May 20, 2013

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C is for Comeback America by David Walker

April 3, 2013 by 3 Comments
unemployment-rate

The national unemployment rate.

Sometimes, I’m a cynic.

For example, I don’t trust that Democrats care as much about the Second Amendment and gun regulation, immigration reform, or gay marriage as they say (heck, I’m not even sure Republicans care as much as they say, either, but that’s another post). I think they’re, largely, cherry picking issues that they can use to pander to various demographic groups and distract from the relatively unexciting business of a slow economy which, by virtue of President Obama’s reelection, they own.  In spite of what political left may argue, little has improved in the economy since the election last year. Unemployment nationally still hovers between 7.9 and 7.7%, economic growth slowed at the end of last year, and personal income is down 2.2% this year.

So why aren’t we talking about economic growth and how to bring about an economic “comeback” for America?

A couple years back, I read an interesting book by David Walker, former Comptroller of the United States. I don’t necessarily agree with everything in it, but I think it can add to the conversation on what needs to be addressed to move our country into a more competitive position than slow growth and stagnant personal incomes.

 

Comeback America

Comeback America: Turning the Country Around and Restoring Fiscal Responsibility by David M. Walker

As the former comptroller general of the United States, Walker knows a little about the fiscal workings of the modern federal government. For fifteen years, he served under both Republican and Democratic presidents, from Reagan to Clinton to the Bushes, and had a unique opportunity to call into question the decisions that have lead to our current fiscal woes. And in Comeback America, he doesn’t hold back.  We are a great country, but we are putting ourselves in a difficult position:

We live in a great and resilient nation. For all of our problems, the United States remains a global superpower and a beacon of liberty for people around the world. We have much to be proud of and thankful for. But I am here to tell you that if we don’t find a way to get spending under control, we will put our nation’s economy and international standing at risk and bequeath to our children a world of severely diminished opportunities.

It’s not too late. But we had better act soon.

After opening the book with describing our current fiscal problems–looking at the America of 2030 if we continue our current trajectory, examining principles from our history, and spelling out the challenges that President Obama faced as he came into office–Walker lays out his recommendations in each major area of federal spending in the succeeding chapters.

Walker skips right over earmarks and discretionary spending, which account for only a very small percentage of our federal budget, and goes right to the heart of  the problem: entitlements, insufficient tax revenues, spending deficits, Defense Department inefficiency, and systemic problems. Each gets a chapter that provides context, history, and recommendations.

Beyond easy accessibility, perhaps the most important reason you should read this book is the lack of partisan taint. His approach, and recommendations, are nonpartisan, pragmatic, and worthy of consideration.  He

David Walker

approaches the problems with one consideration–what is right for America and Americans?

Walker calls for not only the reform of entitlements, review and oversight of inefficiencies in several–large–areas of government, and the reform of the tax code, but also for changes in our very elective processes and to the constitution. It isn’t enough to just change policies–we also need to change the systemic problems with how we got here and make it difficult to get here again.

In the end, Walker makes a compelling case for, in his words, not a “small government or a big government[,]” but an effective government–one that is fiscally responsible, focuses on the future, and looks out for the collective best interest of America and Americans rather than the narrow agendas of various special interests.

As one friend of mine has been known to observe–both parties are glad to spend, as long as it on the program that benefits its constituency. The right will spend on national security, and the left will spend on social programs. Both are spending, just not on the same thing. Indeed, fiscal responsibility is a claim that neither elected major national party can claim–at least not in recent memory or with any measure of integrity.

Despite the current difficulties, exacerbated by the pop of the housing bubble and the subsequent recession, America can “comeback.” Walker’s book is full of great ideas and suggestions to see that that happens. I recommend you pick up a copy soon. You might find yourself asking different questions of your elected representatives than their position on immigration. 

Publius Online is participating in the Blogging from A to Z Challenge, a month long quest to post every day. Each day should match a corresponding letter of the alphabet. Today is C.

Filed Under: Book Reviews, Books and Reading, Entitlement Reform, Fiscal Reform, healthcare reform Tagged With: , , , , , , ,

Senator Hatch’s anti-tax hike sequester proposal [updated]

March 4, 2013 by Leave a Comment

, member of the United States Senate.

[Update] Since original publication, Senator Hatch’s Press Secretary was kind enough to both read and comment that the Senator’s proposal is only intended to be a short term fix and that the Senator has proposed more long term solutions to Medicare and Medicaid. The proposal dates back to the end of January and can be found here.

 

[Original post] Senate Democrats proposal to dealing with the sequester is simple: raise taxes. The expenses of the federal government in caring for America are increasing, and so some Americans should pay more of their fair share.

Senator Hatch on Friday responded, with both a legislative  proposal that avoids any tax increase and an op-ed the Salt Lake Tribune describing the proposal.

Our country is $16.6 trillion in debt. Republicans have tried to work with Senate Democrats on common-sense spending cuts so we can begin to get our crippling debt under control, but we’ve been met with virtual silence. Disappointingly, the president seems more interested in continuing his campaign across the country to score political points, all while the country sits disgusted with a lack of action from Washington to fix the president’s sequester.

The cuts represented in the sequester are necessary, but what is not necessary is how they are structured. To essentially cut $1 trillion from our military in a short period of time will place an unnecessary burden on our service members and the workers who aid their efforts. So why won’t the president work with us to restructure these cuts in a more manageable way so the Department of Defense can plan accordingly?

Hatch’s proposal–his “smart spending cuts”–finds $142.2 billion in cuts from the federal budget. That’s $60 billion more than the amount cut this year by the sequester, “but in a much more common-sense, reasonable way[,]” says Utah’s senior senator in his Tribune piece.

A break down of Hatch’s plan on his site shows proposed cuts, based on a 2011 report by Senator Tom Coburn of Oklahoma called “Back in Black.” Using estimates from that report, Hatch finds ten areas where the federal government can cut back without affecting spending on national security. With the sequester disproportionately hitting defense spending (nearly $500 billion of the $1.1 trillion in cuts over the next decade are coming out of the military spending), Hatch appears to have made special effort not to touch the armed services.

130226-tobias-sequesterNot surprisingly, the list of proposed budget savings include a number of targets for conservative ire in recent years (and decades), including elimination of funding for  National Public Radio, consolidating National Endowment for the Arts and National Endowment for Humanities under one roof, freezing federal employee pay to match locality, and reducing agency budgets for advertising and travel. Also, fewer limousines owned by the feds.

I’m impressed that Senator Hatch is proposing more specific cuts than the across-the-board-we’re-all-gonna-die cuts that have been threatened by fear-mongering administration officials over the last week. The proposals astutely avoid hurting any particular constituency, with the exception of a few federal employees who will make roughly the same as their counterparts in the private sector in the areas they live, but that seems reasonable–working for the government is not supposed to make you rich.

However, it’s clear that the cuts are not much more than chopping at leaves with little real long-term impact on the drivers of federal budgetary growth.  Untouched are the big costs–Medicare and Medicaid.  In spite of bipartisan agreement that reform is necessary to retain the long-term solvency of these programs for the poor and weak in society, little effort has been made to address their future. I laud Hatch’s efforts on the budget, but I would like to see a more frank discussion of how entitlement spending will be addressed.

The full list of Senator Hatch’s proposal is here:

1. Freeze Federal Locality Pay for Five Years:  The Federal Employees Pay Comparability Act of 1990 created locality pay to align salaries for federal employees with private sector pay scales in their geographic area.  Estimated savings: $71 billion over ten years.

2. Reduce Civilian Agencies’ Travel Budgets by 75 Percent:  Estimated savings: $43.3 billion over ten years.

3. Reduce Agency Advertising Budgets by 50 Percent:  Estimated savings: $5.6 billion over ten years.

4. Combine National Endowment for the Arts and National Endowment for the Humanities into One Agency and Reduce Funding by 75 Percent:  Estimated savings: $2.8 billion over ten years.

5. Consolidate Various Funding Programs into a New Office Dedicated to Weather Research with the National Science Foundation and Reduce Overall Expenditures for This Research:  Estimated savings: $11.6 billion over ten years.

6. Eliminate Federal Funding for Public Media (National Public Radio and Public Broadcasting Service):  Estimated savings: $5.6 billion over ten years.

7. Reduce Administrative Expenses for the Treasury Department:  This would include eliminating printing and mailing of certain forms, publications and inserts.  Estimated savings: $2.2 billion over ten years.

8. Reduce the Number of Limousines Owned by Federal Agencies:  Estimated savings: $115.5 million over ten years.

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Filed Under: Entitlement Reform, Fiscal Reform Tagged With: , , , , , , , , ,

Entitlements are…earned? [video]

December 12, 2012 by Leave a Comment

Someone tell me this isn’t a scene from the movie version of Atlas Shrugged…

Rep. Sheila Jackson Lee (D-Texas) on the house floor reminding her colleagues  that entitlements are “earned.” Has someone pointed out to her that entitlement recipients receive a far greater benefit than they ever pay into?

(h/t Breitbart)

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Our problem isn’t the taxes, but the spending

December 10, 2012 by Leave a Comment

“Spending car” by Mike Lester

Is it time for Republicans trying to avert the fiscal cliff to give up on protecting the Bush tax cuts for the wealthy in exchange for entitlement reform?

Maybe, says former Senator Bob Bennett in an opinion piece in the Deseret News.

President Barack Obama wants to raise revenue by increasing taxes on households earning more than $250,000. The financial arguments for his position are weak — there aren’t enough such households to have a big impact on the debt — but he will prevail because all he has to do to get his way is nothing.

No deal, and taxes go up automatically on Jan. 1, giving him what he wants for the rich. Then on Jan. 2, he can propose that Congress immediately pass a law putting rates back down for the non-rich. If Republicans don’t pass it and there is a new recession, he will claim that it was their fault.

Maybe a better question would be: do Republicans still have a choice?

In many respects, the debate over taxes–raise them on the rich! Lower on the poor! Middle class! Get rid of deductions! Close loopholes! Reform the tax code!–is important, but really misses the point of what is behind the fiscal problems our country is facing. At the root of it all, the problem isn’t the tax code–though I’m all for reforming it, simplifying it, and making it more flat–the problem is that we are spending more than we are paying in taxes.

Let me repeat that with some emphasis: we are spending more than we are paying in taxes.  It’s a national problem carried and caused by each and every American. It isn’t about the rich–who are paying more and more–or the poor–who aren’t paying at all, but are more reliant on the government than ever before: it’s about all of us.

  • The Democrats: “Raise taxes on the wealthy!” comes the hue and cry from the Left, regardless of the fact that taxes cannot be raised high enough to avert future fiscal crises. In fact, they may aggravate them. No matter how many times the left side of the political spectrum tries to attack the wealthy, to say that they are not paying their fair share, the fact is that the wealthy are paying an increasingly large percentage of all taxes received by the federal government.  As I’ve noted in an earlier post, the 1950s, which saw record high tax rates on the very wealthy, also saw the wealthy supporting only 27% of the government’s budget. Today, the wealthy support 51% of the federal budget.
  • The Republicans: “No tax hikes!” is a great slogan, and indeed, Republicans are right that taxes slow the economy and hurt entrepreneurs, employers, and families. But they can’t fight tax growth with one hand, and spend more with the other.  One of the major mistakes of Republicans during the George W. Bush Administration was the passage of Medicare Part D, a massive expansion of government spending without corresponding revenues (also known as “taxes”). It didn’t help that we decided to invade and occupy Iraq and Afghanistan at the same time. My point is that you can’t fight taxes and create spending at the same time and expect the books to balance at the end of the day.
  • And the rest of us Americans: Like it or not, whether you are political or not, whether you voted  or not, you too are part of the problem. Our culture’s changing priorities is a part of the problem. Think about your own spending and lifestyle habits:  do you go to the emergency room instead of the physician? Do your lifestyle choices keep you healthy and physically fit? Did you take a job–any job–during the recession, and then, when it wasn’t enough to pay the rent or put food on the table, seek help from family, church, or charity first, before seeking government aid?  Are you saving for your retirement or are you expecting that Social Security and Medicare will provide for you in your “golden” years? And to the wealthy: do you give to a lobbying group that assures your industry gets sweet-heart deals, tax carve-outs and deductions, or protection from competition? For all of us: do you make an effort to be aware of the effect local elected officials actions will have on your home, neighborhood, city, or state?

In large part, I believe that the growth of the mountain of debt our country faces in the coming decades is not merely the fault of politicians in Washington, D.C., but also the result of changes in American culture where we demand more, and more, and give less, less not to our country, but to our neighbors and to our communities. As we fail to prepare and practice self-reliance and interdependence with our neighbors, we hand government bureaucrats more responsibility for things that would have, just a generation ago, been handled by neighbors helping one another.

The costs of Medicare, Medicaid and Social Security are among the heaviest that our country will need to burden in the coming decades, but reforming them is the work of politicians, and work that they can feasibly accomplish. The long-term future of American prosperity depends on it.

On the other hand, the effects that are created by an American culture that creates people that ask “what can my country do for me?” is an effect that can be deterred only by asking “what you can do for your country.” And that question can only be answer by some serious introspection–and personal change.

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Losing sight of the forest for the trees

August 1, 2012 by 2 Comments

It’s August. While we’re still a month away from the full swing of election season, traditionally beginning after Labor Day, there’s enough politics in the news that the rhetoric is already starting to wear thin.

And maybe that’s the problem: too much rhetoric. Too much empty rhetoric.

If it’s not clear to the legions of consultants advising the Romney and Obama campaigns, yet, the economy, and the lack of recovery thereof, is center ring issue of this election.  Instead of an honest and forthright discussion about the role of government with regards to the economy, though, we’ve been treated to a series of sideshows,  a parade of misfits and sideshows that distract from that discussion.

Whether it is Obama’s “evolving” stance on gay marriage (he’s for it, now), attacks on Bain, calling for Mitt Romney to give up more tax returns, or Romney’s gaffe in London, voters have been treated to more tit for tat than substantive discussion.  Even the Supreme Court’s ruling on the Affordable Care Act (aka “Obamacare”) seemed to reveal that neither side was willing to grapple with the effect the law will have on the economy in the form of new taxes. Obama seemed more interested in reiterating that “we won” and Romney’s team seemed afraid to attack, unless it’s something so glaringly obvious as Obama’s telling  entrepreneurs and business people that “you didn’t build that.”

Why is unemployment still high? Why has the Obama plan failed? Unless we want to constantly fight a battle of trying to win the least educated and most volatile voters–and continue to see the selection of inexperienced politicians who will say anything to get elected–we need to see a clear exposition of why it is important to vote Republican in November.

In other words, where’s the vision?  The candidates are clearly different individuals with a different view of the role of government, but are voters hearing that difference?  ”Both men’s positions have been contorted by each other’s attack ads,” as a piece in The Economist recently described,

 But there is a real left-right division, personified by the two candidates. Mr Obama, who has spent most of his life in the public sector, academia or community work, plainly thinks the state has a bigger role to play—in galvanising the economy when demand collapses (as in 2008) and in moderating inequality. By contrast, Mr Romney, who made $200m or so in private equity, believes that the best thing that government can do is to get out of the way—by cutting taxes, reducing regulations and leaving people to build their businesses.

And what will the winner face?

The winner of the November election will immediately be faced with the problem of the “fiscal cliff”—a preset $400 billion tax increase, with the expiry of various tax cuts, and a $100-billion-a-year cut in spending—which could push the economy back into recession. Looming over that is the gaping deficit. And over that, America’s schizophrenia: it taxes itself like a small-government country, but spends like a big-government one.

The state of the debate, says the Economist, is poor, though. On the right, taxes can never balance the deficit (even though the Economist cites Milton Friedman just a sentence before) and expansive spending is justified for prisons, national security, and big business subsidies. On the left, reform is impossible, with Obama methodically “unpicking welfare reform” passed over the last twenty years, including under President Clinton‘s administration. Further, “Mr Obama seems to think the public sector is inherently more moral than the private one. Companies are at best cows to be milked, at worst prey to be hunted.”

Read the full article here.

[The Economist]

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Public roads to nowhere [Contributor]

July 30, 2012 by 2 Comments

  [Benjamin Lusty is a lawyer and an occasional contributor to Publius Online]

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Democrats love talking about roads when they are actually talking about something else.  Listen to Massachusetts senate candidate (and progressive heart-throb) Elizabeth Warren:  “There is nobody in this country who got rich on his own.  Nobody.  You built a factory out there—good for you!  But I want to be clear.  You moved your goods to market on the roads the rest of us paid for.”  Hear this echo from President Obama:  “If you were successful, somebody along the line gave you some help.…  Somebody invested in roads and bridges.  If you’ve got a business—you didn’t build that.  Somebody else made that happen.”

The uninitiated may think that Democrats are actually talking about roads, which only they support, and without which we’re relegated to the anarchic Republican blood sport of “you’re on your own” economics.  Democrats, in their humble public spiritedness, plead for just a few more tax dollars, taken from just a few more rich people, to build just a few more miles of road so we can all share in the wealth they mysteriously generate.  Conservatives, they insinuate, cosset capitalist barbarians who loot our collective infrastructure.

This is obfuscation.  Democrats aren’t talking about roads.  They’re talking about entitlements and the taxes to fund them.  President Obama’s reelection wouldn’t herald a new age of aqueducts, Great Walls, and Hoover Dams.  It will aggrandize the welfare state.  Democrats retain power by distributing cash to special interests within their electoral coalition.  Seniors get social security and Medicare, college students get subsidized loans and Pell grants, and civil servants enjoy “Ferrari” health plans and gilded pensions.  In exchange, they vote Democrat.  It is simple entitlement politics.  Democrats’ political survival depends upon funding it all without asking sacrifices of their supporters.  Although road building grabs some votes, entitlements grab more.

Math, however, gets in the way.  Protracted recession and escalation of federal spending threaten both the treasury and Democrats’ electoral prospects.  This in turn necessitates a prolonged campaign to raise taxes to sustain current benefit spending.  But rather than honestly call for higher taxes, Democrats dress their politico-fiscal paradigm in the camouflage of “public investments” while simultaneously accusing conservatives of anti-social thuggery.  Raising taxes to pay for somebody else’s health care is a hard sale, particularly when higher taxes hurt the families that pay.  It is far easier to eulogize roads and hope that most people believe that’s the actual subject of the ploy.

Consequently, Democrats deliberately misuse the concept of public goods as a campaign strategy.  Public goods are simply those things that everybody can enjoy equally.  One person’s use of a road or a park does not necessarily limit access to the benefit it generates.  Similarly, everybody enjoys national defense, fire protection, and policing.  Government funding of public goods makes economic sense because private markets generally do not provide sufficient incentive for investment.

The same is not true, however, of entitlements which are only privately enjoyed.  One person’s Medicaid benefits cannot be consumed by another, even though the costs are shared by all taxpayers.  Further, entitlements do not lead to the creation of new goods.  Entitlement spending simply funds private consumption of things which the private market already creates.

Although the interstate freeway system may not exist without the Department of Transportation, Pennsylvania Hospital (the nation’s oldest) existed long before Medicaid selectively distributed health care benefits.  Unlike public goods, entitlements do not contribute to social wealth; instead they shift consumption from one group to another.

Democrats’ political survival, however, depends on their ability to convince voters that private consumption of public funds is actually a positive good to the rest of society that justifies elevated taxation.  This is only rhetorically possible if Democrats convince others that their spending program is simply nothing more than making everybody chip in their “fair share.”  The rhetoric used, however, is inherently deceptive and fails to convey honest information about the fundamentally differing economic qualities of public goods and entitlements.

Ironically, Democrats’ confusion of public goods and entitlements jeopardizes the ongoing vitality of public goods far more than any perfidy which they attribute to Republicans.  Entitlement funding dwarfs all other expenses and engrosses an escalating share of public revenue.  Absent comprehensive reform, entitlement politics will bankrupt the state, stalling every core public function upon which Americans rely.  Democrats are travelling a rhetorical public road to nowhere on the racecar of unreformed entitlements.

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Retirement Plans? Private Investment is still Smarter than Social Security

February 22, 2012 by 1 Comment

Well, maybe ‘smarter’ isn’t the best word (see headline). Perhaps ‘a better investment’ would be more accurate.

[...]private capital investment remains remarkably safe over the long term. Despite recent declines in the stock market, a worker who had invested privately over the past 40 years would have still earned an average yearly return of 6.85 percent investing in the S&P 500, 3.46 percent from corporate bonds, and 2.44 percent from government bonds.

In contrast, Social Security,

  • Once the safety net for the poor, is the safety net for most retired Americans. Nine out of ten people age 65 and older receive Social Security benefits.
  • As of 2009, 55,905,731 Americans–rich or poor–received Social Security benefits. In 2011, it cost us $727 billion.
  • Once funded by 159 workers per beneficiary, there are so many Social Security beneficiaries that there are only 1.75 workers in the labor force  per Social Security recipient to fund it. That’s down from 2.9 in 2010 and the most dramatic drop since 1955.
  • Today, it is completely unfunded. The Social Security trust fund has been raided so many times by politicians, that there’s no longer any money in it…just IOUs.

So, which system do you want to be covered by when you retire? One that has paid out an annual return of 6.85 percent or one that’s completely bankrupt and funded from current tax dollars? Apparently, America is split on that question:

  • 50% of the workforce has no private pension coverage.
  • 31% of the workforce has no savings set aside specifically for retirement.

I have only one question if you are part of that 50% or 31%: are you crazy?

APROPOS: See also my review of Congressman Jason Chaffetz‘s notable effort to reform, fix, and revitalize Social Security to make it solvent again here.

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