal-employee retirement and disability systems totally self-funding saves $123 billion.

7.      Eliminate federal education spending entirely: elementary, secondary, and higher-ed. Leaving it to the states and to the market saves us $106 billion. Harvard will figure something out.

8.      Eliminate “community and regional-development” spending, a.k.a. boondoogles and slush funds, except for disaster relief: $15 billion.

9.      Get farmers off welfare: $19 billion. Suck it up, Elmer.

10.  Foreign aid, international development, international-security assistance, etc. Quit meddling abroad and propping up Third World potentates, and save $44 billion.

11.  Cut all the “energy” spending on “energy information,” “energy emergency preparedness,” etc. — all the energy spending that doesn’t actually produce any energy. And throw federal energy-conservation spending on the fire, too. Cutting the bureaucratic answer to Jimmy Carter’s sweater saves $12 billion.

12.  “Advancing commerce” doesn’t. We’re looking at you, SBA et al.: $23 billion.

13.  Federal law enforcement: Cut spending by 10 percent. Legalizing it saves us $3 billion.

14.  Space flight: We aren’t flying in space anymore. Staying grounded saves $17 billion.

15.  Downsize Smokey the Bear: Cutting land-management, recreation, natural resources, etc., by half saves $21 billion.

16.  Quit subsidizing suburban sprawl: Cutting transportation spending by 10 percent saves $10 billion.

17.  Save $36 billion by cutting health research and training. Let Pfizer do it.

18.  The real-estate market isn’t going to make a comeback. So eliminate federal housing assistance and save $60 billion.

19.  Cut food stamps by 10 percent, save $11 billion.

20.  I know, I promised no tax increases, so that’s a 19-point plan to balance the budget: Just over $1 trillion in savings. No. 20 is a bonus tax hike: Eliminate the stupid and destructive mortgage-interest deduction and have the national debt paid off by the time the kids being born this year graduate from college.

Don’t like my version? Get your 2012 estimates from OMB here and tell me how you’d balance the budget.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Balanced Budget , Debt , Deficit , Fiscal Armageddon

Two Ways to Approach a Deficit



Text  



Detroit, the standard specimen of urban dysfunction, has, you will not be terribly surprised to learn, a serious municipal deficit. The numbers and trends will be familiar to anybody who has monitored the evolution of that fascinating modern parasite, the government employee: Having destroyed the city’s economic base and rendered most of the city proper unlivably dangerous, the political powers of Detroit have maintained a consistently large government work force, which subsequently has grown entirely out of proportion to its declining population. Detroit today employs one city worker for every 55 residents, as opposed to one city worker for every 109 residents in Charlotte, which is just barely bigger than Detroit (the Motor City has indeed declined so much) and one city worker for every 101 residents in El Paso, which is one spot down from Detroit on the population rankings. And on its Spartan city budget, El Paso maintains the nation’s second-lowest crime rate among large cities (behind Honolulu), despite its being conjoined to besieged Juarez, Mexico, one of the world’s most dangerous cities. Detroit was found to be America’s most dangerous city in a 2009 Forbes study.

Detroit maintains 13,000 government workers but has 22,000 government retirees burrowed into the body politic, and their health-care subsidies alone account for nearly $200 million of the city’s budget. Pensions alone already account for a quarter of city spending; in three years, they will account for half. Pensions and city workers’ health-care subsidies account for $561 per year from every resident of Detroit, which has a very poor population — average monthly income of barely $1,200 before taxes, a fifth of the population in poverty, etc. The official unemployment rate is 30 percent; the real rate is much higher.

One would think that a city in that condition would engage in some austerity measures, if only small and largely symbolic ones. But then one would fail to appreciate the sort of willful malevolence that put Detroit into its current condition. Rather than cut corners, the city recently finished a multimillion-dollar renovation of a single library branch, installing designer chairs from Allermuir at $1,000 a copy. That’s a lot of library for a city in which about half of the adult population was estimated to be functionally illiterate in a 1998 National Institute for Literacy study. (I was not able to find a more recent estimate, but I cannot imagine that the numbers have much improved, especially since Detroit mayor Dave Bing is pressing to include Detroit natives currently resident in out-of-town abodes of the sort with armed guards and doors that don’t unlock from the inside as part of the city’s population. (That is not purely a matter of civic pride; with its population fallen below 750,000, Detroit is not legally entitled to collect a city income tax.)

Having exhausted all its other options, Detroit’s nominal city government finally is turning to the root of its fiscal problem, and is asking for concessions from the labor unions, which are the city’s real government. The main targets are pensions and health-care costs, along with sheer  work force size. The unions are not inclined to budge. The city council is poised to make things worse by reducing its payments to the city’s pension fund, which will not save money — the pension payments still will be made – but will simply hasten the day on which those pensions will either be rendered insolvent or will require even more direct taxpayer support, i.e., it’s fiscal nonsense on stilts.

Dartmouth College faced a big deficit this year, too, its endowment having been double-decimated (it declined by one-fifth) as a result of the market turbulence of 2009 and after. Dartmouth enjoys many benefits not available to the city of Detroit: Its governance is democratic in only the very loosest sense, and its left-wing maniacs are of the variety who mostly know how to count money. But it also has disadvantages: It cannot levy taxes, for instance, nor issue tax-free bonds on the muni market.

This is how Dartmouth closed its deficit: It fired about 40 employees outright and bought out more than 100 more. It eliminated 82 more positions through attrition, cut raises, and reduced health-care benefits. Dartmouth does not have the ability to levy taxes, but it did raise the cost of attendance (by replacing some grants with loans). The faculty howled and no doubt will continue howling. But Dartmouth acted more or less as if the school believed that its main obligation is to the students, present and future, that it will educate, and not to its employees, whose professional duty is to serve that obligation. Detroit, on the other hand, like most cities (and states and other government groupings) proceeds as though its main obligation is to its employees; in Detroit, that probably is the politically intelligent thing to do, since the citizens are fleeing as fast as they can, while the bureaucrats are staying put.

If there is a lesson to be had from these examples, which admittedly are very different, it is this: Matters of essential fiscal prudence should be isolated from democratic pressures to the extent that it is possible to do so. The main reason that our states run balanced budgets (other than their ability to mask their deficits) is that they are not legally able to do otherwise. While I remain skeptical of the model of problem-solving that says, in essence, “Pass a constitutional amendment saying the problem is solved,” I am increasingly sympathetic to the case for a balanced-budget amendment, and for attaching one to the debt-ceiling bill. True, it would take years for such a thing to become law, if ever it did. But it would be worth the wait.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Fiscal Armageddon , Municipal Bonds

Raising the Debt Ceiling



Text  



I have some tongue-in-cheek thoughts about the debt ceiling over on The Corner. But here’s a serious one: The statutory debt ceiling is not the only debt ceiling. There’s a real debt ceiling, too. Who wants to find out where it is?

(If you are interested in Jim Rogers, you can read my interview with him, “Jim Shrugged,” here.)

Tags: Debt , Deficit , Despair , Fiscal Armageddon

About Those Medicare Savings



Text  



Our current unfunded entitlement liabilities run about $100 trillion.

President Obama proposes to “strengthen” Medicare through a price-fixing panel called the Independent Payments Advisory Board (IPAB).

CBO took a look at IPAB and estimated that it might save us $28 billion over the next ten years, i.e., next to nothing.

And then it took another look and lowered its estimate from next to nothing to nothing:

For 2015 and subsequent years, the IPAB is obligated to make changes to the Medicare program that will reduce spending if the rate of growth in spending per beneficiary is projected to exceed a target rate of growth linked to the consumer price index and per capita changes in nominal gross domestic product. CBO’s projections of the rates of growth in spending per beneficiary in the March 2011 baseline are below the target rates of growth for fiscal years 2015 through 2021. As a result, CBO projects that, under current law, the IPAB mechanism will not affect Medicare spending during the 2011-2021 period.

You have to admire the president: To go out and give a morally preening speech like that, with IPAB front and center, on the assumption that nobody’s reading the footnotes.

Tags: Debt , Deficit , Despair , Fiscal Armageddon

Non-Buyers’ Remorse



Text  



As predicted, the recent budget deal and the Ryan plan have the Democrats wishing in the direst way they’d hopped on Simpson-Bowles. But among Democrats, Simpson-Bowles was dead on arrival: There simply is no plan that credibly controls spending that Democrats are inclined to accept. Now that Republicans have proposed something well beyond the Simpson-Bowles framework, Democrats are ready to celebrate a plan that they dismissed out of hand — “simply unacceptable,” the lady called it.

Ryan and the Republicans will accept the strongest deficit deal they can get; Obama and the Democrats will accept the strongest deficit deal they are forced to: That’s the basic dynamic that shapes this debate between now and November 2012. They have no credible budget plan — they didn’t even pass a budget last time around. Welcome to the Party of No, Mr. President; Mrs. Pelosi will show you the secret handshake.

The Democrats want 2012 to be about anything other than deficit-reduction. Expect an onslaught on the social-issues front, from abortion subsidies to gay marriage. Conservatives should not let them change the subject.

Tags: Debt , Deficit , Despair , Faint Glimmers of Hope

Yes, Entitlement Spending Must Be Cut



Text  



A question for the young ones: Perhaps you’d like an 88 percent tax increase? Perhaps not. If not, then the United States government must spend less on the major entitlement programs — Social Security, Medicare, and Medicaid. And that has to happen approximately now.

Rep. Paul Ryan’s budget addresses Medicare and Medicaid spending, and the Democratic whining about that fact already is under way. Representative Ryan’s budget would cut some $4 trillion off the deficit in ten years. And we cannot get spending under control without reforming the entitlements — they are the main drivers of spending. Axing NPR and foreign aid is not going to balance the books.

The Democrats’ plan will be to make Paul Ryan the most hated man in America, if not the world. The campaign will be — and already is — personal. It will be personal because the facts are not on their side. Our choices are: 1. raise taxes severely, and pretend that that is not going to have catastrophic economic consequences; 2. court a national fiscal crisis on the Portugal model but on a significantly larger scale, and pretend that that is not going to have catastrophic economic consequences; 3. cut spending.

If I were a Republican strategist, I’d be preparing to make sure that the number 88 is on the tip of every tongue. Ryan’s entitlement reforms are intelligent and they are reasonable — an 88 percent tax hike is neither. And that’s the choice.

Tags: Debt , Deficit , Despair , Fiscal Armageddon

Ben Bernanke and the Second Deficit



Text  



Arguing that the Fed should embrace a more aggressive growth agenda, David Leonhardt writes in the New York Times:  

By any standard, joblessness is a bigger problem than inflation.  

Never mind those pesky Austrian-econ types and their argument that many of our economic problems are caused by artificially low interest rates (cheap money = boom built on sand = bust). That “by any standard” stuck in my head.  

As Rush Limbaugh says when he sees something interesting in the New York Times: I wonder if that’s true?  

Because inflation acts slowly and because its costs are dispersed, most people do not much notice it when the rate is very low. But inflation is a pernicious tax on savings and investment. How much does it cost us?  

Since inflation reduces both the value of savings and the value of debts (since you get to pay off your debts in devalued dollars, which seems to be the main attraction of inflation for Uncle Sam), you don’t consider inflation against present income, but against net worth. In 2010, , the net worth of the United States was about $70 trillion. That’s household wealth, savings, investments, non-farm non-financial businesses, tangible assets like real estate, etc., minus household debts, business debt, etc. A very low rate of inflation — say a measly 2 percent — therefore costs a big fat $1.4 trillion a year, i.e., it’s a second deficit. (I know that this is an imperfect measure for lots of reasons, but it gives a good idea of the scale  of the thing.)  

So, about that $1.4 trillion: Is that a smaller problem than unemployment “by any standard”?   In the most recent BLS report, Joe Government put the number of unemployed Americans at about 13.7 million.   Meaning that the cost of 2 percent inflation every year is, give or take a little, about equal to what we’d spend writing a check for $102,189.78 to every unemployed American. That’s a bunch of jack.  

I’m a poet, not an economist, but I find it hard to buy the argument that we must — must — devalue all of our savings every year (which is what inflation does) in the name of monetary stability. I think a trillion bucks is too much to pay for monetary stability, especially when it doesn’t offer all that much, you know, monetary stability.

Of course there are trade-offs from inflation: but practically all of the costs fall on savers and investors, and all of the benefits accrue to debtors and spenders. I do not much like those incentives.

Two percent inflation costs $1.4 trillion a year: Don’t forget the second deficit.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Anemic Fiat Dollars , Debt , Deficit , Despair , English-Major Math , Inflation

What 2 Percent in Cuts Looks Like



Text  



“An outrage!”

So says the guy who was once elected as a Republican about the very reasonable budget proposed by the Democrat. Strange times.

“Proportionally, the cuts that are inflicted on New York City are an outrage,” [NYC mayor Michael] Bloomberg said a day after Gov. Andrew Cuomo announced a tentative $132.5 billion state budget deal that is expected to restore more than $136 million of threatened education money to the metropolis.

Governor Cuomo has turned out to be a pleasant surprise so far. (Don’t worry — I’m sure he’ll get worse!) The budget is getting balanced with no new taxes or borrowing. Not too shabby, especially for New York. Other governors should be tipping their hats — he isn’t doing this in Montana.

Perhaps Cuomo has noticed that Texas is now home to more Fortune 500 headquarters than New York is, and has decided that it would be a lot easier to balance future budgets with a healthier tax base, one with higher levels of employment and better wages. Perhaps the mayor should take a subway ride up to the Bronx, where the nominal unemployment rate is 12.5 percent (and the real unemployment rate God alone knows how much higher) and ask himself if weighing the city and state down with more taxes and more debt is really the best way to turn things around.

Either way: Can we call this the official end of Bloomberg for President? The great manager is looking overwhelmed.

But three cheers for Andrew Cuomo. For now.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Fiscal Armageddon , Taxes

Our Tax Code Is Corrupt



Text  



What General Electric has in common with the guy who runs Obama’s IRS: not paying taxes. That New York Times report on G.E.’s remarkable ability to avoid paying U.S. taxes has been getting a lot of attention today, but there was one paragraph that reminded me of why I’m a flat-tax guy:

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

As government extends its reach over every aspect of the economy, this sort of corporatism will only become more deeply entrenched in fields like health care and energy. What G.E. has done with taxes, the insurance giants will do (and have done) with Obamacare. Everything looks  like ethanol.

But I’ll take a little bit of issue with Ezra Klein’s response:

So patriotic! It really explains why President Obama tapped Jeffrey Immelt, GE’s CEO, to lead the President’s Council on Jobs and Competitiveness. If this isn’t the sort of corporate behavior America needs more of, what is?

I’m sort of creeped out by this particular usage of the word “patriotic,” as though the alternative to the profit-maximizing corporation were the Great People’s Patriotic General Electric Corporation. (I also intensely dislike the proposition that paying taxes is an expression of patriotism, as though the state were the nation.) But I’ll say this: Yes, this is exactly the sort of corporate behavior America needs more of, inasmuch as our corporate-tax regime is kind of dumb, and also kind of corrupt, and one way of cleaning that up is to abolish it.

In spite of our having the second-highest nominal corporate-income tax rate in the developed world (Hello, Japan!), the rates actually paid by businesses vary wildly according to their political clout. Progressives look at that and see the evidence of businesses’ having undue influence on Washington; I look at that and see evidence of Washington’s undue influence on business. But it’s a two-way street, and the end product smells the same.

There are many arguments for a flat tax: Compliance costs are lower, it’s easier to understand, it doesn’t create a divide-and-conquer dynamic with regard to the tax brackets, it aligns taxpayers’ incentives, etc. But there’s a practical moral argument, too: The tax code is corrupt. Using the tax code as a cookie jar full of special favors for friends and supporters is corrupt. It does not matter that it’s legal, it is immoral. The purpose of taxes is to raise revenue for the government, not to repay political favors or to bribe voters with their own money. I do not think our tax system probably is really salvageable: Obamacare is not the only thing that should be repealed and replaced.

While everybody else was filling out their college-basketball brackets, I was working on my fantasy federal budget (I know, I know, I’m a lot of fun on dates), which is not yet complete, but which I will share when it is. (I’m planning a fantasy-budget reader contest.) My revenue side assumed a true flat tax on all forms of personal income — salaries, benefits, bonuses, dividends, inheritances, capital gains, etc. — and, once I’d trimmed the federal government back as small as I think we could realistically get it, figured that I could fund it with a flat rate of about 20 percent, and no corporate income tax. (I think this might be good for investment.)

The upside of the fiscal crisis that our country insists on marching toward is that it will give us the opportunity to enact radical reform of some of our most important institutions, and the tax code should be high on the list. A federal/state/local system that produces a $3.2 billion tax benefit for G.E. but taxes the pants off of poor people to fund useless schools that do their children very little good (and a great measure of harm, in many cases) is an unbearable burden. It has to go.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Barack Obama , Debt , Deficit , Despair , General Shenanigans , Tim Geithner

You Can’t Reframe $14.3 Trillion



Text  



Let me introduce you to the Worrell Professor of Anglo-American Studies (really!) at Wake Forest University, Prof. David Coates, the even dimmer Democrat’s George Lakoff. Professor Coates, writing in the Huffington Post, is interested in (can you guess?) “Reframing the Deficit Debate,” as his headline puts it. “Reframing” means “engaging in rhetorical obfuscation,” or hoodwinking the proles, which is fun to do but doesn’t make the numbers come out any different.

Yeah, I know, all this panicky deficit talk is just part of the Vast Right-Wing Conspiracy — the one apparently headed by former Clinton chief of staff and Obama deficit-panel appointee and dyed-in-the-wool Democrat Erskine Bowles, who co-authored a warning that the country is headed for “the most predictable economic crisis in its history.” Predictable by whom? Not by Prof. David Coates of Wake Forest U.

(Okay, before I go on: “Professor of Anglo-American Studies”? What in hell is that? I picture a guy spending long, fruitless, frustrated grad-school afternoons poring over ancient Brooks Bros. inventory lists and real-estate listings in Greenwich, Conn.)

The guy’s a professor, but he writes like an undergraduate circa 1993, one who has just discovered the words “dominant discourse”: “The dominant discourse in national American politics these days is a discourse on deficits.” The phrase “dominant discourse” reappears, and it is Professor Coates’s goal to correct it. He proposes to do this by repeating things that are at best half true and at worse less than half true. Item No. 1 on his rhetorical agenda is declaring: “We are not broke.” You’ve heard that one a lot lately, no? It’s like there was a memo or something.

Here’s Coates: “We are not broke. We are certainly not broke in the sense of facing any immediate problem of financing public debt. On the contrary, the federal government is currently able to borrow at a historically low rate of interest — lower indeed now than immediately before the 2007–8 financial melt-down.” He does not write, though I assume he knows, that one very large factor influencing those currently low interest rates is that the federal government is not selling a lot of bonds to the real bond market. The Fed, under the “quantitative easing” program, is buying most of what Uncle Sam is selling, and it is simply printing the money to do so. As readers of this column know, players in the real bond market already are saying that they will not finance U.S. borrowing until interest rates go up. Which means that we probably will face an “immediate problem of financing public debt” at the current artificially low rates once the government has to actually, you know, sell all those bonds to willing investors. But if you define “Not Broke” as “Ben Bernanke can still exnihilate money into existence, can’t he?” then, true, we’re not broke, and never will be. And neither will Zimbabwe.

Coates “reframing” ploy No. 2:  Cutting spending won’t really reduce the deficit. Here’s our man: “Cutting programs is not the best way to cut the deficit. . . . At least 75 percent of the current shortfall in government revenues is a product of the recession. Another 11 percent is a product of decisions taken, by this administration and its predecessor, to wage a series of Middle Eastern wars. The best way to cut the deficit is to end those wars and to retrigger sustained economic growth, not least by greater public expenditure on infrastructure and human capital.” But we were running a deficit before the recession, and the recession does not explain the generally negative fiscal outlook that preceded it. Neither do tax cuts for “the rich.” As the CBO puts it: “The sharp rise in debt stems partly from lower tax revenues and higher federal spending related to the recent severe recession and turmoil in financial markets. However, the growing debt also reflects an imbalance between spending and revenues that predated those economic developments.” Spending on what? At the height of the Iraq War, the federal government was spending more on education than it was on the war. (And state and local governments spent far more on education than Washington did.) The Iraq War, CBO reports, cost $709 billion; the Obama stimulus will cost more than that ($814 billion) by the time it has run its course, CBO finds. (An excellent exploration of all this and more is here.) Coates complains about the Bush tax cuts and says we need tax increases on “the rich” to balance things out; in reality, Bush’s tax cuts for the middle class ($2.2 trillion) cost far more in forgone revenue than the cuts for “the rich,” which can be measured in measly billions, rather than trillions.

You see how this reframing thing works, right? You get tenure for this stuff, which is awesome.

Given the obvious deceit of the deficit hawks’ campaign, it is “little wonder then,” as Professor Coates puts it, “that public opinion polls regularly put deficit reduction low on the list of the nation’s pressing issues.” Except for the 40 percent of Americans who listed it as their No. 1 or No. 2 concern (as opposed to 56 percent for jobs).

How broke are we, really? This broke:

Our national debt is $14.3 trillion or so. Our GDP in 2010 was about $14.7 trillion. On the more commonly cited metric of publicly held debt to GDP, the United States, at 59 percent, is closer to European bailout-bait such as Spain (63 percent), or even basket case Portugal (83 percent), than it is to responsible countries like Australia (22 percent), New Zealand (26 percent), or Canada (34 percent). Under CBO’s most realistic scenario, our debt would hit 185 percent of GDP by 2035. I write would because, of course, it won’t: Unsustainable levels of U.S. debt will cause a major global financial crisis well before reaching that level. Probably more like the 110 percent CBO sees us hitting by 2025. The year 2025 is not some Buck Rogers date in the sci-fi future; that’s fourteen years from now.

All of this could be dealt with, and dealt with good ’n’ proper, Coates thinks, if our stumbling president would just learn how to reframe it. (Question: If a professor of Anglo-American studies says our first black president suffers mostly from failure to heed the advice of professors of Anglo-American studies, does that make him a racist? Discuss among yourselves.) 

Coates: “The President would do well to remember that the important thing about legacies is that they have to be defended. Given the accommodatory strategy now prevalent in his White House, there is a genuine and growing danger that his administration may yet be the first in U.S. history to have surrendered its legacy before it has even left office.” (Confession: I included that last bit only as a pretext to note that “accommodatory” is a word unknown to the rascals who edited my Webster’s Third. Maybe it’s not English, but Anglo-American.)

But never mind all that: No problem here, nothing to see, move along, we’ve got reframin’ goin’ on! And when those Social Security checks stop showing up (or when you start cashing them for radically devalued dollars), remember that Professor Coates of Wake Forest U. assured you that it was only a matter of reframing.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Fiscal Armageddon , Nutty Professors

Gangster Government, Pinocchio Government, Whatever



Text  



Michele Bachmann  (and I) call it “gangster government.” The Washington Post calls it “three-Pinocchio” government, assigning the Democrats’ most recent budget claims a credibility rating of roughly You’ve Got To Be Kidding Me. Seriously: Even the Washington by-God Post is getting the message about Fiscal Armageddon.

At issue are Democratic claims that they are offering the Republicans a meaningful compromise on spending cuts, that they are meeting them “halfway.” Which, as the Post points out, is true, if your baseline is an imaginary budget that was never enacted. Congressional Democrats never could be bothered to actually pass a budget on their watch (and, seriously, if you were them, would you want to put all those numbers together in one handy place? Or would you rather spread the spending out so it’s hard to see?), so Obama’s 2011 proposal was never enacted. That means that the only real numbers we have to go on are actual 2010 spending, from which Democrats propose to trim a grand total of approximately nothing.

Quoth the Post:

The Democrats’ posturing that they have met Republicans “halfway” on budget cuts does them no credit. Either they should take a stand and say they won’t accept any further cuts, or they should begin a real negotiation that leads to a higher number. Obama signaled he was willing to deal when he said he was “prepared to do more.” But the persistent claims of going “halfway” when in fact Democrats have done little to engage Republicans on the issue will only hurt their credibility in the long run.

Given the uncertain constitutional status of Obamacare, and given the sneaky way it’s been budgeted for, how about we hold onto that $105 billion in implementation spending that Michele Bachmann is so excited about until we’ve got a Supreme Court ruling on the mandate, etc? That does not seem to me unreasonable, and making the Republicans’ $60 billion in cuts $165 billion would move us that much closer to national solvency.

If somebody isn’t already planning the next rally on the Mall to remind Republicans of why they’ve got a House majority and what we expect them to do with it, it’s time to get moving. The Republicans have been properly wary of overreach thus far, but this is the point at which political momentum can easily be dissipated. Spending-cut precedents have to be established, with real credibility, before we move on to the next — and significantly harder — task, which is straightening out the entitlement mess. (By which I mean straightening out the Medicare mess, mostly. Social Security and Medicaid are relatively easy fixes, but Medicare is going to be a beast.)

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Barack Obama , Budget , Debt , Deficit , Despair , Fiscal Armageddon

The Times vs. Reality: Yes, We’re Broke



Text  



Question for Jay Nordlinger: Why isn’t there a Nobel Prize for computer science? We need to create one, in order to bestow it upon the unknown genius who wrote the cliché-conjoining algorithm that produces editorials for the New York Times.

There is more stupidity and wishful thinking in today’s editorial, headlined “The Hollow Cry of ‘Broke,’” than I can add up. (And I’m not bad at simple addition.)

Let’s start with the outright error: The Times argues that the problem with our governments’ budgets is not spending, but insufficient taxation. We have a revenue shortfall, and “a substantial part was caused by deliberate decisions by state and federal lawmakers to drain government of resources by handing out huge tax cuts, mostly to the rich.” Mostly to the rich.

Cost of extending the Bush tax cuts for “the rich,” meaning families making more than $250,000 a year: about $800 billion.

Cost of extending the Bush tax cuts for the non-rich, meaning those making less than $250,000 a year: about $2.2 trillion.

My always-suspect English-major math says that the tax cuts for the middle class and poor were 2.75 times as expensive as tax cuts for the “rich.” (No, I don’t make $250,000 a year, but, contra Ezra Klein, I don’t think that a family making $250,000 a year is necessarily rich. Maybe in Lubbock, Texas, maybe not in New York, N.Y. Question: Where do you think more of those families are to be found?) I can’t think of a way to make that add up to “mostly for the rich.”

The Times says our deficit is “too large for comfort,” but says that even modest spending cuts would be disastrous. (No, I can’t think of how to make that add up, either.) Let’s consider:

U.S. national debt: about $14 trillion.

U.S. GDP:  About $14 trillion.

Symmetry! Not the good kind.

Obligations of U.S. federal, state, and local governments, including sovereign debt, bonds, pension liabilities, and entitlement liabilities, i.e. the real national debt: About $130 trillion.

GDP of Planet Earth: About $60 trillion.

If you owe more than twice the sum total of the planet’s economic output and you think you are not broke, what the hell qualifies as broke? Do we have to take out a zero-down mortgage on Centaurus A? The Times, I note, has experience with several definitions of broke. Pinch Sulzberger owed a heck of a lot less proportional to his income when he hocked the family heirloom.

Boehner et al. are forcing through some spending cuts. The Times is aghast: “In a matter of days, the Senate will be forced to take up the House bill to make more than $61 billion in ruinous cuts over the next seven months, all under the pretext of “fiscal responsibility.” Ruinous. That $61 billion amounts to 1.7 percent  of FY2010 spending. How big a decline is 1.7 percent? The New York Times lost 8.7 percent of its readers in the first half of the 2010 reporting period, and it’s still in business. We’re feeding Leviathan dollars by the trillions and it’s going to be ruined by a 1.7 percent cut? Horse. . . feathers.

 —  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair

Koch on the Debt



Text  


Tax Cuts and Wisconsin’s Deficit



Text  



There is a Wisconsin talking point that will not die: Everything was fine until Scott Walker got some business-incentive tax cuts passed. I just heard it from Erica Williams of the Center for American Progress. Rachel Maddow has trafficked in this nonsense, as have some more respectable lefty types.

Help an English major out, here: How exactly do $137 million in tax cuts cause a $3.6 billion deficit in two years? I am dying to know.

Those tax cuts may or may not be a good idea; I am generally skeptical of using special tax breaks as a tool of economic development. (Low general taxes, a simple tax code, a sane regulatory environment, and a sane tort environment seem to me much better tools.) But getting a $3.6 billion deficit out of a $137 million tax cut is a pretty good rabbit-outta-the-hat trick.

Wisconsin, it should be noted, has one of the better-managed public-pension funds in the country, inasmuch as they’ve actually socked away the money they are supposed to sock away to pay their pensions. (Surprisingly enough, the other decently managed funds are New York — really — Florida, and Washington.) It’s the Sweden of the United States: a big, expensive welfare state with high taxes, run with relative efficiency. But even in comparatively well-run Wisconsin, pensioners already have seen reductions in their benefits, in the form of reduced “dividend” payments. Why? Because the pension-fund managers have been planning on making just under 8 percent a year on their investments, but over the past decade have made far less — about half, in fact.

Which is to say, Wisconsin’s fight is going to be one of the easier ones. What happens when it’s California and Illinois? If the recent news from Greece is any indicator, Wisconsin’s pension managers might want to put some tear-gas suppliers and riot-shield manufacturers in their portfolio, and see if they can’t get those returns up.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , English-Major Math

50 Wisconsins



Text  



There are 49 more Wisconsins waiting to erupt. At least half the states are positioned to be bankrupted by their government-employee pension systems, but even the best-governed states are facing insolvency because of a factor that is mostly beyond their control: Medicaid. It’s interesting that the first battle is being fought in Wisconsin, but that is mainly because Illinois, the true-blue embodiment of fiscal imprudence, has basically surrendered without a fight.

What does this mean for near-term politics? Leave it to USA Today to get it exactly wrong:

In last year’s congressional elections, AFSCME, the largest public-employee union, gave $2.2 million to Democrats and $10,000 to Republicans, according to the Center for Responsive Politics, a non-partisan group that tracks money in politics. In 2008, AFSCME, founded in Wisconsin in 1932, spent $2.3 million opposing Sen. John McCain, Obama’s Republican opponent.

Union support will be vital to Democrats next year, especially in battleground states such as Wisconsin, to offset the flow of corporate funds into campaigns allowed by a 2010 Supreme Court decision. Last year, 11.9% of U.S. workers were represented by unions, down from 20% in 1983, the Labor Department says.

“Offset the flow of corporate funds.” This is the old “Big Business Backs Republicans” canard. It is not true. It has not been true for a long time. It would be difficult to find any Big Business sector that backs Republicans as lopsidedly as unions back Democrats. (And let me remind you for the 11,000th time that Barack Obama & Co. were carried to power on a wave of Wall Street money, with Goldman Sachs leading the way.)

For instance, take the software industry, a very big business indeed. Out of the five biggest recipients of the software racket’s political money in 2009–10, all five were Democrats: Patty Murray, Suzan DelBene, Barbara Boxer, Charles Schumer, and Harry Reid.

What about the mortgage bankers and the real-estate gang, a.k.a. the Committee to Reinflate the Bubble? Three out of five of the bankers’ top recipients in the last cycle were Democrats — Paul Kanjorski, John Adler, and Barney Frank, purported scourge of the banking world. The real-estate lobby’s top recipients were three Democrats — Schumer again, Alexander Giannoulias, and Kirsten Gillibrand — one independent trying to defeat a Republican — Charlie Crist — and one Republican — Carly Fiorina.

What about the fine gentlemen of the private-equity industry, fighting tooth and talon to defend the carried-interest tax rules that give them an enviably low tax rate? Their top dogs were Democrats Schumer (again!) Gillibrand (again!), Reid (again!) Michael Bennet, and one Republican, Mark Kirk.

Republicans do kill with dentists and coal miners. (Although Democrat Joe Manchin was the blacklung lobby’s No. 2 recipient.)

When people scream about the wicked evil corporations and their influence in Washington, they usually are really talking about the FIRE businesses — that’s finance, insurance, and real estate. Taken together, these industries do, at the moment, slightly favor Republicans, though their two largest recipients were — see if you can guess — Schumer and Gillibrand, again and again. But it is a myth that Republicans own Wall Street, or that Wall Street owns Republicans. As Open Secrets puts it: “The sector contributes generous sums to both parties, with Republicans traditionally collecting more than Democrats. Yet in the past two election cycles, bankers have suddenly shifted their cash toward Democrats.” But look at the charts for 1990 through 2010: hardly a runaway advantage for the Republicans, and nothing like the 220-to-1 advantage the Democrats enjoy when it comes to treasury-raiding union goons like AFSCME.

The narrative of Wall Street vs. Labor in the race to buy political influence is a false one. As often as not, Wall Street and Labor are on the same side, as they were when they helped elect Barack Obama.

What do Wall Street titans and Wisconsin government employees have in common? Above-average incomes, for one thing, and tight relationships with government that help them to maintain them. You bailed out the first gang of miscreants in 2008, and a lot of them came back for more. You bailed out the second gang of miscreants under the stimulus, and a lot of them are coming back for more, too. And they will keep coming back for more until one of two things happens: A. There’s no money left, or B. We stop them.

My money’s on A. Where’s yours?

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair

Deficit Gangsters



Text  



Simpson-Bowles lives!

Sort of.

A “Gang of Six” in the Senate — Republicans Coburn, Crapo, and Chambliss, Democrats Durbin, Warner, and Conrad — is working to create legislation that would put many of the Simpson-Bowles deficit-reduction proposals into effect. That means raising the Social Security retirement age to 69, reducing Medicare benefits for higher-income oldsters, and raising taxes by getting rid of the mortgage-interest deduction and other special-interest tax breaks.

The Simpson-Bowles plan is by no means perfect — no more perfect than recent Republican efforts to make modest cuts in non-defense discretionary spending, no more perfect than Paul Ryan’s Roadmap. But each of those imperfect options represents a step in the right direction — which is to say, a step toward national solvency.

The tax part of the plan is especially good, in my view, even though it is a net tax increase for the country. The proposal would lower overall income-tax rates in exchange for eliminating a lot of special-interest tax breaks, notably the mortgage-interest deduction. The mortgage-interest deduction is a destructive force on its own, encouraging would-be homeowners to take on larger debts than they should, and to pay more interest than they should, contributing significantly to the inflation of the housing bubble and the subsequent financial crisis. It is difficult to imagine that as many people would have signed up for interest-only mortgages without a tax code that richly subsidizes them. Getting rid of it would be a good idea regardless of revenue considerations or tax-rate considerations; getting rid of it in exchange for lower income-tax rates and $4 trillion off the deficit (I know, I know — there’s a leap of faith in there, but if we’re going to spend $1, we have to tax $1) seems to me a very good deal.

The lower corporate tax is worth having, too.

All that being written, a note: This is not the most inspiring group of senators to be found. I think highly of Senator Coburn but have my reservations about any plan that leans heavily upon Senator Durbin.

In any case, I think the Republicans have already missed an opportunity on this one: An Obama-appointed commission’s bipartisan chairmen produced a program with real cuts and real improvements to the tax code — why not run with that? Why not get what’s worth getting out of Simpson-Bowles and then push for the next round? They are getting a second bite at the apple with the Gang of Six, and they should take it.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Debt , Deficit , Despair , Faint Glimmers of Hope

Pages

Sign up for free NRO e-mails today:

Subscribe to National Review