spending

Yes, Paul Krugman thinks Obama is a “Small Spender”

by Lee Doren on October 12, 2010 · 1 comment

in Economy

Paul Krugman wrote a head-scratching column Sunday titled, “Hey, Small Spender.”  In the column, Krugman not only argues that President Obama’s stimulus package was too small, but he even claims that Obama and his administration did not create a bigger government. He asserts that people think Obama is a big spender as a result of “a disinformation campaign from the right.”

One might wonder how Krugman manages to argue something that is proven false by simply looking at the massive increase in government spending, and increase in government regulations. (See Wayne Crews’ 10,000 Commandments for a reference on regulations.)

Well, Krugman frames the issue as follows:

“Ask yourself: What major new federal programs have started up since Mr. Obama took office? Health care reform, for the most part, hasn’t kicked in yet, so that can’t be it. So are there giant infrastructure projects under way? No. Are there huge new benefits for low-income workers or the poor? No. Where’s all that spending we keep hearing about? It never happened. “

It is difficult to figure out whether to laugh or cry after reading the above quote. According to Krugman, because the healthcare bill hasn’t “kicked in yet,” supporting its passage can’t label someone a supporter of big government. Moreover, the fact that the stimulus was squandered and mismanaged can now be used to make Obama immune from being labeled a big spender. Apparently, only if the stimulus money is spent efficiently like a price-coordinated market (which isn’t possible) can one be labeled a supporter of big government. Lastly, supporting unemployment benefit extensions, or the increase of existing entitlements doesn’t count for Krugman.

To be fair, spending on safety-net programs, mainly unemployment insurance and Medicaid, has risen — because, in case you haven’t noticed, there has been a surge in the number of Americans without jobs and badly in need of help. And there were also substantial outlays to rescue troubled financial institutions, although it appears that the government will get most of its money back. But when people denounce big government, they usually have in mind the creation of big bureaucracies and major new programs. And that just hasn’t taken place. [emphasis added]

So, in the end, Paul Krugman concedes that spending increased because Krugman thought it was necessary. However, any existing bureaucracy that increased its power, like the EPA, does not even register on Krugman’s radar.

As Thomas Sowell mentioned recently, this is a “heads I win, tails you lose” approach to economics.  When the stimulus has demonstrated to be an abject disaster, claim it was because the stimulus was too small.

First, Try Getting the Little Things Right

by Ryan Young on October 8, 2010

in Politics as Usual, Stimulus to Nowhere

Conservatives and Progressives believe in the power of government. Conservatives think that government can build democracies abroad and enforce morality. Progressives think government can lift people out of poverty and correct market failures.

This faith in government is simply astounding, given the evidence to the contrary. Government is charged with some big tasks. Some of them are necessary. But often, it can’t even do the little things. Have a look at these two news stories:

Stimulus Checks Sent to the Dead

Postal Union Election Delayed After Ballots Lost in the Mail

Washington has centuries of experience cutting checks and delivering the mail. You’d think they’d have it down by now; apparently not. Even so, politicians from both parties are still pushing for more, more, more. The right wants more military spending. The left wants more entitlement spending. They have all the faith in the world that their proposals will work as intended.

Sometimes, being a classical liberal feels like being the only atheist in a room full of believers.

Stimulus Roundup

by Ryan Young on September 16, 2010

in Economy, Stimulus to Nowhere

Most people doubt Congress’ ability to spend money wisely. The stimulus has given them some proof:

-$800,000 for an African genital-washing program.

-$700,000 to create computer software that can tell jokes.

-$40,000 for ten trash bins.

-$1.6 million to irrigate a golf course inTexas.

-Thousands of dollars to replace – twice – a sidewalk “that doesn’t front any homes or businesses, and leads into a ditch”

-300 truckloads of oyster shells.

Bonus non-stimulus spending: “[T]he Census spent $23,000 on a totem pole in Alaska. Census representative Hector Maldonado says the agency thought it was a great idea. The plan was to increase participation in Alaska, but despite the totem pole, participation dropped in the state by two percent from the last census.”

Making a Difference – A Very Small Difference

by Ryan Young on July 2, 2010

in Economy, Politics as Usual, Zeitgeist

The House passed a budget enforcement resolution yesterday. It sets 2011’s discretionary spending $7 billion below what President Obama has requested.

Next year’s discretionary spending target is $1.12 trillion for next year. The $7 billion difference represents savings of 0.625 percent. Barely a rounding error. If total spending (including mandatory and defense spending) ends up at $3.5 trillion next year, the savings becomes 0.2 percent.

Of course, 2010 discretionary spending was $1.39 trillion. 2011 spending will very likely end up much closer to that than the targeted $1.12 trillion. The appropriations process is not kind to non-binding resolutions, however well-intentioned. Especially when the resolution “doesn’t detail how Congress should reach that [deficit reduction] goal.”

Congress lacks the will to cut $270 billion of spending. The interests benefitting from that spending will scream bloody murder the second their programs are put on the chopping block. In an election year when incumbents are more fearful than usual, no politician worth his salt wants to cause an uproar.

Congress need not worry too much, though. Even in anti-incumbent years, re-election are almost always above 90 percent. The vast majority of congressional turnover happens through retirement, running for other office, or death.

The pattern is holding this year, so far. The University of Virginia’s Larry Sabato recently pointed out that 5 incumbents have lost their state primary elections this year, while 240 were re-nominated. That’s a 98 percent success rate. There will be a few more casualties, especially in the November general elections.

Most members are safe. They can, and should, rock the boat by cutting unnecessary spending. If anything, the most aggressive cutters might become folk heroes like Chris Christie in New Jersey. They just don’t have the guts.

I will be more than happy if Congress proves me wrong. We’ll find out over the next few months.

The Rahn Curve

by Ryan Young on July 1, 2010

in Economy, Personal Liberty, Regulation

A little government can do a lot of good. A lot of government can do little good.

Rules protecting life, liberty, and property can create the stable conditions that entrepreneurs need to flourish. It works best when these rules are simple, clear, and few. But problems emerge when government takes on other missions.

Rules that are complicated, opaque, and numerous create instability. Entrepreneurs are less likely to invest or innovate if they fear the rules of the game might change tomorrow on a whim. Complying with regulations takes up time and effort that could be spent creating wealth. When governments get involved in business, businesses will involve themselves with government. This is an invitation to corruption, rent-seeking, and regulatory capture. Many backs get scratched, but economic growth suffers.

Dan Mitchell‘s latest video introduces the Rahn Curve, named after top-notch economist Richard Rahn, to illustrate that concept visually. Most academic studies on the subject estimate that governments that take up 15 to 25 percent of GDP is about the right size. The U.S. government consumes roughly 40 percent of GDP. That wide range is because different government policies have different effects, and because the complexity of even the smallest economies makes any macro-level study uncertain.

The academics might be guessing too high, though. Historical data from the 19th century show that the best-performing economies had governments around 10 percent of GDP. That includes the U.S. and most of Europe.

Returning to that size government wouldn’t even be particularly austere. the U.S. government would have a $1.4 trillion budget. Roughly what we had during the Clinton years.

I hope you’ll take a few minutes to watch. The Rahn curve contains valuable insights.

Friday Regulation Roundup

by Ryan Young on June 18, 2010

in Deregulate to Stimulate, Economy, Nanny State, Regulation

-Postal Service pays incompetent employees over $20 per hour to not work. They can’t be fired because of union rules. So they come to the office and take naps, play cards, and fill out coloring books. And get paid for it.

-It is apparently against regulations to sell burgers and porn together without a permit.

-NSF funds research to identify star soccer players.

-Illinois high school administrator had $885,327 salary; retires with $601,978 annual taxpayer-funded pension. Total value of the pension? More than $26 million. Watch your back, Greece. America is right behind you.

-Ever want to have a web chat with the federal government about combustible dust? Here’s your chance.

-Arizona spends $1,250,000 to save 250 squirrels. That’s $5,000 per squirrel.

Friday Regulation Roundup

by Ryan Young on June 4, 2010

in Deregulate to Stimulate, Economy, Regulation, Stimulus to Nowhere

-$1.6 million in stimulus money to be used to irrigate a golf course in Texas.

-A new study by Susan Dudley and Melinda Warren finds that regulatory spending grew 31 percent under Bush. Regulatory staffing grew 42 percent.

-Selling shellfish to the Department of Veterans Affairs? There are regulations for that.

-It is illegal to possess pliers in the state of Texas.

-The federal government’s Integrated Nitrogen Committee is having a public teleconference on June 8.

-In Virginia, it is illegal to take a bath without a doctor’s permission.

-Government programs never die. One Cold War relic is the Federal Radiological Preparedness Coordinating Committee.

-The federal government’s Wild Horse and Burro Advisory Board is holding a public workshop June 14-15.

-$300,000 of stimulus money to pay for floating toilets.

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.

Arlington County Board Raises Taxes 10 Percent To Go On A Spending Binge In The Middle Of A Recession

by Hans Bader on April 26, 2010 · 1 comment

in Odds & Ends

The Arlington County Board raised taxes nearly ten percent yesterday in order to increase County government spending even further.  Real estate taxes will go up from a rate of 87.5 cents to 95.8 cents per $100 of assessed value, costing the typical Arlington County homeowner at least $500.

Although inflation has plunged to almost zero in the recession, and private sector employees are tightening their belts and taking pay cuts, “County employees will receive merit-based raises” and other increases under the County’s annual budget.

County spending “has more than doubled” since the start of the housing bubble, and shows no sign of decreasing now that the bubble has ended.  Arlington County’s all-liberal board has barely disguised its contempt for fiscal watchdogs who have questioned wasteful County spending.

County employees are paid better on average than the residents who pay their salaries.  Even teachers, far from the best paid public employees, typically receive compensation of around $100,000 per year in Arlington, even assuming they don’t work in the summer.  (A couple years ago, when their compensation was slightly lower, Arlington teachers’ salaries averaged $71,148, and their pension and other benefits averaged about $27,636, for a total compensation of about $100,000.  The value of their benefits has since increased.)

SAT scores are lower in Arlington than in neighboring Fairfax and Loudoun Counties, even though Arlington spends twice as much per student as Loudoun County and much more than Fairfax County.  (Unlike Arlington’s one-party government, those Counties have competitive political systems where incumbents risk losing reelection if they raise taxes, which gives them an incentive to reduce wasteful spending.)

In nearby Montgomery County, where public employees have a similar death-grip on County government, the County Council last year allowed public employees to collect inflated pensions based on non-existent earnings.  This was too much even for the liberal Washington Post, which has not endorsed a Republican for president since 1952, and a Post editorial today suggests that the County may be watering down this concession to the public employee unions as the County’s tide of red ink grows.

As the Post notes, “Montgomery County politicians have spent the past decade outdoing each other in lavishing favors on public employee unions, whose memberships are presumed to constitute critical voting blocs,” showing a  “deeply ingrained reflex of coddling public employees’ unions.”

Tax rates should be much lower in Arlington County than in other Counties in the region, because its natural expenses are much, much lower (it has far fewer school-age children to educate than do Fairfax, Loudoun, and Prince William Counties, as a fraction of its population) and because its tax base is much richer (due to lots of commercial property within its borders).  Yet its tax rates are not much lower than Fairfax’s, thanks to the enormous wasteful spending of the Arlington County Board.

Friday Regulation Roundup

by Ryan Young on April 2, 2010

in Deregulate to Stimulate

Some of the stranger governmental goings-on I dug up over the week:

-EnergyStar has been certifying bogus products, such as a gas-powered alarm clock and a space heater with a feather duster stuck in it. Out of 20 fake items that the GAO submitted, 15 were approved, 2 were rejected, and 3 received no response.

-NASA spent $500,000,000 on a launching pad for a rocket that will probably never be built.

-In Norfolk, VA, it is illegal for hens to lay eggs between 4:00pm and 8:00am.

-In Minnesota, it is illegal for women to play Santa Claus.

-In California, it is against the law to enter a restaurant on horseback.

-From Jeff Flake’s office: The federal government is spending $935,000 on pasteurizing shell eggs in Michigan.

-The federal government is spending $73,000,000 this year on the Agricultural Water Enhancement Program.

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