September 18, 2014

This isn’t the hope you were looking for…

Debt, debt, debt…

It seems debt is all the rage in Washington these days, and with good reason. The federal government only stays open on debt, and unless Congress and the President can agree soon, we’ll hit that limit and…well, who knows what will happen next.

Originally, negotiators were looking at a deal to cut deficits by about $2.5 trillion over 10 years.

But as the deadline approaches, Obama has raised the stakes. The goal he is now pushing for — as much as $4.5 trillion in deficit cuts over the coming decade — would require changes both in taxes and in the government’s basic safety-net programs.

“There’s going to be pain involved politically on all sides,” Obama told reporters after the White House meeting. [Read more...]

Mexico files brief against Utah…federalism at issue?

Immigration is one of those issues that never seems to go away. While almost every policy can be debated, either passionately or with blithe calm, immigration seems to evoke a passionate and even angry response from people who are, otherwise, level-headed and even-tempered. [Read more...]

Cutting Non-Defense Discretionary Spending Just Isn’t Enough

Cutting discretionary spending alone is not going to solve our fiscal woes. Entitlement reform must happen if we’re to maintain our economic strength.

That, or raise taxes. A lot.

Federal budget outraces CPI by four times

Did you know that federal spending has increased  faster than consumer prices?

Four times faster?

From 2000 to 2010, federal spending has increased 106% while prices (according to the Consumer Price Index) have only increased 26%. In other words, while the cost of stuff has risen only 26%, the government is spending roughly four times more than if it had increased spending to match increased costs.

To be sure, a few things have happened in the last ten years that have affected the increase in federal spending faster than consumer prices. There was 9/11 and wars in Iraq and Afghanistan. There was a recession, and there still is a recession.  But even so, shouldn’t federal spending increases match consumer price increases, at least somewhat?

Mandatory Spending or Discretionary Spending?

Right now, a lot of the debate over the size of the federal budget  centers around “discretionary” versus “mandatory” spending. As one economist (Arnold Kling) points out, budget items in the later group aren’t so mandatory as they may seem.

The data indicate that it is not very difficult to increase Federal government spending, in spite of the large portion that is mandatory. Why not? Some hypotheses:

1. We tend to see discretionary increases in “mandatory” spending. As in the prescription drug benefit. Note that at the time the prescription drug benefit was enacted, nobody said, “You know, on the whole, the elderly are doing fine. We want to provide prescription drugs as an in-kind benefit, but maybe we should cut back on other transfers to the elderly in order to maintain generational balance.”

2. The government’s “cost of living” goes up much faster than the CPI. For example, with Medicare and Medicaid, outlays are tied to health care costs, and we all know that health care costs are rising faster than inflation.

Check out the rest of his analysis here. Noting that, with the exception of “net interest,” every major category in the federal budget has seen an increase in spending greater than the consumer price index, Kling argues that if we cut spending back to 2000 levels–without touching defense, Medicare, or Social Securitywe could slash $500 billion from the federal budget.

That’s a healthy chunk of change, and a simple idea. Roll spending back to 2000 levels, and then start looking at entitlement reform for other budget constraints and deficit reduction.

Here’s his data:

Spending, in billions, vs. Consumer Price Index

Spending Category 2000 level 2010 level Percentage increase
Consumer Price Index 174 219 26 %
Total Federal Outlays 1789 3721 108 %
Defense 294 719 144 %
International 17 51 197 %
Health 154 372 141 %
Medicare 197 457 132 %
Income Security 254 686 170 %
Social Security 409 721 76 %
Net Interest 223 188 -16 %
Other 240 526 119 %

Get it? Prices have risen only 26%, and federal spending should have risen about the same, even accounting for defense, Social Security, and Medicare. But it hasn’t. Federal spending has increased far faster.

Kling puts in a last word:

Or maybe the answer to the paradox is that when it comes to the Federal Budget, spending is discretionary when somebody proposes an increase in its rate of growth but mandatory when somebody proposes a decrease in its rate of growth.

Are politicians really just “the slaves of some defunct economist“?

The Federal budget is a curious thing. It alone in the world of finance and spending–from individual home budgets, corporate coffers, Wall Street, and state budgets–is controlled by persons whose primary interest is not responsibility, but reelection, and who spend based on good ideas for benefits, not the realities of economics.

Few things secure reelection like bringing home the bacon or signing a revolutionary new program. Yet the law of unintended consequences is stronger than all the political clout or well-meaning programs in the world.

So it is: well-meaning Congressmen (and Congresswomen), Senators, and Presidents head off to the marbled halls of Washington, D.C. to make plans and pass laws that their constituents will love back home, solve society’s problems, and make world a better place.

Then, the plans hit the real world, and little do  politicians know what results will really happen.

As I’ve quoted before, “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

The road to hell, or rather, bottomless debt, is paved with good intentions. So, perhaps, is the road to Washington, no matter how little men “really know about what they imagine they can design.”

Recommended reading for more: The Road To Serfdom, by F.A. Hayak.

Cover of "The Road to Serfdom: Fiftieth A...

Cover via Amazon

(h/t Library of Economics and Liberty)

Guest Post: Holly Richardson’s “Article V Convention vs Con-Con”

By hollyonthehill

Arguments against a Constitutional Convention (also called a Con-Con) are plentiful and rightly so. The last Constitutional Convention resulted in a new government. Opening up the Constitution could be like opening Pandora’s box.

First page of Constitution of the United States

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But.

What happens with a federal government that is out of control? Representative Ken Ivory says that the distinct line between the federal government and states’ rights is the issue of our time. I believe it’s certainly in the top 2 or 3 issues. Yet how many timeshave the states ceded their power to the federal government. How many times have we rolled over, thrown up our hands and said there is nothing we can do? Or even worse, how many times have states gone to the federal government and asked for handouts, willingly accepting the strings that come with it. In the last year or two, we have seen what happens when “we the people” get fed up with the government. In fact, political pundit LaVar Webb points out:

In the business world, we have often seen the forces of “disruptive innovation” at work. Harvard Business Professor Clayton Christensen has written best-selling books about the inevitable process of large, bureaucratic, top-down, slow-moving businesses or industries being “disrupted” by small, nimble, innovative competitors using the latest technologies. In business, this process, while deadly for lethargic firms, eventually produces better products, superior customer service, and an upward spiral in efficiency, productivity, wealth creation, and quality of life.

This raises an intriguing question: Could the beneficial process of disruptive innovation work in government? Government obviously isn’t subject to the same competitive forces as are private businesses. Government operates by force and coercion, imposing its will by law and regulation, not according to market needs or consumer demand.

State legislatures have the right to tell the federal government to back off. They can do it through (mostly meaningless) resolutions. They can do it through bills that slap the feds in the face. They can do it through nullification attempts. They can also call for an Article V convention.

Article V reads as follows:

The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as part of this Constitution, when ratified by the Legislatures of three fourths of the several States, or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.

On a state level, there are a couple of ways to change the state Constitution. The legislature can pass a bill by 2/3 in both the House and the Senate, then have it ratified by popular vote. Or, we can have a citizen’s initiative where a certain percentage of the population drives the movement to get an amendment put on the ballot. On the federal level, we can have an amendment passed (such as the Balanced Budget Amendment currently being talked about in DC), OR, we could have a Con-Con, OR we could have a state-called amendment convention.

If the Founding Fathers were truly concerned with the overgrowth of the federal government – and certainly all evidence points to that as a primary concern – then the inclusion of Article V is not an accident. It was meant to be one more check by the states on the federal government.

By Holly Richardson

Look at DC right now and tell me that we don’t already have a runaway government that is acting outside the bounds of their Constitutional authority. We have TARP, we have Obamacare shoved down our throats, we have unelected, powerful czars and we have lame duck sessions where bills like S510 were passed on a voice vote late in the evening, in spite of significant opposition. In addition, we have secretaries – like Ken Salazar, of the Department of the Interior – who have proclaimed that he and his department can now circumvent the Constitution in declaring wild lands and departments like the EPA who regulate by rule when they can’t get the laws they want passed by Congress.

As someone who loves the Constitution, and who loves this country, I am tired of rolling over and letting the federal government trample our rights. I believe we SHOULD use the tools the Founding Fathers gave us to push back against this egregious federal over-reach and for this reason, I support the states banding together and proposing an Article V amendment convention.

Reprinted with permission from Utah State Representative Holly Richardson. Find the original post here.

The answer to why Americans are OK with more spending

Yesterday, just before the State of the Union speech, I had an insightful conversation with a family member. This person is taking his first class in political science, something like a Polisci 101 class. He called me to ask some questions for an assignment he was working on.

“What does ‘non-security, discretionary spending’ mean,” he asked. “I guess the President is going to cut it, or freeze it, or something.” He paused. “It’s supposed to be in the speech tonight.” That would be the State of the Union, I mentally added.

“That phrase,” I said, “refers to items and projects in the federal budget that don’t relate to national security–like the military–and that can be adjusted from year to year, or that we have a choice about whether to spend money on them.”

“So what is non-discretionary,” he asked back.

“Things that must be in the budget, things that are fixed,” I said. “Things that Congress can’t really adjust because they are dependent on other factors, like how much Medicare or Social Security will cost that year.”

“Healthcare?” he asked.

“Yeah,” I said. The other side was quiet for a moment. Then he said thanks, and hung up. Two minutes later, my phone rang again, and he had another question.

“So,” he started. “How will cutting ‘non-security discretionary’ spending affect me?” I thought about his question. “Will it, like, lower my taxes?”

“Not much,” I said. “Most of the federal budget is spent on the non-discretionary things, so the discretionary non security items don’t account for much. And we spend more than we make.”

” More than we make? We pay for the budget with taxes, right?”

“Yeah, but the federal government has to borrow to pay for it, because it doesn’t collect enough taxes for everything.  So taxes pay for some of it, but not all of it,” I said, unsure where this was going.

“How much?” I wasn’t sure how much, but I was pretty sure it wasn’t all. In fact, I was positive.

“We don’t pay for most of it. We raise a lot of money in taxes, but we don’t pay off how much we borrow, ever. With only one exception (I think), we’ve run a debt since the early 1980s.”

“So we’re spending more than the taxes pay for?” He was incredulous, shocked.

“Yeah. A lot more.” I was surprised. Doesn’t everyone know this?

“No way,” he said. “That’s crazy.”

Yeah. It is crazy. But what struck me, and perhaps what is more crazy, is that it’s probably something that few people realize. The federal government spends more than it taxes. Further, it has done that for several decades, and it is projected to continue doing that for the foreseeable future.

And I doubt there are few Americans that realize it. The government is, largely, providing something for nothing and no one is paying for it. The next time you complain that the government owes you something, remember: it’s not paid for–it’s bought with a credit card. The federal credit card. And no one is paying that credit card off.

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Looking at “Signing Unconstitutional Laws” by William Baude (part 2)

First page of Constitution of the United States

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Continuing my look at William Baude’s “Signing Unconstitutional Laws” (86 Ind. L. J. (forthcoming 2011))…

We had just finished look at the summation of why Baude did not believe the act of signing unconstitutional laws was in itself unconstitutional.  In reviewing the arguments of those opposed to signing such laws, Baude states that the reasons are generally pragmatic, not constitutional:

All of these arguments share a different set of common premises—that signing unconstitutional laws is justified not on formalist grounds, but practical ones. And when the authors explain the limits of the President’s power to sign unconstitutional laws, it is in functional or practical terms, not constitutional ones—an approach echoed by many others who have abandoned the hard-line view. Moreover, none of them argue that the same circumstances that allow the President to sign unconstitutional laws require him to do so.

In response, Baude proposes that the premises are wrong.  No “do-not-sign-unconstitutional-bills” clause exists, signing one can be risky, but necessary, and the considerations that go into signing them are constitutionally based. However, while there is not any clause that forbids signing of unconstitutional bills, there are provisions which require caution in signing laws.

Looking at the text of the Constitution, Art.1 Section 7 details the process of a bill becoming  a law and is known as the “Signing and Veto” clause.  The President is able to “approve” or state “Objections,” but nothing more is said about the basis upon which he should evaluate the law.

In contrast, Art. II, Section 3 requires that the President to “take Care that the Laws be faithfully executed” and to “faithfully execut[e]” the Constitution, which is part of the “Supreme Law of the Land.”  Here, Baude argues, is where the President is allowed the flexibility to sign unconstitutional laws, but refuse based on duty to enforce them as conflicting with the Constitution. On the books, but not treated as law by public officials, the “Take Care” clause is upheld.

The Presidential Oath supports this further.  Says Baude:

That leaves the President’s obligation to “preserve, protect and defend,” the opposites of which are allowing something to be destroyed or damaged. But how does an unconstitutional law damage the Constitution? The Constitution, after all, is supreme, and preempts ordinary laws that are repugnant to it. At a practical level, the Constitution might not be preserved if unconstitutional laws are widely enforced; but the practical problem is addressed by ensuring that the unconstitutional law is not executed. And at a more metaphysical level, the Constitution takes care of itself automatically.

Constitutional structure supports this proposition.  A legislative act that is unconstitutional is not law, and is therefore void and to be ignored by the federal government. (Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177 (1803); see generally Kevin C. Walsh, Partial Unconstitutionality, 85 N.Y.U. L. REV. 738, 755-777 (2010) (discussing and defending this view).  In other words, the President need not enforce or veto because the Constitution has already vetoed them.

Baude also discusses, at some length, the impact of the phrase “to the best of my Ability” in the Presidential oath and its role in allowing leeway to the President in executing laws that he may or may not realize are constitutional.

Next time: the risks in signing unconstitutional laws.