Archive for the ‘federal budget’ Category

The Antics of the Government Shutdown, Oct 2013

AnticsOfTheShutdownOct2013  <– PDF version

So we’ve had another “partial shutdown” of the federal government.  As usual, the administration did what it could to inconvenience the people for political gain; “essential” government employees worked as usual; and “non-essential” government employees received a two-week taxpayer-paid vacation.  Meanwhile, non-government employees who suffered from slowdowns and furloughs went without.  Situation normal: the ruling elite always look out for themselves and their non-essential government colleagues, first and foremost.  Finally the Democratic faction of the ruling elite came up with a temporary fix on 16 Oct 2013 which will cause the same debate to recur in Jan 2014.  In return, the Republican faction received a promise to negotiate spending cuts from the elitist President that would not even talk to them during the partial shutdown.

This shutdown started when the Republican faction attempted to link de-funding of Obamacare to a continuing resolution; they later reduced their demands to a delay in the individual mandate, but failed in the end to achieve even that.  The Democratic faction spent the two weeks busily claiming the shutdown was a conspiracy by the Republican faction, whimpering non-stop that it was unfair to link Obamacare modifications to a continuing resolution.  But, in their never-ending hypocrisy, the Democratic faction ignored the fact that Obamacare was passed originally as part of a budget resolution.  Therefore every budget bill would naturally allow a challenge to Obamacare.  The blame-stream media of course castigated the Republican faction at every turn.  What else should be expected from institutions that behave as if they were entirely owned and operated by the Democratic faction?

But the Republican faction is equally hypocritical when they pretend that they would behave any differently than the Democrats if Obamacare had been their idea.  After all, the main purpose of the law is to transfer power to the government by regulating the distribution of health care services, and the Republican faction desires the expansion of government power just as much as the Democratic faction.  As always, it is the people who lose out; in this case, the people will, in the long run, end up with lower quality or lesser quantity at a higher cost, typical of every one-size-fits-all government program.  If the problems signing up for Obamacare so far are any indication, the law is even worse than the analysts concluded.  Good thing the Democrats didn’t read it before they passed it — now they have plausible deniability.

The ruling elite cannot or will not do their jobs because they do not have the discipline to impose a budget process, hence the need for continuing resolutions.  This is especially true of the Republicans, who control the House of Representatives from whence all funding bills must originate.  In this instance the budget problem was coupled with a need to raise the debt limit because the government would be technically unable to meet all its obligations around the 17th of Oct 2013.  Once again, the hypocrisy of the administration was in full vigor, claiming that the U. S. would have defaulted on Treasury obligations (i.e., to pay interest on the debt) on that date.  But there is sufficient cash flow from the never-ending cascade of federal taxes being paid every month to cover those interest payments.  What Mr. Obama really meant was that the government would not be able to both service the debt and make full payouts on all the social programs, corporate welfare, and excessive regulation which the ruling elite together has imposed on the people.

In reality, both factions wanted a shutdown.  The Republicans wanted it for two reasons: a) to embarrass the President into allowing a cancellation of his signature “achievement”; and 2) draw attention to the excessive government spending (except for the part they voted for).  The Democrats also wanted it for two reasons: a) to distract attention from the scandal-of-the-week; and b) let the blame-stream media paint the Republicans as extremists for political advantage.

Look no further to the ruling elites in Washington for “leadership” or “solutions”.  If it’s not in the Marxist Handbook, the Democrats cannot understand it.  If it requires working together for a sensible objective, the Republicans cannot pull it off.  The good news is that they get to do it all again in a few months.

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The Politics of the “Fiscal Cliff”

ThePoliticsOfTheFiscalCliff  <– PDF version

So the elections are finally over and our illustrious federal officials now turn their attention to the so-called “fiscal cliff”.  At issue here is whether the Bush-era tax cuts will expire, along with the Social Security withholding reduction enacted in 2010 as a temporary stimulus measure.  The “fiscal cliff” came about per an interim agreement reached last year, as a result of the debt-ceiling escalation in Aug 2011 and the subsequent failure of Congress to come to a consensus on a fiscal policy.  The idea behind the interim agreement was simple: impose across-the-board spending cuts of $1 trillion over ten years and let the Bush-era tax cuts expire on 1 Jan 2013 unless a long-term fiscal policy is enacted.  The $1 trillion in spending cuts, spread over ten years, result in $100 billion in cuts every year, split approximately equally between defense and non-defense.  This was regarded by its designers as so abhorrent that it would provide sufficient motivation for Congress and the President to actually make a deal.  But the negotiations since the election have not been going too well; and of course both sides are busy blaming each other.

I will review the situation, and show how the Republicans, contrary to conventional wisdom, actually hold all the cards here.  First, a few undisputed facts:

1.  The President campaigned successfully on two notions: that tax rates must go up for the wealthy, and must come down for the middle class.  He has said the marginal rates on the wealthy should go back to the 1990’s; in other words, from 35% now to 39.4% as they were in theClintonera.

2.  If the “fiscal cliff” occurs, tax rates will go up for both the wealthy and the middle class.

3.  The long-term fiscal problem of the nation cannot be solved by spending cuts alone, nor by tax increases alone; a combination of the two is necessary (i.e., a comprehensive package).

4.  The history of past “comprehensive” reforms, as enacted under Reagan and Bush, Sr., shows that the Democrats always insist on tax increases immediately, with a promise of spending cuts in the distant future.  Of course, politicians being who they are, those cuts never happen.  It is safe to say that no Democrat in Congress will ever vote for any bill that actually cuts spending in the near term unless he is forced to do so.

5.  No Democratic President will sign a bill that results in immediate spending cuts, unless he is forced to do so (like Bill Clinton).

6.  If anything bad happens to the economy, the propaganda wing of the Democratic Party (i.e., CNN, CBS, ABC, NBC, and PBS; plus the major newspapers led by The New York Times) will blame the Republicans; if anything good happens in the economy, they will give Mr. Obama all the credit.

7.  The Democrats and their propaganda wing have long held that the Republicans are the party of the rich (conveniently ignoring the fact that tax provisions favoring the wealthy were passed mostly by Democratically-controlled Congresses over the last 50 years).

8.  The Democrats and their propaganda empire have claimed that the Republicans are holding the middle class hostage to protect the rich.

9.  Mr. Obama has stated that he will only accept a “fiscal cliff” deal if it raises tax rates on the wealthy.  He has claimed the wealthy are those with incomes over $250,000.

10.  The Republicans have thus far admitted that revenue increases are necessary and are willing to do so by removing some loopholes used by the wealthy and limiting some deductions.  They do not want to raise tax rates on the wealthy due to a “tax pledge” made some years ago.

Here are a few observations and applications.  First, consider the cuts in the “fiscal cliff” legislation.  The cuts are across-the-board, without the necessary and prudent prioritization that rational people would do.  However, let’s be realistic: it actually imposes spending cuts immediately, and for that reason alone is probably the best that our ruling elite can do as things stand presently.

Secondly, the wealthy already pay a large portion of income taxes.  So, if revenues are to be increased via the Republican preference (closing loopholes and limiting deductions), or increased by Mr. Obama’s preference (raising marginal rates), the wealthy are going to pay more either way.  In reality, the best thing for the nation is the Republican way, since it will do more to promote fairness in the tax code, and limits the ability of Congress to punish their enemies and reward their friends through the tax code.

Third, if we go over the “fiscal cliff”, taxes will go up for those of us in the middle class.  So taxes will go up — what else is new; and how will it matter all that much?  State and local taxes of all types have been going up all along.  Recall that the Social Security withholding reduction was intended to be temporary anyway (it was also a bad idea).  The increase in taxation via federal marginal rate increases is small compared to the already-occurring increases in the cost of living due to the Federal Reserve’s currency-printing machine.  If either side truly cared about the middle class, perhaps they would take action to restrain Mr. Bernanke.

Fourth, although most Republicans were dumb enough to sign “no-tax” pledges at the urging of Mr. Grover Norquist, the simple fact is that both the expiration of the Bush-era cuts and the repeal of the Social Security withholding reduction are already accomplished facts if a deal is not made.  They cannot be accused of raising taxes if they allow law per a vote already taken in 2011 to occur.  Only a moron would sign such a pledge anyway; since when did Mr. Norquist assume the authority to supersede the needs of the nation and the powers of Congress contained in the Constitution?  If Mr. Norquist wishes to be emperor, perhaps he should run for the office.

Fifth, the “smart money” has known for months that our ruling elites are incapable of anything better than the impending “fiscal cliff”.  As for the future of the stock market, the “smart money” managers have probably already priced-in the effects.

Sixth, if one is going to be accused of something, one may as well do it.

With these facts and observations in mind, it seems to me that the Republicans hold all the cards here, and it is possible to get true reform that actually helps the nation.  Mr. Obama needs to score political points by raising taxes on the wealthy (it won’t solve the fiscal problem, but he needs to score points).  He won re-election, so let him have his political points.  The increases on the wealthy are his most famous political need, but not his most important one.  Many of his supporters are middle-class.  He needs a tax cut for them much more than he needs a tax increase on the wealthy.  The Republicans in the House should immediately pass legislation that raises marginal rates on the wealthy to 50%, with no corresponding demands for spending cuts and no other conditions subject to objection.  This is far above the rates that prevailed in the Clinton era.  In fact, they should pass a series of bills that raise rates on the wealthy to 60, 70, 80, or 90%, and let the Senate Democrats and the President choose the one they want.  This turns the argument around while costing the Republicans nothing: taxes are going up on the wealthy either way.  If the Democrats think those marginal rates are too high, it will be incumbent on the Democrats to negotiate lower rates for the wealthy to protect their friends in the tall buildings in Manhattan.  If the Democrats do not really want higher rates on the wealthy, by all means they shall have their “fiscal cliff”.  If they settle on the new rates for the wealthy, Mr. Obama will have his political points, but leaves the Republicans in control of what he needs more (the middle class tax cut).  Then the Republicans can actually do what they’ve been accused of: hold the middle class tax cuts hostage — not to protect the rich, but to get spending under control and thus stabilize and secure the nation’s long-term financial health.  They should demand immediate spending cuts in return for an immediate reduction in tax rates for the middle class, thus forcing the Democrats to do what is necessary but have never done before.

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How Obama Gets Re-Elected in 2012, Part 4

HowObamaGetsReElectedIn2012Part4   <–  PDF version

Governor Romney chose Representative Paul Ryan of Wisconsin to be his Vice-Presidential running mate.  This was a good policy choice on Mr. Romney’s part, since Mr. Ryan is known as a serious thinker on the nation’s debt and deficit problems.  Mr. Ryan had previously put forth a plan to reduce spending and promote economic growth, probably the two most serious problems facing the nation today.  Granted, it is only a plan, likely to have some defects, and no plan survives intact after budget negotiations.  But at least it is something in writing to talk to and debate.  Choosing Mr. Ryan shows that the Republicans are attempting to get serious about the nation’s finances: if Mr. Obama had a budget plan, surely we would have heard about it by now after more than three years in office.

But Mr. Romney is engaging in the most amateur sort of wishful thinking if he believes that Mr. Obama will allow himself or his supporters to be baited into having a genuine discussion about issues.  A discussion about facts is the last thing Mr. Obama and his Party want; they have never won on that basis before.

The attacks on Mr. Romney have proceeded apace, somewhat in line with my predictions in part 3 of this series (23 Apr 2012).  The most recent focus is on Medicare.  Mr. David Axelrod, Senior Advisor to Mr. Obama’s re-election campaign was all over the Sunday morning talk shows claiming that the Romney/Ryan budget plan would “end Medicare as we know it”.  This is earth calling Mr. Axelrod, repeat, earth calling Mr. Axelrod: Medicare “as we know it” has already been changed via Mr. Obama’s Patient Protection and Affordable Care Act (“Obamacare”), which decreases funding for Medicare by about $700 billion over the next decade.  Perhaps it is too much trouble for Mr. Axelrod to read the legislation his Party has already passed.  Mr. Axelrod went on to complain that Mr. Romney and Mr. Ryan were out of touch with regular Americans on the Medicare system.  He said on NBC’s Meet the Press (12 Aug 2012) that the basic issue facing the voters was to evaluate the Republicans on the basis of “do you believe in Medicare or do you not  …..  I don’t believe they [Romney and Ryan] believe in that program”.

Why should any voter believe in Medicare?  The members of Congress don’t (Republicans or Democrats), the President doesn’t (nor his predecessors, regardless of party), and neither do any of their senior staff.  Members of Congress are covered in retirement by the Federal Employees Health Benefit Plan, a system of private health insurance, same as they have while in office. How many of them will give up the private plan for Medicare after they retire?  It is worse than that: all of the aforementioned persons and their families are exempt from Obamacare as well (probably the only part of the bill they actually verified before voting for it).  Only when our ruling elites have demonstrated their faith in Medicare will they be eligible to sit on their high horses, look down their noses at us, and lecture us that it is our patriotic duty to “believe in Medicare”.  The only way to establish the true cost of anything is to let the market set the price.  When the government intervenes, as in Medicare, the true costs are distorted generally upward, and the government picks winners and losers to compensate.  Presently, it is the doctors and hospitals that are chosen to take the loss on caring for the elderly.

This is one example of the mindless hypocrisy that will further enable Mr. Obama to be re-elected, in this case, by scaring the elderly.  The pro-Obama mainstream media will of course pretend not to notice.  But we cannot blame the media entirely.  A suitably large number of American voters have bought into the free-lunch theory offered by Marxism; they vote accordingly, and we get the ruling elites we have.

I have outlined many reasons in this series why I think Mr. Obama will win re-election.  It seems he is vulnerable only if the U-3 unemployment rate goes back above 8.5%, or another financial meltdown occurs, or the stock market declines more than 20%.  The tide of Marxism in America is otherwise too strong.

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A Note on the Budget Impasse, Part 2

A_Note_On_The_Budget_Impasse_2   <== PDF version

We’ve all heard the news about the “budget deal”.  Congress passed, and the President signed, the “Budget Control Act of 2011″, which averts the immediate prospect of a “default on the federal government’s financial obligations” by raising the “debt ceiling” about “$2.4 trillion” while “cutting spending” by a guaranteed $0.9 trillion over ten years, plus an additional $1.2 trillion in “additional cuts” which are to be specified by a “Select Committee” required to report its recommendations by 23 Nov 2011; if this Committee cannot agree, or Congress does not pass a list of “spending cuts”, then the $1.2 trillion in “spending cuts” will go into effect “across-the-board”, “divided evenly” between “security” and “non-security”.

Before we celebrate too much, let’s keep in mind that the federal government was already planning on spending levels that would increase the national debt from about $14.3 trillion to about $24 trillion over the next ten years.  Secondly, “discretionary” refers to all the things the Congress has allowed itself year-to-year control over, which happen to be all the things authorized by the U. S. Constitution.  Third, “non-security” is a code word for “entitlements”, often called “mandatory” spending because the payments are automatic, even though no such power to enact them is mentioned in the U. S. Constitution.  So, “discretionary” spending refers to all the things that the government is constitutionally authorized to do, “mandatory” spending is all the things the government is not constitutionally authorized to do.  If that seems strange to you, rest assured that it makes perfect sense to the people in Washington.  Fourth, “default” means that the government would not have the cash flow to meet all the promises it has made, and would therefore have resulted in politicians actually having to make all those “tough choices” they always brag about.  Fifth, Congress has traditionally changed the rules on these types of deals after the fact; usually the overall spending goes up no matter what.  Sixth, for those unfamiliar with it, a debt ceiling is the total amount of debt the government allows itself to obligate the taxpayers in the long run.

With these useful definitions in mind, let me restate my opening paragraph again, but this time the phrases in quotes will be in accordance with their true meaning:

We’ve all heard the news about the “smoke-and-mirrors swindle”.  Congress passed, and the President signed, the “Business as Usual Act of 2011″, which averts the immediate prospect of a “politician having to do his job” by raising the “actual total debt” to about $21.9 trillion while “pretending to cut spending through promises to reduce the rate of increase” by a guaranteed $0.9 trillion over ten years, plus an additional $1.2 trillion in “accounting gimmicks” which are to be specified by a “bipartisan group of entrenched party hacks” required to report its recommendations by 23 Nov 2011; if this Committee cannot agree, or Congress does not pass a list of “less-than-desired-increased-spending-levels”, then the $1.2 trillion in “less-than-desired-increased-spending-levels” will go into effect “targeted at enemies”, “according to which faction has the political advantage” between “constitutionally necessary tasks, which they don’t care about” and “entitlements, which they are afraid to discuss”.

As I speculated in my first essay on this subject (11 Jul 2011), this bill is full of the usual deceptions, delays, and artifices.  There will come a day, however, when real choices have to be made.  The longer it is put off, the more painful it will be.  As the people in Washington seem to be comfortable with these do-nothing illusions, they will no doubt continue to do so for as long as they can borrow another dime, after which there will be a Very Unpleasant Reckoning.

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