The Practical Side Of Economic Policy

I hate to admit this, but I think economics is boring. I understand the basics, but after that I get lost. Yet economics and economic policy have a lot to do with how successful all of us are and how successful the country is. Right now America is not in good economic shape, and economic policies have a lot to do with that fact.

Fox News posted an article on Friday by Peter Morici entitled, “Why I can’t be both an economist and a liberal.” Mr. Morici goes into detail about the effects of some of the economic policies coming out of the Obama Administration.

The article cites an example of the consequences of one Administration policy:

The Congressional Budget Office estimates raising the federal minimum wage to $10.10 an hour, as President Obama proposes, would eliminate 500,000 to 1,000,000 jobs. Businesses will be forced to raise prices, lose customers and lay off employees. Fast food restaurants will begin to use more machines and we’ll see something similar to automated checkout devices at drug stores and supermarkets.

Past increases in the federal minimum wage did not have large impacts on employment, because those were in line with inflation, and businesses adopted strategies expecting such periodic adjustments. The minimum wage was last reset in 2009 and we knew that raising it one dollar to $8.25 to preserve purchasing power would not cost many jobs.

Jumping it up to $10.10 an hour, however, would fundamentally redefine the tradeoffs businesses face regarding unskilled labor and automation. The workers left standing would have more spending power but overall, increasing unemployment by at least 500,000 would take a bite out of GDP and growth from an already anemic economic recovery.

Meanwhile, the Democrats criticize the Republicans for not being willing to raise the minimum raise. Common sense and cause and effect are not mentioned.

The article also mentions the idea that if America would cut its CO2 emissions to curb global warming, China would follow suit.

The article points out:

Liberals argue that by setting a good example the United States can bring China along.

Nonsense! American diplomats have not been able to get Beijing to respond on its undervalued currency or protectionism generally, abandon the use of force to settle territorial disputes in the China seas, or anything else the Chinese Communist Party sees as impairing economic growth or its quest to wrest leadership from the United States on global economic and security issues.

It’s time for those in leadership in America to begin putting the good of the country above the good of their political party or worse, the desire to stay in power. We have created a political class–something never intended by the founders of this country. It is time to limit terms of Senators and Representatives and return to government by the people. A Congressional term should not be a ticket to lifelong wealth.

When Cuts Aren’t Cuts

The CATO Institute posted an article yesterday about Congressman Paul Ryan’s budget proposal.

The article included this chart which tracks spending in the coming years under Congressman Paul Ryan’s proposed budget:

The chart below compares Paul Ryan’s budget against the CBO projections of the federal budget:

Notice that there are no actual spending cuts in Paul Ryan’s budget–it simply represents a slower rate of growth.

The article reports:

Chairman Ryan’s budget would spend $42.6 trillion over the next ten years. Opponents will say that Ryan’s budget slashes federal spending, while supporters will say that it includes large budgetary savings. The reality is that Ryan’s budget would increase spending at an annual average rate of 3.5 percent, or from $3.54 trillion in 2014 to $5.0 trillion in 2024. Only in Washington would that be considered substantial restraint, let alone slashing.

Until we change the culture of Washington, we can expect to see Congress drive America into bankruptcy. If you want to see change, you need to change the people you vote for. Continually voting for the people who keep spending high will not result in lower spending.  Most of the establishment Republicans (as well as the Democrats) have forgotten their promises to cut spending. Those Republicans need to be replaced by people who will remember their promises.

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The New Definition Of Senate Oversight

Yesterday the Washington Examiner posted a story about an exchange between HELP Committee Chairman Tom Harkin and ranking Sen. Lamar Alexander at a Senate Hearing.

Senator Alexander asked Labor Secretary Thomas Perez  if he believes that the Congressional Budget Office (CBO) is qualified to judge the impact of raising the minimum wage. The CBO has stated that raising the minimum wage will cost jobs. Perez did not directly answer the question.

The article reports what happened next:

Harkin said that Perez can “answer as he wants to answer, not as you direct him to answer. You can’t force him to say one thing or another. If he wants to answer that question, then he can answer that question.”

Alexander: “So a senator is not entitled to a yes-or-no answer to a specific question?”

Harkin: “The senator is entitled to ask a question, and the secretary can give the answer as he sees fit.”

Alexander: “That’s not much congressional oversight in my book.”

Harkin: “Well, it’s being respectful of people who want to respond in the way that they feel is best suited to answering the question.”

Alexander: “Well then we might as well not ask questions if we can’t get answers.”

This exchange depicts where we are in Washington. Congress has given up so much power that it has lost its oversight of the executive branch of government. It will be interesting to see if the minimum wage gets raised by an executive order. Then we will see if there are enough people in Congress who respect the Constitution to demand that it be followed. America has serious economic issues–this is not the time to play political games with people’s lives.

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Creative Spinning

Jonah Goldberg posted an article at National Review today indicating his choice for “word (or phrase) of the year.” He admits it’s only February, but he is convinced that “joblock” will be the winner.

The article reports:

The Congressional Budget Office issued a politically explosive report this week, finding that Obamacare will reduce the number of hours Americans work by the equivalent of 2.5 million full-time jobs. This is different from killing 2.5 million jobs, Obamacare defenders are quick to insist. This will be a shortfall on the supply, not demand, side. In other words, people with health insurance will opt not to work in certain circumstances if they know they won’t lose their coverage.

House minority leader Nancy Pelosi says the CBO report vindicates Obamacare, because “this was one of the goals: to give people life, a healthy life, liberty to pursue their happiness. And that liberty is to not be job-locked, but to follow their passion.” Pelosi is particularly invested in this view. She’s been mocked for years now for her repeated claims that Obamacare is an entrepreneurial bill because it would let Americans quit their jobs to, among other things, “write poetry.”

Good grief! Mr. Goldberg goes on to point out the irony of wanting people to have the freedom to quit their jobs and write poetry while at the same time forcing them to buy health insurance for conditions they are not physically able to have.

The article concludes:

Which is why the real CBO story should be: “That awkward moment when everyone realizes Obamacare was a huge mistake.” The same CBO report projects that by 2024 the number of non-elderly uninsured will be — drum roll, please — 31 million Americans.

And that’s why all of this talk of Democrats as the Job-Lock Liberators is pathetic and hilarious at the same time. Virtually every promise has been broken, every prediction falsified. And now, at a time when millions want work that doesn’t exist, Democrats are claiming victory by trimming the amount of work actually being done.

Hopefully voters will look for ways to liberate these Democrats from the curse of job-lock come November.

What a wonderful idea!

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I Hope This Headline Is True

John Podhoretz posted an article at the New York Post today with the headline, “Congressional Budget Office sends death blow to ObamaCare.”

The article reports the contents of the CBO report:

The one-two punch: Virtually as many Americans will lack health coverage in 10 years as before the law was passed — but 2 million fewer will be working than if the law hadn’t passed.

One killer detail comes on Page 111, where the report projects: “As a result of the ACA, between 6 million and 7 million fewer people will have employment-based insurance coverage each year from 2016 through 2024 than would be the case in the absence of the ACA.”

The irony of the whole ObamaCare program is the fact that ObamaCare was supposedly designed to provide health insurance to some 30 million Americans who are currently without health insurance. The CBO report predicts that in 2024, under ObamaCare, 31 million Americans will be without health insurance. If you consider ObamaCare as  the ‘War on the Uninsured’ in America, it appears that it will be about as successful as the War on Poverty in America.

The article also reports:

If that’s not startling enough, there’s also the telling projection about ObamaCare’s impact on employment — “a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.”

Overall employment will rise, the report says, but not steady, secure, long-term assured employment. The possibility of securing government-provided health-care without employment will give people a new incentive to avoid it. “The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply,” the report says.

Indeed, overall, between 2017 and 2024, the actual amount of work done in this country will decline by as much as 2 percent.

It really is time to come up with an alternative to ObamaCare. I only hope Congress is up to the task.

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Income Inequality

Lately we have been hearing a lot about ‘income inequality.’ It’s even a Biblical concept–Jesus said, “The poor you will always have with you, and you can help them any time you want.” So income inequality was with us in Biblical times and is still with us. It seems to be a constant thing. Other than help the poor among us, do we have the ability to change it. Well, we have a government that right now is trying.

Yesterday CNS News reported that according to a new study by the Congressional Budget Office, the top 40 percent of households by before-tax income actually paid 106.2 percent of the nation’s net income taxes in 2010. So what did the bottom 60 percent pay? That sounds like too few people pulling the wagon with too many people in it.

The article explains:

The households in the top 20 percent by income paid 92.9 percent of net income tax revenues taken in by the federal government in 2010, said CBO. The households in the fourth quintile paid another 13.3 percent of net income tax revenues. Together, the top 40 percent of households paid 106.2 percent of the federal government’s net income tax revenue.

The third quintile paid another 2.9 percent—bringing the total share of net federal income tax revenues paid by the top 60 percent to 109.1 percent.

That was evened out by the net negative income tax paid by the bottom 40 percent.

There is one aspect of the tax code that needs to be considered when viewing these statistics. When Congress has the highest percentage of millionaires per capita in America, why would they produce a tax code that is so unfavorable to the rich? Well, it’s not totally unfavorable to the rich–it is unfavorable to rich people who currently are earning their wealth. Family wealth carefully invested in tax shelters is not taxable. Previously acquired assets are not taxed unless they are sold.

The American tax code is already 13 miles long. We need to scrap it, and make it very simple–how much did you make, how much did you give to charity, how much mortgage interest did you pay? Subtract that from your gross income and pay a small percentage of what is left. The charitable deduction encourages people to support charitable works and the mortgage deduction encourages people to buy houses and form communities. End of story.

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The Positive Impact Of Sequestration

On Sunday, Stephen Moore posted an article at the Wall Street Journal about the positive aspects of sequestration. The bottom line in the story is that because of sequestration the federal government is shrinking.

In fiscal 2013, the sequestration will save the government more than $50 billion.

The article explains the potential future impact of sequestration:

In other words, Mr. Obama has inadvertently chained himself to fiscal restraints that could flatten federal spending for the rest of his presidency. If the country sees any normal acceleration of economic growth (from the anemic 1.4% growth rate so far this year), the deficit is on a path to drop steadily at least through 2015. Already the deficit has fallen from its Mount Everest peak of 10.2% of gross domestic product in 2009, to about 4% this year. That’s a bullish six percentage points less of the GDP of new federal debt each year.

Discretionary spending soared to $1.347 billion in fiscal 2011, according to the CBO, but was then cut by $62 billion in 2012 and another $72 billion this year. That’s an impressive 10% shrinkage. And these are real cuts, not pixie-dust reductions off some sham baseline. Discretionary spending as a share of the economy hit 9.4% of GDP in fiscal 2010 but fell to 7.6% this year and is scheduled to slide to 6.4% in Mr. Obama’s last year in office.

There are still major problems with entitlement programs going broke (I would like to repeat myself here and say that Social Security is not an entitlement program. If you are going to call it an entitlement program, just give everyone the money they have paid into it over the years and stop payments.). Social Security, Medicare and Medicaid will eventually have to be reworked in order to make them viable, but I seriously doubt that will happen under a Democrat president. Partial privatization of all three programs would extend their viability, but would need politicians willing to take a political risk for the good of the country. Right now that’s not what we have in Washington.

 

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Behind The Scenes In The Student Loan Battle

Today’s Wall Street Journal posted an editorial about the current debate over student loan interest rates.

Today the Senate voted on student-loan subsidies. The news just reported that an attempt to roll back the interest rate increase has failed a procedural hurdle. One proposal suggests that the interest rate on the loans be tied to the 10-year Treasury rate. The advantage of this idea is that the taxpayers do not have to guarantee the lower rate to borrowers while the cost of the loans to the government goes up.

The Congressional Budget Office recently estimated taxpayer losses on student loans to be $95 billion over the next ten years. Remember that the government takeover of student loans was part of ObamaCare. (see rightwinggranny.com)

The article in the Wall Street Journal reports:

Liberals apologize for the price hikes imposed by their friends in the faculty lounge by pretending that universities are starved for revenue. Rep. Frank Pallone (D., N.J.) claimed on MSNBC on Saturday that “the federal government is not making the investment in higher education.” Perhaps he’s forgotten that annual Pell grant spending of $34 billion has roughly doubled in the Obama era, or that Uncle Sugar now originates more than $100 billion in annual loans.

In October 2011, I wrote in rightwinggranny.com:

The article also points out that under the proposed changes, the government would be entirely responsible for college loans. Students would borrow directly from the government and pay the government back. What happens when students default? The taxpayers pick up the tab. Aside from the fact that the benefits to the students of this program are minuscule, we need less government in all aspects of our lives–not more.

In a New York Post article quoted in the above article, John Podhoretz wrote:

One federal study found that between 1982 and 2007, tuition costs rose 432 percent while family income rose only 147 percent.

As taxpayers, we are subsidizing inflationary spending on the part of higher education. There is no incentive to cut costs if you know that the money will keep pouring in and that the government will enable the students to afford the rising tuition. Until parents refuse to pay the rising tuition at some of the prestige schools, we will continue to have this problem.

The Harvard University website reports:

The complete budget at Harvard College (exclusive of transportation) for 2012-2013 is $57,950. Tuition – $37,576; Room and Board – $13,630; College Facilities Fees (for use of library and other University facilities including the Health Services) – $3,290; Minimum for extras (books, clothing, dues, recreation, etc.) – $3,454.

In some parts of America, you can buy a house for that amount.

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How To Lie With Statistics

This article has three sources–a Power Line article by John Hinderaker posted yesterday, a Hot Air post from yesterday, and a CNS News article from today. The subject of this article is the Congressional Budget Office report being hailed by supporters of the immigration bill as another reason to pass the bill. Not so fast.

The Congressional Budget Office (CBO) is non-partisan. It is also required to base its report of the numbers given to it. This makes it fairly easy for Congress to scam the system. Since the CBO only scores a ten-year window, all Congress has to do is put the major expenses of the legislation being scored outside of that window. Thus the current immigration bill says that the newly legalized immigrants will not be eligible for any federal programs for ten years. Amazing coincidence that the period of ineligibility ends after ten years. Does anyone want to predict what will happen on the first day after the ten years is up and our government is flooded with applications for government aid?

The article at Power Line points out:

Behind these rather antiseptic observations lies a human tragedy: falling wages and rising unemployment for the very segment of American society that has struggled the most in recent years. On top of that, the nation’s welfare system will be severely strained. While newly-legalized immigrants will not immediately be eligible for federal welfare benefits, that does not apply at the state and local levels. Those welfare systems will be overwhelmed with millions of new claimants–the cost to be borne, of course, by the taxpayers.

CNS News reports:

However, the cost estimate of the legislation that was released on Tuesday by the Congressional Budget Office says that the legislation would actually allow the flow of new illegal aliens into the United States to continue at a rate equal to 75 percent of the current rate of illegal immigration. This will be the case, in part, argues CBO, because of people who overstay temporary work visas that will be authorized by the bill.

This revelation that 75 percent of illegal immigration would continue if the Senate immigration reform proposal were enacted is included in a section of the report headlined, “Future Unauthorized Residents.” The section is on page 23 of the 63-page report.

So let’s get this straight. The current immigration bill would negatively impact wages of Americans, strain state welfare programs, hurt taxpayers, and only stop 25 percent of illegal immigration. So why in the world would we want to pass it?

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It All Depends On How You Name Something

There have been some negative comments lately from Democrats worried about how the implementation of ObamaCare will impact the 2014 mid-term elections. Historically, a President in his second term loses big in the mid-term elections, so the Democrats don’t want any additional difficulties. Recently a Democrat referred to ObamaCare as a ‘train wreck’ about to happen. That certainly does not improve the image of ObamaCare. Also, a lot of 26-year-olds are timing out of their parents’ health insurance and realizing that the IRS will be fining them if they do not pay the increased premiums ObamaCare requires from them. Keep in mind that increasing premiums on younger people is supposed to subsidize medical expenses for the elderly and for those with pre-existing health conditions.

Well, now it’s time for the goodwill tour for ObamaCare. Yesterday the Washington Examiner reported that as part of the Mother’s Day offensive for ObamaCare, President Obama has described ObamaCare as “largest health care tax cut for working families and small businesses in our history. “ Really. If you believe that, please call me about buying some waterfront property in Arizona–or maybe I could interest you in a bridge in New York.

The article reports:

His argument was a Hail-Mary effort to redesignate subsidies for individuals to purchase health insurance on government-run exchanges as a “tax cut.” But according to the Congressional Budget Office, these subsidies actually qualify as more than $1 trillion in “Exchange Subsidies and Related Spending.” (Emphasis mine.)

Far from being a historic tax cut, Obamacare actually qualifies as one of the largest tax increases in history. It contains roughly $1 trillion in taxes — on insurance plans, medical devices and investment income. And many of the taxes will end up falling on the middle class. The law’s individual mandate, which the Obama administration successful argued was a tax before the U.S. Supreme Court, is projected to hit nearly 5 million Americans with incomes less than $60,000 by 2016.

I understand that right now we have a lot of low-information voters who know more about American Idol than about what is going on in Washington. However, as these people begin to notice what is happening to their household budgets, maybe they will wake up and start paying attention. I can relate to the low-information voters–I used to be one. My excuse was not American Idol–my excuse was juggling family, work, etc. Either way, it’s time for America to wake up and begin to vote for people who will actually tell us the truth and practice fiscal restraint. I am sure that we have people in politics who are capable of that–I am just not sure how much power they have right now. We need to pay attention and vote accordingly.

 

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A Disturbing Report On The Economy

CNS News posted a story yesterday about the fate of the American economy under President Obama. The article cites a Congressional Budget Office (CBO) report projecting that America will never see full employment under President Obama.

The article reports:

The natural unemployment rate, according to CBO, is the “rate of unemployment arising from all sources except fluctuations in aggregate demand. Those sources include frictional unemployment, which is associated with normal turnover of jobs, and structural unemployment, which includes unemployment caused by mismatches between the skills of available workers and the skills necessary to fill vacant positions and unemployment caused when wages exceed their market-clearing levels because of institutional factors, such as legal minimum wages, the presence of unions, social conventions, or wage-setting practices by employers that are intended to increase workers’ morale and effort.”

CBO Director Doug Elmendorf has stated, “we think it will take four more years to get back close to full employment.”

I believe that America will recover from this recession. I also believe that the recovery would be much faster if businesses were not totally over-regulated by the government. A glaring example of this is the fact that the energy revolution that is taking place in America is taking place on private land–the government has blocked fracking on government land. If the government land were opened up and the Keystone pipeline put in place, the economy would recover very quickly.

We can recover, but we need to let private citizens have more power and the government have less. That won’t happen as long as the current Washington politicians are in power.

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The Obama Administration Targets Women And Children First

Actually, the Obama Administration targets the elderly, and women and children first. Today’s American Spectator posted an article about a recent announcement from the Centers for Medicare and Medicaid Services (CMS) that it plans to cut an extra 2.2 percent from the Medicare Advantage (MA) program. This new cut, which came as a surprise to everyone except Obama’s health care commissars, will be added to the $200 billion in cuts Obamacare has already mandated for MA. What does this have to with low-income and minority seniors? The administration’s new Medicare cuts will come directly out of their pockets.

Medicare Advantage is one of the most popular health care plans among senior citizens. It is successful because it involves competition in the private sector.

The article reports:

… The MA plans are already taking a huge hit pursuant to Obamacare’s $200 billion cut, and they will be unable to absorb these newest slashes in the program without passing at least some of the costs to the patients in the form of increased co-pays and deductibles.

And it is by no means an exaggeration to say that these extra out-of-pocket costs will hit the seniors who can least afford them. America’s Health Insurance Plans (AHIP), a trade group to which many MA carriers belong, recently issued a report confirming that reality: “Sixty-one (61) percent of all minority (nonwhite) beneficiaries enrolled in Medicare Advantage in 2011 had incomes of $20,000 or less; 59 percent of African-American and 75 percent of Hispanic Medicare Advantage beneficiaries had incomes of $20,000 or less.”

…”This reduction in funding will leave many vulnerable seniors with fewer benefits, higher out-of-pocket costs, and in some cases the loss of their current MA coverage.”

It will indeed. As AHIP reminds us, “The Congressional Budget Office projects that the reform law’s payment cuts alone will result in three million fewer people enrolled in Medicare Advantage.” The group goes on to point out that Obamacare is already expected to increase the out-of-pocket expenses endured by MA enrollees: “Actuaries at Oliver Wyman estimate that the health insurance tax will result in seniors facing $220 in higher out-of-pocket costs and reduced benefits next year and $3,500 in additional costs over the next ten years.”

It is time to repeal and replace Obamacare. Otherwise the American health care system will never be able to recover from the damage being done to it.Enhanced by Zemanta

The Senate Has Finally Produced A Budget

The Senate has finally produced a budget. John Hinderaker at Power Line posted an article today explaining what was in that budget.

The article states:

The process has proved revealing: the Democrats’ budget never balances, increases spending by 62% over ten years, and adds $7 trillion to the national debt despite raising taxes by $1.5 trillion. So Senate Democrats must agree with President Obama that the nation does not face a debt crisis.

The article quotes a statement President Obama made yesterday on ABC:

[W]e don’t have an immediate crisis in terms of debt. In fact, for the next ten years, it’s gonna be in a sustainable place….

There’s not–-in any way–-an immediate crisis with respect to our finances. …

Heritage.org posted an article yesterday explaining some of the details.

The article at Heritage.org states:

…Murray’s budget includes a massive tax increase. She raises taxes by almost $1 trillion ($975 billion to be exact) over the next 10 years by “closing loopholes.” Closing loopholes is Washington-speak for eliminating deductions, exemptions, and credits.

Which loopholes to close Murray leaves up to the Senate Finance Committee. But she is pursuing this tax increase unnecessarily. The Congressional Budget Office says that revenues will be 19 percent of GDP at the end of the current 10-year budget window. That is uncomfortably above the 18.5 percent of GDP that tax revenues have averaged in times of economic growth since the end of World War II. Murray’s budget would push revenues close to 20 percent of GDP by 2023, well above average—yet still not enough to catch up with her budget’s excessive spending.

Until Congress limits spending to 18 percent of the GDP (which is what we generally collect in tax revenue) we can expect deficits to grow. It is time to cut the spending in order to prevent the growth of deficits. Otherwise, we are simply creating a debt our children and grandchildren will never be able to repay.Enhanced by Zemanta

I Don’t Believe This, But It Will Make The Discussion More Interesting

CNS News is reporting that the Congressional Budget Office (CBO) has predicted that federal revenues for 2013 will exceed $2.7 trillion in 2013, slightly higher than the $2.6 trillion the government collected in 2007, when the last recession officially began.

The article reports:

Government revenues had fallen by nearly $500 billion during the recession to $2.1 trillion in 2009, contributing to the $1.5 trillion deficit that year. However, federal revenues have been recovering since the recession ended in June 2009, and the CBO now projects that they will slightly eclipse their pre-recession peak.

In fact, the $2.7 trillion in revenue will be the most money the federal government has collected in history.

Obviously, if government revenue is the highest it has ever been in history, why do we have to increase taxes?

The article reports:

Democrats say we should replace the president’s ‘sequester’ with revenue increases, or delay it.  Republicans say we should replace [it] with responsible reforms that will help put us on a path to balance the budget in 10 years,” House Speaker John Boehner (R-Ohio) said at a news conference on Wednesday.

Frankly, I would love to see federal revenues increase, but I am not convinced they will. Unemployment is still high, and the number of people working part-time who want to work full-time is at an all time high. Much of the revenue the government gets comes from personal income taxes, and if the unemployment situation does not change, I don’t think the revenues will change significantly. The CBO does its calculations based on the numbers it is given. It would be interesting to know where they got the numbers that convinced them 2013 was going to be a banner year for tax revenue.

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Avoiding The Solution Because You Would Rather Have The Problem

Yesterday CNS News posted an article suggesting a real solution to our current budget crisis. As I have previously stated, all of the doomsday forecasts about sequestration are simply another example of the Obama Administration crying wolf. The sequestration does not actually cut spending–it merely cuts the rate of growth.

The article suggests a solution to the ‘horrors’ of sequestration :

Conservative pundit Charles Krauthammer says President Obama could easily reduce the fear and panic engendered by the looming sequester if he would simply push Congress to pass a bill allowing a transfer of funds from less important federal accounts to more important federal accounts.

“And the president is the one who ought to propose it,” Krauthammer told Fox News on Wednesday. “He won’t, of course, because he is looking for a fight, and not a solution.”

You can’t cry ‘wolf’ or blame the Republicans if you actually solve the problem.

The former head of the Congressional Budget OfficeDouglas Holtz-Eakin, puts the whole thing in perspective:

Despite talk of how much the sequester will hurt ordinary Americans, Holtz-Eakin said the reality will be very different: “The day after the sequester starts, people will get up and go to work at federal agencies. You’ll see very minimal impacts, the kinds of things you hear about, you know, the sequester causing a recession.”

The former CBO chief noted that the sequester calls for an $85-billion reduction in spending in the current fiscal year — out of a $3.6-trillion budget. “It’s going to come and go without much notice. It’s a $16 trillion economy. This isn’t going to crater the economy.”

Quite frankly, I am very tired of President Obama telling us that we will all go to hell in a hand-basket if Congress does not do everything he says they should do exactly how and when he says they should do it. There is a reason we have three branches of government, and President Obama does not seem to understand that. This President seems to be acting like a spoiled child who throws temper tantrums when he does not get his own way. My grandchildren stand in the corner for that sort of behavior.

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I Guess This Shouldn’t Be A Surprise

On Friday, Forbes Magazine posted an article about the Affordable Care Act’s (ACA) health insurance tax. I hate to admit it, but this is news to me. I didn’t realize that there was an entire new group of taxes in Obamacare that will impact the middle class and the elderly.

The article reports:

…the tax increases that remain on the books will cost taxpayers more than $675 billion over the next ten years. Chief among these will be the sales tax on the purchase of health insurance, totaling $101.7 billion, and making it larger than all the other industry-specific taxes combined.

The article concludes:

In fact, Medicare Advantage beneficiaries will see costs rise from $16 to $20 per member per month in 2014 – increasing to between $32 and $42 by 2023. The costs for Medicare Advantage coverage over the next ten years is expected to reach $3,590. Individuals on Medicaid managed care will see increase costs on an average of $1,530 per enrollee between 2014 and 2023.

The Congressional Budget Office (CBO) supports Ignagni and Goodman’s warnings, stating that the health insurance sales tax will be “largely passed through to consumers in the form of higher premiums.” Unfortunately, as Goodman predicts, “this is only one example of many middle income taxes buried in ObamaCare.” The time to repeal and replace is narrowing, with just months now separating us from another massive tax hike that Americans cannot afford.

This is one more reason to repeal Obamacare. I suspect there may be a lot of Democrats at this point complaining that this is not what they signed up for. If it is what they signed up for, they should be voted out of office.

 

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It Wasn’t Great, But It Could Have Been Worse

Sorry for the lack of optimism in the new year, but the basically the average American was not the winner in the budget deal passed by Congress this week. Yes, we avoided the fiscal cliff, but we continued the direction of more government spending and bigger government.

Bloomberg reported yesterday that the bill the Senate passed would raise taxes on 77 percent of American households. The Hill reported yesterday that the bill the Senate passed will add roughly $4 trillion to the deficit when compared to current law, according to new numbers from the Congressional Budget Office (CBO).

On December 31st, Breitbart.com reported that the Congressional Budget Office has determined that the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.

So where do we go from here? I guess it depends on what America wants to be. When you look at the history of America, you realize that America was settled by people who were not content to stay where they were in their social or religious situations. The Pilgrims came here to find a place to practice their religion without government interference, the Irish fled the potato famine and the harsh conditions imposed by their British lords, and many Jews fled the pogroms of Russia and European countries. All of these people (particularly early in our history) took risks in coming here. Americans later left the comfort of their eastern homes to settle the western frontier. Historically, we have been a people with a work ethic who expect to be rewarded for our efforts. If government spending and programs continue at their current rate of growth, will we be able to maintain that spirit of adventure, risk taking and achievement or will it be wiped out by government programs? Recently I was talking to a friend who is a retired teacher, and she shared a story with me about an experience she had while working on her graduate degree. One of the students in the graduate program was the third generation of his family to be on welfare. Obviously, one of his goals in getting an education was to break that cycle. That is wonderful. However, it was less wonderful when he stated that if he couldn’t get the job he wanted after completing the program, he would simply go back on welfare because that paid pretty well. That is the danger we face with an ever-expanding government.

With the current President and current Congress, our chances of changing our current direction toward bigger government and increased taxes is very small. Conservatives are a very small part of Congress, and frankly, the Republican establishment is not a whole lot different from the Democrats when it comes to big government. The only real hope to turn this country around is the mid-term elections in 2014. Otherwise, we can expect to become Greece very soon.

One (very unpopular) solution to our current fiscal problem would be to make sure that every person in America pays taxes. Right now approximately 50 percent of Americans pay no income tax. If all Americans paid income taxes, they might be more inclined to elect people who were not likely to increase them!

Just one other note on the general state of affairs. As the third Quantitative Easing (QE3) begins to take effect, expect gasoline prices to rise. The current price for gasoline that we are paying at the pump is more related to the sinking value of the U. S. dollar than it is the price of oil. Unfortunately, unless economic policy in Washington changes, that will continue to be the case.

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When It Doesn’t Pay To Work

John HInderaker at Power Line posted the following chart yesterday:

The chart was originally from the Pennsylvania Department of Public Welfare.

The Congressional Budget Office has a similar chart:

The article at Power Line includes another chart from the Pennsylvania Department of Public Welfare:

Before you believe the lie that federal spending cannot be cut, please study these charts.

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Exactly What Is Fair ?

On Thursday the Washington Examiner posted an editorial with the title, “If top 5% paid 40% of taxes, what is their ‘fair’ share?”. That is a very reasonable question.

The current Democrat talking points are stated in the editorial:

Obama said in his postelection news conference earlier this month, “want to make sure that middle-class folks aren’t bearing the entire burden and sacrifice when it comes to some of these big challenges. They expect that folks at the top are doing their fair share as well.” House Minority Leader Nancy Pelosi, D-Calif., echoed this point in a fundraising pitch sent out on Monday: “Voters sent a clear message to Republicans in the election: we must stand up for the middle class and ensure the wealthy pay their fair share.”

What does the amount of taxes the wealthy pay have to do with standing up for the middle class?

The editorial reminds us:

As matters stand, the top 1 percent of American households paid 39 percent of income taxes in 2009, according to the most recent data compiled by the Congressional Budget Office, and the top 5 percent of taxpayers paid 64 percent.

But income taxes, taken in isolation, do not tell the whole story, because lower-income Americans do pay payroll taxes. But even taking into account all forms of taxation, the top 1 percent still paid 22 percent of federal taxes while earning just 13.4 percent of household income. The top 5 percent paid 40 percent of all federal taxes, despite earning only 26 percent of all income. No matter how you slice the numbers, it’s hard to understand why anyone would think the wealthy aren’t already shouldering a burden commensurate with their blessings.

It seems to me as if the wealthy are already paying more than their fair share. And if raising taxes on anyone is going to slow down an already struggling economy, why in the world would you want to raise taxes on anyone?

In March of this year I posted the following (rightwinggranny.com):

Fox News has a video posted showing President Obama stating in April of 2008 that, despite evidence it doesn’t increase revenue, he’d raise the capital gains tax on America’s richest Americans. Then-candidate Obama used one of his favorite words by saying it would be the “fair” thing to do! So it’s not really about revenue–it’s about redistributing wealth–taking money away from people who have earned it and giving it to people who have not earned it. How does that make our society better?

The purpose of being President (or House Minority Leader) is not to carry out your own personal vendetta upon those you resent because they are successful. It’s time to grow up and get past the idea that it is up to you as President or Congressmen to punish those who are successful.

We will all be seeing tax increases in January due to Obamacare. The question is how much additional taxation will we stand for. I personally feel taxed enough already–I think it’s time for the Tea Party to get back to their roots and begin to make noise again.

 

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Added To The Fiscal Cliff…

The Washington Post reported on Wednesday (notice that it was not reported before the election) that President Obama may pass a carbon tax in order to cut the deficit.

The article reports:

A tax starting at $20 a metric ton of carbon dioxide equivalent and rising at about 6 percent a year could raise $154 billion by 2021, Nick Robins, an analyst at the bank in London, said today in an e-mailed research note, citing Congressional Research Service estimates. “Applied to the Congressional Budget Office’s 2012 baseline, this would halve the fiscal deficit by 2022,” Robins said.

The article further reports:

The tax would not necessarily add to the economy’s total tax burden, according to Elliot Diringer, executive vice president of the research group. Such a tax may free up space for reductions in company taxes that dissuade employment, for example, Diringer said in an interview from Arlington.

“We have lots of need for new revenue to address our challenges,” which include priorities for conservatives such as extending tax cuts, avoiding deep defense cuts, reducing the corporate tax rate, reforming tax territoriality, and deficit reduction, the group said today in an e-mailed statement.

There are more than a few problems with this idea. Someone is going to have to pay this tax. If corporations pay it, the price of whatever they produce goes up, and the already beleaguered consumer pays higher prices. If the average American pays the tax, the standard of living in America, which has already fallen in the past four years, falls lower. This is an ideal way to create more poverty in America. Also, note the comment that ‘we have lots of need for new revenue.’ There is no recognition of the fact that we are overspending. In order for the American economy to thrive, government spending needs to be about 18 or 19 percent of the gross domestic product (GDP). The problem with the Obama Administration is that their goal is to make it closer to 25 percent. That difference is largely responsible for the increases in the deficit under the Obama Administration.

Intellectualtakeout.org posted a chart showing the growth of government spending in relationship to the GDP. Please follow the link to see the chart.

Until we decrease spending to below 20 percent of the gross domestic product, the economy will not grow. We also need to remember that if interest rates go up (which they eventually will), our interest payments will be the biggest part of our budget. You can’t run a country on a maxed-out credit card.

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Where Are The Fact Checkers ?

Yesterday CNS News reported that despite President Obama’s statement on Thursday that “we got back every dime we used to rescue the financial system,” the Congressional Budget Office (CBO) has stated that the government will lose about $24 billion on the bailout.

On Thursday, President Obama stated, “We got back every dime we used to rescue the financial system, but we also passed a historic law to end taxpayer-funded Wall Street bailouts for good.”

The article reports the CBO’s statement:

“The cost to the federal government of the TARP’s transactions (also referred to as the subsidy cost), including grants for mortgage programs that have not yet been made, will amount to $24 billion,” said the CBO report, which was released on the same day Obama spoke.

…CBO said that the cost of TARP “stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home mortgage foreclosures,” noting that the losses will be so large they will eclipse the financial gains the government will realize from bailing out other large financial institutions.

It really is time to tell the truth about how American taxpayer money is spent and to rein in the budget.

 

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The Cost Of ObamaCare

Yesterday the Washington Examiner posted an editorial explaining the impact Obamacare will have on jobs.

The article reports:

And so in order to avoid paying fines or buying massively more expensive health plans that are Obamacare-compliant, Darden is now experimenting with limiting its employees’ hours instead. By keeping workers to fewer than 30 hours per week, Darden can categorize them as “part-time.” Thus, the company avoids the Obamacare fines and leaves employees to the new government health insurance exchanges, where they may receive subsidies to purchase insurance. At least two other restaurant chains — White Castle and McDonald’s — are considering similar plans.

Thus, Obamacare is resulting in people working fewer hours, less tax revenue for the government, and bigger government.

The article concludes:

So to sum up, Obamacare is leading to fewer hours worked, less tax revenue for the government and bigger government subsidies for health insurance for people who were already insured in the first place. If enough companies do this, Obamacare will become a massive dead weight on the federal budget, even as it does little more than shuffle people from one insurance plan to another, whether they like it or not. The Congressional Budget Office estimates, at the high end, that 20 million workers could see their health plans dropped thanks to Obamacare.

One person who commented on the article at the Washington Examiner stated:

In 2009, Barack Obama stood up before the nation, and boasted that, if Obamacare was passed, you could keep your original health care plane.   That clearly was an out and out lie.

The more we see of Obamacare, the worse it gets. It needs to be repealed and replaced as soon as possible. The replacement needs to balance the needs of the health insurance consumer with the needs of the health insurance companies. There is nothing wrong with health insurance companies making a profit–that is why they are in business. The challenge is to make sure that they also meet the needs of the consumer.

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This Sounds Like A Lose Lose Situation

CNS News is reporting today that the Congressional Budget Office (CBO) is predicting that if tax rates rise in 2013, the economy will slip back into recession. Unless Congress acts, there will be a significant tax increase on January 2013.

The article points out that Congress will not act to change the projected increase in taxes until after the election. Great. Translated loosely, that means that Congress does not want to take responsibility for any actions they might take regarding taxes. As you know, President Obama is already saying that he won’t do anything to stop the drastic defense cuts included in sequestration unless the Republicans agree to raise taxes. Does anyone honestly believe that additional tax revenue will be used to pay down the deficit? In the past, when taxes have been raised, has spending ever actually remained the same or been cut?

The article concludes:

While CBO included mandatory spending cuts from the federal budget sequester (the “fiscal cliff”) in its analysis, the vast majority of the impact to the economy will come from the tax increases – the expiration of the Bush tax cuts — due to their sheer size.

CBO estimated that the combination of spending cuts and tax increases would reduce the federal deficit by $487 billion in fiscal 2013, with the vast majority of that figure coming from tax increases.

CBO projects that if current tax policies are kept in place and do not expire in 2013 as scheduled, revenues would be $5 trillion less between 2012 and 2022.

Congress is not expected to address either the mandatory spending cuts or the expiration of the Bush tax rates until after the election.

We need to examine the way that we look at taxes, tax rates, etc. The American public has been fed a line that somehow the government has a legitimate right to the earnings of the American people. It does not. There is nothing greedy about wanting to keep money that you have worked hard to earn. There is something basically wrong about taking money from people who have worked hard to earn it and giving it to people who have chosen not to work. I am sure we have all heard stories about people who refused to take low paying jobs because they could make more money simply by being on welfare and they didn’t have to go to work all day. Because of the amount of taxes taken out of all of our paychecks, the line between making money at the bottom of the economic spectrum and collecting welfare has become very blurred.

It’s time to remember that money belongs to the people who have earned it–no one else is entitled to it–not even the government. Unless we elect an administration that understands that people are entitled to the rewards of their hard work (they did build that!), we are going to wind up in the same place as the bankrupt countries of Europe.

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Accounting Tricks In Obamacare

Today’s Wall Street Journal (this is the link, but it is subscribers only) reported on an accounting trick used to disguise the actual cost of Obamacare. This is one of those articles I occasionally post that I do not fully understand. Be forewarned.

When the debt forecast was released Tuesday, the Congressional Budget Office (CBO) explained that the Affordable Care Act (Obamacare) subsidies are not indexed over the long term. This means that the numbers are not adjusted as the value of the dollar and the cost of living change. How does that impact the program? In one of two ways–the first is that Congress will intervene (as they do on the AMT to prevent it from impacting less wealthy voters) or that Americans will have to pay a larger part of their every increasing health insurance premiums. Under the first scenario the cost of the program to the government increases greatly, under the second scenario the cost of the program to every American increases greatly. Either way, it doesn’t sound like a good deal.

Unfortunately there has never historically been a government program that shrank instead of grew. Unless Obamacare is overturned by the Supreme Court or repealed by the next Congress, it will be cost nightmare for all Americans.

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Budget ? What Budget ?

It’s been more than 1,000 days since the Senate fulfilled its legal obligation to pass a budget. The Democrat talking points say that a budget is unnecessary because of the spending agreement reached last year. Well, anyone who runs a house knows that one reason to have a budget is that it helps keep spending under control. This concept also applies to the government.

John Hinderaker at Power Line posted an article yesterday on the current budget games being played by Congress.

The article reports:

Now, with no fanfare and no press coverage, the Democrats are attempting to negate–effectively, to repeal–the Budget Control Act by adopting spending bills that exceed its limits. Harry Reid and his Senate confederates have offered a bill to increase spending on the Post Office, S. 1789. The bill has been scored by the Congressional Budget Office as increasing the federal deficit by $34 billion, and no provision has been made to recoup that money somewhere else in the budget. (Of course, we don’t have a budget because the Democrats in the Senate won’t pass one. But spending could still be cut somewhere else.)

The article includes a rather lengthy statement by Senator Jeff Sessions that is worth reading. This is a portion of that statement:

Under Senate rules, no committee can bring a bill to the floor that spends even one penny more than is already going to be spent under current law, or increases the deficit more than it will increase under current law.

 In other words, the spending and debt under the postal bill violates the debt limit agreement reached just last summer. In August, we agreed to modest, though insufficient, savings—in fact, discretionary spending will still increase $7 billion this year—and now the Senate is already planning to spend more than we agreed.

This is particularly odd since the President and the Senate Majority Leader have accused the House of breaking the budget agreement by trying to save extra money for taxpayers. This argument, of course, is not sound: The debt deal established basic spending caps—the maximum you can spend on discretionary accounts. Not one word in that law prevents you from doing your duty to try and save more money. Not one word in that law requires you to max out the cap. This is not a matter of interpretation: caps are the maximum, not the minimum, you can spend.

Almost everybody recognizes that deal was insufficient and the lawmakers trying to find more savings are doing their jobs and meeting their obligations.

Only in Washington does spending underneath a cap get you accused of breaking a deal while spending more than an agreement means people just look the other way. The Majority Leader and the Budget Committee Chairman are proud of the Budget Control Act, but where are they when it comes to making sure even these modest savings are enforced?

If this new spending is necessary, then isn’t it worth cutting spending somewhere else to pay for it? Do we really have to break our spending agreement before the ink is dry on it? At a time when we’re facing next year our fourth straight deficit in excess of a trillion dollars?

Washington is in a state of financial chaos. We are in denial. The Government Services Administration is throwing lavish parties in Las Vegas. The Government Accountability Office has identified $400 billion—$400 billion—being spent every year on waste, inefficiency, and duplication. Far worse, the Senate’s Democrat majority has failed to produce a budget plan in calendar years 2010, 2011, and now 2012. In fact, this Sunday, April 29th, marks exactly three years since the last time the Senate passed a budget.

…[N]ow, because the Senate can’t say no, and because the President refuses to exercise managerial discipline, we are set to spend another $34 billion in borrowed money.

The White House warns that Republicans want to cut too much spending. But the American people know the truth. And the truth is that we have never spent more money, more recklessly and with less accountability, than we are spending today.

This is a decisive moment. The point of order I will raise is not a mere formality. It is a crucial vote to see if the Senate will keep the agreement it made with the American people just last summer to reduce spending.

I am not optimistic about being able to change the uncontrolled spending of the current Congress. There are restraining forces (people who were elected in 2010), but there are not enough of them to be effective. Unless we elect people in November who respect the taxpayers’ money, we can expect our country to go bankrupt. We need to vote carefully this year.

 

 

 

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