To love is to stop comparing.
Bernard Grasset
Welfare? What About Welfare Nation?
Michael Grunwald had an interesting spin for an article ("One Nation On Welfare. Living Your Life On The Dole") in Time Magazine. (NOTE: I usually don't refer to articles behind paywalls; I used to subscribe to the now defunct US News & World Report print magazine, and they converted my subscription to Time.)
Mr. Grunwald engages in a little bait-and-switch along the way; for example, he says, "The explosion of Big Government under Obama is mostly a myth; the public workplace has actually shrunk by half a million workers under his presidency." Most people reading that statement might infer that the number of federal workers under Obama has gone down: absolutely false, of course! There have been cutbacks--under state and local government; one could argue that they are bloated, too, but not under Obama. (And on top of that, don't forget when Obama has been doing everything he can to entice college students to seek a well-paid career as a federal bureaucrat; among the perks: college loan forgiveness.)
As a side issue, I disagree with Mark Perry of Carpe Diem and others suggesting that government job losses are the problem area (Obama made a similar claim that I debunked): roughly 5 of 6 jobs are in the private sector, and this economy is still down over 4 million jobs from the 2007 peak (the public sector was still adding jobs in 2008), never mind that the labor force grows over 130,000 a month. Let me cite a couple of sources to make my point:
- "While public payrolls generally downsized in recent years, a Governing analysis of Labor Department data finds state and local government reductions being applied unevenly so far, with employment growing or remaining roughly unchanged in about half of states since the start of the recession. Private sector employment, by contrast, increased in only five states." LBS, Jan 2008 - Apr 2012
- "Unemployment rates ticked up in 44 states in July [2012] as slow economic growth failed to keep pace with a persistent shortage of jobs."
Grunwald goes through a typical day living in Miami, talking about how the government subsidizes everything--breakfast food, mortgage payments, charitable contributions, child and childcare deductions, health insurance, retirement contributions, property taxes, utilities, home office, and flood and state-sponsored home insurance. (Just mortgage interest and health insurance account for nearly a quarter trillion in lost tax revenue, otherwise called "tax expenditures".)
This reminds me of a former MIS colleague from UTEP I've discussed in past posts (e.g., we both taught the data structures course). At the time he was married with a young son; I met them when he invited me over for dinner at the beginning of my stay, months before our falling out. At some point we got on the topic of taxes, and (assuming equal salary) I thought it was unfair that I, as a bachelor, should have to pay more in taxes than another professor with a family. (Yes, I'm aware that that families spend money I don't. But that's not the point. For example, if I go to Disney World, I don't pay more for admission than a family of three.) I was surprised to hear my colleague agree with me.
I want to get rid of all of these government subsidies; I suspect many of my social conservative friends would go ballistic if I suggested doing away with tax-advantaged benefits and various deductions for home ownership, children/childcare, etc. I realize charities would object (since money is fungible, what it really means is that government is subsidizing the charity, which I oppose as a violation of government's core functions). Other countries, notably Canada, don't subsidize their citizens' purchases of homes. I have a general problem with picking winners and losers in the economy. Why the purchases of a home but not other expenses? In a free market, you pay for a house not differently than buying furniture or anything else: on its intrinsic merits. Two of every 3 households own a home; what about the third that doesn't own a home, e.g., a tenant? Are we supposed to subsidize the government services for people whom own homes?
Club for Growth and other conservative organizations vote against striking tax exemptions, credits, and other gimmicks, mostly on the grounds that it increases taxes. I'm more concerned about equal protection issues and point out that tax rates are higher than they should be to make up the effects of all of these tax gimmicks. I would agree that once you take away the gimmicks, you should lower the tax rate across the board.
All of these things, including farm subsidies (at least $15B a year), are violations of free market principles. Among other things, we still pay for them through taxes but it's in a hidden way. If water is largely subsidized to the point the price is artificially low, customers may use more (and waste more) than they would otherwise use. I argue that the true costs would result in more appropriate consumer activity.
Do I think Obama has the courage to take on sacred cows like the mortgage interest deduction? Not a chance. Grunwald points out that the few spending cuts Obama has approved are things like dropping a plane that the military didn't want (obviously being pushed by some powerful Congressman with the vendor as a constituent, etc.) Would Romney? I understand why Romney would not want to be specific about budget cuts before the election: if he mentions anything specific, Obama will appear at a relevant factory or location to express his solidarity with the relevant companies and/or workers. Still, my guess is that Romney might take measured steps, not enough in my view but a start (e.g., means-test, cap the deduction, etc.) But it's going to take healthy economic growth and sizable cuts to put a dent in a $1.3T deficit.
| FY | NGDP($B) | Population(M) | Spending($B) | Type |
|---|---|---|---|---|
| 2000 | 9951.5 | 282.172 | 1788.95 | a |
| 2001 | 10286.2 | 285.082 | 1862.85 | a |
| 2002 | 10642.3 | 287.804 | 2010.89 | a |
| 2003 | 11142.2 | 290.326 | 2159.90 | a |
| 2004 | 11853.3 | 293.046 | 2292.84 | a |
| 2005 | 12623.0 | 295.507 | 2471.96 | a |
| 2006 | 13377.2 | 298.109 | 2655.05 | a |
| 2007 | 14028.7 | 300.733 | 2728.69 | a |
| 2008 | 14369.1 | 303.380 | 2982.54 | a |
| 2009 | 13939.0 | 306.051 | 3517.68 | a |
| 2010 | 14526.5 | 308.746 | 3456.21 | a |
| 2011 | 15094.0 | 311.592 | 3603.06 | a |
Courtesy usgovernmentspending.com
| FY | NGDP($B) | Population(M) | Revenues($B) | Type |
|---|---|---|---|---|
| 2000 | 9951.5 | 282.172 | 2025.19 | a |
| 2001 | 10286.2 | 285.082 | 1991.08 | a |
| 2002 | 10642.3 | 287.804 | 1853.14 | a |
| 2003 | 11142.2 | 290.326 | 1782.31 | a |
| 2004 | 11853.3 | 293.046 | 1880.11 | a |
| 2005 | 12623.0 | 295.507 | 2153.61 | a |
| 2006 | 13377.2 | 298.109 | 2406.87 | a |
| 2007 | 14028.7 | 300.733 | 2567.98 | a |
| 2008 | 14369.1 | 303.380 | 2523.99 | a |
| 2009 | 13939.0 | 306.051 | 2104.99 | a |
| 2010 | 14526.5 | 308.746 | 2162.72 | a |
| 2011 | 1509.04 | 311.592 | 2303.47 | a |
Courtesy usgovernmentspending.com
| Courtesy usgovernmentspending.com |
| Courtesy usgovernmentspending.com |
I usually don't write about my dreams, but I think this one was directly due to my blog. In yesterday's post I was critical about the way Ron Paul and his supporters were treated at the recent Republican National Convention. So the first time I have a dream where I'm a political candidate, I find myself--as Ron Paul's running mate at a joint appearance. He looks at me and then says in his grouchy tone, "You'll do." It was very cool, but--why didn't I get top billing in my own dream? Do girls dream of becoming Miss America runner up? (Well, maybe in a nightmare...) I mean--look at who's been VP--Agnew, Gore, Quayle, Biden. I mean, who wouldn't be inspired to join that illustrious group?
Should Majorities Decide Everything?
This, of course, is a rhetorical question: an ideological democrat would never pose the question. It's become a relevant issue because of so-called "reforms" that seek to neutralize the Senate filibuster, to eliminate the electoral college and/or to ban business political speech. The design of our federal government was specifically designed to serve as a guard against a majoritarian abuse of power, including the federalism concept embodied in the structure of the Senate and electoral college.
There was a widely voiced myth that the GOP, especially during the 111th Congress, "obstructed" the wishes of the public. In fact, there never was popular support for the Democratic progressive agenda; Obama specifically ran against Bush and moved to the center for the general campaign. Keep in mind since LBJ's victory in 1964, only two Democrat candidates--Jimmy Carter and Barack Obama--received a majority of votes. I think Obama and the Congressional Democrat leadership completely misread the results of the 2008 election, and that's why you saw a definite rebuke of those policies in the 2010 election. Any Boy Scout (I used to be one) will tell you that you have to nurse a fragile flame (i.e., economic recovery) into a fire: you don't dump 2000-page laws on top of it. Totally unforced error. I can't speak as an independent or moderate, but I think part of the problem they had was with the GOP nominees during the time of economic uncertainty: McCain had made some key mistakes in judgment (e.g., the selection of Palin and the suspension of his campaign). The Presidential debates didn't help McCain either: Obama had improved his long-winded, professorial responses to debate questions during the Democratic nomination process, and a predictable McCain looked his age against a young, suave Obama.
The Obama campaign can spin the 2008 election results any way they want, but the bottom line was under economic uncertainty, the American people felt more secure with certain government programs, like unemployment compensation, to weather the storm. (I have problems with that as a classical (free market) liberal: I think people should save for a rainy day, and government policies are morally hazardous. At minimum, I would like to see grants and handouts transferred into loans of last resort with strings attached.) However, from a Burkean conservative perspective, welfare support policies are part of expectations of the status quo. What I would have done from a Democratic perspective would have been to facilitate things like relocation for purposes of a job (e.g., selling a house in an illiquid market and/or providing tax credits for moving), to require volunteer hours or retraining to qualify for unemployment insurance, or to provide ways to convert mortgages into leases with option to buy or lower-payment, fixed-rate mortgages.
I am, at best, a nominal Republican and certainly not a party shill. I agree that Democrats faced a number of solid GOP voting against their proposals; but the assumption that this was purely partisan is nonsense. Let me point out that the GOP had been routed in two consecutive elections. They were on the ropes, down to 40 votes in the Senate, only able to mount a filibuster in a united block. Several GOP seats were up in the 2010 election; the senators in question had every reason to seek accommodation with the Democrats, because their "obstruction" votes could be used against them. James Carville predicted that the GOP would spend the next 40 years out of power. Remember, the Democrats could collapse any filibuster by peeling off just one GOP senator; there were 3 senators in the liberal wing (Specter and the Maine senators), and additional Republican senators, like John McCain, prided themselves as being able to reach across the aisle.
In the world of investment, you can always hedge a stock position by buying a put. In a period of volatile elections, it's always prudent to consider the equivalent of a political put, i.e., concessions to the opposition on major legislation. It's a win-win proposition: the governing party get credit for framing a bipartisan solution, which mitigates allegations of partisan legislation; similarly, the senators across the aisle get to appeal to independents and moderates that they are working to find a middle way in the national interest.
If you go back to committee votes, you would see that GOP proposals got voted down routinely on partisan votes. The Democrats decided to push partisan bills based on the votes; Woodward's latest volume reports former Obama Chief of Staff Rahm Emanuel explicitly saying, in terms of the GOP opposition, screw them: we've got the votes.
The bottom line is that Obama does not compromise; he thinks he's cleverer than he is by adopting the nomenclature of the GOP and then presenting watered-down variations, e.g., medical malpractice tort reform. Even in the lame duck session following the historic mid-term 2010 elections, the House Democrats defiantly passed a renewal of the Bush tax cuts--except for the 25% going to upper income taxpayers.
The issue never was for Republicans a question of protecting the upper 2%: it had to do with the fact that business decisions occur at the margin and when you raise the government tax/regulatory burden, you shrink the business tax base: this affects economic growth (and accordingly employment). In Friday's post, I pointed out that it's not just Art Laffer whom has advocated supply-side tax reform: Walter Heller, from the JFK Administration, did the same, and in 1992 Art Laffer designed Presidential candidate (now third-term California Governor) Jerry Brown's innovative flat tax proposal.
I've already outlined my position on taxes (flatter, eliminate deductions, credits, and other gimmicks, and balance with a consumption/VAT tax). The point here is that Obama and the Democrats were playing a game of chicken, literally less than a month before the Bush tax rates were set to expire in a struggling economy: this was purely ideological. Even if implemented, it would barely amount to a down payment on the Obama deficits.
The point is, the filibuster was the only tool (other than Dems vulnerable to near-term elections in red/purple states) the GOP had to stop the 111th Congress from passing partisan bills on party-line votes. In this case, I believe that the filibuster forced Obama to compromise.
Going back to Professor Munger's video, he does a good job of showing how, in the case of France, similar rights had legal fine print intolerant majoritarians could nullify at will.
Musical Interlude: My Favorite Groups
Roxette, "The Look"
