spending

I try to read all of Princeton economist and New York Times’ contributor Paul Krugman’s columns. Call it a nerdy form of masochism. By the end of each article I’m often left ripping at my hair and gouging at my eyes, screaming madly, “how did this guy win a Nobel?!?” Then I’m reminded that Yasser Arafat and Al Gore are also Nobel laureates and that maybe I shouldn’t make such a big deal out of the award.

Regardless of my disdain for his ideology I simply cannot stop reading. His seemingly religious belief that spending for the sake of spending is the solution to any economic crisis is admirable in its consistency.

Then again, it’s also fun to watch him run in rhetorical circles when he’s wrong. Remember this gem?

“[Fannie Mae and Freddie Mac] didn’t do any subprime lending, because they can’t: the definition of a subprime loan is precisely a loan that doesn’t meet the requirement, imposed by law, that Fannie and Freddie buy only mortgages issues to borrowers who made substantial down payments and carefully documented their income.”

Oops, got that one wrong. Must’ve missed the $4.3 trillion in subprime mortgages.

Well in his latest column he gets it wrong again. But in all his economic vanity he can’t admit it. Quite the contrary, he predicts the future for us, the conservative fools, who seek to deter the government from spending us into bankruptcy. In true doom and gloom fashion he argues “[F]uture historians will tell us that this wasn’t the end of the third depression, just as the business upturn that began in 1933 wasn’t the end of the Great Depression.”

Fortunately, we, the conservative fools, have good company. The G-20 Summit, composed of leaders from the world’s largest economies, have decided that trimming deficits is the best way to achieve long term stability in the world economy. German Chancellor Angela Merkel has been one of the most vocal advocates of putting government spending on a sustainable path. In a response to President Obama’s call for more stimulus, her government said,

“Nobody can seriously dispute that excessive public debts, not only in Europe, are one of the main causes of this crisis. That’s why they have to be reduced.”

Nobody? Is that a challenge? Apparently Paul Krugman took it as one. In his latest column Krguman explains why the silly know-nothings at the G-20 summit, with their commitment to fiscal sanity rather than spiraling deficits, will inevitably lead to the “Third Depression.” He writes:

And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.

In the face of this grim picture, you might have expected policy makers to realize that they haven’t yet done enough to promote recovery. But no: over the last few months there has been a stunning resurgence of hard-money and balanced-budget orthodoxy.

Gasp! Inadequate spending. Only in the wonderland that exists inside Krugman’s head could trillions of dollars in new government debt be considered “inadequate spending.” If the United States escaped the Great Depression by building tanks for World War II, Krugman wants us to escape this recession by building presses to print all the money we’ll need for his “stimulus.”

The problem is that Paul Krugman thinks myopically. We must spend, spend, spend and do it now, now, now. Forget the fact that we have no plan to solve these deficits in the long term, beyond inflating our currency to the point where deficits won’t matter. The rest of us have a more nuanced understanding. We actually possess the ability to assess the long-term. Moreover, the ability to think in future terms necessarily colors the way we act in the present.

As Shawn Tully of Forbes explains,

“[I]f investors are convinced that Washington has a plan to restore fiscal balance, they’ll be content with lower returns on their stocks, bonds and buildings for a simple reason: those returns will prove more stable and predictable. That comfort level, in turn, lowers risk premiums and raises the prices of equities, corporate bonds, houses, and office towers.

Right now, many investors and managers are simply terrified by the absence of a roadmap to avoid ruinous debt. “We need to know that Washington can make tough choices, that our leaders are willing to do things that are unpopular,” says Paul Willen, an economics professor at MIT. “More than anything, people need to feel that this is not out of control.”

Frankly we’re scared, not just of today’s economic downturn, but because of a future made cloudy by insurmountable government deficits. In the face of a frightening future, Americans are saving rather than spending, companies are shunning risk and entrepreneurialism, and foreign lenders may soon ask for higher interest rates to hedge against inflation.

Keynes once said, “in the end we are all dead.” Krugman seems to base his entire economic philosophy on this one sentence. There is little other explanation for why he puts so much emphasis on spending now regardless of whether we can pay for it later. Our generation deserves better than that. Solving today’s crisis should not come with the caveat that we have doomed ourselves to another one.

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

http://speakout.crnc.org/blog/2010/06/28/krugmans-keynesiasm-dooms-us-to-future-downturns/

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

Today brings another example of how spending in Washington is dangerously out of control. With the national debt approaching $12.135 trillion, and the Treasury Department having to use "extraordinary accounting tools" to allow an extra $150 billion in debt so Social Security checks can continue to be issued and the federal government can keep its doors open, it is time our elected officials in Washington be held accountable. They just don’t get it.

They must be stopped from increasing the debt ceiling by another $290 billion – as is being proposed now – and instead must make cuts to the federal budget. When a family of 4 hits hard times, they learn to make sacrifices – not sign up for a new credit card. Our government needs to watch and learn from the hard-working folks across our country and stop this mentality of "spend-our-way-to-prosperity." The bailouts, the stimulus packages, the pork and pet projects, and the ever-increasing size of the federal government must be put to a stop.

When I am elected to represent the good people of Tennessee, I will vote for a balanced budget, and I will do everything in my power to make certain that the size and reach of the federal government decreases each year I am there. It's time to bring common sense budget principles to the United States Congress.

To learn more about me, please visit: www.chuckforcongress.com

Follow me on Twitter: @chuck4congress

 Cato's Chris Edwards is correct.  Republicans are playing small-ball.  They have no real vision, so they've ended up with policy paralysis.  - Jon Henke

As I note in a recent New York Post op-ed Republicans are fond of implying that President Obama is a big-spending socialist. But the House GOP recently offered a spending cut plan that was able to find savings worth less than one percent of Obama’s budget.

As Tad DeHaven and Brian Riedl have also pointed out, the GOP spending reform effort is rather pathetic. It proposed specific annual budget cuts of about $14 billion per year.

Consider that the center-left budget wonks at the Brookings Institution put their heads together a few years ago and came up with a “smaller government plan” that proposed about $342 billion in annual spending cuts (by 2014). The Brookings authors note:  

These cuts are achieved by reducing government subsidies to commercial activities ($138 billion); by returning responsibility for education, housing, training, environmental, and law enforcement programs to the states ($123 billion) . . . by cutting entitlements such as Medicaid, Social Security, and Medicare ($74 billion); and by eliminating some wasteful spending in these entitlement programs ($7 billion).

Thus, the Brookings scholars found cuts more than twenty times larger than the House GOP leadership cuts, and Brookings proposed its plan back when the deficit was about one-fifth of the size it is today. (Note that both the Brookings and GOP plans would also put a cap on overall nondefense discretionary spending, in addition to these specific cuts).

My point in the New York Post piece is that the GOP needs to challenge Obama’s big spending agenda at a more fundamental level. They need to do some careful research, pick out some big spending targets, and go on the offense. Why not propose to eliminate the Departments of Education and Housing and Urban Development? Why not sell off federal assets, such as the Tennessee Valley Authority, in order to help pay down the federal debt? Why not open up the U.S. Postal Service to competition?

Obama won’t agree to these reforms at this point, but they would hopefully open a serious national debate about reforming our massive and sprawling federal government. Ronald Reagan in 1980 and the congressional Republicans in 1994 didn’t win by splitting hairs with the Democrats over 1% of spending. They offered a more fundamental critique.

At least, GOP leaders need to offer up spending reforms as bold as those of the Brookings Institution.

Chris Edwards is the director of tax policy studies at The Cato Institute

In his inaugural address, President Obama said we should not worry about the size of government, but about whether we're spending money on things that work... 

The question we ask today is not whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.

And yet, in the few months since taking office, President Obama has spent hundreds of billions of dollars to prop up companies that were not working.  When, exactly, will the answer be "no"? 

The recent explosion in spending is no secret.  The government has already pledged more than $4 trillion in its attempt to solve this economic crisis—more than the cost of World War II. As though that’s not enough, the government has committed to spend trillions more over the next few years, which will bring the grand total to a staggering $12 trillion in new spending. That’s more than 24 times the size of the New Deal. 

But lost in all these colossal figures and vast amounts of debt are the consequences endured by average Americans, both today and especially tomorrow. 

When the time comes to replace Tim Geithner, might I suggest than Kelly Rutkowski, a 23 year old fan of the New York Yankees from New Jersey, might be an improvement

“I literally can’t afford to keep warm at this game,” Rutkowski said. “Can I just tell you, David, this is a sin. I’m freaking freezing, and there’s no way I’m spending $125 on a freaking sweatshirt, because that’s how this country got into this mess.”

The President talks about building our economy on a "new foundation"

Having dealt with construction financing in my career, I would suggest an economy based on well over $9 trillion in deficit spending.  is hmm...not based on a firm foundation.

Perhaps we ought to find out how many "$125 hoodies" our tax dollars are paying for?

Getting back to my old nabe I know what a rock looks like: and I know what sand looks like

Looks like we're payin for a lot of sand.

I'm sure Ms. Rutkowski can tell the difference between the Palisades and the Jersey Shore.

Our President, hmmm....not so much?

There is lots of talk about what needs to be done to fix education.  The big push is that we need to spend more.  I do not totally disagree, nor do I totally agree.  The bigger problem right now is not how much we spend but how we spend it.  To me it is like a trip to the grocery store. 

Lets say you are on the way home from work when your spouse calls.  They need you to stop by the store on the way and pick up toilet paper and light bulbs.  You have got $20 on you, so it will be no problem.  As you pull in to the store you realize you forgot to ask what type of bulbs are needed, but figure it is OK because you have enough to get both regular 100 watt and 3 way bulbs.  When you get there, you grab a cart and head in.  On your way to the TP and light bulbs, you pass the beer aisle.  Mmmmmmm…. Beer.  You turn down there first, like we said there is plenty of money so we can splurge.  You see a 12 pack of Federal Beer for 12 dollars.  It is a nice premium beer with a fancy package and great advertising.  No problem, you still have plenty left for what you need so you grab a case.  As you turn out of that row, you see chips.  You can’t have beer with no snacks, so you turn again.  You see a display of State Pretzels.  They are more expensive than other brands, but go perfect with beer.  They are also in a nice fancy package.  You grab a bad for $4.  You are almost to your destination when you see an end cap of Local Donuts.  You know after a night of pounding pack beer and pretzels you are going to need something for breakfast.  These things like Krispy Kreme too, so you can’t pass them up and grab a box for $3.  Finally you are where you need to be, light and TP.  Light bulbs are $4 per pack for the 3-ways and $3 for 100 watt.  With only $3 left you don’t have money for both, plus you still need that darn TP.  You see that $60 watts are only $2, so you pick that up instead.  Light is light, who cares how bright it turns out to be.  You turn around to the toilet paper.  You need at least a 4 pack, and would love something nice and fluffy.  Nice paper is at least $5.  Even if you buy the stuff that is like sandpaper it is $3 for a 4 pack.  All you have left is $1.  You grab the single roll of single ply sandpaper-like product.  Again, it does the job even if it is not very good.  You will buy something better next time.  Now you could go and put back some of that other stuff, but by now you have time invested and have convinced yourself that all the rest is just as important as what you originally came in for.   

That is the problem in a nutshell.  The purpose of the spending is education, the light bulbs and toilet paper.  We waste a lot of the money that should be paying for teachers, class rooms, books and other materials is wasted as it trickles down from Federal to State to Local Education boards.  We have teachers in trailers, or what they call portable classrooms.  The people in Washington, state capitals and county headquarters are not in trailers.  They are in beautiful buildings with huge staffs to push paperwork and discuss why the children are not learning.  We do not need more money, so much as we need to spend it on what it is intended for. 

http://federalistblogs.wordpress.com

Matt Moon keys off a tweet of mine suggesting a total earmark ban, at least until we get beyond the current disfigurement of the federal budget. He writes:

I agree with Patrick that earmarks are the most visible symbol. But that's exactly the problem. I don't agree that it's enough for Republicans to fix "symbols" of how we've lost our way. I don't agree that we need to focus on symbols. Yes, 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.

I agree that earmarks are the tip of the iceberg when it comes to wasteful spending. Of late, I've also taken a dim view of symbolism as a substitute for policy. But here's the thing.

If we are going to spend $819 billion on an economic stimulus, and a $410 billion omnibus on top of it, the least Congress could do to signal that they are giving up some part of the gravy train is to suspend earmarked spending for the duration of the budget crisis. This is a political winner for Republicans. Republicans didn't have the votes to stop the stimulus or the omnibus, but we could rally public opinion around the idea of cutting off the part of the budget process perceived as the most politically self-serving and corrupt. It's not hundreds of billions of dollars, but it still makes a statement against the idea that the electorate can be bought with government dollars. In a minority situation such as the one we are in, it helps to pick fights we can win in the court of public opinion.

The political case for earmarks rests on the myth that constituents, Republicans and Democrats, want earmarks. In individual cases, this is true. But in the aggregate, polling has shown that the public takes a dim view of the process. And incumbents who do not take earmarks are re-elected at the same rate as incumbents who do.

The trouble with earmarks, beyond just their symbolic importance, is that earmarked spending is inherently recreational in nature. They are mostly for one-off projects that were never funded before, and are often a substitute for private investment -- making each earmark a mini-bailout.

Regardless of price tag, Republicans should not be in the business of defending new and optional spending. It's just not in our DNA as Republicans. One can be a fiscal conservative and support spending on basic public services like police, schools, and roads that are funded year in and year out. If earmarked projects are truly necessary, they should be funded through the ordinary budget process, not through haphazard one-off earmarks.