budget

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.

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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Egyptian Military Seeks to Reverse Economic Reforms

by Hans Bader on February 21, 2011 · 1 comment

in Deregulate to Stimulate, Economy, International, Property Rights

The military government that replaced Egyptian ruler Hosni Mubarak is now moving to reverse recent reforms that gave Egypt solid economic growth in the last several years. It wants to curb free-market competition with military-run enterprises that dominate parts of Egypt’s economy.

As The New York Times reported on Friday, economists say the military “has already begun taking steps to protect the privileges of its gated economy, discouraging changes that some argue are crucial if Egypt is to emerge as a more stable, prosperous country.”

Field Marshal Mohamed Hussein Tantawi, the minister of defense and military production who now leads the council of officers ruling Egypt, has been a strong advocate of government control of prices and production. He has consistently opposed steps to open up the economy. . . already there are signs that the military is purging from the cabinet and ruling party advocates of market-oriented economic changes, like selling off state-owned companies and reducing barriers to trade. . . the military-led government also struck at advocates of economic openness, including the former finance minister Youssef Boutros-Ghali, who was forced from his job, and the former trade minister Rachid Mohamed Rachid.

The young protesters who helped bring down the Mubarak government are short-sightedly not criticizing these measures. Indeed, the Times reports that “some of the young revolutionaries at the vanguard of the revolt identify themselves as leftists or socialists.”

Egypt’s economy had long been a moribund socialist backwater after much of the economy was nationalized by the founder of Egypt’s ruling party, Gamal Abdel Nasser. His successors Sadat and Mubarak had largely continued those policies. But in the last five years, Mubarak finally embarked on serious economic reform, resulting in sustained economic growth. The reforms made property rights more secure, and made it easier to start a business — although much of Egyptian industry remained government-owned.

Ironically enough, this economic liberalization made possible the recent demands for political liberalization that contributed to Mubarak’s ouster, by giving Egyptians access to cell phones, the Internet, and other means of mass communication, and increasing their political consciousness. As Marshall Stocker noted:

Egypt today evidences Milton Friedman’s ‘Capitalism and Freedom’ thesis that a large measure of political freedom only comes when economic freedom exists. The World Bank’s 2006 “Ease of Doing Business index” scored Egypt 165 of 175, among the worst countries for business. After several years of economic liberalization, Egypt is 94 of 183 this year, more economically free than Brazil, India and Russia. The number of days it takes to start a business legally has dropped 85%. It now takes me 10, not the 500 days it took Mr. de Soto in 2004. The World Bank says that property registration now takes 72 days, down from 193, and now costs 90% less.  Economic liberalization permitted Egyptians to afford the tools of freedom: cell phones, satellite TV, Facebook and Twitter. Economic liberalization facilitated this revolution.

The economic regression occurring in Egypt is mirrored in more backward Yemen, where the longtime ruler of Yemen, one of the world’s poorest countries, has sought to shore up his popular support in the face of mass unrest by promising rigid “price controls” and an expansion of welfare to cover 500,000 more people. President Ali Abdullah Saleh has promised to expand his bureaucracy to hire more “college graduates,” and is increasing the pay of government employees. These measures will wreak havoc with his country’s finances, resulting in massive deficit spending. They will further stifle his country’s slow-growing economy, which has failed to keep pace with rapid population increases. Yemen’s lousy economy has helped make it a fertile ground for Al Qaeda recruiters.

In Libya, the viciously bloody and oppressive longtime dictator Muammar Qaddafi is shoring up his support base in the face of public protests by promising to double public-employee pay, even though public employees are much richer than the average Libyan. Egypt recently increased government employee pay by 15 percent to buttress their loyalty, a decision sure to increase its budget deficit and aggravate its economic problems.

We wrote earlier about how ethanol subsidies and mandates were fueling Islamic extremism and contributing to unrest in Egypt’s slums by driving up wheat prices, and thus shifting the locus of opposition to the Mubarak government away from Egypt’s small pro-democracy movements towards the anti-American Muslim Brotherhood, which is popular in the slums because of its relief efforts there.

Image credit: Muhammad Ghafari via Wikimedia Commons.

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.

Wine in Grocery Stores, Still on the Table in New York

by Angela Logomasini on July 22, 2010 · 2 comments

in Nanny State, Personal Liberty

A proposal to allow New York State supermarkets sell wine might re-emerge this year if Governor David A. Patterson can break the state’s budgetary stalemate. Battles over how to pay for New York’s ever-expanding welfare and regulatory states means that lawmakers have been unable to come to an agreement on the budget.

Patterson argues that allowing supermarkets to sell wine would increase much-needed government revenue. Current liquor store owners–who apparently fear competition–have been fighting the proposal while wineries and others support it. Surely, lawmakers should cut spending to resolve their mess, but giving consumers greater freedom is a great idea–budgetary mess or not.

The issue appeared to be dying on the vine, along with the governor’s budget. But Patterson says he will call an emergency session of the legislature to get the budget done–even though lawmakers might prefer to be home campaigning as Election Day approaches. Patterson has such authority under the state’s constitution and has tried to use it in the past without much success. Maybe impending elections will rouse lawmakers to action.

When New York lawmakers finally do allow wine in supermarkets, they should allow consumers to buy spirits there as well–as Governor Robert F. McDonnell has proposed for Virginia. Despite claims to the contrary, there is no evidence that such access would increase abuse or other problems, as reported in a Virginia Public Policy Institute study on the topic. There is no good reason to deprive consumers of access to these products as well.

Silly bans against selling wine or spirits at the supermarket are not really designed to address alcohol abuse, underage drinking, or the like. They exist to serve special interests, be they government agencies or liquor stores those agencies have essentially granted monopolies. An ad on this topic by New Yorkers for Economic Growth and Open Markets says it all.

$3,000,000,000,000 in Tax Increases in President Obama’s Budget

by Hans Bader on March 13, 2010 · 1 comment

in Deregulate to Stimulate, Economy, Employment, Health and Illness, Healthcare, Insurance, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Stimulus to Nowhere, Trade, Zeitgeist

The president’s proposed budget raises taxes by three trillion dollars over the next ten years, notes Washington fiscal analyst Brian Riedl in the Wall Street Journal.  Yet, in spite of that, “The president’s budget would borrow 42 cents for each dollar spent in 2010,” and “double the national debt over the next decade.”

The Obama administration recently ran up the largest budget deficit in history — so big that the monthly deficit was much bigger than George Bush’s entire annual deficit in 2007.

The president wants a new $267 billion stimulus package, on top of the $800 billion one that passed earlier.  Obama claimed the stimulus package was needed to avert “irreversible decline.” But the Congressional Budget Office concluded that the stimulus package will actually cut the size of the economy in the long run.

Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent.”

The stimulus package destroyed thousands of real world jobs in America’s export sector.  Meanwhile, the administration claimed credit for creating thousands of imaginary jobs in non-existent congressional districts.  The stimulus is full of wasteful spending.

“President Obama’s policies would add more than $9.7 trillion to the national debt,” the Congressional Budget Office said.   That’s roughly fifteen times the cost of the Iraq and Afghanistan Wars combined.

The president’s health care proposals will add still more to the national debt, through budget gimmicks.  Even Democrats have expressed alarm about their unaffordable cost.   Their true cost, experts say, is at least $2.3 trillion, dramatically increasing the budget deficit.   ObamaCare would reduce medical innovation, raise taxes, drive up insurance premiums, break campaign promises, and increase state deficits.  It  would cut the quality of  care, while imposing restrictions that failed when tried at the state level.  It ignores advice from experts about how to cut costs.

In the 2008 campaign, Obama promised a “net spending cut,” but as soon as he was elected, he proposed massive spending increases.

Disappointing, but Not Surprising

by Ryan Young on February 17, 2010

in Economy, Politics as Usual, Zeitgeist

Headline from The Hill – “Pay-go gets passed, then it gets bypassed”

Pay-go budgeting rules — that any spending increases must be offset with spending cuts or tax hikes elsewhere — have loopholes big enough to drive a truck through. One of them, the emergency exemption, is invoked as early as the second sentence of the article.

In theory, pay-go is supposed to be a way to slow the growth of government. But it’s all for show. Nobody really means it. Just invoke the emergency exemption. Then spend all you like. Appearances matter, especially in Washington. But they should not be confused with reality. And reality is that Congress is going to spend and spend some more, no matter what budgeting rules are in place.

Shame on them for trying to make people think otherwise.

FDIC Prepares for “an even-larger number of bank failures” in 2010

by Daniel Compton on December 17, 2009 · 1 comment

in Bailout Watch, Deregulate to Stimulate, Economy, Employment, Politics as Usual, Stimulus to Nowhere, Zeitgeist

In a display of supreme confidence in the strength of the American economy, the Federal Deposit Insurance Corporation announced a 2010 budget increase of close to 54% earlier this week.  The FDIC’s annual operating budget grew from $2.6 billion in 2009 to $4 billion for 2010.  The largest portion of the increase is devoted to funding takeovers of failed banks.  The 2009 budget allotted $1.3 billion for this purpose, while the new budget devotes $2.5 billion—nearly twice the amount.  Also in the budget is an increased allocation for staffing.  The FDIC intends to bring on over 1,600 new employees, most of whom are to be hired on a temporary basis, increasing their total staff by about 24% to 8,653.

And what is the impetus for this greatly increased budget?  The press release accompanying the new budget makes it clear that the increase is intended to “ensure that [they] are prepared to handle an even-larger number of bank failures” in 2010.  A total of 133 banks have failed so far in 2009, up from just 28 the previous year.

Clearly, the FDIC must not have gotten word that the recovery has begun.

New CEI Release: One Nation, Ungovernable?

by Elizabeth Jacobson on October 26, 2009

in Bailout Watch, Deregulate to Stimulate, Regulation, Stimulus to Nowhere

Question: What do you get when you combine a $700 billion “stimulus” package, $1.1 trillion in wealth-destroying regulatory compliance costs, a mountainous non-discretionary entitlement obligation, bailouts for large manufacturers, an small army of unelected czars, and a $1.4 federal budget deficit?

Answer: Way too much government!

In a new CEI paper, One Nation, Ungovernable?, Clyde Wayne Crews lays out an agenda for setting America on the path to economic recovery. From lifting burdensome regulations and restrictions on executive compensation to fostering competition and restraining federal spending, Crews calls for an end to the “bailout culture” that’s spread throughout the capitol, and a return to more responsible policies that promote growth and liberty.

As Crews notes, “If government intervention were stimulative, the nation should be overflowing with wealth and job creation already.” Obviously, the folks on Capitol Hill got it wrong. Wealth comes from policies that unleash the creativity and industriousness of private citizens and companies, not from massive regulation or wasteful government  “investment.”  Deregulation and markets encourage competition and growth and create jobs.

Calling all legislators: please take a few moments and read One Nation, Ungovernable? Fret not, at only six pages, it’s far shorter than most of the tax-and-spend bills you’ll see this year.

LibertyWeek 61: How About FCC Neutrality?

by Richard Morrison on September 21, 2009

in CEI Projects, Environment, Features, Global Warming, Podcast, Zeitgeist

Your host Richard Morrison welcomes returning guest co-host William Yeatman and special guest commenter Ryan Radia to the program for Episode 61 of the LibertyWeek podcast. We start with the FCC’s just-announced proposal for “net neutrality,” Treasury documents that reveal the true cost of cap-and-trade legislation and the plan for getting over California’s great depression. We then move on to the G20 Summit’s potential path to prosperity and the ever-expanding scandal that is ACORN.

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