government spending

Mr. Boehner, Please Move Beyond Earmarks

This from the House Speaker-designate for the 112th Congress in today's Wall Street Journal:

[T]here are several steps I believe the next speaker should be prepared to take immediately. Among them:

No earmarks. Earmarks have become a symbol of a broken Washington, and an entire lobbying industry has been created around them. The speaker of the House shouldn't use the power of the office to raid the federal Treasury for pork-barrel projects. To the contrary, the speaker should be an advocate for ending the current earmark process, and should adhere to a personal no-earmarks policy that stands as an example for all members of Congress to follow.

I have maintained a no-earmarks policy throughout my time of service in Congress. I believe the House must adopt a moratorium on all earmarks as a signal of our commitment to ending business as usual in the spending process.

And this from the President during his post-election news conference on Wednesday:

My understanding is Eric Cantor today said that he wanted to see a moratorium on earmarks continuing.  That’s something I think we can -- we can work on together.

In light of the economy, I can understand why Boehner is focusing on earmarks as the most visible symbol of what needs to be fixed on Capitol Hill. And I agree that we need to fix the abuse of the earmark process by reforming it. But the fact is that not all earmarks can be construed as wasteful spending and not all wasteful spending are in earmarks. It's easy to come up with rhetoric denouncing "the evils of earmarks," but what we should be focusing on substantively is wasteful spending.

I don't want to get into debates over how Republicans should define public goods and wasteful spending. I do however want to talk about what principles should be espoused by Republicans when it comes to spending and how we can be innovative on sound spending policies.

What are some budgetary principles that should be communicated by Republicans to the American people?

  • The Solution Principle: Every challenge facing the American people does not require a federal office and federal funding.
  • The Priorities Principle: Every family and every business has to balance their checkbooks, their revenues with their expenses. Through good times and bad times, families and businesses have to sacrifice what they might want and prioritize their spending. The government should operate like any prudent family or business does, and prioritize.
  • The Investment Principle: The American people are "forced to invest" their income into government. Each taxpayer is, therefore, a shareholder in government. Because taxpayers have invested their money into government, taxpayers deserve the best return on their money. This means the "portfolio of investments" (otherwise known as government projects and agencies) must be reviewed carefully and objectively in order for the government to fulfill their due diligence.

How can we turn those principles into solutions? The answer is to do what's difficult, not easy (i.e. earmark moratoriums), and be innovative about our budget from both procedural and substantive points of view:

  • Follow the lead of Paul Ryan and his "Roadmap for America's Future" when it comes to restructuring our entitlements.
  • Don't allow earmarks to be placed during conference committees between the House and Senate.
  • Install a biennial budgeting process, something promoted by Senator George Voinovich (R-OH), while also requiring supermajorities to increase in a fiscal year after a budget has been passed (for legitimate emergencies).
  • Separate capital budgets from operating budgets for each department. Long term projects are very different from short term day-to-day costs.
  • Instead of an executive Chief Performance Officer that gets to pick and choose what works and what doesn't under subjective criteria, have Congress create a Congressional Agency Performance Office that has some independence (like CBO) to constantly scrutinize the operations of all government agencies.
  • On capital projects that go to specific state and local governments, quasi-agencies, and companies, start a Congressional Office for Spending Oversight. Just like every business has control officers, this independent office should scrutinize long term projects' spending practices. This can allow Congress to reward under-budgeted projects and punish over-budgeted projects.
  • Not only should spending be posted online before it's passed. It should also be posted online when it's spent. Just like many state governments have done, the federal government's checkbook should be posted online.

I'm glad that we're getting out in front of the President and Democrats on this. We need to be in a proactive position, not a reactive position. Talking about earmkars is too easy. This is just another area where we need to develop political communication and public policy entrepreneurship on a serious issue.

Breaking Uncle Sam’s Spending Addiction

Uncle Sam is addicted to spending. We’re use to seeing him pointing and saying “I want YOU!” He’s still pointing but now he’s saying “I want your CASH.” He needs a fix. It is little wonder that he is addicted. Washington has developed a culture of spending in which elected officials are worried about getting elected today regardless of the fiscal consequences of tomorrow. Well now it is time to send him to rehab. There have been many attempts at doing so, but detoxing is never fun and Uncle Sam apparently lacks the will to see it through.

Earlier this week, Republicans unveiled their new “YouCut” program, saying it will give voters the chance to tell Capitol Hill what budget-cuts they think are necessary. The program is meant to harness the internet’s power of social media to allow citizens more access to the decisions of their government. In an out of touch Washington it is meant to empower citizens. Each week Republican members of Congress will submit a few proposals to cut some fat out of the federal government. These choices will then be presented to Americans who will be given the chance to vote on which cut they would like to see implemented. Republicans will then use the procedural tools available to the minority party to force a vote on the spending cut. House Whip Eric Cantor, who is putting on this spending “intervention” hopes the method will help.

Democrats, who don’t want to lose their best junkie, have been quick to criticize the program. Alec Gerlach of the Democratic National Committee criticized the program because it “would cut less than one-tenth of 1% of the budget.” Liberal blogger Mark Coatney was quick to pile on saying “Cantor’s ambition seems a little small. Even if you enacted EVERY ONE of these proposals, the savings would be around $6 billion over 5 years.”

These critiques fail to understand the program and reinforce the nickel and diming of the American people. First, each makes a point to highlight how small the cuts are. The average of the first round of proposed cuts is around $800 million dollars. Though only a tiny percentage of the federal government’s budget I don’t think any American is willing to call that pocket change. Lets put it this way – the average household pays around $10,000 in federal taxes each year. If you enacted just one of the YouCut savings – 80,000 households worth of income tax could be saved or put to better use. Still “underwhelmed?” And of course this is only week one of a continuing program. Americans will have the opportunity to vote on cuts each week so the aggregate effect of the cuts will continue to grow.

My main problem with the Democrats argument is that it reveals a flippant attitude toward addressing the culture of spending in Washington. Politicians have become so used to fighting for $1 trillion additions to the federal budget that they ignore the “small” $500 million programs that are purely a waste of resources. This refusal to think small has dampened our ability to dream big.

Small stuff adds up. If we start addressing the thousands of small ticket items that are clogging up our budget and wasting taxpayer resources then we may be able to get back on a path towards fiscal sustainability. A million here, a billion there, and before you know it we’re making a real difference.

Moreover, the program is really about changing the culture of spending into a culture of saving. Rep. Paul Ryan, a Janesville Republican who serves on a new presidential fiscal commission examining major ways to cut the federal deficit, acknowledged that the YouCut program alone won’t balance the budget.

“But it’s a start,” he said. “We’ve got to get the culture in this country focused on containing the cost of government, containing spending. You can’t tackle the big things unless you change the culture.”

Their main argument in favor of YouCut is that it will get the average citizen to think more about reducing spending, and allowing them to let Uncle Sam know that that is what they are thinking about. One definition for culture is “an integrated pattern of human behavior.” In order to integrate a new pattern of spending, preferably of less spending, we have to change the culture, even if it means starting small.

Uncle Sam needs to go to rehab. He’s become addicted to spending and it has left him weak. His enablers in Washington want him to stay hooked. Addiction to spending leads to a lifetime of big government which is exactly what Democrats want. But we must fight to change the culture. To do that we must stop consistently ignoring the thousands of small cuts that need to be made to our budget. With our futures on the line who better to decide than us?

by Brandon Greife and Adam Welsh

Entitlement Reform: The Compassionate Solution

5.7 trillion.  It’s an almost unimaginably huge number.  It’s about six times the cost of the wars in Iraq and Afghanistan since 2001.  It’s more than five times the amount that federal, state and local governments combined spend on educating our children every year.  It is almost half as large as America’s entire GDP.  And yet, that is what America will spend on interest on the national debt over the next decade—not principal—interest.  And things are quickly getting worse.  President Obama’s budgets will add more than $10 trillion to the national debt over the next decade, and America’s debt to GDP ratio will jump from an already alarming 63% today to 90% by the end of the decade.

America is clearly on a fiscal crash course.  Fortunately, some politicians have shown courage and put forward solid ideas to put America back on a sustainable path.  However these solutions are said to lack compassion; the left spreads doomsday scenarios about Americans cancelling retirements, going without medical care and even spending their waning years eating dog food.  No bombast, hyperbole or imagination is spared in the left’s attempt to convince Americans that any action to control the growth of entitlement spending is a heartless sop to rich voters.

The problem with these supposedly compassion based arguments from the left is that entitlement reform is no longer optional—it is an absolute existential imperative.  No amount of willful ignorance can erase tens of trillions in debt or prevent an implosion of America’s social safety net when the money finally runs out.

Given the need for entitlement reform it’s worth asking: which side in American politics is truly compassionate?  The left has long claimed to be the advocates of society’s downtrodden and abused.  And rather than challenge the left’s false assumption of the meaning of compassion, the American right has all too often fallen into the trap of trying to outspend the other side rather than promoting its core philosophy which is inherently compassionate and empowering.

I ask the left: what is compassionate about spending $5.7 trillion on interest alone every ten years when that money could be better spent on education, or left to America’s families?  What is compassionate about hoovering up an ever larger portion of America’s wealth to send to overseas creditors?  What could possibly be compassionate about trying to convince Americans that the programs they have paid into their whole lives are safe and dependable when the exact opposite is true?

The debate over entitlement reform is not a dichotomy between the heartless right and the compassionate left.  It is between a realistic, compassionate and forward thinking right and a woefully ignorant, irresponsible left.  With so much at stake, nothing could be more compassionate than putting America back on a responsible, sustainable path to secure a bright future for America’s children.

Zach Howell is the National Chairman of the College Republican National Committee

Swiss-Cheese-GO: When the Exceptions Swallow the Rule

It was to be a new era of fiscal responsibility. In 2006, Nancy Pelosi promised that “the first thing” Democrats would do when they were in control was to reimpose Paygo rules that “Republicans had let lapse.” That didn’t quite happen. By 2008 those rules had “lapsed” twelve times for a total of $400 billion in new deficit spending. Ok, well that didn’t stick, but on the campaign trail Barack Obama promised to “reinstate pay-as-you-go budget rules, so that new spending or tax cuts are paid for by spending cuts or revenue elsewhere.” He subsequently engaged in a trillion dollar spending binge that painted the nation’s ledger red with deficit spending. Well, that was a slip up, but now he’s was super serious when he said in his weekly internet address,

“Now, Congress will have to pay for what it spends, just like everybody else. . .  After a decade of profligacy, the American people are tired of politicians who talk the talk but don’t walk the walk when it comes to fiscal responsibility. It’s easy to get up in front of the cameras and rant against exploding deficits. What’s hard is actually getting deficits under control. But that’s what we must do.”

At least he got the first part right. Polls show that Americans, especially Millennials, are tired of the federal government’s big spending ways. A February poll by Rasmussen finds that among voters 18-29,

  • 74% are either very or somewhat concerned by the federal deficit
  • 68% believe that cutting the deficit would be better for the economy than the Keynesian approach of increasing deficit spending
  • 64% believe that increasing the deficit will hurt the economy
  • 85% thinkthat the government fails to spend taxpayer money wisely and carefully
  • 87% blame politicians unwillingness to reduce government spending as the cause of the federal deficit

Our fiscally frugal generation has been let down again. Far from being responsible, Congressional Democrats have found creative ways to work around the spirit of the Paygo law. For instance, the law exempts more than 50 federal programs from its reach – including the biggest ticket items like Social Security, the Medicare doc fix, and the alternative minimum tax patch. These tidy little exceptions are worth some $2.5 trillion; money that the government is not required to offset under Paygo.

The biggest farce comes in the form of an “emergency” exception. Patricia Murphy of Politics Daily explains,

“[A]lready, the Senate has issued itself a waiver from the provisions on three of the four spending bills it has considered by declaring several bills to be emergency spending, including a $15-billion jobs bill, a $10-billion measure for unemployment benefits and $100 billion package of tax extenders.”

If everything is the exception is there really a rule? We won’t (though we could) argue that there isn’t a unemployment emergency that requires government action. But, it does not follow that the government can’t make up for that spending elsewhere. As Olsson Frank Weeda of the Peterson-Pew Commission on Budget Reform makes clear,

“You can find there are so many places in discretionary spending that have been increased tremendously over the last two, three, four years that can be cut.”

On Tuesday Tom Coburn attempted to rein in the clear abuse of the Paygo law by introducing an amendment requiring the Senate to post the full cost of Paygo violation online for the public.  Of course the Senate passed it unanimously. To vote no would have been to uncover the swiss-cheese fiscal responsibility of Paygo. Nevertheless, Coburn is less than optimistic about his amendment’s chances to create lasting change to Democrats’ free spending ways. In an emailed statement he says,

“Today, minutes after the Senate accepted my amendment to post its violations of PAYGO online, Senators signaled their intent to remove this amendment from the bill before it goes to the President.  Taxpayers are tired of this cat and mouse game on spending and will hold Senators accountable if they want to be for transparency in words but not action.”

Unfortunately, Obama and the Democrats in Congress have perfected this game of cat and mouse. They say all the right things in public yet continue to drown our generation in red ink. Paygo is a good idea to get us back on track. There should be no exceptions.

by Brandon Greife, Political Director of the College Republican National Committee

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Government Spending is a tax on the middle class

by Rep. Ron Paul, MD   June, 2004

All government spending represents a tax. The inflation tax, while largely ignored, hurts middle-class and low-income Americans the most.

The never-ending political squabble in Congress over taxing the rich, helping the poor, “Pay-Go,” deficits, and special interests, ignores the most insidious of all taxes – the inflation tax. Simply put, printing money to pay for federal spending dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real – the individuals who suffer most from cost of living increases certainly pay a “tax.”

Unfortunately no one in Washington, especially those who defend the poor and the middle class, cares about this subject. Instead, all we hear is that tax cuts for the rich are the source of every economic ill in the country. Anyone truly concerned about the middle class suffering from falling real wages, under-employment, a rising cost of living, and a decreasing standard of living should pay a lot more attention to monetary policy. Federal spending, deficits, and Federal Reserve mischief hurt the poor while transferring wealth to the already rich. This is the real problem, and raising taxes on those who produce wealth will only make conditions worse.

This neglect of monetary policy may be out of ignorance, but it may well be deliberate. Fully recognizing the harm caused by printing money to cover budget deficits might create public pressure to restrain spending – something the two parties don’t want.

Expanding entitlements is now an accepted prerogative of both parties. Foreign wars and nation building are accepted as foreign policy by both parties.

The Left hardly deserves credit when complaining about Republican deficits. Likewise, we’ve been told by Ronald Reagan that deficits don’t matter – a tenet of supply-side economics. With this the prevailing wisdom in Washington, no one should be surprised that spending and deficits are skyrocketing. The vocal concerns expressed about huge deficits coming from big spenders on both sides are nothing more than political grandstanding. If Members feel so strongly about spending, Congress simply could do what it ought to do – cut spending. That, however, is never seriously considered by either side.

If those who say they want to increase taxes to reduce the deficit got their way, who would benefit? No one! There’s no historic evidence to show that taxing productive Americans to support both the rich and poor welfare beneficiaries helps the middle class, produces jobs, or stimulates the economy.

Borrowing money to cut the deficit is only marginally better than raising taxes. It may delay the pain for a while, but the cost of government eventually must be paid. Federal borrowing means the cost of interest is added, shifting the burden to a different group than those who benefited and possibly even to another generation. Eventually borrowing is always paid for through taxation.

All spending ultimately must be a tax, even when direct taxes and direct borrowing are avoided. The third option is for the Federal Reserve to create credit to pay the bills Congress runs up. Nobody objects, and most Members hope that deficits don’t really matter if the Fed accommodates Congress by creating more money. Besides, interest payments to the Fed are lower than they would be if funds were borrowed from the public, and payments can be delayed indefinitely merely by creating more credit out of thin air to buy U.S. treasuries. No need to soak the rich. A good deal, it seems, for everyone. But is it?

Paying for government spending with Federal Reserve credit, instead of taxing or borrowing from the public, is anything but a good deal for everyone. In fact it is the most sinister seductive “tax” of them all. Initially it is unfair to some, but dangerous to everyone in the end. It is especially harmful to the middle class, including lower-income working people who are thought not to be paying taxes.

The “tax” is paid when prices rise as the result of a depreciating dollar. Savers and those living on fixed or low incomes are hardest hit as the cost of living rises. Low and middle incomes families suffer the most as they struggle to make ends meet while wealth is literally transferred from the middle class to the wealthy. Government officials stick to their claim that no significant inflation exists, even as certain necessary costs are skyrocketing and incomes are stagnating. The transfer of wealth comes as savers and fixed income families lose purchasing power, large banks benefit, and corporations receive plush contracts from the government – as is the case with military contractors. These companies use the newly printed money before it circulates, while the middle class is forced to accept it at face value later on. This becomes a huge hidden tax on the middle class, many of whom never object to government spending in hopes that the political promises will be fulfilled and they will receive some of the  goodies. But surprise – it doesn’t happen. The result instead is higher prices for prescription drugs, energy, and other necessities. The freebies never come.

The Fed is solely responsible for inflation by creating money out of thin air. It does so either to monetize federal debt, or in the process of economic planning through interest rate manipulation. This Fed intervention in our economy, though rarely even acknowledged by Congress, is more destructive than Members can imagine.

Not only is the Fed directly responsible for inflation and economic downturns, it causes artificially low interest rates that serve the interests of big borrowers, speculators, and banks. This unfairly steals income from frugal retirees who chose to save and place their funds in interest bearing instruments like CDs.

The Fed’s great power over the money supply, interest rates, the business cycle, unemployment, and inflation is wielded with essentially no Congressional oversight or understanding. The process of inflating our currency to pay for government debt indeed imposes a tax without legislative authority.

This is no small matter. In just the first 24 weeks of this year (2004) the M3* money supply increased 428 billion dollars, and 700 billion dollars in the past year. M3 currently is rising at a rate of 10.5%. In the last seven years the money supply has increased 80%, as M3 has soared 4.1 trillion dollars. This bizarre system of paper money worldwide has allowed serious international imbalances to develop. We owe just four Asian countries 1.5 trillion dollars as a consequence of a chronic and staggering current account deficit now exceeding 5% of our GDP. This current account deficit means Americans must borrow 1.6 billion dollars per day from overseas just to finance this deficit. This imbalance, which until now has permitted us to live beyond our means, eventually will give us higher consumer prices, a lower standard of living, higher interest rates, and renewed inflation.

Rest assured the middle class will suffer disproportionately from this process.

The moral of the story is that spending is always a tax. The inflation tax, though hidden, only makes things worse. Taxing, borrowing, and inflating to satisfy wealth transfers from the middle class to the rich in an effort to pay for profligate government spending, can never make a nation wealthier. But it certainly can make it poorer.

* Today,  the government no longer discloses the M3 value to the public, making it impossible for the public to actually know just how much increasingly worthless paper money the government  is printing and dumping into the economy -- just another example of the growing power of the fascist state over that of the democratic state.

ex animo


Texas-Style Transparency

Last month I offered a couple examples of the good work being done online by state-based think tanks. There's another noteworthy project to highlight today from Texas.

As one of the leading states in the area of government transparency, Texas is already a step ahead of most states when it comes to giving citizens access to information. But what the state lacked was a single source to find what's publicly available. Enter the Texas Public Policy Foundation.

The Austin-based foundation today launched, which was designed to be a one-stop shop for spending data from state and local governments. The project's goal was to put in the hands of citizens the information they need to hold their elected officials accountable.

There is only one way to ensure spending cuts...

...will ever balance the budget -- don't let Congress get their hands on our money in the first place.

While both candidates' economic plan offer tax cuts, in their own way, both will leave billions more in government spending, money we don't have, and money foreign money-lenders will be only too happy to provide. All we have to do is put our children's' future on the slave block. As a fiscal conservative, I am all for tax cuts, but tax cuts without significant cuts in government spending is more than just being irresponsible, it is dangerous. It is putting the economic future of our children and their children, and, thus, the Republic, at risk.

The only way we can expect government spending cuts to pay for tax cuts is to stop our money from ever getting to Congress in the first place. The only fair way to achieve this is to do away with the individual income tax on wages and institute a fair tax on corporate profits (at significantly reduced rates) and a sales tax of no more than 10 percent.

The aim here is to significantly reduce the revenue the federal government has to spend. Any reduction in federal government spending that must be addressed beyond these present levels can and should be made up at the State, county and local levels.

Until we see significant reduction in government spending, we are simply squandering the economic future of this Republic and the country.

ex animo



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