Posts Tagged ‘government spending’

Who was America’s Worst President?

January 12, 2013

During the holidays my sister-in-law got me into a heated discussion on how I could possibly have voted for such a flawed, problematic bumbler with weird religious beliefs, rather than the cool, cerebral, eloquent golden boy Obama.

What is remarkable about the recent “fiscal cliff” deal is that while during the earlier negotiations, President Obama offered relatively piddling spending cuts, the Republicans actually wound up getting even less – zero, in fact. And correspondingly, Obama actually wound up getting less in added tax revenue than Republicans had earlier offered.* These tax increases too are piddly – and, astoundingly, are offset by a new round of tax breaks for corporations which Obama – yes, Obama – insisted on.

I just read the local Metroland paper’s lefty columnist, wishing that liberals would “go off script” for a change and – wait for it – stop being apologetic about protecting entitlement spending and socking it to the rich on taxes!

UnknownCongressional Republicans now say the next needed debt ceiling vote is when they’ll really really, yes really, get serious on spending. Actually, that’s not when it will happen. It will be when pigs fly. Or when voters truly want it, which comes to the same thing.

Incidentally, remember how Republicans did extract some modest spending cuts in exchange for averting a government shut-down a couple of years back? Turns out they were snookered. Those spending cuts were a mirage. And what about that $700+ billion Obama was accused, during the campaign, of cutting from Medicare? He didn’t want to give the true rebuttal, which is that those cuts too were a fake – promised reductions in payment rates for hospitals and doctors. Congress keeps pretending to legislate such cuts, and then rescinds them when the powerful medical lobbies scream (and pony up campaign contributions — it’s really an extortion scam by legislators).

Unknown-1Federal debt is roughly 100% of GDP, and growing at over a trillion a year, with no let-up in sight. Medicare is the gorilla. Its cost is on track to double in a decade. In three decades, it’s set to push national debt to an impossible 250% of GDP. Tax to the max on the rich and you’ll barely nibble at the problem. No conceivable level of tax increases on everybody can close this gap.

Obamacare will not reduce health costs for one fundamental reason. Call this Robinson’s law – when government pays the bill, the price does not go down. (Just look at college tuition. The more government pays, through subsidized student loans (often defaulted), the more colleges raise tuition to milk that cow.)

Already, interest payments on the debt consume a sizeable chunk of the federal budget. But that’s with interest rates at historic lows, near zero. America can finance so cheaply today because its bonds are still seen as the world’s safest. But at some point, as our debt spirals out of control, the bond market will have second thoughts. Even interest rates returning to historically typical levels of just a few percentage points could mean a tripling or quadrupling of our interest costs – not only on new debt, but on rolling over all the old debt, all $20 trillion or whatever.

imagesGoodbye Charlie. Hello Greece.

Take your pick of worst presidents – Buchanan, Andrew Johnson, Harding, even George W. Bush. But none left the nation as catastrophic a legacy as Obama’s willingness to let America slide into economic destruction.

* Note that while Democrats made a career of condemning the “Bush tax cuts for the rich,” the smallness of the revenue from repealing those cuts for the 1% shows that the bulk of the benefit actually went to the 99% — whose Bush tax cuts Congressional Democrats have now cheerfully voted to make permanent.

Fiscal Cliff Notes

November 23, 2012

Here’s the deal:

Tax revenues rise. Not rates – revenues. Raising rates is bad because it disincentivizes work, enterprise, and investment, and encourages tax avoidance. But rates needn’t be raised; the money can be gotten by curbing deductions, which are worth over a trillion a year. And instead of fighting a political WWIII over which deductions to kill, the better solution is to cap the dollar amount of deductions any taxpayer can take.

Romney proposed this during the campaign. It would mostly hit the rich, especially the very rich. Now, it’s true that (contrary to “Buffett rule” hogwash) the rich already pay by far the lion’s share of all income taxes; they should not be seen as a bottomless well of cash for redistribution; nor should their wealth be regarded as somehow illegitimate, deserving more taxation punitively. All that said, it’s my judgment (as a fairly rich Republican) that given the country’s fiscal situation, richer people should pay somewhat more.

And capping deductions is a particularly fit way to do that. The mortgage interest deduction, for example, encourages over-large (and multiple) houses, by forcing other taxpayers to subsidize them. The charity deduction likewise makes other taxpayers subsidize the pet causes and vanity of rich people. Capping deductions would curb these undesirable inequities while still allowing the middle class to benefit reasonably from these deductions and others.

The President is probably right that a reasonable deduction cap can’t produce as much added revenue as he advocates. But he wants too much; that should be seen as an opening bid to be bargained down. Other countries that have tackled similar budget imbalances have done it with a heavy preponderance of spending cuts over tax increases, which is better for economic health.

That our problem really lies with spending is obvious because taxes high enough to close the gap would be far too high for the economy to bear. Indeed, you could never actually raise revenues that much, because it’s self-defeating — the more you tax, the less taxpaying economic activity you have.

What to cut? Defense. Yes. A lot. We need to maintain geostrategic muscle, but the truth is that a huge part of our over-bloated defense budget contributes nothing toward our actual security. A great part of it is political patronage, keeping Congressmen sweet. Unfortunately, because whenever billions are at stake, you can’t banish politics, so it will be easier for the Pentagon to cut meat than fat. But we must try.

Social programs: benefits for the poor and disadvantaged should not be cut. I’ll say it again: we are a rich country and we can, and should, take care of the less fortunate. That’s actually only a small part of government’s social spending. It’s the much greater welfare for the affluent that must be cut.

The big pig here is Medicare. Romney also actually said that benefits for wealthier people will have to be trimmed. Yes, bless his heart, he did say it. But for social spending in general, here again you can’t get politics out of it, meaning it’s a lot easier to screw the poor than the better-off, because the latter carry so much more political weight. Yet again we must try. “Means testing” must become the watchword for all these programs – i.e., only the needy should be “entitled.” That’s the only fair way to achieve swingeing reductions; probably the only way at all.

Another point: no phony cuts, or phony pledges of future cuts. Congress is good at this game: legislating draconian cuts in, for example, Medicare reimbursement rates for doctors and hospitals, that (wink, wink) will never be allowed to actually take effect. (That was how Obamacare was seemingly transformed from a huge expense to a money-saver.)

So there’s the deal. The only possible deal; the deal that has to happen. But Obama flubbed it before. I voted against him mainly because I didn’t believe him capable of achieving it now. Let’s hope I was wrong.