Experience teaches slowly and at the cost of mistakes.
James A. Froude
Blog Readership Update
October readership was at a multi-month high (the highest cumulative pageviews since May). International readership was nominal.
Meet the Press: A Rant on 10/30/11: Part 2
Before continuing the excerpts, it struck me in my long discussion yesterdayof some Plouffe rhetoric, I did not directly respond to Plouffe's assertion that the $447B
Among other things, Obama intends to pay for these with permanent tax increases on upper income taxpayers: this adversely affects economic growth and reduces the tax base. The idea that a government that can't even balance its own checkbook and a President whom has not done a single statistically significant thing to cut spending over the past 3 years and in fact has massively increased spending (over and beyond the massive stimulus bill, 24% of domestic expenditures, way over inflation); at a time when state and local governments have had to cut budgets and layoff some workers, the federal government (ignoring temporary Census employment) has actually grown (the last statistic I saw was 13%). Obama is constantly finding new disingenuous synonyms to cloak the reality of tax-and-spend policies: "investments" in boondoggle green energy projects. The fact is--there is no such thing as a free lunch: sooner or later, we are going to have repay that debt; that doesn't mean the Democratic strategy of playing games with budget increases 10 years down the line. Even if somehow we manage to balance the budget in 10 years, that means the national debt is going to grow a lot bigger than $15T. Obama has already added $4T to the national debt--roughly 2 years of federal revenues.
When exactly is going to be a good time to pay that back? Look at Barack Obama complaining that he is acting against his own party base in looking at some concessions (e.g., raising retirement age) years after his Presidency ends! Oh, cry me a river! While governors, Democrats and Republicans, are looking at cutting services, raising college tuition rates and laying off people, what has Barack Obama given up in the short term (other than maybe smoking and gutting defense research programs)? His only concession has been to suspend TEMPORARILY an unprovoked class warfare attack on the only income group that pays twice their share of national income in tax burden, while 47% of workers not only don't pay a penny towards the cost of government and in fact often receive goods and services. [Disingenuous progressives often argue that payroll taxes are taxes. But these taxes, net of distributions to current beneficiaries, constitute loans to cover federal operations, not direct payment. In addition, some programs like the earned income tax credit serve to offset that cost.
Some states and municipalities have been better governed (e.g., Minnesota, Indiana, West Virginia and Texas) than others (say, Illinois and California). The latter states made unsustainable commitments; I mentioned in an earlier post how Sen. Joe Manchin (D-WV) as then governor did not need to resort to laying off key public sector employees during the 2007-2009 recession; West Virginia basically created a rainy day fund to offset incoming stimulus fund money. It is the state residents whom elected spendthrift Democrats whom went on unsustainable public sector hiring sprees (e.g., in lowering student/teacher ratios) and negotiated taxpayer-unfriendly public sector collective bargaining agreements. In case the reader thinks I'm just on an anti-union rant, consider the following excerpt from Bloomberg [kudos to Carpe Diem for the tip]:
[California men's prison nurse] Jean Keller earned $269,810 last year...tripling her regular pay with overtime hours...California’s public workers collected $1.7 billion of extra pay last year, ...in overtime, unused vacation and [miscellaneous] union-negotiated benefits (e.g., uniform allowances, physical-fitness incentives and “complex work load" conpensation)... [To make room for union extra pay, the California legislature] cut school spending and services for poor children and the elderly. [NB: $1.7B could pay for 25,000 school teachers.]I expect Nurse Keller would put up the Sally Brown defense ("all I want is my fair share"), but the point I'm making here is why the American taxpayers should have to pay for California teachers, when California's governors (Arnold Schwarzenegger and now Jerry Brown) and Democratic-dominated legislators haven't had the balls to jawbone the public sector unions into making long-overdue concessions? It is moral hazard on steroids to bailout California, i.e., to reinforce the dysfunctional behavior of California state and local governments.
PLOUFFE: Every independent economist who's looked at the Republican jobs plan in Washington says it wouldn't do anything to create jobs in the short-term. One macro-economic adviser's actually said their agenda could lead to the destruction of millions of jobs and economic and political upheaval.First, let's reprise Plouffe's earlier estimate that the President's "jobs plan" would create nearly two million jobs. FactCheck looked at the claim; the White House submitted the names of TWO economists whom estimated nearly 2 million jobs: Zandi of Moody Analytics and Prakken of Macroeconomic Advisers. In a rare charitable nod to the White House, I think FactCheck misinterpreted what Prakken said; whereas Zandi cited 1.9M next year, Prakken said 1.3M next year and an additional 800,000 in 2013. (FactCheck seems to believe that Prakken implied 500,000 of those jobs were temporary in nature.) However, the Bloomberg panel of 34 economists showed only 2 whom forecast at least 2M due to Obama's pet legislation over 2012-2013, the median being 288,000 (the bulk in the first year because of Obama's proposed increase in the payroll tax holiday). This is in comparison to 1.2M added by the private sector over the past year.
So, to say the least, Obama picks and chooses his economists much like he picks and chooses winners and losers in the private sector (if we take a look at Solyndra, I think it's safe to say Obama is better at picking losers).
The biggest bang of the jobs package comes from the increase in the payroll tax holiday--in a rather transparent attempt to artificially goose the economy in an election year where Obama is up for reelection. When the payroll holiday expires in 2013--taking 3% of worker pay back out of the economy. How do you think the same models will react to that news? You see, Obama is trying to argue that Republicans are being inconsistent by not going along with his attempts to manipulate the election, when it looks that a double-dip recession is less likely based on the latest GDP statistics.
Plouffe, of course, is a polemicist (and not very good one at that); what did the Obama Administration's chosen two economists say about the Republican plan? Consider the following excerpt from The New York Times:
Joel Prakken, chairman of Macroeconomic Advisers, said Republicans had “reasonable ideas” but not ones that could be measured by the firm’s forecasting model...Mark Zandi, chief economist at Moody’s Analytics, similarly said the Republican proposals “are generally good longer-term economic policy, but they won’t mean much for the economy and job market in the next year.”The Republicans oppose it because they never bought the effectiveness of the original (2009) stimulus in the first place, and this spending cuts a big chunk out of the recent debt ceiling increase, hastening the day towards another showdown over Obama's spendthrift ways.
I want to add some of my own concerns here: the kinds of market interventions being discussed are hardly standard tools, never mind things done in a weak but still growing economy. I think it sets a very poor precedent for future economic weakness, and I definitely think that Republicans and conservatives should oppose rewarding progressive Democratic overspending by agreeing to raise taxes. How many times do I need to remind my fellow conservatives that both Reagan and Bush Sr. agreed to tax increases in exchange for spending cuts that never happened? We should refuse any agreement to raise taxes until we return spending to FY2008 levels, nonnegotiable; Democrats will never agree, exposing their utter hypocrisy when it comes to fiscal discipline. The Democrats have been playing accounting games with almost every piece of legislation they've passed.
Furthermore, I would argue that all these interventions are like the dysfunctional Cash for Clunkers program, only on steroids. There is virtue in patience and letting the economy be the economy. We need to let the economy to function without the obfuscating distortions of market interventions. When Obama and Plouffe argue that we must intercede, it indicates manifestly a distrust in the free market.
The GOP plan focuses on the supply instead of the demand side of the economy. Effectively, they argue that government regulations, unfair and globally uncompetitive business taxes and excessive demand for investment to paper over an unsustainable deficit and debt raise the costs of doing business--which hampers business and job growth. I believe that Plouffe's fear-mongering is based on a comment Prakken made with reference to the short-term implementation of a balanced budget amendment, i.e., what would happen if we suddenly drained $1.3T of federal government spending out of the economy?
First of all, let's pretend that business won't benefit not having the federal government competing with it for $1.3T in investment dollars, that a shored up dollar won't increase the standard of living and we won't have to worry about federal interest expenses crowding out other government programs (cf. California discussion above). The fact is that Obama who has silently stood by without long-term deficit reduction or a credible budget while his own administration has projected trillion dollar deficits through the coming decade; he also has done nothing to shore up increasingly insolvent entitlement programs.
But, in fact, the more usual method of passing constitutional amendments (a two-thirds passage in both chambers of Congress) is all but impossible when you consider there are 53 Senate Democrats or caucusing independents, and I suspect none of them favors a balanced budget amendment. Moreover, even suppose the Congress passed it (when they couldn't even come to an agreement on a year-over-year budget cut), the chances of it being ratified by the requisite number of states within the next year or two is all but impossible.
PLOUFFE: There's a bigger picture here, which is we have to reclaim some of the middle class security by restoring basic American values. That's what the president's trying to do, where hard work and responsibility is rewarded and where everyone's playing by the same set of rules, both Wall Street and Main Street.As a conservative, I find that Obama and Plouffe trying to argue "restoring basic American values" takes chutzpah. There is almost nothing this President or his Democratic colleagues have done, which furthers basic American values of hard work and responsibility. Their stealth creep of government program dependence reaching now into the middle class is the exact opposite of restoring basic values; their class warfare taxation policies, punishing economic success, undermine the very concepts of entrepreneurship. Everybody playing by the same set of rules? Tell me what is fair about GE not paying corporate taxes while our largest energy companies pay the highest effective tax rates of any business--but Obama is obsessed with extracting even more taxes from them. Tell me what is fair about violating the rule and intent of law by intervening during the auto bankruptcies on behalf of lower-standing union interests over higher-ranking bondholders, essentially rewriting the rule book on behalf of their crony special interests. Tell me what is fair about the Democrats giving the GSE's lucrative preferred Treasury finances, which gave the GSE's an unfair competitive advantage over their private sector competition, going from single digit percentage to almost half of market share in the secondary market. Tell me the fairness of Obama picking winners and losers in the market place, giving green market companies financing that the private sector itself sees as being too risky.
We conservatives are against crony capitalism; the point here is, Obama and his Democratic colleagues are part of the problem, not the solution. They simply believe that their special interests are "more equal".
PLOUFFE: Now, the president laid out his plan, which is we've already signed into law over $2 trillion of spending cuts.That's absolutely misleading and false from a common sense understanding. CATO points out that the $2T in projected cuts (over the coming decade) boils down to $200B per year and it's in across-the-board decrease in even larger planned spending increases (the net of which CATO estimates at $1.8T). Only in the Alice in Wonderland world of progressive economics do you actually increase the budget by $180B a year while claiming you're cutting spending by $200B a year. When most of us think of budget cuts, we think in terms, say, you spent $1000 last year, and this year you're spending $800; assuming stable prices, this means you're buying fewer widgets this year than last year. Now to put this in perspective, suppose you've planned your budget so instead of $1000, you have $1250 this year. What Plouffe is arguing (in terms of this example) is that we're cutting $200 from the proposed (not current/previous) budget. The end result is instead of $1250, you're getting $1050. But $1050 is still bigger than $1000. You can still buy more widgets with the extra $50. The tough decisions are not in cutting increases to programs but in cutting the programs themselves.
So from the perspective of true fiscal hawks like myself, when Plouffe is talking about spending cuts, he's talking about "Obama money": future budgets with automatic spending increases baked in. Cutting an imaginary budget is painless. The real cuts come in things like canceling programs or projects, personnel, etc.
PLOUFFE: American people look to Washington and say, "You didn't reduce the deficit," there's only one reason. It's because the Republican Party here in Washington refuses [to tax more from higher income people] because the Democratic Party's willing to do a lot more spending cuts.Expletive deleted! Plouffe in the edited portion is talking about the super-Pease (e.g., limiting deductions, which would have the net effect of making more income subject to the highest bracket). We conservatives are willing to put across-the-board tax simplification on the books--in exchange for lower tax brackets--and in turn Obama has to give up his hodgepodge of special interest incentives, e.g., for green energy. But no back door class warfare tax hike--PERIOD! We believe that the economically successful people will do a better job of deploying their own income (whether spending or saving/investing) than Barack Obama and the other Politics of Envy Democrats.
But more to the point: been there, done that. As I previously mentioned, we've heard Democrats on multiple occasions promise to cut real spending in exchange for tax hikes, and it NEVER happens. The Democrats have burned their bridges on empty promises. What real cuts has Obama made? For over $10T in spending, Obama had one cut of $17B, half in defense research spending, and another $100M reduction; these aren't even statistically meaningful cuts. Do you really believe we are going to believe some party hack like Obama or Plouffe is going to make real cuts when they haven't shown a single good faith effort to date?
Also, it is unfair to taxpayers paying a disproportionate amount of taxes (like the economically successful, whom pay twice their share of income in relative tax burden) to pay even more, without asking for commensurate sacrifices from all other workers, including the 47% whom pay no federal income tax.
I'll resume my discussion (part 3) in my next post.
Political Humor
"President Obama had dinner with a U.S. postal worker who won a contest to meet him. The mailman was like, 'Wow, someone who takes longer to deliver than I do!'" - Jimmy Fallon
[During dinner, President Obama mentioned that he has had his own delivery problems; his supporters are wondering when he's going to keep his campaign promises. He noted that next year he's up against this guy, Herman Cain, whom promises to deliver within 30 minutes, or the government is free.]
An original:
- Where did Herman Cain come up with the idea for that campaign ad with the smoking chief of staff? Well, there was that campaign spot for California gubernatorial candidate Jerry Brown last fall--only the song in the background was "Puff, the Magic Dragon", and that wasn't a cigarette being smoked...
Foreigner, "Cold As Ice".
