Archive for category Deficit
Obama Budget Is Unsustainable
Posted by Tom in Budgets, Centrally Managed Economy, Congress, Deficit, National Debt on March 30, 2011
Senator Jeff Sessions from Alabama brings his cross examination skills to the fore with Secretary Tim Geithner who is forced to concede that the federal debt is unsustainable.
DOE…Carter’s Creation Provides Obama’s Cover
Posted by Tom in Deficit, Energy Facts & Policies, Environment, Government Regulation, National Debt, Stimulus/Bailout, Subsidies on March 7, 2011
Shika Daimia’s Reason.com post today, Global Warming By Another Name, points out that Obama’s bow to the environmental religion is coded in his promotion of “clean energy.” That global warming has suffered since Climategate, the East Anglica University disclosures, is obvious even to Obama. Ever the politician, he still must curry favor with the well ensconced global warming conspirators. After all, he gets them money, grant money, and they get him votes. To cement that support and yet stay away from that “global warming” fraud, Obama promotes “clean energy.”
Daimia argues that “clean” equals” cool” by virtue of the EPA’s mission to limit greenhouse gasses. Those, in addition to the air you exhale are mainly caused by hydrocarbon energy, coal, oil, gas. So what does our president propose in this year of a $1.6 Trillion deficit and $14 Trillion in debt? He proposes to increase the budget for the Department of Energy by 12%, $8 Billion in addition to the $30 Billion in the 2010 “stimulated” budget!
So our president doesn’t think seriously about the morality of stealing from our future generations. He neglects to treat the budget seriously. He won’t look at the unsustainable entitlements which he has just added to with Obamacare. No, he wants more votes, greater deficits, and more debt for our grandchildren to pay! SICK!
What’s he want to do with that largess? Something smart like nuclear power? No, sorry. He wants things your tax dollars and the tax dollars of your great grandchildren must go to subsidize. Things like, solar with a budget increase of 88% and wind with a budget increase of 61%. Something my grandchildren recognize in their youth is that the sun doesn’t always shine and the wind doesn’t always blow. Apparently Obama hasn’t gotten that message. He hasn’t driven through the Coachella Valley to Palm Desert to see the thousands of acres of still, silent wind mills bilking the US taxpayers. He hasn’t been to Victorville on an overcast day to see all those wonderful mirrors tilted toward the grey sky, reflecting only a testimony to taxpayer ignorance.
Here’s an idea. Let’s abolish the Department of Energy. What does it do that isn’t already being done by or could be done by the myriad of other real departments? It employs 1600 bureaucrats who could contribute the economy significantly better in the private sector, if for no other reason than that taxpayers would not be paying for them. It is not exactly what one thinks of as one of the essential functions of government. And, look who created it, Jimmy Carter, Obama’s alter ego! What better argument to undue it, than that Carter did it?
If we abolish the DOE, Obama will no longer have a code with which to appease the global warming alarmists! Then he must choose, make a decision! What a frightening thought!
Time For A Little Humor…….Aw WTF!
Posted by Tom in Budgets, Deficit, Fiscal Policy, Humor, National Debt, Politics, Presidency on February 23, 2011
Sorry but I couldn’t resist!
Leftist Confronts Problems of His Own Making
Posted by Tom in Budgets, California, Deficit, State Finances, Unions on February 20, 2011
The picture of a Democratic governor confronting the out-of-control public pension mess that he himself initiated in his earlier term. California pension payouts have gone from $2 Billion to $6 Billion in 10 years. Of course, there’s a lot of games played with last minute promotions, etc. to maximise those generous payouts. The state’s program is underfunded and those unfunded liabilities don’t show up on the accounting books.
Those books show a $25.4 Billion current budget deficit! Jerry Brown wants to punt a tax increase to help solve the budget gap to the taxpayers. But he needs a handful of Republicans to agree to put the tax increase on the ballot. Business groups and the Republicans want the pension issue included as part of the fix.
According to the WSJ article, Public-Pension Fight Surfaces in California, ”Several big unions argue that the time isn’t right for a pension overhaul, including some that helped block efforts along those lines by former Republican Gov. Arnold Schwarzenegger. They worry that union members would have to pay significantly higher costs to fund their pensions, among other things.”
Imagine that, they worry that they would have to pay significantly higher costs to fund their pensions!
If there is any solace in this, it’s that the man responsible for public union collective bargaining in the state must now deal with the mess he created! Public employee unions, public monopolies, even FDR would be shocked!
Fear Mongering Is No Substitute For Leadership
Posted by Tom in Deficit, Entitlements, Fiscal Policy, Social Security on February 4, 2011
As Charles Blahous notes in his “Slash” op-ed in yesterday’s WSJ, during the State of the Union address “Mr. Obama mentioned Social Security only long enough to issue vague warnings against “putting at risk current retirees” and “slashing benefits for future generations.”
As has been recently reported, this year alone Social Security is projected to collect $45 Billion less in payroll taxes than it pays out in benefits. This deficit is projected to continue each year until the fund is exhausted in 2037. Our president is not unaware of this. In fact, in that same speech he failed to mention the bipartisan reforms proposed by his own Commission of Fiscal Responsibility and Reform.
It’s worthwhile to review the history of Social Security a fairly concise summary of which is offered by Wikipedia. It is interesting to see the twists and turns the history has taken. It has been a political football with over-promising and mistaken formulae.
Indeed, the formula which Blahous criticizes was inserted in the law to correct an over-indexing mistake which increased payments at double the rate of inflation. “Since 1977, Social Security has employed a formula that links a retiree’s initial benefit payment to growth in the national average wage index. Since wages tend to grow faster than prices, this formula pays younger cohorts greater benefits (in inflation-adjusted terms) than those paid to earlier retirees.”
“The rationale behind this is to provide the same replacement rate (i.e., benefits as a percentage of pre-retirement earnings) for “similarly situated” workers of different generations. In other words, if a typical worker’s benefit today is 50% of his previous wage earnings, then that worker’s grandson, assuming he occupies the same relative position in the national wage distribution, will also get a benefit equal to 50% of his own earnings.”
“What this means practically is that today’s medium-wage retiree receives a benefit just below $18,000 at the normal retirement age. But benefits scheduled for a medium-wage retiree of 2050 would equal nearly $29,000 in today’s dollars.”
“To slow the growth of tax burdens, therefore, the benefit formula must grow more slowly. Current wage- indexing doesn’t create benefit equity across generations. Rather, it ensures that each successive generation must pay higher taxes to get the same replacement rate.”
“Most responsible reform proposals recognize that the benefit formula needs to change. Under the proposal put forward by the commission’s co-chairs, Alan Simpson and Erskine Bowles, for example, the medium-wage worker of 2050 would get a benefit somewhat over $24,000 (in today’s dollars) at normal retirement age. This amount is not as much as the current system is promising, but still offers far more purchasing power than today’s retirees possess.”
Blahous points out that none of the reform proposals would “slash” benefits. For the President to imply such is demagoguery, typical of the class-war rhetoric he’s wont to fall back upon. And this when courageous leadership is the order of the day.
Immorality At Its Highest
Posted by Tom in Deficit, Justice, Law, Morality & Religion in the Public Square, National Character, National Debt on January 27, 2011
Consider the $14 Trillion in national debt. Now consider the $1.5 Trillion U.S. budget deficit that will increase it this year and the like sized deficits in future years. Now consider the $140 Billion plus in state budget deficits and hundreds of billions in state and municipal debt. Finally, consider the $3.1 Trillion in the unfunded liabilities of the several states and the $53 Trillion in unfunded liabilities of the federal government.
Now who is benefiting from all that money? Who has benefited from all that money?
OK, now who will repay all that deficit generated debt and all those over-promised unfunded liabilities?
That’s right, future generations will pay. Your children, grandchildren and great-grandchildren will pay. They will pay for what you have used! For what you have become entitled to! For your welfare! For your retirement and medical care!
DOES THIS STRIKE YOU AS IMMORAL?
In short, this generation is stealing from the next generations. And it is reaping benefits that the next generations will not enjoy. And it is obligating those generations to pay for our benefits.
This is absolutely wrong, immorality at the highest level. And, does our president attack this or suggest reform? No he merely wants to freeze this immorality in place at the high levels he had promoted!
Uncle Milty’s Wisdom and the Hidden Cost of Government
Posted by Tom in Deficit, Entitlements, Fiscal Policy, Government Regulation, National Debt, Taxation, Welfare on January 23, 2011
As sure as we have unintended consequences of legislation and regulation we have hidden cost thereof and indeed of basic government. This was brought home last week in a WSJ op-ed by Dick Armey and Matt Kibbe, What Congress Should Cut. They lead with Milton Friedman’s wise observation:
“Milton Friedman correctly argued in 1999 that the “real cost of government—the total tax burden—equals what government spends plus the cost to the public of complying with government mandates and regulations and of calculating, paying, and taking measures to avoid taxes.” He added, “Anything that reduces that real cost—lower government spending, elimination of costly regulations on individuals or businesses, simplification of explicit taxes—is a tax reform.”
Just think of that simple observation and put it alongside with the runaway regulatory environment wrought by Obama. The EPA plans to regulate the breath you exhale from one end or the other! The FCC likewise with your freedom of email and web based speech. HHS with Obamacare favors and penalties for both unions and states, not to mention individuals. Financial services regulators do overburdened with Dodd-Frank that they can’t get new rules out quickly enough.
Top these administrative dictates off with Obamacare, Financial Regulation, Cap and Trade proposals, and the ongoing Fannie-Freddie mess and its aftermath, and you have the perfect storm for explosive government costs. Obama’s feint at regulatory restraint a couple of days ago, was just that, nice sounding words with little substance when it comes to the important issues restraining growth.
So Friedman’s maxim bears analysis. Think of the man hours, expensive man hours, spent, no wasted, in compliance, or workarounds to obviate compliance. How much better could the time be spent. How much better could the dollars thus spent be invested in potentially productive endeavors! The same is true for paying or not paying taxes under our complex tax structure. What a needless waste of time and money, both of which could be put to better use.
The article goes on to suggest candidates for elimination and they are numerous: The discretionary spending binge since 2007. Obamacare. Fannie/Freddie subsidies. Farm subsidies like Ethanol. And eventually, no soon, a serious reform of Medicare, Medicaid, and Social Security. All of these are a cancer some slowly, some rapidly bankrupting the nation.
The call is to wake up; time is rapidly running out.
Let’s Hire More Government Workers
Posted by Tom in Academics, Deficit, Economics, Education Facts & Policies, Fiscal Policy, Nevada, Taxation, Unions on January 12, 2011
It’s wrong to pick on public workers, so I hesitate to write this post; but when the public workers profess to teach students at college and post graduate levels, pick on ‘em we should, and hard!
I speak of an op-ed in today’s edition of that bastion of elite journalism, the Reno Gazette Journal, by Tom Harris and Elliott Parker. Harris is a professor of “resource economics” and more frighteningly “director of the University Center for Economic Development.” Parker is a professor and chairman of economics at UNR’s College of Business.
The article, What is the effect of taxes on state economies? compares Nevada’s GDP growth to the “share” of GDP “provided by state and local governments” during the past 45 years and concludes that Nevada’s small government did not cause it to be the fastest growing state! No correlation here. Yeah, how about that?
Being economists, however, they struggle and find a strong correlation between real GDP growth and and “lagged growth rate of its state and local government!” Whew! I was worried about that.
Perhaps our good professors don’t realize that Nevada’s state and local government spending has grown more than the population growth plus inflation with little to show for it save deficits and unfunded liabilities. Or perhaps they aren’t aware of the slight deficit problem here caused to a great extent by public employee unions at the local level. Or perhaps they don’t read the Wall Street Journal which published the following chart in discussing spendthrift Illinois and the great migrations away from the tax, borrow and spend fools in state governments.
Anyway, back to the article, our authors continue searching for a reason for the non correlation in one case and strong correlation in the other. “One way to look at it is that state and local governments provide essential public goods that cannot be adequately provided by the private sector, such as roads and education. While higher taxes might create some disincentives for private investment and growth, many of these public goods are necessary investments for the private sector to function.”
I love that “essential public goods that cannot be adequately provided by the private sector.” And they use education as an example, later stating that “without good public education, the private sector lacks the educated work force it needs.” Nevada public education is at the bottom of the barrel and the more money we throw at it the worse it gets. Oh, but our professors are in the education business, a business whose prices dramatically outpace inflation and in truth outpace value delivered.
But what’s the point of the article, well it’s an exposition of the Keynesian multiplier. You know the one Obama rolled out for his stimulus billions. Government spends a dollar which creates $1.50 in GDP. It’s as if that dollar comes out of thin air. In truth that dollar is taxed currently or borrowed and repaid with later taxes (grandchildren look out!). In either case there has been a misallocation of what could have been productive capital.
Ah, but our good professors use the Keynes multiplier in reverse, a dollar reduced in state or local government spending will diminish GDP by $1.62! “Firing a school teacher means less money is spent by that teacher on rent, food and other goods!” They fail to mention that the teacher might be deadwood kept on in tenure by the infamous teachers union which accounts for a significant portion of the current deficit and unfunded liabilities. But the real sin is that the dollar saved by firing that non productive teacher might have been invested and produced $10 dollars in GDP.
Finally they elevate the sin to the level of a crime in discussing the multiplier effect. “Economists teach this to every first-year student in macroeconomics, and estimates from real data consistently find it to be true.” This of course is not true, not even a half truth as Obama has demonstrated.
Besides, if this were true we should all go to work for the government, since there is no “essential public good” it doesn’t seem to have its hand in.
Snake Oil Resold: Repealing Obamacare Will Raise Deficit!
Posted by Tom in Centrally Managed Economy, Congress, Deficit, Democrats, Entitlements, Nationalized Health Care on January 9, 2011
The Democrats really think the public is stupid: They are saying that eliminating a new unsustainable Obamacare entitlement will increase the deficit! (Of course, they passed this abomination with cloak room deals, in the dark of night, against the will of the voters.) Let’s see, adding 32 million to a federal health care program will save money. Really!
They who make it their mission to steal from our grandchildren are claiming the high ground and claiming that repeal of this monstrosity will increase our grandchildren’s indebtedness. If the public believes that they will buy bridges in Brooklyn!
Yesterday’s WSJ editorializes against their lies with ObamaCare’s Reality Deficit. The article treats the phony assumptions given to the CBO, and the real assumptions withheld from the CBO, and shows how the CBO can do the math correctly and say that the deficit will increase. Given the real assumptions and complete picture, the CBO would say that the deficit will be reduced by repealing Obamacare.
“Among the worst Democratic abuses was gaming the CBO’s budget conventions to make it seem as if ObamaCare “saves” money.”
“The accounting gimmicks are legion, but we’ll pick out a few: It uses 10 years of taxes to fund six years of subsidies. Social Security and Medicare revenues are double-counted to the tune of $398 billion. A new program funding long-term care frontloads taxes but backloads spending, gradually going broke by design. The law pretends that Congress will spend less on Medicare than it really will, in particular through an automatic 25% cut to physician payments that Democrats have already voted not to allow for this year.”
“The CBO budget gnomes are required to “score” what’s on paper in front of them, no matter how unrealistic, and that’s the method its Congressional masters prefer. The political class makes believe that CBO’s forecasts are carved into stone tablets through divine revelation, but all they really show is that politicians have rigged the budget rules to hide the true cost of entitlements.”
“The government can’t subsidize coverage for tens of millions of new people and simultaneously reduce the deficit, as most Americans seem to intuitively understand. The real offense Republicans are committing in the eyes of Washington is exposing its illusions.”
A quick review of some of the posts on Nationalized Health Care on the right side of this page may refresh any memories that need refreshing. Suffice it to say that the House should repeal the damn law and let the Senate go on record after the November results as favoring it; and let Obama veto any repeal that gets to his desk! 2012 is just around the corner!
They Never Learn: Leftists Won’t Cut As Long As They Can Tax and Borrow
Posted by Tom in Deficit, Fed, Federalism, State Finances, Taxation on January 8, 2011
Illinois legislators, facing a $15 Billion deficit, $54 Billion unfunded pension liability and the highest state borrowing costs in the nation, are considering, what else, 75% income tax increase, from 3% to 5.74%, according to an IBD editorial, Illinois Taxes: How Blue Can You Get? And this, despite the preponderance of evidence showing that businesses, jobs and people flee high-tax states.
A chart illustrates the great migration and resulting great reapportionment:
But Illinois pols don’t have the same long view perspective that muni bond investors have, so the borrowing spigot is now in jeopardy. Michael Corkery picks up the story in his WSJ article, Bond Buyers’ Eyes Are on Illinois. The smart investors like Bill Gross of Pacific Investment Management are avoiding Illinois bonds. The state has been paying its vendors in IOUs. And “Illinois has struck fear in bond buyers’ hearts because, they say, more than many other financially troubled governments the state has increasingly relied on debt to pay bills, rather than making deep spending cuts or raising income taxes to increase revenue.”
So Illinois debt costs are the highest of the spendthrift states, including CA and NV.
People and businesses vote with their feet as the great migration from the high tax states to the business friendly low tax states well illustrates. As the IBD editorial exhorts: “Stop worrying about the distribution of the golden eggs and start worrying about the health of the goose!”
The only ray of hope here is Ben Bernanke’s statement Friday: “We have no expectation or intention to get involved in state and local finance,” Mr. Bernanke said in testimony before the Senate Budget Committee. The states, he said later, “should not expect loans from the Fed.” For the full discussion see, Bernanke Rejects Bailouts in today’s WSJ.
I would argue for a statutory prohibition against such Fed loans, a statutory provision for voluntary state bankruptcy, and a constitutional amendment precluding federal bailout of the states.