An Explosion of Government Spending will require an Explosion of New Taxes, Borrowing and/or Printing
Blah, blah, blah. And the budget debate goes on. It is interesting that it is the Republicans that are being intransigent. They’re the reason why there is no deal. But the Democrats aren’t intransigent when they’re being intransigent. Funny how that works. Well now there’s a fallback plan. In case the Republicans refuse to compromise and agree to all of the Democrat’s terms. Here it is (see Five questions on the debt-ceiling debate posted 7/15/2011 on The Washington Post).
The third, and increasingly likely, option is a fallback proposed by Senate Republican leader Mitch McConnell (Ky.). Congress would allow Obama to raise the debt limit in three increments totaling $2.5 trillion. It would also vote on resolutions disapproving of the debt increases, letting Republicans formally blame the increases on Obama.
To get House Republicans behind the deal, McConnell and Senate Majority Leader Harry Reid (D-Nev.) are revising it to include $1.5 trillion in cuts to government agencies and a new bipartisan committee to produce a framework for long-term debt reduction. Obama signalled Friday that he could live with the McConnell-Reid fallback.
So they will agree to disagree and let Obama do what is ‘best’ for the country. And let him have full blame for doing it. It’s a trap. So when the nation implodes under unsustainable debt and a destroyed economy, the Republicans can point at Obama and say, “He did it.” The Republicans may win the battle. But they will lose the war.
A new bipartisan committee? Didn’t we already do this? The president’s own bipartisan committee of Erskine Bowles and former-Sen. Alan Simpson already did this. And Obama promptly ignored their recommendations. Then Joe Biden gave it a whirl. And failed. Then the president sat in meetings himself. And failed.
Another committee? Why? It’s just going to fail, too. They need to cut government spending. They know it. All of these bipartisan committees know it. Even the Chi-Coms know it. But Obama and the Democrats just aren’t going to do it. They’ll just keep wasting time with these meetings until they can get the Republicans to cave. Because that’s their idea of compromise.
A “grand bargain” would mean settling for smaller tax increases on the wealthy than if Obama simply let the George W. Bush-era tax cuts expire at the end of 2012. And it could impede the economic recovery by ratcheting back government spending, thus reducing demand.
A bargain implies two competing viewpoints reconciled to best satisfy both sides. It doesn’t work well when the Democrats simply reject the Republican’s views in toto. And hold on to failed, dogmatic Keynesian economic policies. For if government spending worked there would be no recession. Or a budget debate to raise the debt limit.
This pervasive view that these Keynesian policies are accepted as the only viable policies by the Democrats is the reason why we’re in the mess we’re in. It appears that no amount of empirical evidence discrediting Keynesian economics will ever dissuade the Democrats from their reckless spending ways. Thickheaded, stubborn and imbued with an air of all-knowing condescension and infallibility, they will let the country crash and burn before ever considering the idea that maybe they aren’t as brilliant as they think they are.
But as Obama sees it, the debt-ceiling crisis has offered an opportunity to fulfill his grand if nebulous campaign promise to get serious about attacking the nation’s fundamental problems. Being able to campaign on a major debt deal could outweigh giving up the chance to attack Republicans over Medicare. Settling now for a smaller tax increase on the wealthy would spare Obama a divisive fight over the Bush tax cuts. And getting the nation’s fiscal house in order could make it easier to win support for spending on education, research and infrastructure in a second term.
As for the economy, Obama seems to have adopted, at least to some degree, the Republican theory that businesses will invest more if they see Washington getting a handle on the debt. And a 10-year debt deal could be arranged so that few of the cuts went into effect immediately — there could even be some upfront stimulus included in the deal.
More spending?!? You’re going to get your fiscal house in order (i.e., reduce the deficit) by spending more? Well there’s only one way of doing that then, isn’t there? With massive new taxes. And not just on the wealthy. These are going to have to reach deep into the middle class. Because Obama has increased the deficit by a trillion dollars. He’s the king of deficit spending. He’s taken deficit spending to uncharted heights. And it will take trillions in new taxes to reduce his deficits. And this is the problem. He is spending too much.
The Reagan Revolution was animated by “supply side” theory, but Ronald Reagan himself presided over several tax increases after his initial big cuts of 1981. He escaped GOP opprobrium, but George H.W. Bush caught his party’s ire when he signed a 1990 deficit-reduction deal with higher taxes. George W. Bush passed two big tax cuts, which nonpartisan budget experts now say were a major factor in today’s deficits.
Those ‘budget experts’ are no doubt Big Government Keynesian economists who love stroking their egos by advising governments on macroeconomics. Talk to an Austrian School economist and you will hear a far different story. And one that better stacks up against history.
Reagan made a deal with Tip O’Neil and the Democrats to cut $3 dollars of spending for every new $1 in taxes. Of course, the Democrats lied. They never honored their spending cuts promise. Still his tax rate cuts nearly doubled tax receipts. So tax rate cuts can and have increased tax revenue. It was the out of control spending of Tip and company that gave Reagan those $200 billion deficits. Chump change by Obama’s deficit standards.
Bill Clinton fell ass-backwards into an economic boom thanks to the irrational exuberance of the dot-com bubble. Money from capital gains tax from all those exercised stock options poured into federal coffers. Then the bubble popped. And George W. Bush started his presidency with the dot-com recession. So, in response to the recession, Bush cut taxes in 2001 and 2003 to stimulate the economy. In 2003 federal tax receipts were $1.782 trillion. In 2008 they increased to $2.524 trillion. That’s an increase of $742 billion. Or an increase of 41.6%.
So, no, the Bush tax cuts did not cause the deficit. It was TARP (caused by the Democrat’s poor oversight of, and profiting from, Fannie Mae and Freddie Mac and their great subprime mortgage scam). Obama’s stimulus. And Obamacare. An explosion of federal spending that will require an explosion of federal taxes, borrowing and/or printing to pay for. No, this isn’t George W. Bush’s deficit. This is Obama’s deficit.
A Shortage of Health Care Workers in Canada?
And speaking of national health care, let’s take a look at how well it is working in Canada (see Interactive Billboards: Bringing Billboards To Life by Misty Belardo posted 4/24/2011 on Bit Rebels).
An example of a great interactive campaign is this interactive billboard placed at bus stops. The campaign’s objective was to raise awareness about careers in public service. The challenge for the ad agency was to create enough interest in people so that they might seriously consider pursuing a career in public health. The big idea was to give people the feeling that they are capable of saving a life.
The billboard consisted of a huge interactive screen that illustrated a patient dying (as morbid as that may be). When a passerby pushed the hand marks on the sign, the electrocardiogram beeped, indicating that the man came back to life. Right at that moment a message read “Choose a career in public health, visit SaveLives.com.” It would be interesting to find out how many people interacted with the billboard, and even more importantly, how many of those registered and inquired about that career. Usually for campaigns like this it takes a couple months to find out the results.
The ad is apparently to attract health care workers in the province of Québec, Canada. Which means they must have a shortage of health care workers. And must be rationing care. For that is an expensive way to advertise. And you don’t do that unless the need is critical. Whereas in America, it is one of the few growing sectors of employment. Until the government takes it over under Obamacare, that is. Then the Americans, too, no doubt, will be advertising to get more people to work in the bloated bureaucracy that American health care will become.
And it’s going to be bad in America. The debate over raising the debt limit so they can pay their current bills? Those bills don’t even include the explosive costs of Obamacare. Those costly benefits are yet to kick in. When they do there will be a whole lot more people covered by the same amount of health care workers, thus creating a shortage of them. Which will require the rationing of limited health care resources. (Unless the government finds an extra trillion dollars in some old coat in the closet.) And then Obamacare will limp along like Medicare. Chronically in the red. And forever threatening to cut providers’ pay.
The State Governors know how to Govern
Part of Obama’s grand plan is to pass a lot of costs along to the states. Because they can. And states have to bite the bullet and absorb these costs. Because they can’t pass them onto anyone else. Or print money. We call them unfunded mandates. State governors call them bull [deleted expletive].
You see, states don’t have the options of the federal government. They can’t be forever silly and irresponsible. They can’t bluster in hyperbole, thump their chests with pride for a job not done and then just kick the can down the road. They have to do what Obama and the Democrats in Washington won’t do. Govern (see For governors, a personal toll from budget battles by Dan Balz posted 7/16/2011 on The Washington Post).
Talk to state executives gathered here at the summer meeting of the National Governors Association and it quickly becomes clear that the budget fights this year have not just left political scars, but some personal ones as well. As Washington Gov. Christine Gregoire (D) put it, “I’ve just come through a session in which I made rotten decisions.”
In Gregoire’s view, those decisions weren’t bad because they failed to solve the state’s budgetary problems or left her budget hopelessly out of balance. To the contrary, Gregoire oversaw cuts of more than $4 billion that balanced her biennial budget.
Like many governors, Gregoire cut pay for state workers, reformed the state pension system, asked state employees to pay more for health care and retirement, eliminated cost-of-living increases for some retired state employees and revamped the state’s worker compensation system.
She cut education spending and raised college tuition.
Now that’s governing. Doing the right thing no matter how much it pains you. This is the way it’s supposed to be. Politics just isn’t a game, a path to riches and a fat pension. It’s doing what’s best for the people you govern. Even when it goes against your own personal philosophy.
We’ve come a long way from the Intent of the Founding Fathers
It’s just more of the same from Washington. And this is what Thomas Jefferson feared. And why he hated Alexander Hamilton so. Permanent government debt is a dangerous thing. It can give you an out of control federal behemoth. Intruding ever more on our individual liberties to feed it’s appetite for ever more revenue. Which is what Washington is today.
Jefferson cut federal spending so much he could hardly defend American shipping. Today the federal government collects in taxes enough to pay for one Apollo moon program each month and it still isn’t enough.
We’ve come a long way from the intent of the Founding Fathers. Lucky for them they didn’t live to see what we’ve done to their beloved republic.