Free Markets, Free People

budget

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President’s FY2015 budget more proof that he lives in a fantasy world

If I’m not mistaken, not a single Obama budget (those few he’s submitted) over the years has gotten even one vote when it hit Congress.  And that includes votes from Democrats.

This year is likely to be no exception.

Veronique De Rugy at George Mason Univerity’s Mercatus Center says:

Much of the president’s proposed budget’s rosy projections will require considerable tax financing and political restraint to come to fruition. If revenues are lower than anticipated or spending is not restricted as planned, the ten-year debt picture will look quite different. I have noted before that President Obama’s later mid-session review budget differed considerably from his early budget projections. Early revenue and outlay projections were higher than actual amounts, while deficit spending surged much higher than anticipated from 2010 to 2012. This budget will likely mis-project critical variables as well. The rosiest projections all too often turn out to be the most disappointing.

Talk about an understatement.  And the rosy projection?  Well here it is compared to the CBO projection:

You have to chuckle at a miss that bad. In the outlying years, look at the percent of GDP the CBO projects vs. Obama.  Any guess as to which projection is most likely of the two?

Go back to a key line ins De Rugy’s analysis:

If revenues are lower than anticipated or spending is not restricted as planned, the ten-year debt picture will look quite different.

Point to a moment in recent history where our profligate politicians have actually followed a restrictive spending plan that would have the effect Obama says it will?

Yeah, I can’t point to it either.

Regardless, however, we’re supposed to believe that if the plan is followed as layed out in the Obama budget, we’ll see long term debt reduction.

Unfortunatly the next chart doesn’t at all support that claim:

In every year projected, spendin is greater than revenue.  So what they’re assuming is massive growth in the eoncomy to make the debt they pile up in the later years a smaller percentage of the GDP.

Really?  Taxes are going to go up, government spending will also go up and yet somehow the private economy is going to surge (10 more “recovery summers”, eh?)?  Obama plans spending and taxation as a percentage of GDP that are at or near historic highs, but we’ll see huge economic growth to support that?

Wow, if you’re not flying the red BS flag, you need to take an Econ 101 class.

Yet this is what the President of the United States is presenting as a functional budget for this country 10 years into the future.

Fantasyland.

~McQ


Where the money goes

Once again, it’s time to look at the state of the Federal budget, and get our heads around how well—or badly—we’re doing as a republic. The short answer is…not well. Let’s take a look at a simple chart of the last full year of federal spending and receipts, which is Fiscal Year 2012. The chart is clickable, so you can see a full-sized version.

2012 Federal Budget

We spent $3,795.55 billion, while taking in $2,469 billion in taxes and receipts. That gave us a deficit for the year of $1.326.55 billion.

Much of the spending is required by law. Mandatory spending includes Social Security, Medicare, Medicaid, and retirement benefits for the military and federal workers. In addition, interest on the national debt of $227.73 billion must also be paid, by law. Overall, $2543.51 billion in spending was legally required. That’s 67% of all federal spending.

Keen observers will note that revenues of $2,469 billion do not cover that amount of mandatory spending. So, we missed being able to pay for required spending alone by by $74.51 billion. Essentially, we borrowed money to pay one-third of the interest on the money we’ve already borrowed.

Actually, we’re pretty lucky when it comes to the whole interest payments deal, because the average interest rate on the debt is hovering at around 2%.  Every additional percentage point in that interest rate translates to about $115 billion dollars in additional interest charges every year. If interest rates were to rise to the historical average of 6%, that would add about $575 billion per year to cost of servicing the debt. That would raise the annual debt service costs from $228 billion to $803 billion. That’s about $44 billion more than we currently pay for defense. So, let’s hope for a weak, struggling economy, right? Gotta keep those interest rates at historical lows.

Anyway, the remaining spending is all discretionary, so, we chose to spend another $1,252.53 billion in discretionary spending. $759.11 billion was spent on killing foreigners. Everything else the Federal Government does—all of the executive departments, science and medical research, the Judicial branch, and giving money to heathen foreigners to try and make them our friends—cost us $492.42 billion. Giving money to the heathen foreigners—also known as foreign aid—accounted for about $38 billion for the year, or 1% of federal spending.

So, what can we extrapolate about the future? Well, we know that, even if interest rates stay steady, mandatory spending on entitlements will rise as the huge population bolus that is the Baby Boom generation begin retiring. Without either significant new taxes and/or significant entitlement cuts, re. That means that, in the not-too-distant future, revenues will not cover even the cost of mandatory entitlement spending.

We can—and probably will—ameliorate this by slashing defense. It’s what the Europeans have done, after all. There’s this huge chunk of money that goes to defense, and it gives us a defense budget larger than the defense budgets of the next 19 largest nations combined. Obviously, we will be told, we’re acting like a bunch of paranoid maniacs, so we can cut defense by at least half, and still have a huge defense establishment in world terms. So, we got that going for us.

So, that’s the situation for FY 2012. In a couple of months, we’ll get a final accounting of FY 2013, and we’ll see where we stand. Revenues were significantly higher in 2013, and spending growth doesn’t appear to have kept pace, so the deficit probably fell to somewhere in the vicinity of $800 billion.

That’s progress, I guess, though one year does not make a trend. Let’s see how much Obamacare is gonna cost us next year, assuming it isn’t delayed because of all the fail.

Anyway, please feel free to show this spending chart to your ignorant friends.

UPDATE: Here’s a more detailed look at federal spending in 2012 by government function:

Government Function Amount (billions)
Social Security $778.574
National Defense $716.300
Income Security $579.578
Medicare $484.486
Health $361.625
Net Interest $224.784
Education, Training, Employment and Social Services $139.212
Veterans Benefits and Services $129.605
Transportation $102.552
Commerce and Housing Credit $79.624
Administration of Justice $62.016
International Affairs $56.252
Natural Resources and Environment $42.829
General Government $31.763
Community and Regional Development $31.685
General Science, Space and Technology $30.991
Energy $23.270
Agriculture $19.173
Allowances $0.125
Undistributed Offsetting Receipts $-98.897
TOTAL $3,795.547

These are total spending amounts by function, and include both mandatory and discretionary spending in each line item.


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Obama budget proposal should be DOA

Apparently President Obama is sure his newest budget proposal is so good there’s no room or need for negotiation.  Or so a senior White House official says:

“We don’t view this budget as a starting point in the negotiations. This is an offer where the president came more than halfway toward the Republicans,” a senior administration official told reporters Tuesday, speaking on condition of anonymity to detail the forthcoming document.

“So this is our sticking point,” the official said. “And the question is: are Republicans going to be willing to come to us to do serious things to reduce our deficits?”

Obama is proposing a $3.78 trillion dollar budget.  Estimated tax revenues for 2014 are  $3.22 trillion.  Yet, this is being touted as a “budget cutting” budget and the White House claims it is exactly what the Republicans have wanted.

What … another deficit?

By the way, I don’t want “reduced deficits”.  I want NO deficit.  I.e. any budget that begins with an amount higher than the estimated tax revenues for the year is Dead On Arrival.

And that’s precisely the declaration this budget (like all the other budgets Obama has submitted) deserves.

DOA.

~McQ


The GOP has a chance to take the White House if it can discipline itself to stay on message

Pew Research as a survey out today that is one taken after Romney became the presumptive nominee for the GOP.  It compares its numbers to a survey taken while the GOP’s nomination was still contested.

Pew entitles it’s piece about the survey, “With Voters Focused on Economy, Obama Lead Narrows”.  It subs it with “Social Issues Rank As Lowest Priorities”.

Hello out there GOP – are you reading this?  There’s your campaign.  What to stress.  What to avoid.

Any chance they’ll actually figure that out?

I mean so far we’ve talked about sluts, contraception, race, wars on women, stay at home moms, even about dogs riding on roofs (well at least the Romney’s didn’t eat the dog).

We’ve been distracted by the outrage of the week – Rush Limbaugh, Hillary Rosen, Ted Nugent, Bill Maher, etc. 

That’s the left’s game plan, for heaven sake – Obama has a dismal, in fact awful economic record.  Horrible.

And yet the GOP is walking into every distraction trap the left sets like they haven’t a clue.

As I’ve been saying for months, once the nomination is settled, regardless of who the nominee is, and the focus begins to turn on Obama and his record, there will begin a shift in voter preference that should (note the word) carry the GOP nominee to the White House -  if the GOP plays its cards right.

Should.

Here’s what I mean:

Obama’s lead over Romney has narrowed since last month, when he had a 12-point advantage, though it is comparable to margins from earlier this year. While Obama’s advantage has declined since March, there is little to suggest a specific problem or campaign event as having a critical effect.

While there have been debates over issues related to gender, the rise and fall in Obama’s support has largely crossed gender lines, with a fairly consistent gender gap over time. For example, since March, Obama’s support among both men and women has slipped five percentage points.

Independent voters remain up for grabs. In the current survey, 48% favor Romney while 42% back Obama. A month ago, it was 47% Obama, 44% Romney.

If anyone would not expect an incumbent president to have some sort of  lead at this point, I’d say you don’t know much about American politics.

That said, as you can see by the change in a month, the lead is at best tentative, soft and narrowing. 

But … there is still a way to absolutely screw up this chance at making Obama a one-term president and, unfortunately, I wouldn’t be surprised to see the GOP manage that.

That is, to concentrate on the wrong issues.  They have a track-record of snatching defeat from the jaws of victory doing exactly that.

I’ll make it as simple as possible.

Limit the main issues of the GOP campaign to three themes: the economy, jobs and the debt.  Talk about how to improve the first two and reduce the third.  Talk about getting the hell out of the way while giving business the green light to lead us out of this economic morass.  Declare the war on fossil fuel to be over.   Talk about exploiting our natural resources and the jobs that will bring.  Put confidence back in the business sector that expansion and hiring will be enabled and supported, not killed with more and more regulation.  Talk about repealing ObamaCare and draconian regulations.  Talk about bringing America back.

Once the incumbent has given his concession speech, talk about whatever else tickles your fancy then. But discipline yourself until then.  Until then narrow the focus and be relentlessly on message.  Refuse the distraction traps.  Just flat refuse them.

Do that and the GOP has a shot.  The numbers will continue to improve.

Fall into the distraction traps and kiss victory goodbye.  If the other side is allowed to frame the campaign and establish the narrative and avoid examining Obama’s record,  the GOP loses.

We’ll see which course they choose.

~McQ

Twitter: @McQandO


In praise of lazy Harry Reid

Okay, yes, it’s a bit of a sarcastic title, but in a sense I mean it:

For those who need proof that the Senate was a do-nothing chamber in 2011 beyond the constant partisan bickering and failure to pass a federal budget, there is now hard evidence that it was among the laziest in 20 years.

In her latest report, Secretary of the Senate Nancy Erickson revealed a slew of data that put the first session of the 112th Senate at the bottom of Senates since 1992 in legislative productivity, an especially damning finding considering that it wasn’t an election year when congressional action is usually lower.

For example, while the Democratically-controlled Senate was in session for 170 days, it spent an average of just 6.5 hours in session on those days, the second lowest since 1992. Only 2008 logged a lower average of 5.4 hours a day, and that’s when action was put off because several senators were running for president, among them Hillary Clinton, Barack Obama and John McCain.

On the passage of public laws, arguably its most important job, the Senate notched just 90, the second lowest in 20 years, and it passed a total of 402 measures, also the second lowest. And as the president has been complaining about, the chamber confirmed a 20-year low of 19,815 judicial and other nominations.

Frankly, I think Congress should be a part-time job.  That was the way it was designed at the founding.  Come in, do the work necessary – you know, such as pass a budget? – and then go back to your real job.

So, in reality, I’m not against a Senate that doesn’t do much.  Unfortunately, we have an activist president who is more than happy to use the Senate’s laziness as a pretext for issuing executive orders and accomplishing his agenda via executive agencies with no accountability to the people.

And, it appears, Harry Reid is fine with that – not that anyone should be particularly surprised by that.

It is the only way Reid can apparently assist the President in doing what he wants to do.  You know, provide an excuse.  “We can’t wait on Congress”, something that is only a problem since the GOP took the House one assumes.  Of course somehow even lazy Harry Reid managed to at least rouse himself long enough to pass that abomination we know as ObamaCare. 

Once that was done, he went back into tax-payer subsidized hibernation.

But with Reid, how do you tell?

~McQ

Twitter: @McQandO


New York Time editorial declares war on GOP [update]

I sometimes wonder what world the editorial board of the New York Times calls home.  It certainly isn’t the one the rest of us live in.  But I guess it is necessary to live in an alternative world to be able to push narratives like it pushes in an editorial today.  The NY Times has decided, to use a poker term, to go “all in” on Obama’s “right-wing extremism” and “dishonesty” meme. 

Referencing the Obama speech yesterday, the editorial board says:

Mr. Obama provided a powerful signal on Tuesday that he intends to make this election about the Republican Party’s failure to confront, what he called, “the defining issue of our time”: restoring a sense of economic security while giving everyone a fair shot, rather than enabling only a shrinking number of people to do exceedingly well. His remarks promise a tough-minded campaign that will call extremism and dishonesty by name.

Remember Obama, who’s answer to the “defining issue of our time”, submitted each of the two years (I’m talking about his budgets) has gone a collective 0-511.  That’s right, the two budgets he’s submitted to address the “defining issue of our time” hasn’t garnered a single vote in two years.  

Why?  Primarily because neither of the budgets convinced a single legislator of either party, to include the President’s own, that they addressed that issue at all.

Yet he presumes to lecture the GOP on the failure to confront this issue?  And the NYT somehow manages to buy into that nonsense?

The GOP budget at least passed the House.  The NYT presumes that no negotiations are possible because, again, it buys into the Obama claim that the GOP won’t compromise.   Nonsense.  Compromise doesn’t mean wholesale capitulation.  In an negotiation or compromise there are lines drawn over which the two parties won’t give in.  Each side has them.  The NYT and Obama, naturally, want to characterize the lack of movement as GOP intransigence.  But the Democrats are equally intransigent.  They want more money in taxes.  The GOP continues to point out that taxes aren’t the problem.  The problem is spending.

Says the NYT:

Mr. Obama has, in recent months, urged Republicans to put aside their destructive agenda. But, in this speech, he finally conceded that the party has demonstrated no interest in the values of compromise and realism. Even Ronald Reagan, who raised taxes in multiple budget deals, “could not get through a Republican primary today,” Mr. Obama said. While Democrats have repeatedly shown a willingness to cut entitlements and have agreed to trillions in domestic spending cuts, he said, Republicans won’t agree to any tax increases and, in fact, want to shower the rich with even more tax cuts.

Ronald Regan agreed to raising taxes in return for what from the Democrats?

Spending cuts.  In fact as I recall, his deal was 1 1/2 to 2 times the spending cuts to the tax increases.  Guess what never happened?

That’s right – spending cuts.

So call it a lesson learned.  What the GOP is pointing out that until the spending cuts are implemented and take effect, there is no reason to discuss revenue increases.

That’s a common sense approach that best safeguards the citizenry’s money and is based on a history that says the Democrats don’t keep their word about spending cuts.

I don’t blame the GOP for refusing to compromise on taxes.

Finally, and I’ve flipped the paragraph order in the editorial, consider the NYT lede:

President Obama’s fruitless three-year search for compromise with the Republicans ended in a thunderclap of a speech on Tuesday, as he denounced the party and its presidential candidates for cruelty and extremism. He accused his opponents of imposing on the country a “radical vision” that “is antithetical to our entire history as a land of opportunity.”

There has been no search for compromise with President “I won”.  None.  And it is amazing to see smaller and less intrusive government being characterized as a “radical vision” that is “antithetical to our entire history”.  It is the basis of our entire history up until the welfare state came into being.

“The land of opportunity” was such because of a lack of government interference, not because of it.  Obama and the left continue to attempt to rewrite history in a manner in which they redefine the words and key phrases that characterized our nation differently than they’d like prior to the institution of the welfare state.

The radical vision is that which Obama, the NYT  and the Democrats continue to push, not the GOP.  They don’t seem to understand that the majority of the American people have come to understand that we just can’t afford their radical vision and that government control of more and more of our lives is not a “good thing”. 

If there is anyone out of touch with the American people it is Mr. 0-511. He hasn’t a clue.

And neither does the New York Times editorial board.

UPDATE: A further thought sparked by a comment by The Shark.  If compromise is what Obama and the Democrats really want, they’ve had two opportunities to actually force that or at least make the argument they attempted it.  For two years the GOP House has passed a budget.   The way the Congress works is the Senate then passes its version of the budget and the two houses of Congress get together and hash out the differences (known commonly as “compromise). 

Except the Democratically controlled Senate hasn’t passed a budget in over 1000 days.  So who isn’t interested in compromise, Mr. President?  And why aren’t you exerting a little leadership and confronting the Senate about its dereliction of duty?  If “compromise” is so all fired important to you, why are you neglecting the easiest way of forcing it?

~McQ

Twitter: @McQandO


Obama budget goes 0-414 in House

So let’s see, the two votes I’ve seen on the two Obama budgets that at least one of the houses of Congress has voted on in the past two year, neither has garnered a single vote from any legislator regardless of party.

Yesterday the House voted unanimously against President Obama’s current budget.  Last year the Senate went 0 for and 97 against his previous budget.

The House Democrats claim to have their own budget which closely mirrors the Obama budget deficits but differs in the details.

Oh good.

Meanwhile:

Senate Democrats have said they will not bring a budget to the floor this year, though Republicans in the chamber have talked about trying to at least force a vote on Mr. Obama’s plan there as well.

Thank you Harry Reid for your strong fiscal leadership.  What is it?  Well over 1,000 days and Senate Democrats have yet to produce a budget.

My guess is it’s Bush’s fault.

~McQ

Twitter: @McQandO


Obama budget full of gimmicks and rosy assumptions

Representative Paul Ryan characterized the Obama budget as not a fiscal plan but “a political plan designed to help the President’s reelection.”  Getting into the details seems to validate Ryan’s point.

He also pointed out that the debt crisis is the most predictable crisis imaginable and the president has "punted" again with this budget. Said Ryan, “Instead of an America built to last we get an America drowning in debt.”

The White House claims the Obama budget saves 4 trillion over and above the Budget Control Act.  But in fact, the Obama budget rides the base line and throws more taxing and spending on top of it (while claiming to save 4 trillion).  Analysis of the budget shows, at best, a savings of 300 billion over 10 years.

As for an “America Built To Last”, Obama approaches that in a very odd way.  He goes after businesses and investors:

1. The top income rate would be raised to 39.6 percent vs. 35 percent today.

2. Under the “Buffett rule,” no household making over $1 million annually would pay less than 30 percent of their income in taxes.

3. Between now the end of a second Obama term, Obama proposes $707 billion in “net deficit reduction proposals.” Of that amount, only 16 percent is spending cuts.

4. The majority of small business profits would be taxed at 39.6 percent vs. 35 percent today.

5. The capital gains rate would rise to 25.0 percent (including the Obamacare surtax and deduction phase out) from 15 percent today.

6. The double-tax on corporate profits (including dividends) would increase to 64 percent based on the statutory corporate tax rate (58 percent using the effective tax rate), easily the highest among advanced economies.

7. The double tax on corporate profits (including capital gains) would increase to 51 percent (44 percent using the effective tax rate), also among the highest among advanced economies.

Those details alone are a basis for declaring his budget “dead on arrival” at Congress.  These new taxes would take the tax revenue as a share of GDP to 20.1 percent in 2022.  The historical average is 18 percent.  In a time of deep recession, when government should be proposing economic, tax, labor and trade policies to create jobs and move the economy in a positive direction, Obama’s budget proposes to do exactly the opposite.  The attack on small business, as well as corporations, points to a president out of touch with the problems of the economy.  He claims to save 4 trillion on debt with these policies but in fact, his budget proposals add 6.7 trillion to the debt over the next 10 years and the debt-to-GDP ratio is predicted to be 74.2 percent this year and 76.5 percent in 2022.

And here’s the bottom line truth about policies such as Obama is pursuing:

Corporate taxes are paid by consumers in higher prices and by workers in lower wages – so much for the promise not to increase taxes on those making less than $250,000. Every good tax economist knows this, but the president chooses to ignore reality and demagogue the issue.

Indeed.

Given that, how does the White House justify such policies?  Well, it simply makes up a rosy forecast for the future, that’s how.  3.4 percent in 2015, 4.1 percent in 2017 and 3.9 percent in 2018.  As James Pethokoukis points out:

The U.S. economy has only seen a run like that three times in the past four decades.

Yet we’re supposed to believe that we’ll come roaring out of one of the longest and deepest recessions since the Great Depression with taxes focused mostly on business at a higher than historical rate?  Not likely.

Meanwhile we’re being told by the President’s Chief of Staff that it is all the Republican’s fault that we don’t have a budget out of the Senate.  Mistakenly claiming that it takes 60 votes to pass a budget, he points to the Republican Senators as the obstructionists.

Of course, on budget matters, it only takes a simple majority.  And there are 53 Democratic Senators.   If you recall, the Senate minority leader, Republican Mitch McConnell introduced and got votes on two budgets last year – the Ryan budget, voted down by Democrats and President Obama’s budget which was voted down 97-0.   Harry Reid, however, has introduced no budget in over 1,000 days.

And the gimmicks:

At issue is how the government projects spending and deficits going forward. Of the $4 trillion in deficit reduction claimed by the White House, $3 trillion would come from a combination of tax increases and spending cuts. Another $900 billion would come from domestic spending caps agreed to with Republicans last year to resolve the impasse over raising the nation’s statutory borrowing limit.

But if Congress and the president did nothing, spending would actually fall by $2 trillion under current law. That is because automatic cuts to defense and nondefense programs totaling $1.2 trillion are already set to go in force in 2013. The Obama budget assumes those cuts will not happen. The president also assumes that sharp cuts to reimbursement rates for doctors treating Medicare patients will never be enforced, but the budget does not detail how those scheduled cuts will be prevented.

Republicans say that effectively negates $522 billion over 10 years, since Congress will have to figure out how to pay for the so-called Medicare doc fix.

Republicans also protest that Mr. Obama is "saving" nearly $1 trillion by not spending over the coming decade what the United States has spent each year on wars in Iraq and Afghanistan.

So the Obama savings are built on assuming the “Doc Fix” won’t be made and that war spending will remain at the current level (even with the withdrawal from Iraq and the coming withdrawal from Afghanistan) for 10 years – something obviously not the case.  He’s built his 4 trillion in “savings” on 1 trillion in tax increases, 2 trillion on spending cuts already enacted into law (sequestration), 1 trillion assuming war spending will remain level for 10 years.  Meanwhile most of his spending cuts come from where?  The military, of course.

Finally, remember this?

“This is big,” wrote White House director of new media Macon Phillips in a February 23, 2009 blog post, ”the President today promised that by the end of his first term, he will cut in half the massive federal deficit we’ve inherited. And we’ll do it in a new way: honestly and candidly.”

Indeed, President Obama did make that promise that day, saying, “today I’m pledging to cut the deficit we inherited in half by the end of my first term in office. This will not be easy. It will require us to make difficult decisions and face challenges we’ve long neglected. But I refuse to leave our children with a debt that they cannot repay — and that means taking responsibility right now, in this administration, for getting our spending under control.”

This budget does none of the above.  In fact, it’s not even close.  There are no “difficult decisions” included.   There are now “challenges” faced.  As Rep. Ryan said, Obama has again “punted”.

This is indeed the most predictable crisis imaginable and again, the man who claimed he would do what is necessary to fix the problem has once again kicked the can down the road.

~McQ

Twitter: @McQandO


The defense budget

Here’s a little fact to keep in mind when considering the current cuts to spending at DoD (and let’s be clear, there is nothing wrong with appropriate cuts to defense spending), besides all the other ramifications it promises:

Defense accounts for less than 20 percent of the federal budget but already exceeds 50 percent of deficit-reduction efforts. And for every dollar the President hopes to save in domestic programs, he plans on saving $128 in defense.

And that’s without the looming sequestration cuts (keep in mind, most war fighting costs are not included in the budget) of another half trillion dollars.

Or said another way, the administration has decided that it will attempt to cut spending primarily with cuts to national defense.  There is no serious program afoot to cut back the myriad of other government agencies and branches.  In fact, many are expanding (see EPA, IRS, etc.).

As for sequestration, Democrats are bound and determined to see it through, because, you know, national defense is less important than winning an ideological struggle.

Charles Hoskinson of POLITICO’s Morning Defense reports (btw, if you don’t subscribe to it, you should):

BUT REPUBLICANS AND DEMOCRATS are still far apart on one key issue: taxes. We caught up with SASC Chairman Levin at a breakfast Thursday and he said he’s counting on public pressure to push the GOP to accept new tax revenues as part of any solution – something they’ve so far refused to consider. Meanwhile, Levin and other Democrats won’t budge on reversing sequestration except as part of a complete package. "The dam has got to be broken on revenues, and what I believe will break it is the threat of sequestration," he said.

Shorter Levin, “we’re more than willing to hold national security hostage and see it gutted to get our way on taxes”.

It is rather interesting  approach for an administration which is hung up on everyone paying their ‘fair share’.  It seems that the lion’s share of what it will surely tout during the upcoming campaign as serious budget cutting, will come from the one Constitutionally mandated duty it has – national defense.

As for all the programs that have a future funding liability of 200 trillion dollar?

Meh.

~McQ

Twitter: @McQandO


The Gang of Six is back

Gangs of anything are rarely good things.  And when it comes to the Senate’s Gang of Six, that caution is doubly true.  Today the Gang proposed a bipartisan deficit plan to which the president–eager to kick the deficit can down the road past the 2012 election–gave his qualified approval.  There is only this summary (PDF) available at the moment, and there is much to digest.

The good news is that there is at least some sanity in it.

  • Personal and corporate income taxes would be reduced to a top rate of 29%.
  • The Alternative Minimum Tax–which has turned into a horrific taxation burden–will be eliminated.
  • The CLASS Act provision of Obamacare would be repealed.

The bad news–and there’s always bad news with these guys–is that the budget reduction portion of it is notional.  As usual in Washington, it calls “cuts” what the rest of us would call “reductions in the rate of spending increases”.  In other words, spending isn’t actually reduced at any point, they just promise not to spend as much as they previously said they would. The main problem points include:

  • None of the plan’s “spending caps” apply to entitlement programs, only discretionary spending. So the 800-pound gorilla of the budget remains untouched.
  • Reform tax expenditures for health, charitable giving, homeownership, and retirement. These aren’t expenditures! They are allowing you to keep your money for IRAs, 401(k)s, Mortgage interest, etc.  So, that sounds…ominous. Especially since the plan assumes that these, and similar reforms will net an additional $1 trillion in revenue.
  • No reform at all of Medicare of Medicaid.
  • A politically-imposed requirement to use the Chained-CPI as an inflation measure, presumably to cut down on cost-of-living increases, as the Chained-CPI understates inflation even more than the current CPI does.
  • Requires the tax code to become more “progressive”, so you can expect serious increases in Capital Gains taxes.
  • No Social Security reform at all, unless there’s 60 votes for it in the Senate, i.e., sponsors for such reform prior to its submittal to the Senate for consideration. So, essentially, never.

There’s no information at all on how big or expensive government will be, say 10 years down the road. No information on how strict the spending caps will be, making me expect another Gramm-Rudmann deal: Good on paper, ineffective in practice.

Basically, this plan, so far as I can tell, contains some eye-candy on income taxes to draw in the supply-siders, with the actual deficit reduction portion sounding…sketchy. Or in the case of entitlements, by far the source of most federal spending, non-existent.

~

Dale
Twitter: @DaleFranks

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