federal budget

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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Education Cuts Needed; Massive Spending Fuels Waste, Deficits

by Hans Bader on February 14, 2011

in Economy, Employment, Politics as Usual, Zeitgeist

Education expert Neal McCluskey earlier lamented the failure of House Republicans to propose meaningful cuts in education spending, “despite the fact that the ivory tower is soaking in putrid, taxpayer-funded waste. Quite simply, the federal government pours hundreds of billions of dollars into our ivy-ensconced institutions every year, but what that has largely produced is atrociously low graduation rates; at-best dubious amounts of learning for those who do graduate; ever-fancier facilities; and rampant tuition inflation that renders a higher education no more affordable to students but keeps colleges fat and happy.” Shortly thereafter, in an effort to trim the deficit, House Republicans came out with some additional cuts, proposing the elimination of some wasteful education programs.

If the GOP is reluctant to make cuts, Obama is much, much worse: he earlier sought to double education spending, and Obama’s recent State of the Union called for more increases in education spending (and other wasteful boondoggles at taxpayer expense), even though many students learn little in college. As we noted earlier, half “the nation’s undergraduates show almost no gains in learning in their first two years of college,” according to a study cited in USA Today. “36% showed little change” even after four years. Although education spending has exploded, students “spent 50% less time studying compared with students a few decades ago.” “32% never took a course in a typical semester where they read more than 40 pages per week.” States spend hundreds of millions of dollars operating colleges that are worthless diploma mills, yet manage to graduate almost no one — like Chicago State, “which has just a 12.8 percent six-year graduation rate.”

College degrees are delivering less and less, even as students graduate massively in debt. Law schools deceptively claim that virtually all their graduates get jobs. But they inflate their jobs figures by treating as success stories even students who end up working in low-paying non-legal jobs like “waiting tables at Applebees,” “stocking aisles at Home Depot,” or babysitting — or in part-time temporary jobs. And they sometimes hide joblessness by “losing track” of easy-to-locate nearby graduates who are jobless.  ”‘Enron-type accounting standards have become the norm,’ says William Henderson of Indiana University, one of many exasperated law professors who are asking the American Bar Association to overhaul the way law schools assess themselves.”

America already produces so many more liberal-arts graduates than it needs that 5,057 janitors have Ph.D’s or other advanced degrees. People who went to college due to rising college attendance rates mostly ended up in low-skilled jobs, even as their tuitions soared to pay for growing educational bureaucracies. Education spending in America is huge compared to most countries.

Image credit: Honeywell-Nobel Initiative’s flickr photostream.

Fuzzy Math on Foreign Aid Shows Why Spending Cuts Are Difficult

by Ryan Young on December 6, 2010 · 1 comment

in Economy, International

According to a new poll, the average American thinks that 25 percent of the federal budget is spent on foreign aid (or, more accurately, government-to-government transfers). They would like it cut to about 10 percent.

The actual figure is under 1 percent.

As Aid Watch’s Laura Freschi points out, that means most Americans want to increase government-to-government transfers ten-fold from current levels while also cutting them in half.

That most people think like this is a major reason why cutting the federal government’s $3.5 trillion budget is so difficult. The issues that people get worked up about tend to be small potatoes, in budgetary terms.

Besides transfer payments to other governments, earmarks are another lightning-rod issue. But even if earmarks were abolished entirely, that’s only about 2 percent of the budget. It would put the smallest of dents in spending.

Entitlement spending is the single largest driver of current and future deficits. That’s where the battle is. Aid spending and earmarks are not threatening to bankrupt the country. Social Security and Medicare are. And those programs are extremely popular. No politician with an eye on 2012 would be willing to cut them.

The government has made promises it can’t possibly keep. But most people refuse to believe that. So they don’t. As a guarding mechanism, they instead make grand assumptions about how much things like transfer payments to other governments and earmarks cost.

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.

No, two stimulus plans are enough!

by Michael Fumento on February 2, 2010

in Features, Stimulus to Nowhere, Zeitgeist

In rolling out his (Cough, cough!) $3.8 trillion budget proposal even as we’re facing a historic national debt, Pres. Obama has included $100 million for a third stimulus package. (A lot of people forget that we had one under Pres. Bush.)

True, the Obama administration has made great claims about what an incredible success his first stimulus was, but the claims haven’t withstood the facts. You don’t need 20 economists to crunch a million numbers to see that.

Back in August I wrote that Cristina Romer, chair of President Obama’s Council of Economic Advisers, declared “Absolutely” the stimulus package was working. Yet she accompanied her talk with contradictory evidence.

Along with her speech, Romer presented a table with calculations of the percentage of 2009 GDP “discretionary fiscal stimulus” spending in various countries. It showed that the U.K. spent 1.5% of its GDP on stimulus, the same as Germany and more than twice that of France at 0.6%.

Nevertheless, even as the German and French economies grew by 0.3% in the second quarter, the British economy plummeted 0.8%. Sweden spent more than twice the proportion of its GDP on stimulus (1.4%), as did France, yet had no growth.

And the U.S.? It outspent everybody, Romer boasted. Her table shows we spent 2.0% of GDP. In her talk, she said “roughly 5% of GDP.”

“Choose whichever figure tickles your fancy,” I wrote. “It remains the case that for all President Obama’s personal back-slapping and media crowing of ‘disproved’ stimulus skeptics, the U.S. economy shrank 1% in the second quarter. It was remarkable only in being a major improvement from the previous quarter.”

This proposed stimulus is just political fodder for the November elections. The fact is the economy is on the mend and jobless rates will start going down.

Believe me, I have more sympathy for jobless people than you can know. But I’ll just point out that my brother is unemployed and my wife spent a good part of last year unemployed. But this latest stimulus plan won’t help. It will just help dig us deeper into long-term debt that will threaten not just jobs and the economy as a whole but America’s standing as a world power.

Health-Care “Reform” Bills Increase Costs, Endanger Access for Millions, Federal Experts Say

by Hans Bader on November 15, 2009 · 1 comment

in Health and Illness, Healthcare, Insurance, Legal, Nanny State, Personal Liberty, Regulation

The healthcare “reform” bill backed by Obama “would reduce senior care,” and “could jeopardize access to care for millions,” report healthcare experts at the federal Centers for Medicare and Medicaid Services. The bill also “increases medical costs” through inflation, increasing health-care costs to 21.1 percent of GDP by 2019.

The House of Representatives recently passed the bill by a vote of 220 to 215.

According to the federal experts, the bill would likely either cost much more than projected, or result in some “hospitals and nursing homes” deciding to ”stop taking Medicare altogether,” notes the Washington Post.

The bill will increase taxes to “European levels of taxation,” while failing to provide European-style universal coverage.  It will vastly increase the costs of our health care system, rather than reducing it to European levels.   It reinforces foolish restrictions on national competition in health insurance, which do not exist in Europe.

Doctors afraid of being wrongly sued for malpractice despite providing good quality care order unnecessary tests (or defensive medicine), which wastes at least $200 billion annually. That’s nearly as much money as France spends on health-care for all its citizens.  The bill does nothing to reduce such costs, ignoring lessons from Europe.  (Many European countries have specialized health courts, rather than American-style jury trials, to cut lawyers’ bills, speedily compensate the injured, and prevent American-style baseless lawsuits against doctors.)

In European countries like France, doctors don’t need to be paid as much, because competing professions, like lawyers, are paid less.  European law is generally much more conservative than American law when it comes to lawsuits, including lawsuits against doctors.  Punitive damages are generally forbidden, and lawsuits are discouraged by making unsuccessful plaintiffs pay the other side’s legal bills.

The health-care bills backed by Obama also contain lots of waste and subsidies for politically-correct things like “cultural competency,” while cutting spending on crucial things like anesthesia.

Obama’s proposals contain provisions that he falsely claims will cut costs, but which actually exploded costs when tried by state governments.

Dems’ Health Care Bill Looking Weaker by the Day

by Alex Hankins on July 27, 2009

in Economy, Healthcare, Insurance, Personal Liberty, Politics as Usual, Regulation

For the Democrats still supporting the health care overhaul, the blows just keep coming. As if the financial problems I described in a previous post were not enough to deter this fiscal suicide, the Congressional Budget Office has now said that a plan to offset the massive costs by putting an outside panel in charge of budget-cutting for other government health care programs will amount to savings of only about $2 billion over 10 years — practically negligible in comparison to the final price tag, which is already expected to exceed $1 trillion.  For those who still consider this legislation financially feasible, that is a discount of 0.2%.  Oh boy, I can’t wait to cut out the coupon!

When the Congressional Budget Office announced its cost assessment of the health care bill, Senator Chuck Schumer (D-N.Y.) called the estimate “wacky” and accused the CBO of omitting the savings he inexplicably expected the plan to reap after full implementation. This new statement from the CBO directly counters that claim and casts even further doubt on both the viability of the bill and the credibility of leading Democrats.

Yet, instead of heeding the advice of their own budget analysts, Democratic lawmakers are still charging forward and losing Blue Dog support in the process.  Senate Majority Leader Harry Reid has already acknowledged that the bill will not come to a vote in the Senate until after the recess.  By then, the bill likely will have lost so much support due to increased awareness of what it entails that it will either disappear entirely into obscurity (along with the last of Obama’s invested political capital) or be diluted down into a politically innocuous and much less  economically threatening shell of its former self.

The latter is the safer and more probable option for the administration to choose. Its rush to pass this legislation may be related to its desire to have some major policy accomplishment of which it can boast in time for the 2010 midterm elections, the inevitably disastrous effects of which will not materialize until well afterward.  Obama has a lot riding on this.  Given his rock-star status and his party’s dominance of Congress, Obama will look embarrassingly weak if his prized health care initiative fails to pass.  He and the leaders in Congress must quietly cut away much of the spending from the bill or risk halting their already ebbing momentum.

Senator Jim DeMint (R-S.C.), who compared the prospect of a defeat for Obama on health care to Napoleon’s career-ending battle at Waterloo, may turn out to have been right on the money.  Obama’s victories so far have been enabled by confidence in his personal leadership and still-unfulfilled promises — so if he cannot deliver on the crown jewel of his policy agenda, he will be vulnerable to a catastrophic loss of both the necessary support in Congress and the iconic status that has served him so well until now.

Take away their credit card

by Julie Walsh on March 27, 2009

in Economy

President Obama and Congress need an intervention.

Here are the guidelines for an individual’s debt to income ratio:

What’s a good debt-to-income ratio?
36% or less
This is where you want to be.

37% to 42%
You may want to start paying your debts down before you incur financial difficulties.

43% to 49%
This is a high debt-to-income ratio. You may want to take immediate action to reduce your debt.

Above 50%
You should seek professional financial advice to reduce your debt.

Perhaps China is available?