Free Markets, Free People

Monthly Archives: April 2011


Federal government: It is not a revenue problem, it is a spending problem

Nick Gillespie and Reason do a good job of dispelling the myth that our problem is a revenue problem, the nonsense that always prompts the “tax the rich” mantra.

Taxes aren’t the problem, never have been – it is a spending problem.  We’re spending more than we take in.  Cut that difference and you cut the deficit to nothing.  Cut it enough and you begin to work down the debt.

 

Taxing the rich at a higher rate might make the class warriors on the left feel good, but it does nothing to address the real problem.

Spending addiction – something Michael alludes too below.  What we have are the addicted trying to handle their own addiction, and essentially their solution has nothing to do with the problem.

Big surprise.

~McQ


The Government Is A Wanton Slut

So we’ve reached an agreement. I’m not surprised. The entire argument — over money, of course — was nothing more than a prelude to an inevitable act.

Foreplay, if you will.

Oh sure, the back and forth was heated at times, but was there ever any doubt that the money-spenders would arrive at a deal? I mean, you cut off a gold-digger from the credit cards and concessions will inevitably be made. Not at first of course (even whores have their pride), but once it becomes inevitable that the spigot will be cut off, even the lowliest scum whores will come to obeisance. It’s what they do.

Without the sweet ambrosia of federal income, the power brokers — a.k.a. your elected officials — would lose all of their power, ephemeral as it may be. And powerless whores are the lowliest whores of all.

Why are they (i.e. Congress, the White House) whores? Because no matter what, regardless of any consequences, our “betters” have declared themselves to be more concerned with maintaining their ability to lord their will over our money (being realistic, our credit), than they are with protecting our ability to spend it as we see fit. Their main worry is that they won’t be able to control how we spend that money, and — most importantly — that it won’t go to the “correct” people. Frankly, if they can’t control our income/wealth/money, then they can’t control us. Indeed, without access to our tax dollars, congress-critters will have no influence at all. And that will not abide for too many if them.

Whatever the deal may be, the only certainty is that, like any John, we’re screwed. And that we will still be paying maximum price for that pleasure.

I don’t mean to make light of the fact that the House was able to wrestle some budget cuts away from the opposition. Kudos are definitely due. But they are paltry … i.e. cuts of $39,000,000,000 in the face of a $1,650,000,000,000 deficit just for this year, which is about a 2.4% cut. Seriously? Who cares?

The unfortunate answer is, “your representatives of all stripes and colors.” Because they need that money to dole out the gifts that keep them in power. A government shutdown means that there will be no incoming money to buy the power and influence our rulers crave. They may whinge about seniors dying and children crying, but what they truly care about is the power of the purse. With that power they can pay off favored constituents whom they will eventually call to account for the government’s distribution of largesse (witness the current fear-mongering about budget-cutters wanting to “kill women” and starve the elderly). They are simply using our tax dollars to buy their own power.

Our elected money-spenders will always bleat in earnest when their source of power is interrupted. So, of course a budget deal was cut. Like a wanton slut, they will always strike a deal to keep the money flowing.


Meanwhile in Libya …

As we watch the politicians dance around about government shut down and play their political games, a little aside for the quickly forgotten war in Libya.

This week NATO managed to take out 13 more … rebels.  Apparently NATO didn’t know the rebs planned on using some captured tanks and paid the price.

That’s led to a little friction between NATO and the rebs:

Outside Ajdabiya, rebel fighters slapped peach-colored paint on their vehicles to try to distinguish from the pro-Qaddafi units.

"We are painting the trucks so NATO won’t hit us," said Salam Salim, a 29-year-old rebel militiaman.

Tensions between the rebels and NATO were flaring even before the latest accident, with the fighters criticizing the alliance for doing too little to help them.

A NATO official, meanwhile, said there is growing frustration with the rebels’ perception that NATO is acting as their proxy air force. The U.N. mandate calls only for international air power to enforce a no-fly zone and prevent attacks on civilians — although Qaddafi’s ground forces remain a primary target.

"We’re trying to get messages back to them about what we’re doing and what we’re trying to achieve," said the official, who spoke on condition of anonymity under standing NATO regulations.

I can just see Gahdafi’s men slapping peach paint on their vehicles now.

Meanwhile, the promised “no boots on the ground?”   Not so firm apparently:

The United States may consider sending troops into Libya with a possible international ground force that could aid the rebels, according to the general who led the military mission until NATO took over.

Army Gen. Carter Ham also told lawmakers Thursday that added American participation would not be ideal, and ground troops could erode the international coalition and make it more difficult to get Arab support for operations in Libya.

Ham said the operation was largely stalemated now and was more likely to remain that way since America has transferred control to NATO.

He said NATO has done an effective job in an increasingly complex combat situation. But he noted that, in a new tactic, Muammar Qaddafi’s forces are making airstrikes more difficult by staging military forces and vehicles near civilian areas such as schools and mosques.

Adaptation.

But back to the point – why would we consider “sending troops into Libya?”  I mean we’re there to enforce a no-fly zone and protect civvies, right?

Only one reason to even be considering troops on the ground and that is the real end result desired – regime change- doesn’t look like it will happen without them. 

Like I said before, “mission creep”.

Worth noting – SecDef Gates said there’d be no US boots on the ground “as long as I’m in this job.”  He may be leaving sooner than we think.

~McQ


For wind power advocates, reality delivers bad news

Again I feel compelled to say, “hey, if we can develop a feasible and affordable clean alternative to petroleum, I’m all for it”.  But, we’re not even close in most areas, such as wind power.  Obviously I and everyone else hope we can develop this particular technology to take advantage of a natural phenomenon to generate power, but for then next few decades we really need to be exploiting what works – oil and gas. 

Why?

Well here’s a little wind power reality:

A new analysis of wind energy supplied to the UK National Grid in recent years has shown that wind farms produce significantly less electricity than had been thought, and that they cause more problems for the Grid than had been believed.

The report (28-page PDF/944 KB) was commissioned by conservation charity the John Muir Trust and carried out by consulting engineer Stuart Young. It measured electricity actually metered as being delivered to the National Grid.

So, as usual, theory and predictions were “significantly” off base.  The assumption, and probably the selling point, was that wind power would deliver 30% of its maximum capacity over time.   But it hasn’t:

Average output from wind was 27.18% of metered capacity in 2009, 21.14% in 2010, and 24.08% between November 2008 and December 2010 inclusive.

Apparently the new target output should be figured around 25% over time or worse.  And note it has gotten worse over time.

Another critical part of this is when it delivers power.  You’d want it at peak use periods wouldn’t you? 

At each of the four highest peak demands of 2010 wind output was low being respectively 4.72%, 5.51%, 2.59% and 2.51% of capacity at peak demand.

The way UK wind farmers make money and stay in business is through Renewable Obligation Certificates (ROC) or what we would call carbon offsets.  They sell them to more traditional power generators who need them and the trade is quite lucrative for the wind farmers (in fact, ROCs make up the bulk of their income).  The end result is higher prices electricity, both from wind power and the added cost to traditional power generation the ROCs impose.

And – Catch 22 – high electricity prices make the conversion to electric transportation, heating and industrial use less feasible and affordable. 

~McQ


Democrats, after a year’s hiatus, finally come up with a budget

Funny what actually producing something – a budget plan to bring government deficits and eventually debt under control — will see the other side produce.  After a year in which the Democratic Congress was unable to produce a budget, suddenly the Progressive Caucus in Congress has an answer to the Ryan budget proposal produced by Rep. Paul Ryan (R-WI).

And, as you might imagine, it is, definitely snort worthy.  However, if you remember what group I said had produced it, it shouldn’t surprise you. Phillip Klein brings you the “good news”:

Next week, the group of progressives plans to introduce its alternative to Ryan’s proposal, called "The People’s Budget." Based on an advanced peek provided by a senior Democratic aide, it promises to return the nation to surpluses by the end of the decade and reduce the debt, only with a much different approach from Ryan’s.

To extend the long-term solvency of Social Security, it would propose dramatically increasing payroll taxes on both the employer and employee side, and funneling the money into even more generous benefits.

Payroll taxes are economically destructive, because they make it more expensive for employers to hire new workers, meaning lower real wages and higher unemployment.

Yet the tax increases wouldn’t end there. The People’s Budget would rescind last year’s tax deal to raise rates on higher income levels, boost taxes on capital gains and dividends, increase the estate tax, institute three "millionaire tax rates," with the highest reaching 47 percent, tax corporate foreign income, impose a "financial crisis responsibility fee," and institute a "financial speculation tax."

Overall, taxes would rise to 22.3 percent of the economy, compared with 18.3 percent under the Ryan proposal.

The plan would also build on Obama’s most notable initiatives. It includes an additional $1.45 trillion in economic stimulus spending. On health care, the plan would add a government-run plan, or "public option," to Obamacare and have the government negotiate drug prices.

Yet while other parts of government would grow, the defense budget would be gutted. The proposal would "reduce baseline defense spending by reducing strategic capabilities, conventional forces, procurement, and R&D programs."

File this under “they just don’t get it”, for starters.  And, if you didn’t get a horse laugh out of the “People’s Budget” (VolksBudget?) then your sense of black humor is a bit lacking.  These fools, and I haven’t a better word for them, would absolutely ruin the country if given an opportunity.  They’re ignorant of economic, ignorant of reality and just flat dangerous.  If nothing else, the GOP ought to make this available far and wide – this is what these freaks will do if they get control of Congress again.  If you think the debt and deficit are bad now, let this crew pass their “People’s Budget” and we’ll all wave goodbye to life as we know it.

However instead of waiving this off, people need to study these two contrasting approaches to government advance by Paul Ryan and the Progressive Caucus.

Oh, and Megan McArdle, doing some back of the napkin figuring, isn’t buying the “22.3%” of the economy nonsense:

A 47% federal tax rate on top incomes, plus increases on estates, capital gains, and dividends, and all you get is . . . 22.3% of GDP?  A bare 1.3% above the collections envisioned by Simpson-Bowles?

And she asks for a little honesty:

No, if you want to get the budget under control without meaningfully cutting into entitlements, you’re going to need to hike taxes substantially on the middle class.  I’m waiting for the first politician to say this out loud.

Well, it won’t be the Progressive Caucus, you can count on that.  Instead, they’re all for making entitlements even more generous.  National defense – we don’t need no stinkin’ tanks.

Meanwhile the left has been savaging Ryan’s proposal (and so far the “People’s Budget” is the best they can throw back).  But serious people, like Charles Blahaus of e21 find it pretty refreshing (read the whole thing).  And he makes a point or two I’ve been making recently:

Yesterday’s release of the draft Ryan budget offers a vision for repairing the federal budget. Thus far, this vision for fiscal repair remains the only serious legislative alternative to fiscal catastrophe. President Obama’s submitted budget, by contrast, contains no significant effort to repair the federal fiscal outlook. The Congressional Budget Office (CBO) has shown that it would leave federal finances on a clearly unsustainable trajectory. Health care reform, long touted by some as being the real key to fiscal reform, turned out to mean expanding federally-subsidized coverage rather than fiscal correction. Last year the Congressional Democratic leadership declined even to pass a budget at all. If there is a responsible left-of-center alternative to the Ryan proposal, we have yet to learn what it is.

Well sir, it won’t be the People’s Budget for the People’s Republic of Fantasy Land, I’m sure of that.

~McQ


Our energy future should involve a lot of shale gas–if our government will allow it

This map should give you a good feeling as you survey it:

 

shalegas-map

 

All the red you see in the US is a good thing.  This graphically shows the results of a survey conducted by the US Energy Information Administration in which it assessed world shale gas resources.  The legend is a little hard to read so, for those with eyes like mine:

  • Red colored areas represent the location of assessed shale gas basins for which estimates of the ‘risked’ gas-in-place and technically recoverable resources were provided.
  • Yellow colored area represents the location of shale gas basins that were reviewed, but for which estimates were not provided, mainly due to the lack of data necessary to conduct the assessment.
  • White colored countries are those for which at least one shale gas basin was considered for this report.
  • Gray colored countries are those for which no shale gas basins were considered for this report.

And here’s a chart that give you some of the numbers.  Pay particular attention to the numbers in the left hand column:

shalegas

 

The chart doesn’t show all of the 32 countries, but I wanted you to see the amount of shale gas that is technically recoverable and the amount we import (10%).  With the development of these gas fields  we can up our domestic production and consumption (an alternative to oil in many cases) as well as become a net exporter.

Says the report:

The development of shale gas plays has become a “game changer” for the U.S. natural gas market. The proliferation of activity into new shale plays has increased shale gas production in the United States from 0.39 trillion cubic feet in 2000 to 4.87 trillion cubic feet in 2010, or 23 percent of U.S. dry gas production. Shale gas reserves have increased to about 60.6 trillion cubic feet by year-end 2009, when they comprised about 21 percent of overall U.S. natural gas reserves, now at the highest level since 1971.

In fact, this assessment provides good news for much of the world:

To put this shale gas resource estimate in some perspective, world proven reserves of natural gas as of January 1, 2010 are about 6,609 trillion cubic feet, and world technically recoverable gas resources are roughly 16,000 trillion cubic feet, largely excluding shale gas. Thus, adding the identified shale gas resources to other gas resources increases total world technically recoverable gas resources by over 40 percent to 22,600 trillion cubic feet.

Of course the catch is “technically recoverable” – i.e. is it worth bringing to market even if we have the technology to do so?  That depends on a number of things, to include the cost governments place on those attempting to bring it to market, and the hurdles governments may place in their way if they attempt to do so – such as the hydrofracking controversy.

It is estimated that 80% of the new oil and natural gas wells in the US will require hydraulic fracturing (hydrofracking).  What hydraulic fracturing does is create tiny fissures in the rock so the oil and gas can flow through the wellbore to the surface.  Hydrofracking has been used in over 1 million – yes, that’s right – 1 million wells in the last 60 years (here’s an animation of the process if you’re interested).  The fracturing takes place hundreds, if not thousands of feet below the aquifer.

But, as with all things, the process which as been in use for over 60 years and with a million wells is now “controversial” with unsubstantiated claims that hydrofracking in these shale sites will cause contamination of the ground water.

Yet no evidence of that is apparent in the history of the process or an investigation conducted by the EPA in 2004:

U.S. government studies have found no evidence of drinking water contamination from hydraulic fracturing. In 2004, the Environmental Protection Agency (EPA) conducted a study to assess the contamination potential of underground drinking water sources (UDWS) from the injection of hydraulic fracturing fluid into coalbed methane (CBM) wells. EPA found "the injection of hydraulic fracturing fluids into CBM wells poses little or no threat to USDWs and does not justify additional study at this time." EPA also reviewed incidents of drinking water well contamination believed to be associated with hydraulic fracturing operations. It found "no confirmed cases linked to fracturing fluid injection of CBM wells or subsequent underground movement of fracturing fluid."

In 1998, the Ground Water Protection Council (GWPC) and a team of state agency representatives conducted a survey of state oil and natural gas agencies to establish an accurate assessment of the number of active CBM wells associated with hydraulic fracturing. Based on the survey of 25 oil and natural gas producing states, the GWPC concluded, "there was no evidence to support claims that public health is at risk as a result of the hydraulic fracturing of coalbeds used for the production of methane gas."

So, the map points to a bonanza of natural gas that is technically recoverable, would cover our own domestic needs easily (and may see some oil dependent means of transportation and energy production look toward to switching to cleaner burning natural gas) and even have us exporting the product versus importing it.

If … key word … if the hydrofracking Chicken Little’s aren’t allowed to have their way and delay or stop such exploitation.

Look, no one wants ground water contamination – no one.   But a system that has been in use for over 60 years an a million wells with no evidence it has contributed to ground water contamination has enough time and data points to help assure us of process reliability in this case.  Here’s something we can do now to help alleviate our energy deficit and cut dependence on imports.

Will we take advantage of this opportunity?

That remains to be seen.

~McQ


Saudi Arabia: Not happy with Obama and seeking partners elsewhere

Obviously I have mixed feelings about the country of Saudi Arabia.  On the one hand they’re a tyrannical 12th century monarchy that controls a good portion of the world’s oil and exports a brand of radical Islamism.  On the other hand they’re a bulwark against Iranian aggression and expansionism and a titular ally of the US.

So, the question then, given the situation in the Middle East, is it in the best interest of the US to do things that have them seeking  solace and partners (allies they feel they can depend on?) elsewhere?

Yeah, probably not.  But that’s exactly what is going on.  Interestingly it is Tom Brokaw who brought the situation to our attention:

After remarking on the difficulty of establishing democracy in the Middle East, Brokaw said that Defense Secretary Robert Gates “will face some tough questions in this region about the American intentions going on now with all this new turmoil, especially in an area where the United States has such big stakes politically and economically.”

“And a lot of those questions presumably will come from King Abdullah of Saudi Arabia,” reported Brokaw on the Nightly News.  “I was told on the way in here that the Saudis are so unhappy with the Obama administration for the way it pushed out President Mubarak of Egypt that it sent high level emissaries to China and Russia to tell those two countries that Saudi Arabia now is prepared to do more business with them.”

Wonderful.

All of this stems from how the Obama administration handled Egypt.  And it has caused Saudi Arabia to doubt the sincerity of the relationship between the US and the kingdom.

However, Saudi Arabia’s concerns emanate from the manner in which Egyptian dictator Hosni Mubarak was removed from power. Mubarak had been an American ally for decades and yet the Obama administration, in the eyes of Saudi criticism, turned its back on the Egyptian government when reformist protests spilled into the streets.

High sounding rhetoric talks, but actions walk, and SA is not at all happy about the actions the administration took in Egypt nor, apparently, satisfied with their assurances since.  And despite the supposed buy-in of the Arab League on the latest attack on an Arab country- Libya- I’d guess they’re not particularly happy with that either.  Another indicator they file away and continues to feed their fear of the sincerity of the US as an ally.

The good news, if there is any, is the administration has apparently figured out that it has badly messed up its relationship with SA.  Whether or not they can salvage the relationship remains to be seen.  It may take another trip by Obama and a lot more bowing and scraping to do that:

Mr. Gates met with the Saudi king on Wednesday, and the Associated Press reported that the purpose of the meeting was to smooth relations with the uneasy and oil-rich ally, noting that "this was Gates’ third trip to the area in the past month."

Thus far the Obama administration has been a foreign policy disaster.  Interestingly, some of the highest polling results for Obama deal with his handling of foreign affairs.  If anything, that should clue you into how badly it is going for him on the domestic front.

[HT: McQ2]

~McQ


Your global warming, er, climate change update

The Gorebots are not in a happy place today and the latest update on our warming changing climate are posted:

The global temperature has fallen .653°C (from +0.554 in March 2010 to -0.099 in March 2011) in just one year. That’s a magnitude nearly equivalent to the agreed upon global warming signal agreed upon by the IPCC. It is quite a sharp drop.

According to the 2007 Fourth Assessment Report by the Intergovernmental Panel on Climate Change (IPCC), global surface temperature increased by 0.74 ± 0.18 °C (1.33 ± 0.32 °F) during the 20th century

Oh noes.

For those who prefer charts, try this:

uah_march2011

So when they try to limit the EPA’s power to "regulate" Greenhouse gasses today in the Senate via the McConnell/Inhofe amendment, tell your Senator to vote for the amendment.

~McQ


Musing about government shut down

Obviously the first and most important point to be made about the possibility of the government shutting down this week is the fact that had Democrats, who held a majority in both the House and Senate last year, done their basic job of passing a budget, this wouldn’t be an impending problem.

Now, unsurprisingly, it has devolved into a political battle pitting the Republicans on the side of cutting spending as their constituency insists upon (and voted for) against Democrats who, failing to do their job last year, now are dragging their feet in the Senate (the House passed a continuing resolution to fund government 46 days ago) and making veto threats from the White House.

Funny, how politics works, isn’t it?  Those who didn’t do their job last year or provide any leadership on the subject are now actively working against passage of a stop-gap funding measure and prepared to blame those who are attempting to fix the problem for any government shutdown which might occur.

While he had every opportunity to weigh in on the budget last year when Democrats didn’t pass one, now that he sees political advantage in weighing in (he just started his 2012 re-election campaign remember) we finally hear from President Obama:

“What we can’t be doing is using last year’s budget process to have arguments about abortion; to have arguments about the Environmental Protection Agency; to try to use this budget negotiation as a vehicle for every ideological or political difference between the two parties. That’s what the legislature is for, is to have those arguments, but not stuff it all into one budget bill.”

Now he takes a stand.  When his party failed to pass a budget last year?  Crickets.  Apparently fully prepared to live on continuing resolutions during the tenure of the Democratic controlled Congress, now he’s putting his foot down.  Instead of working to ease the situation and negotiate a settlement that would be acceptable to both parties, he threatens a veto.

“On the issue of a short-term extension, we’ve already done that twice. We did it once for two weeks, then we did another one for three weeks. That is not a way to run a government.

No kidding.  But where in the heck was the president last year when Congress failed in its duty and set this predicament up?  The government has been working on “short-term extensions” since October of last year.  Now, suddenly, they’re a problem.

I don’t disagree with Obama’s points, I just am disgusted by the disingenuousness of the argument.  Not that it surprises me, however, at all.

But when government shuts down, and the blame game begins, remember the reason that such a situation even developed in the first place.  Congressional nonfeasance and lack of presidential leadership.

~McQ


Ryan budget proposal: you can pay me now or you can really pay me a heck of a lot later (updated)

Problem:  As a nation we’re in dangerous debt territory.  If we don’t do something quickly and dramatically, we’re headed for some very rough and painful times.

But while it seems the American public senses this on the whole, polls seem to indicate that all the “free” stuff handed out by government is popular with a large percentage of the population.  Or said another way, they understand that we have a debt problem, they understand the implications of that problem and they don’t mind spending cuts – just so the spending cuts don’t effect programs they like.

The problem is further compounded by an irresponsible administration which gives the debt problem lip service but submits budgets that exponentially increase the problem:

The president’s recent budget proposal would accelerate America’s descent into a debt crisis. It doubles debt held by the public by the end of his first term and triples it by 2021. It imposes $1.5 trillion in new taxes, with spending that never falls below 23% of the economy. His budget permanently enlarges the size of government. It offers no reforms to save government health and retirement programs, and no leadership.

Both of these facts make it hard for those who would actually like to address the problem of debt before it overwhelms us.  That’s because they’ll really get no support politically from the administration, no call to arms and leadership, and the American people are proving to be fickle about the whole process sending very mixed signals.

Solution?

Well the obvious solution is to find some means of cutting spending to at least the level of revenue and to begin working to pay the debt down in an earnest and timely manner.  What isn’t a solution is business as usual but on steroids as proposed by the President.  So today, Rep. Paul Ryan (R-WI) introduced the GOP plan to address the problem.  Or at least part of the problem.  That of out-of-control spending and addressing the debt.  How it will play with the American people remains to be seen, but it is both an earnest and timely proposal.  It also makes some pretty dramatic cuts which is where you can expect to see the pushback.

For starters, it cuts $6.2 trillion in spending from the president’s budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.

But there’s pain in them thar words.  And it means things are going to have to be quite different in some areas than they are now.  Government is going to have to be rolled back.  That is unless we’re partial to a complete collapse of our economy and our currency, hyper inflation and all the good times those developments would bring.

So to specifics in Ryan’s proposal.  Addressing welfare in general, he says:

This budget will build upon the historic welfare reforms of the late 1990s by converting the federal share of Medicaid spending into a block grant that lets states create a range of options and gives Medicaid patients access to better care. It proposes similar reforms to the food-stamp program, ending the flawed incentive structure that rewards states for adding to the rolls. Finally, this budget recognizes that the best welfare program is one that ends with a job—it consolidates dozens of duplicative job-training programs into more accessible, accountable career scholarships that will better serve people looking for work.

As we strengthen and improve welfare programs for those who need them, we eliminate welfare for those who don’t. Our budget targets corporate welfare, starting by ending the conservatorship of Fannie Mae and Freddie Mac that is costing taxpayers hundreds of billions of dollars. It gets rid of the permanent Wall Street bailout authority that Congress created last year. And it rolls back expensive handouts for uncompetitive sources of energy, calling instead for a free and open marketplace for energy development, innovation and exploration.

I am quite pleased to see the second paragraph.  It is indeed time to eliminate “corporate welfare” and subsidies for favored industries.  It also takes on what we would call traditional welfare.  And make no mistake about it Medicaid and food stamps are welfare.    As for the “perverse incentives” Ryan points too, here’s what they’ve yielded recently:

Snap 1

I’m sure some of that comes with the economic downturn, but it also indicates the effect of the incentives to sign people up for the welfare program.

We can’t afford the level of welfare we’re paying out now – and that included corporate welfare and subsidies.  We are a compassionate people, but I end up shaking my head when I hear government officials claiming that people at “4 times the poverty level” need help?  Really?  So what’s the purpose of the poverty level as a measure and why are we now convinced we have to “help” people well above that level?

Then there are the twin third rails of politics, but areas where dramatic reforms are absolutely necessary to get us on the right fiscal track as a country.  And those are Medicare and Social Security.  The Ryan plan:

Health and retirement security: This budget’s reforms will protect health and retirement security. This starts with saving Medicare. The open-ended, blank-check nature of the Medicare subsidy threatens the solvency of this critical program and creates inexcusable levels of waste. This budget takes action where others have ducked. But because government should not force people to reorganize their lives, its reforms will not affect those in or near retirement in any way.

Starting in 2022, new Medicare beneficiaries will be enrolled in the same kind of health-care program that members of Congress enjoy. Future Medicare recipients will be able to choose a plan that works best for them from a list of guaranteed coverage options. This is not a voucher program but rather a premium-support model. A Medicare premium-support payment would be paid, by Medicare, to the plan chosen by the beneficiary, subsidizing its cost.

In addition, Medicare will provide increased assistance for lower- income beneficiaries and those with greater health risks. Reform that empowers individuals—with more help for the poor and the sick—will guarantee that Medicare can fulfill the promise of health security for America’s seniors.

I’ve already seen some on the left characterizing this as "privatizing" Medicare. And, of course, as we all know, that’s dangerous as government always does it better – look at the budgets for example. Look at the debt.

In fact, what Ryan is talking about is giving seniors a choice vs. automatically enrolling them in a government insurance program that averages about $60 billion a year in waste, fraud and abuse.  There will be a subsidy – probably means tested.  Is the the ideal libertarian answer?  No.  But as I’ve said before, freedom is choice and any legislation that expands that is at least a step in the right direction. 

We must also reform Social Security to prevent severe cuts to future benefits. This budget forces policy makers to work together to enact common-sense reforms. The goal of this proposal is to save Social Security for current retirees and strengthen it for future generations by building upon ideas offered by the president’s bipartisan fiscal commission.

Perhaps raise the caps (I gave a certain percentage to my 401k regardless of how much I earned, so doing the same with Social Security doesn’t really bother me.  And it will provide increased revenue for the fund.  Again, ideal?  No, but then I don’t consider either Medicare or Social Security to be “welfare” since most participants have paid into those systems for their entire working life.   But there are changes which will have to be made.  I don’t favor means testing if the cap is raised.  But I do think that a hard look at the retirement age is necessary.  My ideal outcome, obviously, would be getting government out of the retirement income business, but that’s not going to happen.  So Social Security has to be made self-supporting and not a drain on the budget – as does Medicare.

Budget enforcement: This budget recognizes that it is not enough to change how much government spends. We must also change how government spends. It proposes budget-process reforms—including real, enforceable caps on spending—to make sure government spends and taxes only as much as it needs to fulfill its constitutionally prescribed roles.

If we don’t get some restrictions on government spending, nothing is going to change.  Nothing.  We’ve watched Congress talk the talk for decades, ala Nancy PAYGO Pelosi.  But they ignore their own legislation and policy at will.   As Ryan says, there have to be “real, enforceable caps on spending”.  I interpret that as “you cannot and will not spend more than you take in”.  We’ll see how the Congress interprets that.

Tax reform: This budget would focus on growth by reforming the nation’s outdated tax code, consolidating brackets, lowering tax rates, and assuming top individual and corporate rates of 25%. It maintains a revenue-neutral approach by clearing out a burdensome tangle of deductions and loopholes that distort economic activity and leave some corporations paying no income taxes at all.

Here is something that is going to be as hard to do as entitlement reform.  Why?  Because the tax system provides Congress with another way to wield its power.  But the way it has wielded this power has done precisely what Rep. Ryan points too here – it has “distort[ed] economic activity.”  Make the system simple, remove the loopholes, broaden the base (get some more “skin” in the game from those who now don’t pay taxes) and my guess is you’ll not only see an increase in revenue, but a far greater increase in economic activity.

Bottom line:  We are in a “you can pay me now or you can pay me later” moment.  And if we wait, we’re going to be paying a price we’re just not willing to pay, all because we chose to avoid the pain now.   I’m sure the opponents of this proposal are going to call it “extreme” and something that will “hurt the children”.  Trust me, if you want to see extreme, put it off until this house of cards collapses.  And if you want to avoid “hurting the children”, man up and face the pain now to avoid it later when it really will “hurt the children”.

UPDATE: Chris Edwards at CATO gives his take on the Ryan budget.  I’m pretty much agreed with everything Edwards says:

  • Ryan doesn’t provide specific Social Security cuts, instead proposing a budget mechanism to force Congress to take action on the program. It is disappointing that his plan doesn’t include common sense reforms such raising the retirement age.
  • Ryan finds modest Medicare savings in the short term, but the big savings occur beyond 10 years when his “premium support” reform is fully implemented. I would rather see Ryan’s Medicare reforms kick in sooner, which after all are designed to improve quality and efficiency in the health care system.
  • Ryan adopts Obama’s proposed defense (security) savings, but larger cuts are called for. After all, defense spending has doubled over the last decade, even excluding the costs of wars in Iraq and Afghanistan.
  • Ryan includes modest cuts to nonsecurity discretionary spending. Larger cuts are needed, including termination of entire agencies. See DownsizingGovernment.org.
  • Ryan makes substantial cuts to other entitlements, such as farm subsidies. Bravo!
  • Ryan would turn Medicaid and food stamps into block grants. That is an excellent direction for reform, and it would allow Congress to steadily reduce spending and ultimately devolve these programs to the states.
  • Ryan would repeal the costly 2010 health care law. Bravo!

Here’s a chart Edwards includes in his post:

201104_blog_edwards52

 

I’m a huge supporter of military spending in order to maintain our national security and technological edge, but I find it hard to believe that there aren’t many places where savings could be accrued in “Security”.  And I’d also note under the broad “Security” umbrella fall many other programs that could be cut – like the entire TSA.  But, in any event, it is an area that should also be looked at with an eye for cutting spending.  It would get us to our goal of paying down the debt even sooner and it can be done without jeopardizing our security (cut costs not capability).

UPDATE II:  Geoff over at Ace of Spades gives a little context to the Ryan proposal:

PublicDebtRyanvsCommissionSmall

 

Now, where I come from, the “extremes” are on either side of a situation, right?

~McQ