budget deficit

Congressman Mike Doyle: $3.5 Trillion in Spending is Too Little for the Government to “Spend Any Money”

by Hans Bader on August 2, 2011 · 3 comments

in Economy, Features, Politics as Usual, Sanctimony, Zeitgeist

Post image for Congressman Mike Doyle: $3.5 Trillion in Spending is Too Little for the Government to “Spend Any Money”

Even after the modest reductions in spending resulting from Sunday’s deal to raise the federal debt ceiling, the federal government will still spend $3.5 trillion in 2012 — compared to $2.9 trillion in 2008. But Congressman Mike Doyle (D-Pa.) had a big tantrum yesterday that the spending won’t be even bigger: “We have negotiated with terrorists,” an angry Doyle said. Referring to the Tea Party, he lamented that “This small group of terrorists have made it impossible to spend any money.” (The Tea Party doesn’t control either House of Congress; Democrats control the Senate.)

His reference to peaceful Tea Party members as “terrorists” was echoed by Vice President Biden. “Vice President Joe Biden joined House Democrats in lashing tea party Republicans Monday, accusing them of having ‘acted like terrorists’ in the fight over raising the nation’s debt limit.” Although Biden regularly voted to increase the debt limit as a senator when a Democrat was in the White House, he and Obama voted against such increases when Republicans were in the White House, even when such debt ceiling increases were needed to pay for federal programs and wars that Biden had voted for. Unlike some Tea Party Republicans, Biden did not make any constructive suggestions about how to rein in deficit spending when he voted against increases in the debt limit. He simply did so to score partisan political points.

Doyle’s claim that Tea Party members are terrorists was echoed by some intemperate left-wing op-ed writers, like The New York Times‘ Joe Nocera, who claimed today that “Tea Party Republicans have waged jihad on the American people.” Curiously, although left-wing journalists depict peaceful Tea Party members as terrorists, they depict violent Greek anti-austerity protesters who oppose cutbacks in deficit spending as “largely peaceful” even when such protesters firebomb banks, resulting in the deaths of innocent people. To them, “peaceful” simply means you don’t question the big-government status quo.

Even with the cuts in the July 31 deal to lift the debt ceiling, America is still spending so much money that its credit rating may be downgraded by Standard and Poor’s. That might wreak havoc on the economy, but The New York Times‘ Paul Krugman called for even more deficit spending in an August 1 op-ed. His frequent lament is that President Obama is insufficiently “progressive,” even though Obama is by any reasonable measure the most left-wing president in history. The federal budget deficit is now $1.6 trillion — compared to $160 billion in 2007. But even increasing the deficit by a factor of ten just isn’t enough for progressives like Krugman.

In Politics, Inertia Always Wins

by Ryan Young on April 15, 2011

in Economy, Politics as Usual

The GOP has been bragging that its shutdown-avoiding budget deal will save $38 billion. The CBO took a closer look, and it turns out the actual figure is $353 million, or 0.02 percent of this year’s budget deficit.

In The Daily Caller, I point out that this is one more example of the iron law of politics — inertia always wins.

Disclaimer: CEI takes no stances on foreign policy  or social issues. The opinions on those issues in the article are my personal opinions.

CEI Podcast for April 14, 2011: Avoiding a Government Shutdown

by Ryan Young on April 14, 2011

in Economy, Podcast

Have a listen here.

Warren Brookes Journalism Fellow Kathryn Ciano analyzes the Continuing Resolution passed by the House today that will keep the federal government open for another six months. She also looks at proposals from President Obama and Rep. Paul Ryan to reduce the budget deficit over the next decade.

Obama Administration Understated Deficits by $2.3 Trillion; Resists Spending Cuts Needed to Stem Deficits

by Hans Bader on March 25, 2011

in Economy, Employment, Energy, Environment, Stimulus to Nowhere

The Congressional Budget Office reported last week that the Obama administration understated budget deficits “by more than $2.3 trillion over the upcoming decade,” and that “if Obama’s February budget submission is enacted into law it would produce deficits totaling $9.5 trillion over 10 years — an average of almost $1 trillion a year.” President Obama objects to even a tiny two percent cut in the federal budget, submitting a self-indulgent, smoke-and-mirrors budget that would actually increase spending even faster than previously proposed for 2012.

Obama’s record deficit spending is based on the notion — contrary to all evidence — that if the government increases spending, that spending will more than pay for itself through increased economic growth. (Never mind that Canada’s economy boomed after it slashed government spending in the 1990’s, and America experienced an “economic boom” after our government slashed spending in 1946.)

For example, even though “federal education spending has gone through the roof” in recent years, Obama has called for big increases in education spending, saying that “the best economic policy is one that produces more college graduates.” But dumping more money on colleges won’t spur economic growth.

Jacking up college attendance rates further just results in the presence of bored, unmotivated students who are not interested in learning, and only go to college to get a diploma, while spawning an economically-destructive “arms race” over who can acquire the most unnecessary credentials. Already, “36%” of “the nation’s undergraduates” learn “little” or nothing after four years of college, according to a study cited by USA Today. Many of their professors didn’t even try to teach them much: “32% never took a course in a typical semester where they read more than 40 pages per week.”

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Regulation of the Day 166: Cowboy Poetry

by Ryan Young on March 8, 2011 · 1 comment

in Economy, Features, Regulation of the Day

Post image for Regulation of the Day 166: Cowboy Poetry

This year’s budget battle is especially heated. Democrats want the federal budget to be $3.7 trillion. Republicans want it to be $3.6 trillion. Both sides are willing to shut down the federal government rather than give in.

That’s where cowboy poetry, of all things, comes in. This traditional American art form, which I’d never heard of until today, has suddenly become the latest front in the epic struggle over the size and scope of government.

It is currently official federal policy to financially support cowboy poetry. But the GOP wants to cut $61 billion, or 1.6 percent, out of President Obama’s proposed budget. And cowboy poetry funding is on the chopping block.

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Wisconsin Union Backers Defame Virginia and Spread Bogus Statistics

by Hans Bader on February 26, 2011 · 1 comment

in Features, Labor, Politics as Usual, Regulation, Zeitgeist

Post image for Wisconsin Union Backers Defame Virginia and Spread Bogus Statistics

Virginia schools have better-than-average test scores. Virginia obviously doesn’t rank an abysmal 44th in the nation on SATs and ACTs, as supporters of Wisconsin government-employee unions keep falsely claiming. They’re making that claim up because Virginia bans collective bargaining by government employees, and Wisconsin, which currently mandates collective bargaining in government agencies, is considering proposals by its newly-elected conservative governor to bar such bargaining in areas like pensions, which frequently result in government costs being passed on to future generations.

In 2009, Virginia ranked in the middle of states on the ACT and SAT, and in 2010, it actually outranked Wisconsin on the ACT (12th vs. 17th in “average composite score“). The reason it doesn’t rank higher on the SAT is because so many of its students take the test – including marginal students who wouldn’t even take them in another state. (Wisconsin boasts a higher average SAT score than Virginia partly because only “four percent” of Wisconsin students took the SAT, compared to “67 percent” in Virginia. Virginia’s lower average SAT score is a function of a larger pool, not dumb students or bad schools, as PolitiFact pointed out in debunking the false claim that Virginia ranks 44th.)

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Senate Democrats: House’s Modest 2% Budget Cut Is Too Big

by Hans Bader on February 26, 2011

in Economy, Employment, Politics as Usual, Stimulus to Nowhere

Post image for Senate Democrats: House’s Modest 2% Budget Cut Is Too Big

The budget deficit for Fiscal Year 2011 is projected to be a staggering $1.645 trillion, out of a budget of $3.819 trillion. The Republican-controlled House of Representatives voted to cut $61 billion — about 2 percent — out of this year’s budget to shrink the deficit. Remarkably, to Senate Democrats, this tiny cut is too much.

The Washington Examiner’s Susan Ferrechio reported on Wednesday that “Senate Democrats proposed a short-term budget on Tuesday that would keep federal spending at current levels, setting up a showdown with House Republicans that increases the possibility of a government shutdown as the GOP presses ahead with plans for steep budget cuts.” (On Friday, though, they showed a potential willingness to compromise by cutting a smaller amount: those few “programs that President Obama has already marked for elimination.”)

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Obama’s Budget Philosophy: Life Is Short, Eat Dessert First

by Hans Bader on February 18, 2011

in Economy, Employment, Energy, Politics as Usual, Stimulus to Nowhere

If a motto summed up the Obama administration, it might be, “Life is short. Eat dessert first.” President Obama’s policies are all about self-indulgence in the present, to be paid for with either long-run economic decline, or painful sacrifices by future generations.

His recent budget proposal, which contains a mix of real spending increases and mostly imaginary “cuts,” is a case in point. It pretends to cut spending and the deficit, but its “cuts” are slated to occur largely in the distant future (and thus may never happen), while its increases kick in almost immediately. It is so dishonest that it has drawn criticism from across the political spectrum.

As former congressional economist Chris Edwards notes, although Obama claims it cuts spending:

His new budget proposes slightly more discretionary and entitlement spending for next year than did his last budget!

  • Last year, Obama planned to spend $1.301 trillion on discretionary programs in FY2012, but now he plans to spend $1.340 trillion.
  • Last year, Obama planned to spend $2,107” billion “on entitlement programs in FY2012, but now he plans to spend $2,140” billion.

Similarly, The Wall Street Journal calls the “White House Budget” proposal “cynical and unrealistic,” since it pretends to cut spending over the long run, but openly “increases deficits above the spending baseline for the next two years.”

(Obama made the same kind of deceptive sales pitch for his $800 billion stimulus package, focusing on immediate gratification and ignoring future costs. In pushing the stimulus, he cited Congressional Budget Office claims that it would save jobs in the short run, while ignoring the CBO’s own finding that the stimulus will actually shrink the economy over the long run, by exploding the national debt and crowding out private investment. Obama also made the apocalyptic claim that the stimulus package was necessary to avert “irreversible decline,” but this claim was so incredible that it was not even peddled by his supporters in the media. The stimulus ended up destroying jobs even in the short run by wiping out jobs in the export sector, and subsidizing foreign green jobs .)

The Atlantic’s Megan McArdle, who voted for Obama in 2008, calls Obama’s budget proposal “disastrous.” She notes that his proposed budget includes phony, “sketchily outlined cuts,” and short-term patches that are “stacked to expire just after Obama (in theory) gets reelected.” Moreover, she points out that the supposedly “‘fiscally responsible’ Democrats have given us the largest peacetime deficit in history, one that keeps growing beyond all expectations.”

Her colleague Andrew Sullivan, who was Obama’s chief cheerleader in the blogosphere until now, finally admits the truth about his idol:

this president is too weak, too cautious, too beholden to politics over policy to lead. In this budget, in his refusal to do anything concrete to tackle the looming entitlement debt, in his failure to address the generational injustice, in his blithe indifference to the increasing danger of default, he has betrayed those of us who took him to be a serious president prepared to put the good of the country before his short term political interests. Like his State of the Union, this budget is good short term politics but such a massive pile of fiscal [male bovine excrement; we like to keep this a family blog if we can--ed.] it makes it perfectly clear that Obama is kicking this vital issue down the road.

To all those under 30 who worked so hard to get this man elected, know this: he just screwed you over. He thinks you’re fools. Either the US will go into default because of Obama’s cowardice, or you will be paying far far more for far far less because this president has no courage when it counts. He let you down. On the critical issue of America’s fiscal crisis, he represents no hope and no change. Just the same old Washington politics he once promised to end.

AOL News notes that  for all the talk of cuts, “President Barack Obama’s 2012 budget proposes to spend $3.48 trillion on everything except interest on the national debt. That’s a 7 percent increase over what the government spent in 2010. And keep in mind that in 2010, there was a lot of stimulus money flying out the door.”

Even The Washington Post, which endorsed Obama in 2008 and has not supported a Republican for president since 1952, said Obama’s budget was full of “gimmickry,” and called Obama the “Punter-in-Chief” for failing to address America’s looming budget problems.

Obama would increase wasteful education and transportation spending by billions more. The Washington Post’s Robert Samuelson gave a thumbs down to the Obama administration’s anachronistic focus on rail boondoggles that few people will use. The Cato Institute’s Neal McCluskey debunked the bogus offsets Obama is using to pretend to pay for his budget-busting and wasteful education proposals. We earlier explained why Obama should have cut rather than increased education spending at this link.

Time to Privatize? The Economics of Social Security

by Alex Schibuola on November 16, 2010 · 3 comments

in Economy

Government spending reform is not an option. It’s a necessity. Reforming Social Security goes a long way here. The most sensible reform would be to privatize it. To see why, one needs to understand the economics of Social Security.

First: What is saving? When we buy stocks, bonds, and CDs with our money, we call it “saving.” In the economics sense, when we save, we abstain from consuming resources today. Businesses use the saved resources to produce more for tomorrow.

Suppose an economy produces a stock of corn. We can either consume it or save it. The saved corn is planted and makes more corn next year. This is saving and investment, in the economics sense. Here’s the link between “saving” and saving: I decide not to spend all my money consuming corn. Rather, I buy a bond from a farmer. I am “saving.” In doing so, I also leave corn on the shelf of the supermarket. This is saving.

The farmer buys the leftover corn using the money from the bond I bought. He invests by planting the corn. In a year, it becomes more corn. He sells it to the supermarket for money which he uses to repay me for the bond, with interest. Now I have the money, and I can consume more corn or save again.

This corny story is an analogy for gross domestic product (GDP), the measure of all final goods and services produced within a nation in a year. It includes all the corn, cars, soda, etc. produced by a nation. The saved portion of GDP becomes investment. Investment creates more GDP in the future.

So is Social Security saving? No. Those paying in today don’t consume it or save it. The government receives the money, but they don’t leave it in a personal account; they transfer it someone else who uses it to consume resources. In other words, the government takes corn from you and gives it to your grandma. Now she can consume it. There’s no real saving because no corn gets planted to make more corn tomorrow.

If there’s extra money in Social Security, government takes it and buys corn to consume itself, e.g., to build corny missiles. It gets replaced with a government IOU, Treasury bonds (aka higher future taxes). Not only is this not saving, but the corn missiles mean there is even less corn for individuals and businesses to consume and invest too.

Identically, imagine you “save” $1,000 of your income, but buy a new TV instead of depositing it with a bank. Since you’re “saving” and not a scheming politician, you write an IOU to yourself, promising to repay yourself $1,000 with interest. Is this “saving” plan stupid? It is. This is Social Security.

If Social Security were privatized, people would deposit their income with a bank. People actually save resources that businesses can invest. We, as true savers, get more resources in the future.

“Lockbox” proposals are equally flawed. In this instance, government doesn’t reach its hand into the cookie jar. It keeps the extra cash stowed aside. This is like putting money under your mattress. Once it’s out of circulation, it serves no purpose. Less money in circulation relative to real GDP means the average price level goes down (deflation). The Federal Reserve would just print more money to offset this.

Remember, the purpose of actual saving is to allow you to consume more in the future — not today. Social Security retards this process whereas privatized Social Security means actual saving. If people defer consuming some corn (GDP) today with a bank that lends it to someone to invest, then there will be more corn (GDP) tomorrow. This is the economics of Social Security.

Yandle: Everyman’s Deficit

by Anne Sutherland on August 13, 2010 · 1 comment

in Bailout Watch, Deregulate to Stimulate, Economy, Nanny State, Odds & Ends, Stimulus to Nowhere

Clemson University economist Bruce Yandle has published a new paper that compares the federal government’s spending habits with that of the average family. Yandle effectively bridges the gap between private common sense and public finance.

As he relates, overspending and government bailouts have created a federal deficit of $1.4 trillion. Already at 10 percent of GDP, this is only predicted to rise. A series of graphs clearly show the alarming rate at which government outspends itself.

Professor Yandle also highlights how government programs “lack a coordinated way to assess their effectiveness.” As a result, their budgets expand without any true gauge of their success or failings, or “how government-provided services can be improved.”

The paper goes on to explain how government- supported programs crowd out similar private sector efforts. Yandle shows a more uniform government approach does not, and cannot, provide individual cases with individual commitment as effectively as private enterprises such as charities can.

Private sector donations and causes are further squeezed out as businesses and individuals realize that it is often more profitable for them to lobby for more government support than turn to the free market economy.

Yandle then addresses President Barack Obama’s fiscal proposals. In his 2010 State of the Union address, Obama compared the government’s fiscal troubles to those faced by the average family. Yandle writes that “[t]he call to freeze discretionary spending brought a few chuckles, since that part of the budget accounts for just 17 percent of the total. But 17 percent matters in a 2010 budget that totals more than $3 trillion. We have to start somewhere.”

He goes on to cite a Gallup poll that showed the American public becoming increasingly concerned with its government’s fiscal situation. “Part of the explanation for this surge in interest in the federal budget deficit may reflect the surge in the deficit itself.” Never before has America faced such a deficit, with the prospect of such drastic consequences for the Everyman family.

Professor Yandle concludes that in the coming years, the federal government’s “Golden Handcuffs” will no doubt be strained, to not much avail, while the average family tightens its purse strings, nervously awaiting government cuts or increased taxes.

“Everyman’s Deficit” is a crash course in why we need to reduce the size of government. The paper clearly emphasizes and explains the benefits of private sector enterprise over government mismanagement. It should be a required read for all congressmen–and voters!

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