RTD: ‘Insurance Exchange: Just Say No’

Posted by Michael F. Cannon

Regarding legislation to create an ObamaCare “Exchange” in Virginia, the Richmond Times-Dispatch explains:

Republicans at the General Assembly are falling prey to the fallacy of the false alternative…

[H]ere are the real options facing Virginia: (a) federal bureaucrats determine the form of our exchange, or (b) federal bureaucrats determine the form of our exchange. There is no (c)…

Running a health-insurance exchange would cost a lot of money — money Virginia does not have. Since Washington will dictate how it will be run, Washington should pick up the tab.

Senator Schumer’s Feeble Grasp of Fiscal History

Posted by Daniel J. Mitchell

I’m not a big fan of Senator Schumer of New York. As I’ve noted before, he’s a doctrinaire statist who wants the government to have control over just about every aspect of our lives.

But that describes a lot of people in Washington. I guess what also bothers me is his willingness to say anything, regardless of how divorced it is from reality, to advance his short-run political agenda (sort of a Democrat version of Karl Rove).

For example, here’s part of what the Empire State  Senator recently had to say about fiscal policy, as reported by a Washington Post columnist.

Schumer said, “…Republicans came in and said, `We can solve your problem by shrinking government’…We tried their theory…The American people resent government paralysis, but most of them would say that government is doing too little to help them, not too much.”

What’s remarkable about this statement is that it’s so inaccurate that we can’t even decipher what he means. I’ve come up with three possible interpretations of what he might have been trying to say, and they’re all wrong.

1. He’s referring to GOP actions this year. This interpretation might make partial sense because the House Republicans have made a few semi-serious efforts to shrink government, but how can Schumer say “we tried their theory” when every Republican initiative was blocked by the Senate and Obama?

The Ryan budget died of malign neglect since the Senate didn’t even bother to produce a budget, and Republican efforts on the 2011 spending levels and the debt limit also were stymied, resulting at best in kiss-your-sister deals.

2. He’s referring to GOP actions during the Bush Administration. This interpretation might make some sense because the GOP did control the House, the Senate, and the Presidency, but does Schumer understand that “shrinking government” was not part of the Republican agenda during those years?

But don’t believe me. The numbers from the Historical Tables of the Budget unambiguously show that the federal budget almost doubled during the Bush years because of huge increases in domestic spending.

3. He’s referring to GOP actions during the 1990s. This interpretation actually does make sense because the burden of the public sector did shrink as a share of GDP during the Clinton years when Republicans controlled Congress, so it would be accurate to say “we tried their theory.”

But what was so bad about the era of spending restraint during the 1990s? The economy expanded and people were better off, in large part because, to quote Schumer, government was “doing too little to help them.”

Heck, the Clinton-GOP Congress years were so good that I even offered, during a debate on national TV, to go back to Clinton’s higher tax rates if it meant we also could undo all the reckless spending of the Bush-Obama years.

This doesn’t mean I’ve stopped caring about low marginal tax rates. It just means that I understand that the ultimate tax is the burden of the public sector. This video explains more, in case you’re wondering why I’d like to go back to the 1990s.

It goes without saying (but I’ll say it anyhow) that it would be even better to combine Clinton’s spending levels with Reagan’s tax rates.

Supercommittee Tax Fight Is About Increasing Spending, not Reducing Deficits

Posted by Daniel J. Mitchell

Some people have asked why I’m so agitated about the possibility that Republicans may acquiesce to tax increases as part of the Supercommittee negotiations.

Rather than get into a lengthy discourse about the proper role of the federal government or an analysis of how the Bush-Obama spending binge worsened America’s fiscal situation, I think this chart from a previous post says it all.

Republicans are considering a surrender on taxes because they are afraid that a deadlock will lead to a sequester, which would mean automatic budget savings. And the sequester, according to these politicians, would “cut” the budget too severely.

But as the chart illustrates, that is utter nonsense.

There are only budget cuts if you use dishonest Washington budget math, which magically turns spending increases into spending cuts simply because the burden of government isn’t expanding even faster.

If we use honest math, we can see what this debate is really about. Should we raise taxes so that government spending can grow by more than $2 trillion over the next 10 years?

Or should we have a sequester so that the burden of federal spending climbs by “only” $2 trillion?

The fact that this is even an issue tells us a lot about whether the GOP has purged itself of the big-government virus of the Bush years.

A few Republicans say that a sellout on tax hikes is necessary to protect the defense budget from being gutted, but this post shows that defense spending will climb by about $100 billion over the next 10 years under a sequester. And that doesn’t even count all the supplemental funding bills that doubtlessly will be enacted.

In other words, anyone who says we need to raise taxes instead of taking a sequester is really saying that we need to expand the burden of government spending.

So even though Ronald Reagan and Calvin Coolidge are two of my heroes, now you know why I don’t consider myself a Republican.

Sequestration Is a Small Step in Right Direction, Not Something to Be Feared

Posted by Daniel J. Mitchell

I have sometimes wondered whether it is accurate to say that Republicans are the “Stupid Party.”

We’ll soon know the answer to that question. As part of the debt limit agreement, the politicians agreed to set up a “Supercommittee” comprised of six Republicans and six Democrats that was responsible for producing at least $1.2 trillion of supposed deficit reduction.

But the Democrats appointed a group of hardcore leftists to the Supercommittee, which means that it is virtually impossible to get the necessary seven votes for a good agreement. Indeed, the more relevant question is whether one or more of the Republicans surrenders to a big tax hike.

Fortunately, there is an alternative. The law says that there will be automatic spending reductions if the Supercommittee does not reach an agreement. The political establishment in Washington thinks that this outcome—known as sequestration—would be horrible.

They tell as that a sequester would mean “savage” and “draconian” budget cuts. The only “responsible” approach, we are told, is to go along with a tax increase.

This is hogwash. The automatic spending cuts are only “cuts” using Washington’s dishonest budget math. Here’s a chart showing how much spending will grow over the next 10 years, and the relatively tiny reduction in budgetary growth that will be caused if there is a sequester.

We’ve actually been down this path before. There was a small sequester back in the mid-1980s, shortly after the Gramm-Rudman-Hollings law was enacted. There was much wailing and gnashing of teeth, but the sequestration helped restrain the growth of spending and helped bring about a record amount of deficit reduction in 1987.

There was a similar (unsuccessful) fight in 1989. Here’s what then-Senator Bob Packwood of Oregon wrote in 1989.

…the sequester has become the focus of partisan debate . Each side accuses the other of being responsible for “deep and arbitrary” budget cuts . Some legislators say we should do whatever it takes to cancel the sequester, even if it means higher taxes. While a sequester is certainly not the ideal way to resolve this year’s budget dispute, there are reasons to believe that the fiscal discipline of a sequester is the medicine we need to cure the budget process. For all its drawbacks, a sequester is real deficit reduction . Instead of budget gimmicks, accounting tricks, phony cuts, and “revenue enhancements,” a sequester would reduce spending levels by a fixed percentage in eligible spending programs . In other words, unlike most deficit reduction packages, sequestration would actually reduce the deficit.

The only argument against a sequester, at least among conservatives, is that a sequester would impose too much of a burden on the defense budget. But I’ve already explained in this post that the defense budget will climb by about $100 billion under sequestration.

I don’t know whether Republicans are the stupid party, but I know they will be very stupid if they don’t take the sequester and declare victory.

Question for Candidates: Yes or No to a National ID?

Posted by Jim Harper

Back in March of this year, with a May deadline for REAL ID compliance looming, the U.S. Department of Homeland Security quietly kicked the can down the road. It once again changed the date on which states would have to implement federal standards for their drivers’ licenses and IDs.

The original deadline was three years after the law’s May 2005 passage. It has now been more than five years and there’s no REAL ID thanks to resistance from states around the country. Congress has not moved to repeal this failed law. In fact, it still appropriates money to REAL ID in the Homeland Security appropriations bill.

The DHS has now set a new compliance deadline at January 15, 2013. That’s five days before the next presidential term begins on January 20, 2013. Indeed, the period between the election and the inauguration is when the question of whether to enforce REAL ID against the states will be decided.

Which puts a question before the Republican candidates vying for the highest political office. Where do you stand on the national ID issue? If your Transportation Security Administration is turning fliers away from airports because their states aren’t going along with this federal surveillance mandate, are you going to stand by the feds or stand by the states and people who say no to having a national ID?

The question is a nice bellwether for Republicans on both federalism and essential American liberty.

Will Republicans Choose Sequester Savings or a Supercommittee Surrender?

Posted by Daniel J. Mitchell

The budget fights this year began with the “shutdown” battle, followed by the Ryan budget and then the debt limit. These fights have mostly led to uninspiring kiss-your-sister outcomes, which is hardly surprising given divided government.

Now the crowd in DC is squabbling over Obama’s latest stimulus/tax-the-rich scheme, though that’s really more of a test run by the White House to determine whether class warfare will be an effective theme for  the 2012 campaign.

The real budget fight, the one we should be closely monitoring, is what will happen with the so-called Supercommittee.

To refresh your memory, this is the 12-member entity created as part of the debt limit legislation. Split evenly between Democrats and Republicans, the Supercommittee is supposed to recommend $1.2 trillion-$1.5 trillion of deficit reduction over the next 10 years. Assuming, of course, that 7 out of the 12 members can agree on anything.

There are two critical things to understand about the Supercommittee.

With these points in mind, it doesn’t take a genius to realize that the Supercommittee is designed — at least from the perspective of the left — to seduce gullible Republicans into going along with a tax hike.

Read the rest of this post »

Republicans Employ Education Weapons, Too

Posted by Neal McCluskey

A couple of days ago I blasted President Obama for, in repugnant tradition, using “education” as a political weapon, invoking it to scare Americans into demanding increased taxes for “the rich.” House Speaker John Boehner, thankfully, did not abuse education similarly in his rebuttal. But his proposal for raising the debt ceiling illustrates just how weak the GOP’s commitment is to returning the federal government to its constitutional — and affordable — size. And I say this not because of the relative puniness of his proposed cuts, but what the proposal would do in education, the only area it specifically targets: increase funding for Pell Grants.

Now, I know what many people will say to this: Pell is a de facto entitlement; it has a big shortfall; and Boehner’s bill would offset the Pell increase by eliminating federal student loan repayment incentives and grad student interest subsidies. And do you just hate education, McCluskey, or poor people?

On the first points, yes to all of those, and the CBO even projects that over ten years Boehner’s bill would achieve some savings from his student-aid moves. But ten years is a long time, during which a lot of things — especially spending increases – could happen. And the seemingly forgotten fact of the matter is that we have a $14.3 trillion debt and are sooner or later going to need big, tough cuts. And though Pell Grants sound so nice – they give poor kids money to go to college! – they should be eliminated for several reasons well beyond  frightening fiscal reality:

  1. They are unconstitutional: None of the Federal government’s enumerated — and only – powers say anything about paying for college.
  2. They are inflationary: Maybe Pell Grants, because they target low-income students better than federal loans and tax-based aid, aren’t the biggest drivers of tuition inflation, but research suggests they are a driver, especially at private institutions. There is also good reason to believe that schools target their own aid dollars to other, better-off students when they can use taxpayer dough for low-income ones.
  3. They take money from real human beings — taxpayers — to make others rich: Okay, maybe not rich, but as higher ed advocates will quickly tell you, on average a person with a college degree will make roughly $1 million more over her lifetime than someone without one. There’s a lot of play in that number, but the point is generally correct: A degree helps to significantly increase earnings. How, then – even absent a mind-blowingly colossal debt – can we justify taking money from taxpayers, many of whom did not go to college, and just giving it away to others so that they can get a lot wealthier? At the very least Pell should be made into a federally backed loan program — recipients should at least have to return taxpayers’ “investment” – which Boehner could have put into his bill.

Republicans might not be as quick as Democrats to rattle education-tipped missiles, but they’re fully committed to keeping them in their arsenal.

Boehner Plan Doesn’t Cut Spending

Posted by Chris Edwards

House Speaker John Boehner is scrambling to revise his budget plan after the CBO found that it would only cut spending by $850 billion, not the $1.2 trillion promised.

However, the Boehner plan doesn’t actually cut spending at all. The chart shows the discretionary spending caps in the Boehner plan. Spending increases every year—from $1.043 trillion in 2012 to $1.234 trillion in 2021. (This category of spending excludes the costs of wars in Iraq and Afghanistan).

The “cuts” in the Boehner plan are only cuts from the CBO baseline, which is an imaginary path of future spending designed as a planning tool for Congress. Boehner can propose to spend any amount in any future year he wants, and in this plan he choose to have a steadily rising spending path.

The Boehner plan also doesn’t cut spending in a more fundamental way. It doesn’t lay out any particular programs or agencies to terminate. I’m in favor of spending caps as a secondary enforcement mechanism, but actual cuts have to come first. A caps-only plan like Boehner’s just kicks the can down the road. At best, it simply nudges future legislators to actually cut something specific.

Why doesn’t the House leadership propose real cuts? They’ve certainly got the resources and expertise to do the job. A single senator — Tom Coburn — produced a 620-page report last week detailing hundreds of programs to cut and terminate. Coburn and his staff read through thousands of articles and reports on the real-world performance of federal programs, and they made a good case for each particular cut they proposed.

Republican leaders can’t hide behind baselines forever. If they really want a smaller government as they keep claiming, they’ve got to target particular programs and agencies and begin a national debate about terminating them.

Health Care Entitlements Are the Real Debt Bomb

Posted by Michael F. Cannon

I’m a few days behind on this, but over at The Corner Yuval Levin has written an important post about how health care entitlements are the real cause of the debt crisis facing the federal government. Using Congressional Budget Office projections, Levin creates this magnificent chart, which I plan to steal over and over again:

If Republicans want to conquer the federal debt, they need to embrace health policy like they embrace tax cuts.

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.

    Will Republicans Come to Grips With Immigration?

    Posted by Roger Pilon

    Today POLITICO Arena asks:

    Given President Obama’s speech today in El Paso, Texas, is immigration a winning issue for Democrats?

    My response:

    Immigration will be a winning issue for Democrats only if Republicans allow it, which they’re quite capable of doing. Where’s the anti-immigrant part of the Republican base going to go — to the Democrats? Hardly. With so much else at stake, will they sit out the 2012 elections, over this one issue? Please.

    If Republicans play it right, this can be a winner. No one seriously believes that the estimated 10 to 12 million illegal immigrants in the country, most working, can or should be sent back to their countries of origin. So the main issues are paving the way to legalization, better securing the borders, and providing for a rational guest worker program. If Republicans got behind a package like that, immigration would cease to be a Democratic issue. This isn’t rocket science.

    Thursday Links

    Posted by George Scoville