Posted tagged ‘government spending’

Will History Repeat?

July 24, 2013

Shutting down the Government is risky business.  When Republicans followed Speaker Newt Gingrich’s advice and refused to approve legislation funding daily Government operations in 1995/1996, President Bill Clinton called their bluff.  Unfortunately for the GOP, it was not a bluff and the Government was forced to suspend all but essential services for 28 days.  The GOP paid the price for this irresponsibility in the next election.

The tables are almost set for a repeat.  President Obama has proposed a budget which calls for modest increases in spending while the GOP is calling for significant cuts (except in Defense and State).  They know their proposals won’t pass in the Senate but that hasn’t reduced their bravado.  To the contrary, Senate Republicans are spewing their own “Armageddon” warnings.  And what would be a better target than the Affordable Care Act?

So why this threat to repeat history?

  • Bluffing.  President Obama has demonstrated that he is a poor negotiator preferring to show his best hand right away.   The President, however, has no history of yielding as much as the GOP is asking.  Is this a wise GOP strategy?   Hmmm.
  • Principle.  The GOP has been consistently calling for a balanced budget and that will require significant spending cuts.  How can the GOP suddenly change its message?
  • Appeasing their base.  Most GOP supporters do not favor Democrat spending priorities and believe cuts are necessary.  How could the GOP not respond to this grass roots appeal?
  • Emotional reasons.  The GOP seems to believe that spending cuts, especially to entitlements and healthcare programs are a fundamental truth of life.  America is an exceptional Country, they believe, and pulling oneself up by the boot straps is simply part of what makes America great.  Hmmm.
  • Clear and logical reasons.  The GOP is supported by a brain trust of conservative economic thinkers who believe lowering taxes, emasculating Government services, and basically throwing fate to the hands of private enterprise is the way to go.  These same thinkers dismiss the notion of global economic connections (the US can prosper alone) and the experience which all the European Union nations have endured when they instituted austerity economic packages over those which could stimulate growth.  Hmmm.

In the end, it makes little difference why the GOP is so directed.  The GOP is flirting with serious damage once the American people find an alternative.  While Democrats represent more sanity on this issue, Democrats fall far short of having any long term plan for producing growth and a sound economy.

The answer to this predicament is, of course, doing nothing.  A budget compromise where spending increase below the rate of inflation and the national debt is extended without incident are the sensible answers.  The world’s economies are connected.   There is no place for the US to grow other than within its boarders  But is Congress smart enough to recognize this?

The GOP’s consistent and persistent rage against the Affordable Care Act is shameful in the absence of specific and actionable alternatives.  The GOP claim that ACA is flawed is most likely correct.  The question is where is it flawed?  (Remember the ACA is originally a Republican think tank proposal and it is a near copy of Mitt Romeny’s Massachusetts healthcare legislation.)

There is still a lot of time for reason to prevail.  The danger is that with each day, GOP leaders are gaining headlines with messages that also march them closer and closer to the cliff.  One of these days, the GOP will wake up and find that Americans (maybe not the very rich) are feeling good about the economy and the steady hand the President has carried towards domestic policy.

 

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The Size of Government

May 4, 2012

If you have heard it once, I am sure you have heard it a thousand times already.  And, between now and the election, you will hear it many thousand of times more.  “Government has grown to large and must be reduced.”

Some who say this are referring to government agencies such as the EPA or the SEC, or departments like Education, Energy, or Interior.  These departments, of course, are minuscule when comes to cost or numbers of employees.  The big hitters are the Department of Defense and Health and Human Services (along with the big spenders, Medicare, Medicaid, and Social Security).

So when most political pundits speak of the government being too large, they are thinking Medicare, Medicaid, and Social Security because these three account for more than half of the current deficit.

I would argue that the government expenditures for M/M and SS are not a sign of government being too large.  (It is true that there is some amount of fraud associated with M/M but that is due to regular citizens stealing from the government.)  Rather, the deficit problem with these agencies is about a revenue collection deficiency with some modification to benefits.

The places to look for government being to large is where the government spends money and delivers little or no service.

My candidate for the first cuts is the Department of Homeland Security and within it, the Transportation Safety Administration.  TSA is charged with protecting the American flying public from another 9/11 like hijacking.  Supporters boast that since 9/11 there has not been another.  So is that a license to spend?

I have an artificial knee.  It is a wonderful gift from medical science and I appreciate it dearly.  It also sets off alarms every time I go through airport security.

In all foreign countries I have visited, their airport security officials use a “wand” to perform a secondary check of the knee.  With a positive response, the security procedure is over.  These officials know why the first alarm sounded and I am allowed to pass quickly.

In the US, however, I get the opportunity for a full pat down.  This procedure wastes time and never verifies why the alarm went off in the first place.  The flying public is no safer due to these procedures.  And no serious terrorist would be thwarted either since they would simply not use anyone with a metal body implant.

So why does this continue?

The answer lies in the real truth about allowing government to grow to large.  The TSA is inefficient and ineffective, and is employing more and more people.  Look around when you go through the terminal.  There are far more TSA employees than there are airline agents and bag carriers combined.

No one wants a 9/11 repeat.  But if you think doing what the TSA says is necessary is the way you prevent a repeat, you are dreaming.

I am the same person who flies each time under the same name and with the same implant.  My iris and finger prints never change.  It would be straight forward to confirm my identify.  A hand held body want could confirm the location of the metallic mass and the procedure would be over.

In Florida this year it was a farce to see all the elderly people, many in wheel chairs, being screened to ensure they were not a terrorist.  There are far better and more productive ways to spend government money.

The One Handed President

April 11, 2012

President Obama had best take care not to build the image of a “one handed” President.  While his position on adopting the “Buffett Rule” makes eminent sense, left by itself, is makes the counter punch of “class warfare” too easy.

The Buffett Rule asks those Americans earning more than $1 million per year to pay at least 30% of their income in taxes.  Saying this differently, Mitt Romney would have paid about $75 million in Federal Taxes in 2011 on his $250 million of declared income instead of the $36 million he paid.

But why should anyone have to pay more in taxes?

There are two reasons.

  • First, the country is going broke and has been reduced to borrowing more and more each year to pay our bills.  While it is possible to reduce discretionary government spending (and it should be), there is little appetite among our elected representatives to cut any money from their districts.  Discretionary spending is one issue, the other is what is called entitlements with Social Security and Medicare/Medicaid being the two largest.  Reductions in government spending in these area shifts the expense to recipients and directly smacks the wallets of the middle class and poor.  Never the less, both programs will go bankrupt if nothing is done.
  • Second, it does not matter whether the Tea Party or the GOP or the Democrats want to say this, Americans will have to pay more for the services they are receiving one way or the other.  Changing qualification requirements, or increasing the payroll taxes, or increasing the deductibles all mean that the poor and middle class will have to pay a greater share of their discretionary income to afford their retirement or health care.  This is inevitable and will be painful.  Knowing that the wealthy are sacrificing too, may make increased payments more palatable.

The issue for the President is that the “Buffett Rule” is not just “fair”, it is a necessary component of a deficit reduction plan where “all of us” pay more.  The very wealthy do not worry in the slightest about whether Medicare or Medicaid or Social Security go bust.  Those programs have never figured in their retirement planning.  They do worry about keeping America vibrant so their business interests thrive.    Choking the middle class and poor is a dangerous way to go.

The President needs a combination approach, a left to set a minimum tax for those earning $1 million or more, a right that allows the Bush tax cuts to expire across the board, an upper cut left that tackles meaningfully the funding side for Social Security, Medicare, and Medicaid (like increasing wage taxes), and a round-house right that reducing real government spending across the board (like 10% in all areas).

I will keep my eye out and when I see the pigs flying, I will know the President has heard my suggestion.

The Lonely Messenger

January 24, 2012

In last nights GOP debate, Ron Paul appeared like the lonely messenger standing to the left of Mitt Romney, Newt Gingrich, and Rick Santorum.  His message was not to the left, however.

Mitt and Newt occupied most of the oxygen while Rick Santorum flailed about trying mightily to distinguish himself from the Mitt and Newt show.  It is anyone’s guess which candidate was the most effective debater last night, but following the debate Ron Paul was clearly the winner in the eyes of his backers.

Paul’s message is simple and easy to remember.  Reduce the size of government, keep the government out of our personal affairs, and end our involvements overseas.  Not surprisingly this plays very well with the younger voter.  Do you wonder why?

My guess is “spending money overseas” translates into a smaller military and less chance of people getting killed.  I would also think “keeping government out of personal affairs” suggests the end of social conservatives trying to dictate personal choices on others.  “Less government”, like “less filling” might mean anything or nothing to the younger generation.

For example, if you visit the Ron Paul for President web site you can read one of his proposals.

REGULATION:

Repeals ObamaCare, Dodd-Frank, and Sarbanes-Oxley. Mandates REINS-style requirements for thorough congressional review and authorization before implementing any new regulations issued by bureaucrats. President Paul will also cancel all onerous regulations previously issued by Executive Order.

Here is where a sense of history or perspective might help.  As with all the other candidates, the repeal of these three laws and their resulting regulations is proposed in a vacuum.

The Affordable Health Care Act (ObamaCare) may be in serious need of improvements (from a cost perspective) but to repeal it and return to a system where health care can be denied for arbitrary reasons like pre-existing conditions, or put beyond reach by out of sight premiums, is scandalous.  Dodd-Frank also may need changes but to say we have not learned anything from the 2007 experience where the country’s financial sector collapsed is not a very encouraging sign.  And for anyone who can remember MCI, Adelphia, and Enron, repeal of Sarbanes-Oxley makes only sense in the context of other regulations that would hold CEOs accountable for misrepresentations their corporations may purposely make?

I am fairly certain Ron Paul supporters do not think about these three regulations this way.  I also do not think Paul supporters think through his other proposals and figure out how the Country can cut taxes and still deliver services they currently depend upon.  Instead, to them, Paul represents a repudiation of a poorly functioning system.

Never the less, Ron Paul appears genuine and like a good wine, provides hints of honesty and American virtues.  His supporters will enjoy him while he lasts.

The Lull before the Storm

August 27, 2011

Irene is cruising up the East Coast.  It looks every bit the Hurricane that weather forecasters have predicted.  It does not look good for the North Carolina outer banks and the East Coast north, all the way to the Big Apple.  Today, however, it is quiet and all that can be done is just to wait.

The Northeast and Middle Atlantic have pretty much gotten a free ride the last few years.  Most all these storms have taken a right turn and headed out to sea.  Not this time, so it seems.  Nature is about to meet a lot of people.

This year has seen killer tornados and treacherous floods in other parts of the country.  All of these natural disasters display nature’s amazing power.  Try as much as man can, the tools officials use to try and mitigate or control these phenomena pale in comparison.  I wonder in this age of “government is the problem” whether emergency relief operations are still justified?

I wonder whether President Obama should identify offsetting savings before ordering any un-budgeted FEMA expenditures.  I wonder whether emergency relief assistance should wait for congressional approval before extending them to homeless and unemployed workers?

To be sure, much disaster relief is carried out by States, Counties, and local governments along side of private relief organizations like the Red Cross.  There is one thing, however, that all these organizations have in common.  They can only provide relief if there is funding or a believable promise they can pay in due time.

Our Country is much larger and far more complicated than when it was founded.  The US faces all sorts of challenges from national security to building a thriving economy.  There are education, health, and social welfare issues that only a Federal government can meet.  If we are to be the United States, all US citizens must expect the same availability of these services.

All of these services, however, require funding.  Citizens have every right to demand these Government services function properly, and in a caring and timely manner.  Government need not be the problem.

As the East Coast sits and awaits Irene, I hope people are considering how necessary a government is that serves all the people all the time.  It might be tempting to want the hand of government nearby when the winds approach but absent when the skies turn blue.

I wonder whether that approach works?

Don’t Flinch This Time, Too

June 26, 2011

The Republican and Democrat debt ceiling limit negotiating team has disbanded.  They were not successful in their attempt to gain a compromise.  Rumors are that talks collapsed because Republicans insisted upon no tax increases.  As the current debt ceiling limit deadline approaches, President Obama has a chance to try again.  Last December, he flinched (sort of) and agreed to allow no tax increases for the wealthiest of Americans.

His compromise to keep in place the Bush tax cuts was short term brilliant.  The compromise package pumped about $600 billion into the economy but of course put the same amount of pressure on the national debt.  There are no free lunches.

There is no route either through straight tax increases or straight budget cuts foreseeable to eliminate the deficit.  One hundred percent of either will cripple the country.

Republican leaders are between a rock and a hard place.  Intellectually they realize there must be tax increases.  A small but financially loaded fanatical minority has hijacked the Republican party on this issue as well as on social conservative ones.  It is with the risk of ones personal political life for any Republican to voice support for tax increases.

Ironically, President Obama has a strong hand.  He needs to make clear to the public that he would support deep cuts.  He must then make clear that tax increases must accompany any budget cuts so that the burden is shared fairly.  Let the Republicans call his hand and let’s see what happens.

There is a small chance that nothing will happen.  In other words, world lenders just sigh and say “ok, we will wait to be paid”.

The far greater prospect is that world capital markets will freeze.  We will see a return to the near financial sector implosion of 2008.  Much of the Republican moneyed base will see their worlds collapsing (as will the rest of us as 401k’s crash again).  The day of reckoning will have arrived.

The silver lining might be that common sense might return to enough of the country.  If so, expect a house cleaning in 2012 with dogmatic Republicans once more denounced as unfit to lead.  While we would expect Tea Party types to try valiantly, I would expect that “Jon Huntsman type” might emerge as the future for both parties.

In the darkest of possible scenarios, the depths of a world depression might take some of the glow off the emergence of a new political movement.

 

Deal or No Deal?

June 24, 2011

The gang of six minus one broke up yesterday when the Republican members walked out.  The gang had been wrestling with finding an agreement on how to raise the federal debt ceiling.  Rumors had it that the gang had agreed upon $4 trillion savings over 10 years but could not agree on tax increases.

Details were not made known but it is safe to say that $400 billion a year will not eliminate the deficit.  The result will be the debt will continue to grow but at a rate lower than otherwise anticipated.  I wonder what the stumbling points were?

First and most obvious would have been the Republican pledge “no tax increases, no way”.  This flies in the face of common sense and demonstrates an example future generations should not learn.  America’s greatest generation in WWII sacrificed everything to fight a war that they did not create but threatened America’s existence.  They did not saddle or pass the problem on to their children and grandchildren.

Today, America has a $14 trillion debt and a slowing economy.  We will not grow our way out of this hole.  Real patriots would do two things.  First they would say “no more”, it will be balanced budgets or nothing.  Second, they would say “let each of us do our part to reduce or eliminate the debt so our children and grandchildren inherit a clean sheet”.

Second, the gang would not have acted like the Medicare/Medicaid crisis did not exist.  This is understandable since the Federal Government cannot fix the Medicare/Medicaid situation without reducing recipient coverage to a meaningless level, or transferring so much of those programs’ costs to the receiving individuals that they would voluntarily cease using those plans because they could no longer afford them.

The gang recognizes (but does not say it) that Medicare and Medicaid are too hot politically to touch, and that any fix begins with a reform of our private health care delivery system.  Until annual health care cost increases become less than the rate of inflation, there can be no fix for Medicare/Medicaid.

It is not over until it is over.  So it is possible that the “walk out” is just part of Washington theatrics.  We will see soon.  The day of debt reckoning is coming soon.