Free Markets, Free People

budget


The Republican Alternative Budget

It can be summed up in one sentence: They still don’t get it.

Tax cuts are great, but they’re not real tax cuts unless there’s a commensurate cut in spending. If there’s no cut in spending, they’re simply taxes which are being deferred. And that is precisely what the Republicans offer in their alternative. Long on tax cuts and long on spending. Their only claim to fame is they don’t spend as much as the Obama budget. Well, you’d have to be insane to spend as much as the Obama budget, but claiming that your plan is better because you spend less isn’t much of a recommendation.

For instance:

Discretionary Spending. The budget gives priority to the Federal Government’s most important obligations, national defense and veterans’ benefits. All other appropriated spending is level-funded for fiscal years 2010-14, and then increased at a moderate rate through 2019. The final allocation of these and other amounts will be determined by the Committee on Appropriations.

As long as we’re running a deficit, we can’t afford “increased spending” even at a “moderate rate”. What part of that can’t these people seem to get through their heads? Of course, that means they have to bring the bad news to the people that spending for government provided goodies isn’t going to go up, and, in fact, may go down. And the people haven’t exactly been kind to those who do so. Talking about it is one thing, but unfortunately actually doing it is detrimental to a politician’s career. So their cowardice is understandable if still unacceptable (given their rhetoric)

Mandatory Spending. Total mandatory spending increases by an average of 3.9 percent per year for the next 10 years. This is slightly slower growth than projected in the Congressional Budget Office baseline and the Obama/Democratic budget. It provides for a sustainable growth rate to assure the viability of these programs in the future.

Here is the budget killer – mandatory spending. And what to the Republicans propose? Growing it at almost 4% a year. The inflation rate is what? Well, even now, it certainly isn’t 4%. And while it may rise, you can’t assume that. So this does precisely what they claim their budget does:

To Control the Nation’s Debts. It halts the borrow-and-spend philosophy that brought about today’s economic problems, and puts a stop to heaping ever-growing debts on future generations.

It does not end the “borrow-and-spend philosophy” at all. It merely slows the rate of borrow-and-spend. The claim is nonsense on a stick.

And to cap it all off, they buy into the premise of some sort of universal or nationalized health care.

To Fulfill the Mission of Health and Retirement Security. The budget reforms the health care marketplace by making quality coverage affordable and accessible for every American regardless of pre-existing health conditions. It reinforces the decision-making of patients and their doctors, not government bureaucrats; and it reforms Medicare and Medicaid to make them sustainable. The budget also advances the cause of strengthening Social Security.

So instead of buttressing and supporting the concept of private health care and less government intrusion, the Republicans again commit to the concept of government involvement, but just not at the level of the Democrats. And they also want us to believe this isn’t going to cost much as well.

Disappointing is a mild word for what I see in their proposals. They’re again Democrat lite, buying into all the programs just claiming theirs doesn’t spend as much, and again proposing tax deferral as “tax cuts”, completely ignoring the need to cut spending to make those deferrals actual and permanent cuts.

No wonder they put it out on April 1st.

~McQ

[My latest Examiner.com article]


The Obama Budget

Senator Tom Coburn’s office provides a few facts about the budget the Obama administration has submitted to Congress. Budget buster would most likely be a better description:

Total Spending:

Total spending under this budget is $3.9 trillion in 2009, or 28% of GDP, the highest level as a share of GDP since World War II.

Discretionary Spending:

This budget provides $1.2 trillion in discretionary budget authority for FY 2010 and increases discretionary spending by $490 billion over 5 years. Total spending in 2009 is 28 percent of GDP.

Mandatory Spending:

The Democrat budget includes $2.2 trillion in mandatory spending for FY 2010, which includes Social Security, Medicare and Medicaid spending.

So there are the basics. And remember the pledge that by 2012 the deficit will be cut in half. Well, with this budget, that doesn’t mean a whole bunch in terms of what’s left in the deficit. It will still most certainly be higher than any deficit prior to this one.

Deficit is one thing, debt is another. Politicians like to use smoke and mirrors with deficit and debt, preferring to ignore debt and talk about how they’re dealing with debt. Well let’s get serious about this – the debt is what we owe, the deficit is just how much more we’re piling up.

Total National Debt Today:

$11.055 trillion

Under the Democrat Budget:

FY 2010: $12.2 trillion
FY 2011: $14.3 trillion
FY 2012: $15.3 trillion
FY 2013: $16.1 trillion
FY 2014: $17.0 trillion

So now we see the bottom line. In FY 2011, we will have more debt than GDP (the US GDP is 13.84 Trillion). And, in all honesty, we don’t have to be – unless we pass this budget. You cannot spend yourself out of debt. And you cannot cure a credit problem by extending more credit.

More:

Public Debt:

This budget adds $4.96 trillion to the public debt by 2014. Debt will be about two-thirds of GDP for the entire budget window, and deficits will be at least $500 billion in each year of the budget window.

Deficit:

The Democrat Budget sets total outlays in FY 2010 at $3.53 trillion and total revenues at $2.29 trillion, for a deficit of $1.24 trillion.

This is truly the beginning of the end. And without cap and trade involved, without universal health care is factored in, just to pay for this mess, taxes are going to go up. The question is how high. And as you’ll see, it’ll be higher than the spin is spinning:

Tax Increases:

Against a baseline that assumes current law tax policy is extended, S. Con. Res. 13 raises taxes by $361 billion and allows for $1.3 trillion in additional tax increases. In addition their budget paves the way for additional tax increases from a proposed cap-and-trade tax in reconciliation.

If you’re wondering where the additional $1.3 trillion in taxation might (will?) come from, Coburn provides a little behind the scenes look at how the Democrats procedurally set up phantom funds that they can initiate through a majority vote anytime they wish to fund favored initiatives:

Deficit Neutral Reserve Funds:

The Democrat budget includes 15 “reserve funds,” which essentially “phantom spending” policy statements that allow the majority to say that they would like to fund a certain initiative. The deficit neutral requirement associated with the reserve funds typically require that taxes be raised in order to pay for the new policy initiative. If all reserve funds were to be fully enacted, total spending would increase by $1.3 trillion, financed by tax increases or spending decreases.

Welcome to “hope and change”. More debt, more spending, bigger deficit, and no end in sight.

Someone will end up paying for all of this mess, and my guess is it will be all of us – for generations.

~McQ


Fact Checking Obama

Believe it or not, it was AP which undertook this job. And although superficial, it was interesting to see the agency actually attempt some objectivity. That said, the one that really stands out as almost laugh outloud funny was where Obama did a little chiding of the Republicans:

First of all, I suspect that some of those Republican critics have a short memory, because, as I recall, I’m inheriting a $1.3 trillion deficit, annual deficit, from them.

Well, first of all, only Congress can appropriate money and for the last two years, when that 1.3 trillion was pile up, it was appropriated by a Democratic Congress.

Yes, Paulson rolled them and they ran around like a bunch of chickens with their heads cut off – and that includes Republicans – but trying to lay this deficit solely at the feet of the Republicans is simply laughable.

Laughable point two came when Obama claimed “In this budget, we have made the tough choices necessary to cut our deficit in half by the end of my first term even under the most pessimistic estimates.”

Well, that’s just not true. The “most pessimistic estimates” (in this case the CBO) essentially disagree with his point.

The Congressional Budget Office forecasts that Obama’s spending plan would leave a deficit of $672 billion by the end of 2013. Explaining the differences between his projections and CBO’s, Obama said his administration projects a higher growth rate.

It is also important to understand that “cutting the deficit in half” is a mask for the fact that it means he’ll still be running up a record deficit of over 600 billion a year. That is not progress in deficit reduction or  “fiscally responsible” government. But it sounds good when thrown out there in a sound bite. Here, maybe this will help make the point:

wapoobamabudget1

As you can see, both the most “pessimistic” and his own projections see huge deficits projected well into the future – and, as many economists have said, unsustainable deficits.

So let’s get a few facts straight concerning spending and deficits then and now:

-President Bush expanded the federal budget by a historic $700 billion through 2008. President Obama would add another $1 trillion.

-President Bush began a string of expensive financial bailouts. President Obama is accelerating that course.

-President Bush created a Medicare drug entitlement that will cost an estimated $800 billion in its first decade. President Obama has proposed a $634 billion down payment on a new govern ment health care fund.

-President Bush increased federal education spending 58 percent faster than inflation. President Obama would double it.

-President Bush became the first President to spend 3 percent of GDP on federal antipoverty programs. President Obama has already in creased this spending by 20 percent.

-President Bush tilted the income tax burden more toward upper-income taxpayers. President Obama would continue that trend.

-President Bush presided over a $2.5 trillion increase in the public debt through 2008. Setting aside 2009 (for which Presidents Bush and Obama share responsibility for an additional $2.6 trillion in public debt), President Obama’s budget would add $4.9 trillion in public debt from the beginning of 2010 through 2016.

Yes, Bush did contribute to an expanded deficit. But Obama’s plans expand it beyond anything Bush did and it continues the spending well into the future. Obama’s budget is the blueprint for a huge and unsustainable expansion of government over the next decade.  What you see going on now is all Obama.

And don’t let him get away with pretending otherwise.

~McQ


Notes on the “Big Plan”

Two major points about the budget plan the Obama administration has out there (from the Heritage Foundation):

Spending: Obama’s budget proposes $1.13 trillion in regular discretionary spending for 2010. This is a full 12% increase over the 2009 spending baseline. On top of this the Obama budget increases entitlement spending by another $700 billion. The proposed post-recession spending level of 22% of GDP has been exceeded only 8 times in the post-war era. And these numbers do not include the spending priorities of the unchecked far left in Congress.

The Chicago Tribune reports today “President Barack Obama will break a campaign pledge against congressional earmarks and sign a budget bill laden with millions in lawmakers’ pet projects … Taxpayers for Common Sense, a watchdog group, identified almost 8,600 earmarks totaling $7.7 billion.”

Deficits: The Obama budget claims to cut the deficit in half by 2012, but relies on audaciously optimistic economic forecasts that no one believes in. Adding the “stimulus” bill to a realistic budget baseline yields a projected 2010-2017 cumulative budget deficit of $8.4 trillion – 2.5 times the size of President Bush’s deficits over the same 8-year time period. Before the recession, revenues were 18 percent of GDP and spending was 20 percent. After the recession, President Obama would maintain revenues at 19 percent of GDP, and spending at 22 percent. In other words, all new tax revenues would finance new spending, rather than deficit reduction. President Obama’s structural budget deficit would exceed President Bush’s.

So you have, in the time of economic contraction and massive deficit, a 12% increase over the 2009 spending baseline in discretionary spending. 12%. And entitlement increase of $700 billion. In an 8 year time period (should he be re-elected in 2012) Obama plans to add 8.4 trillion to the debt – a full 2.5 times larger than the huge debt George Bush added. This is a phenomenal and eventually crippling level of borrowing and spending. There is no end in sight. Where the Bush administration spent 2% above the revenue, even with an increase in revenue from increased taxation, the Obama administration plans on maintaining a 3% spending gap of revenue/spending.

Untenable, unsustainable and ultimately, utterly destructive to a market economy.

~McQ


Budget Voodoo

Barack Obama is about to submit his first budget to Congress.

Finally, because we’re also suffering from a deficit of trust, I am committed to restoring a sense of honesty and accountability to our budget.  - President Barack Obama to a joint session of Congress, Feb 24, 2009

That’s the promise.  The reality, as the Washington Post observes, isn’t quite in keeping with the promise:

President Obama’s spending plan is built on the assumption that lawmakers can resolve some hugely contentious issues — and it relies on a few well-worn budget tricks.

The tricks?  The usual stuff – calling something what it isn’t and inflating future spending numbers to make the future real numbers appear to be “savings”.  For instance:

And though Obama told Congress on Tuesday that his budget team has “already identified $2 trillion in savings” to help tame record budget deficits, about half of those “savings” are actually tax increases, administration officials said. A big chunk of the rest of the savings comes from measuring Obama’s plans against an unrealistic scenario in which the Iraq war continues to suck up $170 billion a year forever.

The tax increases, of course, include an increase in taxes on the top 2%.  And further savings are based on pretending that the Bush administration planned on spending $170 billion (seems like a small number when compared to the numbers being thrown around these days, doesn’t it?) beyond 2011 when it planned on pulling the bulk of the troops out of the country.

“It’s a hollow number,” said Sen. Judd Gregg (R-N.H.), the senior Republican on the Senate Budget Committee, who recently withdrew as Obama’s nominee to head the Commerce Department. “You’re not getting savings if you’re assuming spending that isn’t actually going to occur.”

What accounts for the other major source of income?

 But to pay for it, the president counts on a big infusion of cash from a politically controversial cap-and-trade system, which would force companies to buy allowances to exceed pollution limits. 

The promise that energy costs are going to skyrocket seems one promise he’s bent on keeping.  That of course will require more spending to offset the consequences (but don’t figure on being in on the subsidy, you probably won’t qualify).  And then there’s the redistributionist “spread the wealth” bonus to be realized from cap-and-trade:

Obama also wants to use the money to cover the cost of extending his signature Making Work Pay tax credit, worth up to $800 a year for working families. That credit, which will cost $66 billion next year, was enacted in the stimulus package, but is set to expire at the end of 2010.

Cover the cost is a way of saying, making the program permanent.

Then there’s the deficit promise.  Obama has set a goal of cutting the deficit in half by the end of his first term.   As observers say, there’s absolutely nothing difficult about reaching that goal:

This year’s budget deficit is bloated by spending on the stimulus package and various financial-sector bailouts, expenses unlikely to be repeated in future years. The nonpartisan Congressional Budget Office recently predicted that the deficit could be halved by 2013 merely by winding down the war in Iraq and allowing some of the tax cuts enacted during the Bush administration to expire in 2011, as Obama has proposed. That alone would cut the deficit to $715 billion, according to the CBO.

Notice that final number, folks.  That’s “half” of the deficit.  In other words he’s going to be running a deficit north of $700 billion dollars and trying to convince you how well he’s done.  In fact, all he’ll have done is add several trillions to the debt with several trillions more to come if reelected.

The era of big deficit financed government isn’t just back, it’s back on steroids sitting in a rocket sled pointed at economic  hell.

~McQ


The Fight In Kansas

While California’s budget debacle seems to be catching most of the MSM coverage, there’s an interesting drama in Kansas going on as well.  Kansas pits a Democratic governor against a Republican legislature.

The situation:

Income tax refunds and state employee paychecks could be late after Republican leaders and the Democratic governor clashed Monday over how to solve a cash-flow problem.

Payments to Medicaid providers and schools also could be delayed.

“We are out of cash, in essence,” state budget director Duane Goossen said.

The move places state taxpayers, workers and schoolchildren in the middle of a political battle over budget cuts.

Before we move on, note how the situation is framed. Clearly, at least to me, the bias leans toward what? Averting pain. In essence the state should do what is necessary – even if illegal and counterproductive – to avoid any pain.

The fight then, is about pain avoidance or, said another way, facing up to what excessive spending and poor budgeting has brought to the state of Kansas.

Why? Well what happens to politicians when pain is visited on voters? So it’s a very natural thing for politicians who enjoy the perks and power of office and harbor hopes of even higher office to want to avoid pain and the possiblity of losing that power and those perks.

That is essentially what is going on in KS where the governor wants to rob one fund which is healthy to pay out in other areas and the legislature is saying a) that’s illegal and b) we insist instead that we take a hard look at the situation and do things which will actually remedy it while, unfortunately, causing some pain.

The fight:

Republicans, who hold majorities in both chambers, blocked Gov. Kathleen Sebelius’ proposal to borrow $225 million from healthy state funds to cover shortages in accounts used to meet the state’s payroll and issue tax refunds.

GOP leaders said they won’t approve the IOUs until Sebelius either cuts the current budget herself or signs the bill they passed last week slashing $326 million — including $32 million for education — to balance the budget.

Republican leaders said they had no choice, that by law the state can’t borrow any more money from itself.

Sebelius and Democrats disagree and accuse the GOP of playing politics with people’s paychecks.

“Through their refusal to act today, the Republican legislative leadership is jeopardizing our citizens’ pocketbooks for no other reason than to play political games — games in which the only ones set to lose are Kansas families, workers and schools,” Sebelius said in a written statement.

Replied House Speaker Mike O’Neal: “While we all can agree that these are trying times for Kansas families, seniors and business owners, the Kansas House of Representatives respectfully disagrees with breaking the law in order to gain political capital.”

Notice the Governor and Democrats come back – the GOP is “playing politics with people’s paychecks”. But what is the Governor trying to “play” with:

The Governor is asking the Legislature to be complicit in breaking the law by approving certificates of indebtedness outside of the parameters set in statute. Kansas law requires the Director of the Budget to certify that money will be present at the end of the year to pay off certificates of indebtedness, and there is no evidence that will be the case. There is no reason to believe that under the current budget such money will be available. It is irresponsible and illegal to act as if the money will be available when all economic indicators show that we may see even less.

So, in fact, it appears that the GOP isn’t “playing” with anything to include the law, while the Governor wants to waive it so she doesn’t have to face the music and make the cuts necessary to bring the budget of Kansas back into balance.

Given that, which then is the “reality based” group in Kansas? And, after adapting to the new reality, to include the pain it will bring, do you think Kansas will be on the road to recovery faster than some state where pain avoidance is being practiced? Last, but not least – want to bet Governor Sebelius delays signing the bill which would require such cuts hoping the “stimulus” bill to be signed today by Obama will rescue her and help keep her from having to make that difficult decision (and avoid the pain)?

Pain avoidance for political purposes or rule of law?  Screw the law, opt for pain avoidance, even if illegal.

That’s exactly the type person I want as my governor.  [/sarc]

~McQ


This Has To Give You A “Warm Fuzzy”

Not content with busting the bank with the Pork bill and TARP II, now, finally, the 50+ trillion in unfunded mandates are apparently next:

The following week, the president will host what the White House is billing as a “fiscal responsibility” summit on February 23. The goal of the summit is to begin weighing the impact of massive federal programs like Social Security and Medicare just days before the president plans to unveil his first annual budget to Congressional leaders.

Budget? There’s nothing left to spend. Frankly I think Michael Ramirez has the best take on it.

flock

My guess is this can will get kicked down the road, left for 45 or 46 to deal with.

~McQ