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.

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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Andrew Sullivan Blames Tea Party for Budget-Busting Deal That He, Not It, Supported

by Hans Bader on January 21, 2011

in Deregulate to Stimulate, Economy, Employment, Politics as Usual, Sanctimony

The deficit is largely the result of “feel-good” bipartisan policies supported by the political establishment. But rather than taking credit for the deficit it helped to create, the liberal establishment blames it on political outsiders like the Tea Party who have little influence over public policy. Sometimes, the Tea Party is accused of supporting policies it had nothing to do with.

Writing at his blog at The Atlantic, liberal journalist Andrew Sullivan recently faulted the “Tea Party” for the recent budget-busting deal between Obama and congressional leaders that exploded the deficit by extending tax cuts, unemployment benefits, and government handouts: “immediately after the election, moreover, they did a deal borrowing a huge amount more and adding $700 billion to the debt.”

The irony is that Sullivan, one of Obama’s biggest cheerleaders, had earlier endorsed that very deal, a deal also endorsed by other liberal media like the Washington Post because of the government handouts it contained. In an explanation that was hard to follow, Sullivan said that this new “stimulus package financed by borrowing” would somehow create “the best context for serious reform” of the nation’s finances, providing a “big new stimulus” that would help Obama “as he moves toward re-election.”

By contrast, some Tea Partiers publicly opposed the deal. A Wall Street Journal article quotes a Tea Party activist and Senate candidate saying that “she decided to run after watching Congress pass legislation during this month’s lame duck session, including a package of tax cuts, that added to the national debt.”

Most Tea Party bloggers took no position on the deal. The few that did either opposed it or reluctantly supported it as the best one could expect from a government that would still be dominated by liberals in the next Congress (with Democrats controlling both the White House and the Senate).

I criticized the deal in a blog post that was reproduced at a blog called “Freedom Action“” that includes many Tea Party members. It drew no objections from any blogger or reader at that site (which has more than 300 members). I noted that the billions it will spend on extending unemployment benefits won’t stimulate the economy, but will financially burden states. 30-40 state unemployment funds are already insolvent or teetering on the edge, thanks to past federal extensions of unemployment benefits. Giving people unemployment benefits for years on end discourages people from taking lower-paying jobs, and results in some recipients gaming the system. It encourages people not to relocate in search of work, and not to take productive jobs that they think are beneath them, even if those jobs are the only jobs that they will realistically find once their jobless benefits come to an end, because of the disappearance of the type of job they once performed.

As the Heritage Foundation notes, “The consequences of extended unemployment benefits are some of the most conclusively established results in labor economic research. Extending either the amount or the duration of UI benefits increases the length of time that workers remain unemployed. UI benefits subsidize unemployment. They reduce the incentive unemployed workers have to search for new work and to make difficult choices–such as moving or switching industries–to begin a new job.” (The deal also contains other disincentives to work.)

Admittedly, the deal is not as economically-destructive as some of the measures that Obama previously pushed through Congress on party-line votes, such as the $800 billion stimulus package, which actually shrank the economy in several ways. (The stimulus used “green-jobs” subsidies to send American jobs overseas. 79 percent of those subsidies went to foreign firms, such as an Australian firm that imported Japanese wind turbines, effectively outsourcing American jobs. It also wiped out jobs in America’s export sector.)

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!

Around the Country with Public Sector Unions

by Ivan Osorio on August 10, 2010 · 1 comment

in Bailout Watch, Economy, Employment, Labor

It’s often a sign that a problem is turning into a crisis when the public outcry over it becomes ubiquitous. That seems to be the case with the stress that government employee compensation is placing on government budgets at all levels, as several news items today indicate.

In a front-page story, USA Today reports that federal employees earn far above their private sector counterparts, and that gap has widened considerably in recent years.

Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.

Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.

The federal compensation advantage has grown from $30,415 in 2000 to $61,998 last year.

Public employee unions say the compensation gap reflects the increasingly high level of skill and education required for most federal jobs and the government contracting out lower-paid jobs to the private sector in recent years.

However, as Reason‘s Nick Gillespie rightly notes, such touting of government employees’ education credentials “probably reflects credentialism run amok as a demonstrated need for specialized skills.”

Moreover, higher salaries are just the beginning. In addition to generous benefits, many government workers enjoy retirement benefits that most private sector workers can only dream of. Negotiated as part of collective bargaining agreements, lavish pensions allow union-friendly politicians to keep their organized labor supporters happy, while they get to kick the can down the road to their successors — when the bill comes due, it becomes the new office holders’ problem.

And how lavish can those pensions get? Take the city of Bell, California,  where, The Wall Street Journal notes in an editorial, “City Manager Robert Rizzo stepped down after news broke that he was making $800,000 a year to oversee the blue-collar town of 40,000.”  And he’s just the tip of the iceberg.

According to the California Foundation for Fiscal Responsibility, a nonprofit that advocates pension reform, Mr. Rizzo is hardly alone. The foundation lists 9,111 retired California government workers receiving pensions in excess of $100,000 a year. The top earner, one Bruce Malkenhorst, receives $510,000 a year for his tenure as city administrator of Vernon, California (population, 91). Not including health benefits.

These paydays are the inevitable result of the dominance of government unions in city and state politics. While most private workers have 401(k)-type plans that rise and fall in value with economic growth, unions negotiate guaranteed payouts that stay lucrative whether or not the cities can afford them. California Attorney General Jerry Brown is investigating the Bell episode, but he’d enhance his chances to become the next Governor if he proposed more ambitious pension reform.

That is bad enough, but making that situation even worse is the fact that those same politicians who negotiated those generous pensions have neglected to adequately fund them, while setting up rules that could be gamed to increase payouts — sometimes even beyond retirees’ former salaries. Now those states face huge financial shortfalls, which underfunded pension obligations are making far worse. As the Mercatus Center’s Eileen Norcross and Todd Zywicki note in The New York Daily News:

At 44, Hugo Tassone retired from the Yonkers police force with an annual pension of $101,333 – thanks to overtime pay he tacked on to his $74,000 salary. Tassone told The New York Times it was the pension he could collect after 20 years of service that attracted him to the job in the first place.

He’s not alone. In the last decade, half of the police and firefighters who retired in Yonkers collected pensions that exceeded their base pay, in (at least one case) by as much as 75%.

Don’t blame the officers. New York’s pension rules make it pay more to retire than to work.

[...]

But loopholes and gamesmanship aren’t the only reason why public pension systems nationwide face massive funding shortfalls. They are the result of a perfect storm of flawed accounting, which fueled unrealistic employee demands that were then underfunded by politicians. In plans across the country, during booming years of the late 1990s, many workers were promised retirement payouts that were “too good to be true” and, thus, impossible to make good on.

New York’s budget situation is bad. In California, it’s reached a point that Governor Arnold Schwarzenegger calls “unsustainable.” He lays out the numbers in a Los Angeles Times op ed:

We have $500 billion in government-employee pension debt alone, a mind-numbing figure that is six times the size of our entire state budget and 10 times the amount we spend on education.

[...]

We must also reform California’s pension system for government employees, whose costs to taxpayers for just one of our major pension funds have skyrocketed from $150 million a year a decade ago to almost $4 billion this year. Private-sector workers already struggle to pay for their own retirement. Now they are being forced to pay more and more for the government workers’ retirement, at the very time their own retirement accounts have declined. What is worse, in five years those pension costs will grow to well over $10 billion per year, and keep growing from there.

Fixing this will not be easy, but public attention turning to this crisis is a welcome first step.

For more on public sector unions, see here and here.

LibertyWeek 101: Urban Beekeepers Unite!

by Richard Morrison on July 12, 2010

in CEI Projects, Features, Podcast, Zeitgeist

Richard Morrison and Marc Scribner welcome back long-lost co-host Michelle Minton to Episode 101 of the LibertyWeek podcast. We discuss the sobering recommendations of the White House debt commission, the intoxicating budgetary success of Chris Christie in New Jersey, the bunker mentality of UN climate scientists, the travails of urban homesteaders and the birth of scandal-based tourism.

How Much Would a Congressional Pay Cut Save?

by Ryan Young on May 18, 2010

in Deregulate to Stimulate, Economy, Politics as Usual

Rep. Ann Kirkpatrick is proposing a 5 percent pay cut for members of Congress.

“In the face of our ever-deepening federal debt, the federal government must follow their example by finding common-sense solutions to do more with less,” she told The Hill.

A noble sentiment. And one that would save $8700 per member. With 535 members of the House and Senate, the total savings are $4.65 million.

The federal government is on track to spend about $3.8 trillion this year. Trimming $4.65 million means that for every $816,502 the federal government spends, it would save one dollar.

Rep. Kirkpatrick is proposing a 0.00122 percent spending cut. That’s not even a rounding error.

I do not intend to mock Rep. Kirkpatrick. Her spending cut is better than nothing, and I am glad she is proposing it. But placed in proper context, it is very, very small. It is a largely symbolic proposal, and should be treated as such. A 5 percent pay cut for Congress is no austerity measure.

More fundamental solutions would involve fundamental entitlement reform paired with a deregulatory stimulus. Cato’s Chris Edwards has some other spending cut ideas that deserve a serious look. They total $380 billion, or ten percent of federal spending.

“Nearly Two-Thirds of Americans Say the Stimulus Isn’t Working”

by Hans Bader on April 29, 2010

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

“Nearly two-thirds of Americans do not believe the $787 billion stimulus package the president passed last year has helped create jobs, according to a new Pew Research Center poll.”

As the Washington Examiner notes, “a recent survey of business economists showed they didn’t think the stimulus was creating jobs, either.”  President Obama falsely claimed that virtually all economists supported his stimulus package, but this was patently untrue at the time he made this claim, when at least 200 economists publicly opposed it, and it  is even more untrue now.

Obama falsely claimed that the $787 billion stimulus package was needed to prevent “irreversible decline,” but the Congressional Budget Office admitted that it would actually shrink the economy “in the long run”.  The stimulus package has since destroyed thousands of jobs in America’s export sector, and subsidized countless examples of government waste and corruption.

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 . . . The reality is that it passed 10.3 percent.”

Nobel Prize-winning economist Gary Becker says that Obama’s policies are delaying economic recovery.

“How is stimulus money allocated? Unemployment isn’t a factor, but politics is,” found George Mason University researcher Veronique de Rugy in a recent study.

Districts where people are struggling and unemployment is high are not receiving any more money than those in which unemployment is low, even though a stated purpose of the $800 billion stimulus package was to help the unemployed.  But politics mattered in doling out federal funds.  And “Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts.”

There are three trillion dollars in tax increases in Obama’s proposed budget, yet it would still borrow 42 cents on the dollar, resulting in colossal deficits.

Obama’s policies would raise the national debt by $9.7 trillion, noted the Congressional Budget Office.

Earlier, one of Obama’s own advisers worried that the “barrage of tax increases” in his budgets could harm the economy and prevent a “sustained” economic recovery.

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

Tax Freedom Day

by Ryan Young on April 9, 2010 · 1 comment

in Deregulate to Stimulate, Economy, Regulation

Today, April 9, is Tax Freedom Day. The good folks at the Tax Foundation calculated how much money local, state, and federal governments harvested last year from taxpayers ($3,469,000,000,000), and compared that to national income ($12,901,000,000,000). At 26.89 percent of national income, you basically work until April 9 just to pay off your taxes.

April 9 is the national average; different states have different tax burdens, so Tax Freedom Day actually varies from state to state. If you live in Alaska, you already celebrated Tax Freedom Day on March 26. But if you live in Connecticut, you have to keep the champagne on ice until April 27.

That isn’t the whole picture, though. The federal government spends far more than it taxes. $1,414,000,000,000 more, last year alone. The burden of federal deficit spending adds another 40 days. Not even counting state and local deficit spending, that puts us out to May 19 by my calculations (May 17 by the Tax Foundation’s).

Even that’s not all. The hidden tax of federal regulation cost businesses and consumers an additional $1,187,000,000,000 last year, according to Wayne Crews’ soon-to-be-released 2010 edition of Ten Thousand Commandments (previous editions are online here). None of that extra trillion-plus actually shows up in the federal budget. Regulation eats up an additional 9.2 percent of national income, or 8.3 percent of GDP. So you have to work an additional 34 days until you pay off the federal regulatory burden.

It’s tempting to brush off regulatory costs, since most of them are borne by businesses. But remember, businesses pass on their costs to consumers. You pay for the regulatory state. Its costs are real.

Adding together total taxes, plus federal deficit spending, plus federal regulations pushes us out to June 22 by calculations, or June 20 by the Tax Foundation’s.

And remember, that’s leaving out state and local deficit spending. Nor does it count state and local regulations. I don’t have the data handy for that. But if they add up to at least $460,000,000,000 then we’re past the half-way mark of the year. Just to pay for government.

Even using the larger number of GDP ($14,253,000,000,000 in 2009), and leaving state and local deficit spending and regulation, we’re still talking 42.9 percent of the economy going to pay for government. That’s 157 days out of the year. You’re not free until June 6 even by that generous measure.

I’d argue that government has grown too big, but the data have already done that for me.

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