Tuesday, January 25, 2011

America cannot survive its weak will
and compulsive spending

It ought to be obvious that you cannot continue to amass debt beyond your ability to pay it off, but our leaders in Washington have not yet figured this out.

US Treasury data shows the national debt is $13.95 trillion, which has accumulated over many years of spending more than we took in.

We have a statutory debt ceiling of $14.29 trillion, raised to that level less than a year ago. Treasury Secretary Timothy Geithner informed Congress recently that sometime between March 31 and May 16 the federal government will have spent enough to breach that boundary, and that Congress must once again raise the debt ceiling.

The folks down at the Department for the Creation of Scary Scenarios – whose recent work includes the doomsday prognostications of global catastrophe if the country does not immediately replace fossil fuels with undeveloped technologies – has issued a dire warning that the debt ceiling must not be breached, or the world as we know it will end. This catastrophic scenario reached Austan Goolsbee, chairman of the U.S. Council of Economic Advisers, who then proclaimed that the impact on the economy would be “catastrophic.”

And if the debt ceiling is ultimately breached, the results would be very serious. But that isn’t forecast to happen until two to four months from now, and the intervening time can be used for more than hand-wringing and gnashing of teeth, or for a thoughtless overreaction to the scare tactics and hastily raising the debt limit.

The U.S. debt ceiling has been raised 11 times since 1996, and it’s time to stop. Starting now we must take steps to prevent having to raise the limit again, or at the very least to substantially delay raising it.

However, rather than limit spending, our government continues to dole out dollars to favored constituencies, and continues borrowing the money to do so. This has been occurring off and on for decades, and instead of doing the right thing, the sensible thing, the responsible thing – which is to control spending – our weak-willed, self-interested big spenders in Congress and the administration want to raise the ceiling yet again, and borrow more money.

And apparently Mr. Goolsbee also favors the free-spending status quo, saying on ABC’s “This Week,” “I don’t see why anybody’s playing chicken with the debt ceiling. If we get to the point where we damage the full faith and credit of the United States, that would be the first default in history caused purely by insanity.”

Speaking of insanity, let’s review a few of the loony things our government does. The Heritage Foundation has produced a long list of things that are improper, inefficient, and/or wasteful, including:

• The Government Accountability Office’s list of wasteful duplication includes 342 economic development programs; 130 programs serving the disabled; 130 programs serving at-risk youth; 90 early childhood development programs; 75 programs funding international education, cultural and training exchange activities; and 72 safe water programs.
• Improper or fraudulent Medicare spending now totals $47 billion annually—12.4 percent of its budget.
• Washington spends $25 billion annually maintaining unused or vacant federal properties.
• The Conservation Reserve program pays farmers $2 billion annually not to farm their land.
• Government auditors examined all federal programs and found that 22 percent of them — costing $123 billion annually — show no positive impact on the populations they serve.

Furthermore, Heritage tells us:

• There were 2.15 million federal employees in 2010 (including 80,000 temporary Census workers) costing taxpayers approximately $447 billion.
• Federal workers earn 30 to 40 percent more on average than their private sector counterparts.
• In 2009 their average wage/salary was $74,403, not including benefits.
• Federal employees owe more than $1 billion in income taxes they failed to pay.

The country is paying too many employees too much money to run dozens of duplicate and wasteful programs, and to operate the government inefficiently.

But despite these disgraceful examples of malfeasance by our public servants, many members of Congress still want to raise the debt ceiling.

Continuing this fiscal irresponsibility is not an option. We have to take tough, drastic action on federal spending now, and given the abundant opportunities listed above – nearly $200 billion specifically enumerated, and who knows how much more – finding ways to save billions isn’t difficult.

A US Senator spoke passionately on this issue just before a vote to raise the debt ceiling a few years ago: “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. Leadership means that ‘the buck stops here.’ … America has a debt problem and a failure of leadership. Americans deserve better.” Those are the words of then-Senator Barack Obama (D-IL), and on this issue, he was right.

So, Congress, your instructions are: Lower spending and lower the debt by doing away with duplication, waste, fraud, and inefficiency, and get federal pay and benefits in line with the private sector. Start doing the job you were elected to do, and don’t punish any American with higher taxes until you first straighten things out. At that point, we won’t need higher taxes to balance the budget.

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Tuesday, January 18, 2011

The shift in the balance of power in Washington
provides the opportunity to move forward

The year 2011 begins with control of the federal government divided. Democrats still control the White House and the Senate, albeit with a narrower 51-47 majority, but Republicans now control of the House of Representatives, 242-193.

As the 112th Congress got underway outgoing House Speaker Nancy Pelosi was gracious in her final comments, if long-winded and hallucinatory in reviewing her speakership. "Deficit reduction has been a high priority for us. It is our mantra, pay-as-you-go," she declared, not mentioning that during her four-year reign the House added $1 trillion to the federal debt each year.

Such irresponsible spending can’t be sustained, and Republicans must keep their pledge to fix that problem.

The Republican plan to read the United States Constitution aloud to the entire House drew surprisingly harsh criticism from Democrats, one of whom accused Republicans of “worshiping” the founding document and treating it like a “sacred text.”

Others grumbled that the roughly ninety minutes it took to read the document was a terrible waste of time, and still others complained that the version to be read was the amended version, as if reading the original un-amended document was more appropriate than reading the form that lawmakers have sworn to honor, defend and obey.

A cynic might say that given the abysmal performance of Congress, especially over the last four years, House members might benefit from having the governing document read to them. The same cynic might also suggest that for many it is their first exposure to the Constitution.

Evidence of a lack of familiarity with constitutional limits on government authority abounds, but perhaps none is more prominent, or a better example of irresponsible lawmaking than the 2,300-page healthcare reform bill, the passage of which the public strongly opposed, to no avail. The House now must vote to repeal it.

However, supporters of the bill say “don’t waste time trying to repeal the health care bill. The Senate won’t support repeal, and if it did, the president will veto it, and Congress won’t be able to override the veto. Spend time on more important things.”

That is a perspective many agree with, but it is exactly wrong. Republicans must push to repeal health care reform, even if it ultimately fails, for several reasons:

• There is a principle favoring limited, constitutional government involved
• The reform law as passed is disastrous
• Repeal was an important issue for many of them in the election
• Their credibility depends upon it

But also consider that the election changed the balance in the Senate and some Senators who formerly supported the bill and are up for re-election in 2012 may actually have learned something about public sentiment of health care reform last November, and may have changed their mind on this issue, or simply don’t want to lose the next election because of it.

So, Republicans must bring it to a vote in the House, forcing members to take a public position on the issue, and let the chips fall where they may.

“But repealing the law will add $145 billion to the deficit,” supporters claim, and a Congressional Budget Office (CBO) report supports that claim. However, the CBO had to use numbers Democrat authors of the bill provided, which is an exercise in voodoo economics.

CBO Director Doug Elmendorf explains that “CBO’s cost estimate noted that the legislation maintains and puts into effect a number of policies [such as arbitrary reductions in the growth rate for Medicare] that might be difficult to sustain over a long period of time.” They also omitted from the scenario they gave the CBO the Medicare “doc fix” cost of about $14 billion in the first year alone, and who knows how much in later years. And the Democrat’s scenario includes 10 years of collecting higher taxes, but only six years of paying the bills.

And if the reform law is such a great thing, why have waivers exempting 222 companies and unions covering 1,507,418 people from insurance provisions in the bill been granted? Why are health insurance premiums rising, not falling? And why are more than 20 different states fighting implementation of the law?

Health care reform imposes a plethora of tax increases, fees and penalties, and according to a July report produced by the Congressional Research Service will create dozens of new federal bureaucracies: “the exact number of new organizations and advisory bodies that will ultimately be created … is currently unknowable.” A description of those the report specifically discussed took 22 of the 42 pages, and includes such things as: “Office of Women’s Health” in five different agencies; the “Negotiated Rulemaking Committee”; the “Personal Care Attendants Workforce Advisory Panel”; and the “Patient-Centered Outcomes Research Institute.”

The public knows reform is big government excess that accomplishes a tiny bit of good, and a great deal of bad. Our elected representatives must now obey the wishes of the majority of Americans: repeal the gargantuan, overreaching reform bill and start over fixing the world’s best health care system by implementing a few sensible improvements, one at a time, in individual pieces of legislation, as the bill’s opponents suggested two years ago.

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Tuesday, January 11, 2011

Faulty economics has produced
two years of stagnation

The US economy continues to languish, despite an occasional bit of good news and as much positive spin as the Obama administration can generate without sounding completely unbelievable.

The latest piece of good news is that the unemployment rate dropped from 9.8 percent to 9.4 percent; good news, yes, but not as good as it seems on the surface. A four-tenths-percent drop represents a decline of about 4 percent, but clouding that marginally good news is that the decline would be smaller were it not for the number of people who have become discouraged at being unable to find a job, and are no longer counted in the workforce.

You may remember that President Barack Obama justified the wildly unsuccessful $787 billion economic stimulus bill, signed just a couple of weeks after he took office in 2009, by saying that it was needed to prevent unemployment from rising above 8.0 percent.

The unemployment rate rose fairly steadily to more than 10 percent in late 2009, and was substantially above 9.0 percent through 2010 until December’s 9.4 percent rate. Unemployment has been higher than 8.0 percent during all but the first month of Mr. Obama’s tenure in the White House. The last time unemployment was at the 5.0 percent full employment level was January 2008.

The anemic job production figure of 103,000 is disappointing because most experts expected the number would be 150,000, according to a Bloomberg News survey. But even that number is well below the 200,000 to 250,000 new jobs needed each month to move the unemployment rate lower.

What the administration and the Congress have produced over the last two years includes the following:
• Only 64.3 percent of the civilian labor force has a job, the lowest level in a quarter century
• Approximately 15 million Americans are out of work
• Nearly 9 million workers are involuntarily working less than full-time
• The number of workers who are discouraged and have given up trying to find a job is 1.3 million, up 389,000 from last year

Federal Reserve Chairman Ben Bernanke, testifying before the Senate after the jobs report came out, said it might take five years for the labor market to completely normalize. That’s not acceptable, and it’s not necessary.

For the labor market to normalize we must have policies that reflect an understanding of how business works and that encourage businesses to expand and create jobs, and that requires a president and a majority of members of each house of Congress that understand basic economics, and are more concerned with allowing the private sector to function than with implementing ideological goals that frustrate private sector activity.

The formula for a vibrant economy isn’t a difficult one, however. All one has to do to find it is look back over recent history, as the Cato Institute did. The episodes of highest annual growth in GDP in the last 30 years came between 1983 and 1989, and between 1997 and 2000, and the circumstances that produced those results were a combination of lower government spending as a percent of GDP and lower marginal tax rates.

In the period 1983 to 1989 government spending dropped by 2.4 percent of GDP and tax rates for the highest earners dropped from 70 percent to 28 percent, producing growth in GDP at an average rate of 4.31 percent.

But the greatest average growth of GDP occurred from 1997 to 2000 when government spending dropped by 2.0 percent of GDP and marginal tax rates dropped to 21 percent from 29 percent. That produced average GDP growth for the period of 4.45 percent.

By contrast, in the 2nd quarter of fiscal year 2009-2010, the average GDP growth was 0.23 percent and the circumstances were that spending increased by 4.0 percent as a percent of GDP with a top tax rate of 35 percent, and talk of raising it to 39.6 percent.

High taxation and uncontrolled spending are the problem, according to Brian Riedl, lead budget analyst at the Heritage Foundation. In early December before extending the Bush tax cuts for all taxpayers had been implemented, Mr. Reidl wrote an economic analysis based on the National Commission on Fiscal Responsibility and Reform’s report. “Over the next decade, runaway spending is set to double the national debt, which would risk higher interest rates, slower growth, and steeply higher tax rates,” he wrote.

“Even if all tax cuts are extended,” he predicted, “revenues will soon slightly exceed their historical average of 18 percent of the economy [and] Federal spending [will rise] from its historical average of 20 percent of the economy to a projected 26 percent by the end of the decade.”

The last two years demonstrate rather dramatically the failure of Keynesian economic theory that has held sway in Washington. Now it’s time to try something else.

As shown above, during the periods from 1983 to 1989 and from 1997 to 2000, reduced government spending and lower tax rates produce economic expansion, and economic expansion produces jobs. Those are the policies we must now follow.

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Tuesday, January 04, 2011

As we watch a new year begin,
let’s review some things from 2010

Here are reminders of what we don’t want to see in the New Year:

● Hey big spender - During the tenure of the 111th Congress the federal government has accumulated $3.22 trillion more in new debt than it did during the first 100 Congresses combined, according to the U.S. Treasury’s official debt figures. That equals $10,429 in new debt for each and every one of the 308.7 million people in the United States, according to the 2010 Census.

The total national debt of nearly $14 trillion as of Dec. 22 now equals $44,886 for every man, woman and child in the United States.

The 111th Congress captured this scandalous spending label from its predecessor, the 110th Congress.

● Better late than never - "It is not a good policy to have these massive subsidies for first-generation ethanol," Al Gore told a clean energy gathering last week in Greece. He called the benefits of ethanol "trivial," adding that "It's hard once such a program is put in place to deal with the lobbies that keep it going."

"One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee,” he continued, “and I had a certain fondness for the farmers in the state of Iowa because I was about to run for President."

Mr. Gore finally has admitted that the ethanol program that has caused such turmoil, wasted so much money, and benefitted so few is primarily political, but at least he finally came “clean.”

● Compensation for 9-11 first responders - Last year saw politics being played over the James Zadroga 9/11 Health and Compensation Act. You might expect something like this to be a straightforward bill to address a specific problem, but no.

First, it was going to be funded by raising taxes, violating stated Democratic rules that new spending would have to be funded by cuts in other spending. Further, it was poorly written and larded up with $3 billion in pork barrel spending, there were no hearings on the bill, it contained no oversight provisions and no requirement for claimants to provide evidence showing a link between their illnesses and activity at the 9/11 site.

A good purpose, but irresponsibly executed.

● The Imperial Presidency - President Barack Obama has an annoying habit of circumventing the Congress and the Constitution. Although other presidents have dabbled in similar behavior, he has raised it to a high art.

The profusion of “czars”– political decision-makers that are unelected and untouchable by the people, who report to no one but the president — has reached a new high (or low). These czars have the same power as cabinet members, but do not have to go through either a vetting process or Senate confirmation as cabinet members do. The president has authority to appoint such people, but they have no Constitutional regulatory, legislative or law-making powers. Such powers are reserved for the Congress.

The president also has authority to fill open positions while the Senate is in recess, a feature intended to foster efficient operation of the government, but which has been misused by presidents through the years to avoid the confirmation process in the Senate for candidates that are controversial. Mr. Obama will likely give recess appointments to six executive branch officials, bringing to 28 the number of such appointments in his two years. So much for transparency.

Unable to get contentious and dangerous Cap and Trade and Internet Neutrality legislation through Congress, the administration simply ignores the proper method for enacting such measures and imposes new regulations on energy production and the Internet through the Environmental Protection Agency and the Federal Communication Commission. The degree of regulation being imposed on Americans without Congressional approval is higher than at any time in at least 50 years, and perhaps higher than ever before.

Our government was designed specifically with power dispersed through three co-equal branches, and a system of checks and balances to prevent any single branch from having too much power.

From time to time presidents must be reminded that they are only the President of the United States, not a King, Emperor or Grand Poobah. The time for a reminder has come.

A fitting reminder can be found in the words of George Washington, who said in November of 1787, less than two months after the US Constitution was signed, “The power under the Constitution will always be in the people. It is entrusted for certain defined purposes, and for a certain limited period, to representatives of their own choosing; and, whenever it is executed contrary to their interest, or not agreeable to their wishes, their servants can and undoubtedly will be recalled.”

More 18th century wisdom comes from Daniel Webster: “It is hardly too strong to say that the Constitution was made to guard the people against the dangers of good intentions. There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters, but they mean to be masters.”

We’ve had enough of masters governing us. Now we need public servants.

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