The Curious Case of Lloyd Chapman

Posted by Tad DeHaven

Last week, I flayed the American Small Business League’s Lloyd Chapman for his absurd claim that legislation introduced by Sen. Richard Burr (R-NC) would close the Small Business Administration (see here). As I expected, Chapman’s response is equally absurd.

In an ASBL press release, Chapman actually threatens to take me to court over my calling him a “conspiracy theorist”:

The next time you call me a conspiracy theorist, be ready to back it up with facts. You just might find yourself in court.

Good luck with that, Lloyd. In the meantime, let’s allow the court of public opinion to decide if the following claim you recently made is the stuff of a conspiracy theorist:

Clearly Republicans like Senator Burr, his supporters and groups such as the CATO Institute are directed like puppets by the defense and aerospace industry.

I can’t speak for Sen. Burr, but Chapman’s assertion that the Cato Institute is being “directed like puppets by the defense and aerospace industry” is ridiculous. Cato’s Downsizing Government website, which I co-edit, lays out the case for cutting the Department of Defense.

My Cato colleagues past and present have consistently advocated for a limited U.S. presence abroad:

Cato’s foreign policy vision is guided by the idea of our national defense and security strategy being appropriate for a constitutional republic, not an empire. Cato’s foreign policy scholars question the presumption that an interventionist foreign policy enhances the security of Americans in the post-Cold War world, and maintain instead that interventionism has consequences, including the formation of countervailing alliances, the proliferation of weapons of mass destruction, and even terrorism. The use of U.S. military force should be limited to those occasions when the territorial integrity, national sovereignty, or liberty of the United States is at risk.

Does that strike the reader as anything the defense and aerospace industry would direct Cato to advocate? Clearly, Chapman is hopelessly lost in a fantasy world of his own creation.

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Christina Romer’s Naïve Keynesianism

Posted by Chris Edwards

President Obama’s former head of the Council of Economic Advisers has taken to the pages of the New York Times to warn us against pursuing “fiscal austerity just now,” particularly not spending cuts.

Christina Romer’s views are Keynesian. She doesn’t use that word, but she is focused on juicing “demand” with optimally-targeted and well-managed government “investments.”

Economics has numerous schools of thought, but Romer’s writing reflects nothing but the most simplistic Keynesian framework. The fact that the huge Keynesian stimulus of recent years that she supported has coincided with the slowest economic recovery since World War II seems to be of little concern to her.

She also doesn’t seem to be interested in how government spending actually works in the real world. She assures us that “government spending on things like basic scientific research, education and infrastructure . . . helps increase future productivity.”

That view has a veneer of economic authenticity, but it leaves many issues unaddressed:

  • Most federal spending is on transfers and consumption, not investment. The debt crisis we face is driven mainly by entitlements, which is consumption spending. Romer’s talk of investment spending is a rhetorical bait-and-switch.
  • Romer doesn’t distinguish between average and marginal spending. If some federal investment spending has created positive net returns, that doesn’t mean that additional spending would. Governments already spend massive amounts on education, for example, so the marginal return from added spending is probably very low.
  • If the government investments that Romer touts are so valuable, then why hasn’t the government done them already? After all, federal, state, and local governments in this country already spend 41 percent of GDP.
  • If science, education, and infrastructure investments have the high returns that Romer seems to think they do, then why does the government need to be involved? Private firms seeking higher profits would be all over such investments.
  • Romer mentions that the “social returns” on some investments might be higher than purely private returns. However, that doesn’t mean that the government should automatically intervene. For one thing, the government suffers from all kinds of management failures and other pathologies.
  • Romer also ignores that the government imposes substantial deadweight losses on the economy when it commandeers the resources it needs for its “investments.”

So my reading assignment for Romer is www.DownsizingGovernment.org so she can get a better understanding of how federal programs actually operate.

And readers interested in all the economics of government spending that Romer doesn’t tell you about can consult Edgar Browning’s excellent book, Stealing From Each Other.

$1 Trillion in Phony Spending Cuts?

Posted by Chris Edwards

In the Washington Post Friday, Ezra Klein partly confirmed what I fear the Republican strategy is for the debt-limit bill—get to the $2 trillion in cuts promised through accounting gimmicks. As I have also noted, Klein says that there is about $1 trillion in budget “savings” ($1.4 trillion with interest) to be found simply in the inflated Congressional Budget Office baseline for Iraq and Afghanistan. Klein says, “I’m told that a big chunk of these savings were included in the debt-ceiling deal” that Rep. Eric Cantor (R-VA) and Sen. Jon Kyl (D-AZ) are negotiating with the Democrats.

Republican leaders have promised that spending cuts in the debt-limit deal must be at least as large as the debt-limit increase, which means $2 trillion if the debt-limit is extended to reach the end of 2012. In a Daily Caller op-ed, I noted that you can find $1 trillion in “savings” from this phony war accounting and another $1 trillion by simply pretending that non-security discretionary will stay flat over the next decade.

There is more evidence that few, if any, real spending cuts are being discussed. One clue is that the media keeps quoting Joe Biden essentially saying that it was easy to reach agreement on the first $1 trillion in cuts.

The other suspicious thing is that the media keeps floating trial balloons for specific tax hikes, but I’ve seen very few trial balloons for specific spending cuts. Friday, the Washington Post story on the debt discussions mentions all kinds of ideas for raising taxes on high earners. A few days ago, news stories revealed that negotiators were talking about changing tax bracket indexing to create annual stealth increases in income taxes. The only item I’ve seen being discussed on the spending side is trimming farm subsidies.

If Republican and Democratic lawmakers were really discussing major spending cuts, then the media would be full of stories mentioning particular changes to entitlement laws to reduce benefits and stories about abolishing programs widely regarded as wasteful, such as community development grants.

I hope I’m wrong, but this is starting to look a lot like the phony $100 billion spending cut deal from earlier this year.

Sean, Rush, Greta, Glenn, Bill: When you get Republican leaders on your shows, get them to promise that they won’t use phony baseline accounting like war costs to reach the $2 trillion in cuts. The budget and the nation desperately need real cuts and real government downsizing.

This Week in Government Failure

Posted by Tad DeHaven

A fierce storm from Mother Nature killed my Internet connection last Friday (I didn’t see any black helicopters, so I’m assuming it was her). Therefore, the following are issues we focused on over the last two weeks at Downsizing the Federal Government:

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FTC Advert: Cut Our Budget!

Posted by Jim Harper

An insert that ran in the Washington Times this week didn’t say directly that the Federal Trade Commission’s budget should be cut. But a few short steps get you there.

The FTC-produced insert—a 16-page, color brochure appearing in a number of papers—is titled: “Living Life Online.” It’s aimed at teaching children how to use the Internet, with articles titled: “Sharing Well With Others” and “Minding Your Manners.” An ad on the back points kids to an FTC Web site about advertising called Admongo.gov, and little smart-phone insets contain factoids like:

DID YOU KNOW? Teens text 50 messages a day on average, five times more than the typical adult (who sends or receives 10 text messages a day).

Well, I have some factoids to share, too:

DID YOU KNOW? The U.S. Constitution provides for a federal government of limited, enumerated powers (and teaching kids about the Internet is not one of them).

Here’s another:

DID YOU KNOW? The federal government has had massive deficit spending in recent years, of $459 billion in FY2008, $1.4 trillion in FY2009, $1.3 trillion in FY2010, and $1.5 trillion in FY2011 (which is a huge damper on economic recovery).

It’s time to make serious budget cuts, and a government agency that seeks to replace parenting with government propagandizing to children is a great opportunity to do that.

Cato’s Downsizing Government project has been making its way through the major agencies, but don’t overlook the little ones. President Obama’s budget called for the FTC to spend $321 million in fiscal 2012. Zeroing that out would save a bunch, not only in direct expenses but in the dead-weight loss to the economy and consumer welfare symbolized by the FTC’s awful “Man Restraining Trade” statues.

John Boehner’s Spending and Debt Promise

Posted by Chris Edwards

House Speaker John Boehner has promised to tie substantial spending cuts to upcoming debt-limit legislation. He said spending cuts will have to be at least as large as the dollar value of the allowed debt increase. Thus, if the legislation increased the legal debt limit by $2 trillion, then Congress would have to cut spending over time by at least $2 trillion.

How can we be sure that spending cuts are real?

There are only two types of solid and tough-to-reverse spending cuts—legislated changes to reduce entitlement benefit levels and complete termination of discretionary programs. Republicans will have to define what time period they are talking about, but let’s assume it’s the standard 10-year budget window.

  • Entitlements: The legislation, for example, could change the indexing formula for initial Social Security benefits from wages to prices. The Congressional Budget Office says that change would reduce spending by $137 billion over 10 years (2012-2021). Other options include raising the retirement age for Social Security and raising deductibles for Medicare.
  • Discretionary: Each session of Congress decides the following year’s discretionary spending. Promises of discretionary spending cuts beyond one year are meaningless. Thus, the various promises in Republican and Democratic budget plans to freeze various parts of discretionary spending through 2021 or reduce spending to 2008 levels over the long term have no weight. Those are not real cuts.

The only way to get real cuts in discretionary spending—cuts that would be tough to reverse out in later years—is complete program termination and repeal of the program’s authorization. That way, policymakers in future years would generally need at least 60 votes in the Senate to reinstate the spending.

Thus, if the GOP promises to save $50 billion over 10 years by reducing the levels of Title 1 grants to the states for K-12 schools, that is not a real and solid cut. However, if they pass a law to repeal Title 1 spending altogether, that cut may well be sustained over the long term.

To make spending cuts even more secure, the GOP should also insist on a statutory cap on overall outlays with a supermajority requirement to break, as I’ve outlined here. For program termination ideas, see www.DownsizingGovernment.org.

In sum, the GOP needs to ensure that spending cuts tied to the debt-limit vote are either:

  1. Changes to entitlement laws to reduce benefit levels, or
  2. Discretionary program terminations.

    Promises to hold down future discretionary spending levels and partial program trims are not real spending cuts.

    This Week in Government Failure

    Posted by Tad DeHaven

    Over at Downsizing the Federal Government, we focused on the following issues this week:

    • A lot of Americans are aware that their tax dollars subsidize cotton farmers. However, it’s unlikely that many Americans are aware that their tax dollars are now supporting cotton farmers in Brazil.
    • Chris Edwards released an updated version of his Plan to Cut Spending and Balance the Federal Budget. No sacred cows are spared. Defense, domestic, and so-called entitlement programs are all cut.
    • The good news in a new Deloitte survey of members of the U.S. business community is that optimism is on the rise. The bad news is that the heavy hand of government is still a dark cloud hovering over the recovery.
    • In her budgets, in her speeches, and in her strategic plans, Secretary of Labor Hilda Solis says that her “vision” for federal action is “Good Jobs for Everyone!”
    • Some good news for once: President Obama’s dream of connecting 80 percent of Americans to a high-speed rail line appears to be dead.

    Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

    This Week in Government Failure

    Posted by Tad DeHaven

    Over at Downsizing the Federal Government, we focused on the following issues this week:

    • Michael Tanner’s new paper is a sobering reminder that it’s the major entitlement programs that are pushing us toward the cliff’s edge.
    • This week the House Republican leadership finally put the Pentagon on the chopping block. However, the cuts suggested by the GOP are pathetic.
    • The federal government engages in a lot of activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.
    • We’re still looking for a convincing argument as to why farmers deserve taxpayer- and consumer-funded special treatment compared with other businesses.
    • Record spending levels…trillion dollar plus deficits…mountainous debt…a weak economy…what, Congress worry?
    • Uncle Sam sticks it to the Easter Bunny.

    Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

    This Week in Government Failure

    Posted by Tad DeHaven

    Over at Downsizing the Federal Government, we focused on the following issues this week:

    • Sen. Rand Paul introduces a practical, common sense budget that recognizes that the federal government’s growth has become unsustainable, and thus a threat to our economic well-being and future living standards.
    • According to the Congressional Budget Office, the president’s latest budget proposal would once again leave “our people” with a “mountain of debt.”
    • It would be nice if the latest example of FAA bungling woke Congress up to the idea of privatizing our nation’s air traffic control system.
    • Instead of tinkering with federal welfare programs, let’s have a public discussion and debate over the fundamental justness and desirability of letting Washington dictate how to meet the needs of the less fortunate.
    • Electric vehicle subsidies: The Obama administration apparently believes that it possesses the unique foresight to optimally plan the economy.

    Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

    This Week in Government Failure

    Posted by Tad DeHaven

    Over at Downsizing the Federal Government, we focused on the following issues this week:

    Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

    This Week in Government Failure

    Posted by Tad DeHaven

    Over at Downsizing the Federal Government, we focused on the following issues this week:

    Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

    This Week in Government Failure

    Posted by Tad DeHaven

    Over at Downsizing Government, we focused on the following issues this week: