Tag: Government Spending

The Bernie Pill

The amazing thing about the Bernie Sanders campaign is that his ideas are so … tired. Nothing he has proposed — “free” healthcare, “free” college, “free” daycare — is particularly original or innovative. Sanders admits as much, saying that he wants is to imitate the model of the social democracies of Scandinavia. Of course, that itself is an indication of how outdated his ideas are. Many of those social democracies have moved beyond Sander’s 1970’s ideal of what they really are, privatizing and shrinking government and now enjoying comparable or even superior economic freedom compared to the United States.

Matt Welch has a thorough rundown of just how bad many of his ideas area. A lot of them are things I’ve hit on these pages: how expensive socialized medicine would be, how ineffective “universal pre-K” is, how bad a federal minimum wage of $15 would be. But it also hits a few topics I haven’t gotten around to such as Sanders’ opposition to reforming the VA:

Sanders was lucky the question wasn’t about his actual track record as chairman of the Senate Committee on Veterans Affairs. As The New York Times reported in February, “a review of his record in the job…shows that in a moment of crisis, his deep-seated faith in the fundamental goodness of government blinded him, at least at first, to a dangerous breakdown in the one corner of it he was supposed to police.” Ouch.

What was Sanders doing in May 2014 instead of holding oversight hearings and sounding the alarm bell over a national disgrace? Complaining to The Nation magazine about “a concerted effort to undermine the V.A.,” led by “the Koch brothers and others,” who “want to radically change the nature of society, and either make major cuts in all of these institutions, or maybe do away with them entirely.”

(The VA, incidentally, was long upheld as the shining model of what single payer healthcare would be like in this country. Well … they weren’t entirely wrong about that. Much of Sanders’ blind support for the VA was precisely because he wanted it to be the example for single payer.)

You should read the whole thing.

So why is Sanders so popular? Is it because America loves his crackpot ideas? No.

First, like Trump, he really isn’t that popular. He’s drawing about half the votes in a Democratic primary, which means about 10% of the vote. If he were the nominee, he’d have to get a lot more independent and conservative votes, which I don’t see materializing unless Trump is the Republican nominee.

Also, like Trump, he’s appealing to economic populism. Sanders supporters hate it when you compare Trump to Sanders (which is one of the reasons I like doing it). But they both harp on a similar message — trade is bad, Washington doesn’t work, you’re being rooked, vote for me. That sort of populism traces through a long and diverse array of politicians from Roosevelt I to George Wallace to Trump/Sanders. It never has worked out.

(Both also prefer a more isolationist foreign policy; another key element of populism).

But I think the main reason, as I’ve said before, is that Sanders isn’t Clinton. Sanders is honest about what he thinks, has stayed positive and his earnestness is almost refreshing contrasted against the calculated fumbling of Clinton. Last week, the Clinton camp said she wouldn’t debate Sanders any more unless he changed his “tone”. Even for Clinton supporters, like the ever-reliable Vox, this was laughable. Sanders’ tone has been very respectful toward Clinton. The only thing she could complain about is that he’s called her out — accurately, as it happens — on such things as her Wall Street ties, her support for the Iraq War and her role in runaway criminalization.

In any case, I don’t expect Sanders to be the nominee. But I do expect that his success will lead to an insistence that his ideas are awesome and that this country is ready for socialism. Don’t be fooled. Single payer healthcare failed to gain support in Sanders own state once it became obvious how much it was going to cost. Even Clinton’s plans are going to require big tax increases that I don’t see the public swallowing.

So let the socialists enjoy their moment. Once the extent and cost of their ideal system becomes clear, support for it will evaporate. Because it’s one thing to promise the moon; anyone can do that. It’s another to actually deliver it.

(PS – Speaking of Vox, Yglesias has another article arguing that the Democrats shouldn’t be too concerned with how to pay for their pipe dreams. Since interest rates are low, he argues, we should be borrowing to pay for “investments”.

Yglesias is usually a reasonable voice but this is one area where he, and many liberals, have lost their minds. Interest rates will not remain low forever. And when they come up, we’ll not only have $19 trillion in debt to roll over, but massive structural deficits for all this new spending. Any increase in spending increase the baseline for future spending. Deficit spending now because interest rates are low is a long walk off a short plank.

Besides, it’s not like the deficit isn’t about to explode anyway.)

The Deficit Bomb Looms Again

Over the last few years, flat spending has cut the deficit down from $1.4 trillion to $400 billion. That’s OK. But it’s not a permanent fix. And after the recent budget deal, the Committee for a Responsible Budget here to remind us that we are in temporary lull:

CBO now projects deficits more than tripling, from $439 billion in 2015 to $1.37 trillion by 2026, with trillion dollar deficits returning by 2022 – three years earlier than prior projections.

Debt held by the public, meanwhile, will grow by over $10 trillion from $13.1 trillion at the end of 2015 to $23.8 trillion by 2026. As a share of Gross Domestic Product (GDP), debt will grow from 74 percent of GDP in 2015 – already twice its pre-recession levels – to 86 percent of GDP in 2026. By comparison, August projections showed debt on track to reach roughly 77 percent of GDP, or $21 trillion, by 2025….

The largest driver of this difference is legislation changes, especially the $855 billion tax extenders and omnibus spending package. Total legislative changes appear somewhat lower, driven by gimmicks and baseline quirks surrounding the $70 billion highway bill and the Bipartisan Budget Act. The remaining difference is from a combination of economic and technical factors, especially driven by lower projected economic growth….

CBO shows a worse debt picture than before both because of lawmakers’ own doing and other factors. It is clear now that deficits will no longer be in decline as they have been for the past five years, and debt will continue to increase from near-record high levels. The complacency that lawmakers have shown about debt over the past few years must end so they can address the troublesome trajectory of deficits and debt.

Now, to be fair, the CBO projects from baseline budgeting. And the worsening of the debt picture is mainly because the budget deal made tax breaks permanent rather than pretend they would expire every year. Still, that’s a grim picture.

The good news is that it is not an unsolvable problem. Returning to the flat spending levels we had for five years would dramatically cut into that debt — each new dollar spent is compounded by baseline budgeting that grows that dollar into two within a decade. A 1986-style tax overhaul that increased revenue will cutting the deadweight loss of the tax system would also help. Obamacare is driving some of the deficit — the system was designed to “balance” over the first ten years but start steering into a ditch very soon (a really a very big ditch). The main priority, of course, has to be entitlement reform.

So surely our two parties are addressing this problem, right?

Well …

Party A is now experiencing a huge surge at the polls from a man who wants to add trillions in new healthcare spending, hundreds of billions in “free” college and hundreds of billions in “jobs spending”. His opponent, now panicking because her second inevitable coronation is threatened, is rapidly moving left, promising even MORE spending. The debate among the Democrats is not about whether the federal government should provide “free” college. It’s about whether rich kids should or should not be included in that largesse.

Party B, however, is not much better. They are talking about big tax cuts combined with huge increases in military spending. Rand Paul, at one of the debates, called the other Republican candidates out on their deficit-busting tax-cut-and-spend plans. He’s now polling too low to even be invited to the debates. Their frontrunner … well, who knows what the hell Trump is saying this week.

This is one of the biggest reasons to be dubious of electing a Republican President while the GOP has Congress. Or, contrarily, the biggest reason to maintain a Republican Congress if a Democrat takes the White House*. Historically, the only way we’ve kept spending under control is to have the first two branches of government in different hands. With another budget apocalypse looming, can we trust the GOP with total control of the pursestrings again?**

(*There are other reasons to want a Republican in the White House: foreign policy, SCOTUS appointments etc.)

(**And before we get into “BUT DEMOCRATS!”, here are the annual budget increases for the last five combinations of President and Congress:

Clinton and Republicans (1995-2001): 3% per year
Bush and Republicans (2002-2007): 7% per year
Bush and Democrats (2008-2009): 9% per year
Obama and Democrats (2010-2011): 5% per year
Obama and Republicans (2011-present) : 0% per year

That last one will go up with the 2016 budget. But not by much.)

Notes On A Sequester

A few notes on the budget sequester that is schedule to happen tonight.

First, it’s going to happen. We may, eventually, get something else to replace it. But it has been obvious to me for two weeks now that the sequester is going to happen. The writing on the wall was when Congress went on vacation and the politicos spent time blaming each other rather than talking about solutions.

The reason it’s going to happen is not because it’s necessarily a good idea. It’s because replacing it entails a lot more work and political risk than our lazy cowardly leaders are willing to take on. They would much rather throw some blame on those idiots in the last Congress and the last Administration and hope that no one notices that the two groups of idiots are almost exactly the same. In fact, one of them still occupies the same big white house he did back in 2011.

The Woodward story Alex cites below (and the subsequent liberal freakout) comes from the allegation by Woodward that the sequester was Obama’s idea. Obama can tolerate a sequester; but he won’t tolerate being blamed for it. That, in a nutshell, is the sequester debate.

Second, the sequester is a very poor way of cutting spending. To give you just a few examples. Vaccination programs are going to be cut, perhaps resulting in tens or hundreds of thousands of missed shots. Vaccinations are a public interest. Unvaccinated kids don’t just put themselves at risk; they put everyone at risk because they compromise herd immunity. You’d have to dig pretty deep into Ayn Rand or Adam Smith to justify putting the public health at risk.

To give you another example, detained immigrants are being released because we won’t have the personnel to keep them in detention (although this raises a host of side issues, such as the atrocity of illegals being in detention for years awaiting hearing). On the other hand, it appears that supervised release is both perfectly doable and infinitely cheaper. In the end, this may be a win-win.

State governments are also up in arms including many died-in-the-wool conservatives like Jindal, Haley, McDonnell, Hubert and Walker. They are, inadvertently, revealing how often “responsible balanced state budgets” are balanced by the influx of federal dollars. But they are also very aware that a blind cut in education spending, for example, runs into a thorn maze of regulations, union rules and laws. The end result may be disastrous.

Supporters have pointed that $85 billion isn’t a lot in a $3.5 trillion budget. It is, a lot, however, when it is narrowed to a thin slice of spending with almost all entitlements exempted. For most programs, you’re looking at 10% cuts. And programs that need to be completely gutted — ethanol support for example — are hurt just as much as programs that are desperately needed like law enforcement.

However, …

Third, I don’t think this is going to be the economic disaster a lot are foretelling. I’ve seen estimates that this could destroy a couple of million jobs and plunge us back into recession. That seems absurd, given the scale of cut we’re talking about and Congress’s ability to reverse them. We’ve had cuts much larger than this in the past. Somehow, we’ve survived.

Fourth, I think this once again demonstrates how useless our leaders are. They came up with the sequester a year and a half ago as a way to force themselves to make smart cuts in the budget. This could be replaced, quite easily, with a package that reins in entitlements (e.g, chained CPI on Social Security) and kills some pointless government programs (e.g., ethanol subsidies, the second engine for the hyper-expensive F-35). They have had eighteen fucking months of holding that gun to their own heads. And now they are sitting on their hands waiting for the gun to go off so they can blame each other.

Why do we even have a Congress? Why do we even have a President? They aren’t doing their jobs. Maybe it’s time for the governors to say “that’s it” and pull the plug on this shit show.

In the end, this will be a relatively small cut in spending that could have very bad side effects and does nothing to address the tens of trillions in unfunded liability for entitlements (to which Obamacare is now estimated to add $6.2 trillion). That’s not exactly a solution.

(Disclosure: As a grant-funded scientist, I should note what the sequester will do to research funding (which has strangely been falling under the leadership of the “Party of Science”). You can see details here. No matter how you slice it, you’re looking at thousands of scientists out of work. And not scientists doing research on crab boners or something. This includes NIH-funded research on medicine, cancer treatment, public health and antibiotics. I suspect this will also mean a lot of people leaving for other countries to do research.

I won’t comment on the wisdom of this; my opinion is probably easy to discern. I mention it here so you can weigh it in considering my opinion of the sequester in general.)

Fuzzy Math

Jesus Tapdancing Christ. I have seen this now in several places and it needs to fucking stop:

Almost everyone believes that Obama has presided over a massive increase in federal spending, an “inferno” of spending that threatens our jobs, our businesses and our children’s future. Even Democrats seem to think it’s true.

But it didn’t happen. Although there was a big stimulus bill under Obama, federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.

Even hapless Herbert Hoover managed to increase spending more than Obama has.

Stop right there. If you’ve been on this site, you know that the “Hoover cut spending” thing is a complete myth. Hoover increased spending massively and doubled the debt during his Presidency. Roosevelt called him out as a socialist. So this writer is already starting from ignorance. But carry on:

• In the 2009 fiscal year — the last of George W. Bush’s presidency — federal spending rose by 17.9% from $2.98 trillion to $3.52 trillion. Check the official numbers at the Office of Management and Budget.

• In fiscal 2010 — the first budget under Obama — spending fell 1.8% to $3.46 trillion.

• In fiscal 2011, spending rose 4.3% to $3.60 trillion.

• In fiscal 2012, spending is set to rise 0.7% to $3.63 trillion, according to the Congressional Budget Office’s estimate of the budget that was agreed to last August.

• Finally in fiscal 2013 — the final budget of Obama’s term — spending is scheduled to fall 1.3% to $3.58 trillion. Read the CBO’s latest budget outlook.

Over Obama’s four budget years, federal spending is on track to rise from $3.52 trillion to $3.58 trillion, an annualized increase of just 0.4%.

You see what the problem is? FY2009 was not a Bush year. FY2009 was not a Bush year. FY 2009 was not a Bush year. The Democratic Congress did not pass a budget until March 12, 2009. Do you know who was President on March 12, 2009? It was not George W. Bush.

FY2009 also included the stimulus which this analysis now considers part of the baseline — exactly as conservatives warned would happen. Do you know who passed the stimulus? It was not George W. Bush.

You can blame Bush for TARP. But let’s remember that Obama voted for it, used it, expanded it. Two car companies got bailed out on that budget authority. Do you know who bailed those car companies out? It was not George W. Bush. Well, not the big bailout at least.

Look, I’m prepared to bash Bush with the best of them. But this is bullshit. If you’re going to use a baseline for Barack Obama’s spending, maybe you can use $3.1 trillion Bush originally requested. But you can’t use the final budget figures as a comparison. That’s simply cheating.

The author eventually, on page 2, gets around to this, admitting that, at minimum, Obama has increased spending 1.4% per year. But that too is deceptive since many of the Obama “tax cuts” were for people who don’t pay taxes. Moreover, we’ve been winding down two wars, which should have moved the budget closer to balance.

(The New York Times tried this stunt too, gaming the figure so that it looks like Obama has cut spending. Even then, they have to credit him with state spending cuts. I find that ironic since the point of the stimulus was to prevent state spending cuts, but … let’s not interrupt the Times when they’re in the middle of Democratic propaganda.)

Anyway, the idea that Obama has not increased spending is pure garbage. To the extent that he has controlled spending, it has been because of relentless pressure, faceoffs with the GOP and the winding down of two wars. His last two budget were rejected almost unanimously by Congress. He does deserve credit for winding down the wars. I’ll give that to him. But let’s not pretend he’s a model of fiscal restraint.

Consensus! The debate is over…

Well, not really but that’s how they operate on the left, so I wonder how they will react to this revelation:

The majority of economists surveyed by the National Association for Business Economics believe that the federal deficit should be reduced only or primarily through spending cuts.

The survey out Monday found that 56 percent of the NABE members surveyed felt that way, while 37 percent said they favor equal parts spending cuts and tax increases. The remaining 7 percent believe it should be done only or mostly through tax increases.

That tells me 56 percent of economists understand the problem with our politicians and spending, 37 percent are still hoping the politicians this time will actually institute real cuts if they get revenues, and only 7 percent are insane or stupid enough to think the answer is to fleece the productive even more. Looks like the grand majority is however for cuts, an aggregate 93% of economists that believe government is way too big and spending too much, and that’s an awesome thing to see, despite the fearful belief of some 37% that more taxes will not simply make these morons forgo any real cuts. The 7% that want tax increases only are to be made fun of. I bet most are part of the Obama Admin though. That was a joke CM, so don’t ask for proof please.

It gets better too.

As for how to reduce the deficit, nearly 40 percent said the best way would be to contain Medicare and Medicaid costs. Nearly a quarter recommended overhauling the tax system and simplifying tax rates and exemptions. About 15 percent said the government should enact tough spending caps and cut discretionary spending.

How about a balanced budget amendment – with no loopholes please! And also make everyone pay taxes. It is very clear now that the compassionate conservative move to spare the lowest earners from paying taxes just served to divorce them completely from the reality that the others paying taxes are already paying far too much. But there was also some bad.

According to the survey of 250 economists who are members of NABE, nearly 49 percent of those responding said the country’s fiscal policy should be more restrictive, while nearly 37 percent said they believe the government should do more to stimulate the economy. The remainder said fiscal policy should remain the same.

A striking 37% of these idiots either still think Keynesian economics work and that the problem was they didn’t spend enough or that government spurs economic growth. The reality is that it can certainly stump or kill economic growth, but as far as I am concerned whatever “stimulus” they do is at best mediocre, and more likely fictitious, because they do not account for the impact that taking all that wealth from others that do far better growing it has in any of this nonsense. And printing new money or borrowing it might short term look like it helps, but now that we are there economically and doing this stupid crap, we can clearly see that the jump in inflation and the weight of the huge debt load that comes with this, has a far greater overall impact on the economy.

Finally there is this:

At the same time, more than 70 percent of the people that responded said they expect U.S. fiscal policy to be more restrictive over the next two years.

One can only wish.

UPDATE: And many others are pointing this discrepancy in government spending vs. revenue collection out, like Byron York does in this awesome article at the Washington Examiner:

There’s no doubt federal spending has exploded in recent years. In fiscal 2007, the last year before things went haywire, the government took in $2.568 trillion in revenues and spent $2.728 trillion, for a deficit of $160 billion. In 2011, according to Congressional Budget Office estimates, the government will take in $2.230 trillion and spend $3.629 trillion, for a deficit of $1.399 trillion.

That’s an increase of $901 billion in spending and a decrease of $338 billion in revenue in a very short time. Put them together, and that’s how you go from a $160 billion deficit to a $1.399 trillion deficit.

But how, precisely, did that happen? Was there a steep rise in entitlement spending? Did everyone suddenly turn 65 and begin collecting Social Security and using Medicare? No: The deficits are largely the result not of entitlements but of an explosion in spending related to the economic downturn and the rise of Democrats to power in Washington. While entitlements must be controlled in the long run, Washington’s current spending problem lies elsewhere.

The truth is a bitch.

Why We Must Do What Reagan Did

Reports are that the budget talks are falling apart. The Democrats have agreed to several trillion in budget cuts. But the GOP is refusing to budge even a little bit on taxation.

If I read the reports correctly, we would get something like five dollars in spending cuts for every dollar in tax increases. This is far better deal than we got under Reagan, Bush 41 or Clinton. The GOP should hold out as long as they can. But in the end, the federal government can not meet its existing commitments on 15% of the GDP. And the economic effects of large deficits or a default dwarf those of a tax increase.

The refusal to contemplate any tax increases illustrates the difference between talking and governing. We have a democratic Senate and White House. We can not wait until 2013 to solve this problem, even assuming the GOP would win both houses and that they would exercise the spending discipline they failed to exercise from 2000-2006. Holding our breath until we turn blue is not an option. Shutting down the government or defaulting is not going to generate an angry mob marching on Washington (something like 60% favor a combination of spending cuts and tax increases). The GOP simply has to cut a deal: preferably one that broadens the tax base rather than raises marginal rates. They can then use late 2011 and 2012 to push for a gigantic overhaul of the tax system (as Reagan did). If they want to cut taxes, make it an issue in the 2012 election.

Yes, that’s a compromise. But that’s how government works. We’re not going to get everything we want. We’re winning, getting unprecedented budget concessions that will shrink the size of government. Now is not the time to piss that away.