SAFRA-ficed?
Here’s a quick, preliminary reaction to the higher-education portion of the mammoth health-care reconciliation bill. I could find I’m wrong about some stuff as I delve more deeply into the bill’s language, but it appears that much of the out-of-control spending that would have occurred under the odious Student Aid and Fiscal Responsibility Act has been axed under reconciliation. SAFRA, it appears, has been sacrificed, though to bring to life an even more destructive demon.
Unfortunately, some of SAFRA survived. While a great deal of the spending has been stripped out, reconciliation would still tighten the federal government’s already iron grip on college financing. It would also plow billions more into Pell grants despite decades of evidnece that schools just eat such increases by raising prices. And don’t be fooled by the deceptive accounting in which administrative costs for guaranteed lending are counted as mandatory, but for direct lending as discretionary. When one fully accounts for the costs of going to all direct lending the estimated savings drop from $19.4 billion to $14.4 billion between 2010 and 2019, a sizable chunk of change for a nation so in debt it needs to save every penny it can.
Filed under: Education and Child Policy; General; Health, Welfare & Entitlements
David Goldhill: “A Democrat’s Case For ‘No’”
David Goldhill has done it again.
You may recall his article, “How American Health Care Killed My Father,” from the September 2009 issue of The Atlantic.
Now, at HuffingtonPost, he comments on the health care legislation that may soon face a final vote (of some sort) in the House:
[C]ontinuing our Party’s almost unquestioned conflation of health insurance with health care, the central feature of the proposed “reform” is further extension of our flawed insurance-based system…[D]espite the Administration’s recent heated rhetoric, most of the entrenched health industry interests are quietly or openly in favor of this bill. Should the bill become law, I suspect we will look back at it as an industry bailout…
How…can Democrats in the depths of a recession support a massive tax increase on middle-class job creation…? How…could we justify diverting even more of middle class income to support our broken system of care, further starving families of funds for all their other needs? Most uninsured Americans lack insurance only temporarily; how many of them would trade lesser lifetime job prospects and lower disposable income for the short-term retention of health insurance?…
If the legislation had any real prospect of controlling health care spending, would the pharmaceutical industry be funding the “yes” campaign?
As a former Democrat who hung door knockers for Michael Dukakis in 1988, I know the heavy heart with which he writes. Read the whole thing.
Watch the video to hear Goldhill’s story:
Just Give Us the Data! Transparency and Change
Yesterday my government transparency site WashingtonWatch.com rolled out a transparency campaign (along with many collaborators) called “Just Give Us the Earmark Data!”
Visitors to Earmarkdata.org are encouraged there to sign a petition asking Congress to publish data about earmarks in formats that are useful for public oversight. Developers can also participate in perfecting the data schema that will capture the “earmarks ecosystem” in the best possible way.
After a surprisingly successful effort at “crowdsourcing” earmark data last summer, the push for earmark transparency gained steam in January, when President Obama spoke about it in his State of the Union speech. A White House “fact sheet” issued the same day called for a “bipartisan, state-of-the-art disclosure database that allows Americans to examine the details of every proposed earmark.”
(We were going to ask for good earmark data anyway, but this gave the idea currency in a lot of quarters.)
The focus on earmarks and transparency got the political calculators whirring on Capitol Hill. “Is earmarking worth doing considering the political heat it is going to draw?”
One set of actors came up with their answer last week. House Democrats announced that they would restrict their earmarking only to non-profits. They want for-profit businesses seeking taxpayer money to go through conventional channels like competitive bidding.
The next day, House Republicans came back over the top of Democrats’ political bet. They announced that they would forgo earmarking entirely.
That’s House Democrats and House Republicans. Don’t assume that earmarking is going to go away. A good-government bidding war is on, though—spurred by the political challenge of transparency.
A couple of observations, least important first:
- If it wasn’t obvious before, this illustrates that politicians are very capable political risk balancers. Indeed, surfing political waves is arguably the primary task of elected officials, most especially at the national level, and without this skill, they are goners. (That’s why looking for a wellspring of principle in an elected official usually gets you swamped in disappointment.)
I’ve had a number of friendly cynics suggest that politicians wouldn’t mind earmark transparency—bringing home the bacon brings in the votes! This appears in general not to be true. There may still be earmarking from a hard core group who do perceive overall political benefits from it, but they’ll have to buck their parties, who do not.
(Alas, I can’t say “I told you so!” because I tended to just grin and say “Maybe you’re right!” For future reference, I agree with the tendency, but doubt the direct outcome described in the adage attributed to Benjamin Franklin, “When the people find that they can vote themselves money, that will herald the end of the republic.” Thankfully, it’s more complicated than that.)
- Notable: Elected officials’ political tuning is not just reactive. The anticipation of earmark transparency is what started this bidding war.This is especially worth noting with respect to President Obama’s “Sunlight Before Signing” promise, which I most recently reported on here. Skeptics have said that President Obama’s promise to post bills he receives from Congress online for five days before making them law wouldn’t make any difference because a bill that Congress has sent down Pennsylvania Avenue is already final. But a parochial amendment hanging out there for five days threatens to draw political discredit on its author and supporters—and their party. Sunlight Before Signing was a meaningful promise.
(SBS has two advantages over the creditable “Read the Bill” proposal to hold bills 72 hours before a vote in Congress: 1) SBS takes advantage of interbranch rivalry, and 2) it was a campaign promise of the president!)
- Broadly, this episode illustrates how transparency can bring welcome change. It’s correct to observe that earmarks represent only a tiny part of overall spending. But applying parallel transparency efforts to other parts of the legislative and regulatory processes are likely to elicit similar good behavior from government officials. There are manifold directions to go with government transparency. Each in its way stands to create political dynamics more congenial to good government and—more importantly—to liberty.
Filed under: Government and Politics; Telecom, Internet & Information Policy
Obama’s Education Proposal Still a Bottomless Bag
This morning the Obama Administration officially released its proposal for reauthorizing the Elementary and Secondary Education Act (aka, No Child Left Behind). The proposal is a mixed bag, and still one with a gaping hole in the bottom.
Among some generally positive things, the proposal would eliminate NCLB’s ridiculous annual-yearly-progress and “proficiency” requirements, which have driven states to constantly change standards and tests to avoid having to help students achieve real proficiency. It would also end many of the myriad, wasteful categorical programs that infest the ESEA, though it’s a pipedream to think members of Congress will actually give up all of their pet, vote-buying programs.
On the negative side of the register, the proposed reauthorization would force all states to either sign onto national mathematics and language-arts standards, or get a state college to certify their standards as “college and career ready.” It would also set a goal of all students being college and career ready by 2020. But setting a single, national standard makes no logical sense because all kids have different needs and abilities; no one curriculum will ever optimally serve but a tiny minority of students.
Also, on the (VERY) negative side of the register, Obama’s budget proposal would increase ESEA spending by $3 billion from last year — for a total of $28.1 billion — to pay for all of the ESEA reauthorization’s promises of incentives and rewards. That’s $3 billion more that the utterly irresponsible spenders in Washington simply do not have, and that would do nothing to improve outcomes.
Even if this proposal were loaded with nothing but smart, tough ideas, it would ultimately fail for the same reason that top-down control of government schools has failed for decades. Teachers, administrators, and education bureaucrats make their livelihoods from public schooling, and hence spend more time and money on education lobbying and politicking than anyone else. That makes them by far the most powerful forces in public schooling, and what they want for themselves is what we’d all want in their place if we could get it: lots of money and no accountability to anyone.
As long as such asymmetrical power distribution is the case — and it’s inherent to “democratic” control of education — no proposal, no matter how initially tough, is likely to make any long-term improvements. As the matrix below lays out, no matter what combination of standards and accountability you have, politics will eventually lead to poor outcomes. It’s a major reason that the history of government schooling is strewn with “get-tough” laws that ultimately spend lots of money but produce no meaningful improvements, and it’s a powerful argument for the feds complying with the Constitution and getting out of education.
When all is said and done, you can throw all the great things you want into the federal education bag, but as long as politicians are making the decisions you’ll always come up empty.
They Spend WHAT? The Real Cost of Public Schools
Although public schools are usually the biggest item in state and local budgets, spending figures provided by public school officials and reported in the media often leave out major costs of education, and understate what is actually spent.
In a new study, Cato’s Adam B. Schaeffer reviews district budgets and state records for the nation’s five largest metro areas and the District of Columbia. Schaeffer finds that, on average, per-pupil spending in these areas is 44 percent higher than officially reported.
In this new video, Schaeffer explains the whole thing in under three minutes:
Our Little Scholars
As I mentioned a few days ago, today is the “Day of Action” in California — and, it turns out, elsewhere – when college students and just general protectors of public schooling are supposed to take to the streets and demand that taxpayers fork over not one less red cent to students and schools.
Ironically, the mindless, property-destroying, absurd goings-on that have surrounded past such demonstrations in Cali — and are already in evidence today – brilliantly illustrate one major reason we need to cut higher education subsidies, not increase them. Clearly, too many college students have both far too much time on their hands, and far too little self control, to justify spending hard-earned taxpayer dough on their “education.”
But at least the ostensible motivation behind recreational rioting in California has been slightly related to a principle — namely, the principle that taxpayers owe students stuff. That’s actually a better excuse for taking to the streets than what set off last night’s student riots in College Park, Maryland: a victory in a basketball game. (To be fair, University of Maryland students also riot after losses – they’re no fair weather fans!)
And to think — one of the reasons we’re supposed to support massive subsidies for students is that it serves the common good. Go figure.
Filed under: Education and Child Policy; Tax and Budget Policy
Ray LaHood as Santa Claus
U.S. News & World Report’s columnist Paul Bedard reports that Transportation secretary Ray LaHood told him that it’s fun playing Santa Claus to states and cities around the nation.
So let’s take a look at some recent examples of DOT gift-giving with federal taxpayers’ money:
- DOT’s Federal Highway Administration helped restore an old brewery in Petosi, Wisconsin with a $450,000 gift. That should make taxpayers want to drink.
- DOT is sending $116,000 to Calaveras County, California to restore a train that operated in the 1920s.
- Dolgeville, New York intends to use DOT stimulus money to repair sidewalks even though the village acknowledges that the new sidewalks will have to be torn up and replaced again due to impending water and sewage line upgrades. Keynes would be particularly proud of this one. Last year the city received a $1 million gift from DOT for the “installation of period street lights, trees, accent pavers, street furniture and sidewalk improvements” on the city’s Main Street.
- Cascade County, Montana plans on spending $75,000 of DOT money on the Montana Museum of Railroad History.
- The Michigan Department of Transportation plans on spending $5 million in federal DOT money on a bunch of projects that are of unquestionable national importance: cobblestone streets in Grand Rapids; exhibits at the Detroit Science Center; rehabilitating the historic Quincy and Torch Lake Railroad Engine House in the Upper Peninsula; a bridge for bicyclists and pedestrians over the Clinton River in Utica and bike racks at several locations in Wayne, Oakland, and Macomb counties.
- Boone County Regional Airport in Arkansas plans on using $50,000 in DOT money to market SeaPort Airlines. Fly, fly away taxpayer money.
These projects might be worthwhile, but they should be paid for by the local interests who can best judge their worth.
In his 1932 book, Congress as Santa Claus, constitutional scholar Charles Warren offered a prescient warning on the dangers of federal subsidization of state and local affairs:
The continuance of this practice of shifting to the National Government responsibility for payment for matters which formerly were dealt with by individual initiative, by community cooperation, by voluntary organizations, or by local or State governments – the continuance of this practice of making drafts on the National Treasury to carry out purposes not within the enumerated or implied powers of the National Government will inevitably have two results.
So far as these Government donations consist of direct appropriations for private or local interests, they will deaden and finally destroy the eagerness or willingness of State Governments and local communities to pay for their own needs. So far as they take the shape of the so-called Federal Aid laws for local projects to be matched by local appropriations, they will have ‘a tendency to induce excessive expenditures by State and municipal governments, with top-heavy bond issues and oppressive local taxation.’
I doubt in Warren’s worst nightmares could he have envisioned the examples of DOT spending above, let alone the existence of a $90 billion federal Department of Transportation.
Before Administering the Lethal Injection, Dr. Obama Offers to Sterilize the Needle
In a letter to congressional leaders, President Obama wrote of his openness to including Republican proposals in his health care legislation.
Dropping a few Republican ideas into a government takeover of health care is like sterilizing the needle before a lethal injection: a nice thought, but the ultimate outcome is the same.
- Two of the four Republican ideas – federal grants to states that adopt medical malpractice liability reforms, and ratcheting upward Medicare’s physician-price controls – would increase government spending.
- The president’s health savings accounts (HSAs) proposal would merely loosen the noose around consumer-directed health plans.
- Undercover investigations in Medicare and Medicaid are likely to be as unsuccessful as past efforts to combat fraud.
This is not bipartisanship. President Obama is creating the illusion of bipartisanship while taking the most partisan route possible: forcing his legislation through Congress via reconciliation.
(Cross-posted at National Journal’s Health Care Arena.)
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Federal Aid to States Is Too Popular
The Economist’s Free Exchange blog asks: “[W]hy isn’t federal aid to states more popular, and popular enough to get through Congress, given that nearly every American lives in one?”
I would ask the blog’s author: How much more popular would he like it to be? As the following charts show, federal aid to state and local governments has catapulted to record levels.
As I’ve discussed elsewhere, Medicaid has been driving the growth in federal subsidies to state and local governments. But other areas, such as education, income security, and transportation, have also seen substantial increases.
Subsidizing state and local government is quite popular with federal, state, and local policymakers and associated special interests. It’s doubtful the average citizen is aware that so much of their state’s spending is derived from their federal tax dollars. However, I suspect that most folks (who aren’t on the take) would frown upon the concept of sending money to Washington only to have politicians send it back to the states via the federal bureaucracy. While there may be popular support for many of the state programs funded with federal dollars, citizens need to understand that federal subsidization of state and local government has fueled unhealthy government growth at all levels.
Yeeow? Ayipioeeay?
And when we say
Yeeow! Ayipioeeay!
We’re only sayin’
You’re doin’ fine, Oklahoma!
Oklahoma O.K. — Oscar Hammerstein, Oklahoma
And when you’re not doing fine?
I was asked recently by Brandon Dutcher of the Oklahoma Council of Public Affairs to investigate the relationship between spending and student achievement in his state, and to chart the results as I’ve done for U.S. school spending and student achievement. Here it is:
For reasons I’ve never understood, the NAEP test results for students at the end of high-school have never been broken down by state–they’re only reported nationwide–so for the achievement measure I used the ACT. Oklahoma’s participation rate in the ACT is high (between the mid 60s and low 70s), hasn’t fluctuated wildly over time, and is not significantly correlated with its actual scores (I ran a regression to find out), so it’s a reasonable measure. I’ve only carried it back to 1990 because the ACT was redesigned in that year, making the scores discontinuous.
When they see the chart, maybe Oklahoma taxpayers can say: “Owwww! AiYaiYai!”
A Value-Added Tax Is Not the Answer…Unless the Question Is How to Finance Bigger Government
While admitting that spending restraint is the ideal approach, Tyler Cowen of Marginal Revolution asks whether a value-added tax (VAT) might be the most desirable of all realistic options for dealing with an unsustainable budget situation.
Read his post for yourself, but I think a fair summary is that he is basically saying that a) there will be a crisis if we don’t do something about future deficits, b) a crisis will result in very bad policy, and c) if we support a VAT now, we will at least be able to extract concessions from the other side.
I have no idea whether there will be a future crisis, but I think the rest of Tyler’s argument is wrong.
But before explaining my position, let’s start by stating what I assume to be our mutual objective, which is to control the size of government. We all agree that there is a problem because government is too big now, and it is projected to get even bigger because of the built-in growth of entitlement programs. One symptom of growing government is deficits, which are very large today and will be even bigger in the near future as more and more baby boomers retire and push up costs for Social Security, Medicare, and Medicaid.
Filed under: Government and Politics; Tax and Budget Policy
A Time for Less Government?
The public is unhappy with government. How could it be otherwise, given the mess our governors have made? Reports the Washington Post:
Two-thirds of Americans are “dissatisfied” or downright “angry” about the way the federal government is working, according to a new Washington Post-ABC News poll. On average, the public estimates that 53 cents of every tax dollar they send to Washington is “wasted.”
Despite the disapproval of government, few Americans say they know much about the “tea party” movement, which emerged last year and attracted voters angry at a government they thought was spending recklessly and overstepping its constitutional powers. And the new poll shows that the political standing of former Republican vice presidential nominee Sarah Palin, who was the keynote speaker last week at the first National Tea Party Convention, has deteriorated significantly.
The opening is clear: Public dissatisfaction with how Washington operates is at its highest level in Post-ABC polling in more than a decade — since the months after the Republican-led government shutdown in 1996 — and negative ratings of the two major parties hover near record highs.
Surely this is a moment for a true political entrepreneur, someone who believes in liberty–across the board–willing to challenge Washington’s bipartisan consensus that government should grow ever bigger and more expensive. Someone who opposes expensive, and often deadly, social engineering at home and abroad. Someone willing to simply leave the American people alone, rather than determined to conscript them into yet another annoying, intrusive, and expensive national crusade. Someone willing to back up his or her rhetoric about individual liberty with action.
Filed under: General; Government and Politics; Political Philosophy
Criminalizing Politics
Steve Poizner, the California insurance commissioner who is seeking the Republican nomination for governor, created a stir this week by charging opponent Meg Whitman’s campaign with attempting to coerce him out of the race. He said he had reported her campaign to state and federal law enforcement authorities.
What did Whitman actually do? Well, Poizner said that Whitman consultant Mike Murphy had contacted a Poizner staffer by phone and email to urge him to withdraw from the race. The email, released by Poizner, said: “I hate the idea of each of us spending $20 million beating on the other in the primary, only to have a badly damaged nominee. And we can spend $40 million tearing up Steve if we must; bad for him, bad for us, and a crazy waste to tear up a guy with great future statewide potential.” In the email, Murphy went on to suggest that if Poizner dropped out of the race before the June 8 vote, Whitman and her team would immediately get behind him for a 2012 challenge to Sen. Dianne Feinstein.
Poizner says that’s not only “strong-arm tactics” but possibly an illegal inducement to get him to withdraw. But isn’t this really just politics as usual? Don’t candidates as a matter of course say “support me this time, and I’ll support you next time” or “run for a different office and I’ll endorse you”? Presidential candidates, or their campaign managers, are often said to have promised the vice presidency to more than one rival to clear the field.
The point about spending $40 million of Republican money tearing up fellow Republicans is a pretty common complaint about party primaries. In fact, National Review correspondent John J. Miller raised just that concern about the Rick Perry-Kay Bailey Hutchison showdown in Texas.
Even during the Rod Blagojevich flap over “selling” a Senate seat, the always-provocative Jack Shafer and Jim Harper both asked, Isn’t this what politicians do? They make deals — including deals like “I’ll support your campaign if you’ll make my buddy (or me) a Cabinet secretary.” No doubt the promises are often worthless, but they still get made. Blagojevich and Murphy have reminded pols all over the country that such deals are better made in person, not via email or telephone.
Politics ain’t beanbag, Mr. Poizner. Accept the deal or reject it. But “let’s clear the field and spend our money fighting the other party” is pretty standard politics. And a darn sight better than another standard political practice, using the taxpayers’ money to bribe the voters to support you.
Obama Small Business Lending Fund Likely A Bust
President Obama has announced his intention to use $30 billion in TARP funds to create a new small business lending fund. In all likelihood, this is $30 billion the taxpayers will never see returned.
First of all, the problem facing small business, outside of the massive uncertainty being created by Washington, is one of credit availability, not cost. For those who can get credit, its quite cheap, arguably too cheap. So if the president doesn’t intend to lower the cost of credit, the plan must be to lower the quality; using the $30 billion to cover expected credit losses. Of course, we tried throwing lots of taxpayer money at unsustainable homeownership, is there any reason to believe throwing taxpayer money at unsustainable businesses is going to work any better?
Using TARP funds for this program is also somewhat disingenuous. This program adds $30 billion to the deficit regardless of whether it’s funded by TARP or by Congressional appropriations. Taking from the TARP only allows the President to keep treating the TARP as his personal slush fund. Nowhere in the TARP legislation can you find language authorizing the use of funds to cover credit losses on new loans. Being a constitutional scholar, the President should know very well that the spending power rests with Congress, not the President. If we are to have a new small business lending program, it should be designed and funded by Congress, not bureaucrats at the Treasury Department.
Historically the two main sources of small business start-up funding have been home equity and credit cards. Clearly the availability of home equity has declined. Sadly as well, with the passing of credit card “reform” the availability of credit card lending has also declined. If the President truly wants to help small business, then the first thing to do is ask Congress to repeal the credit card bill and then just get out of the way.
How to Tell When ObamaCare Is Dead
Democrats have lots of ambitions. One of them is their health care overhaul, which included a lot of “pay-fors” — i.e., spending cuts that would pay for ObamaCare’s new entitlements. But they also want a jobs bill, a “doc fix,” and other things that require new government spending. Those also require pay-fors — unless Democrats are willing to expand further a $1-trillion-plus deficit — and pay-fors are a scarce commodity.
Today, CongressDaily’s Anna Edney reports:
Some, though, are skeptical Democrats would use any of the pay-fors because that would mean officially declaring the reform effort dead.
“I don’t expect any effort to dismantle the reform bill until there’s no pulse,” one lobbyist said.
Right now, ObamaCare is mostly dead. And as we all know, “There’s a big difference between mostly dead and all dead…Mostly dead is slightly alive.”
A good way to tell when ObamaCare is all dead is when Democrats start picking at the carcass for pay-fors.
Filed under: Cato Publications; General; Health, Welfare & Entitlements
Weekend Links
- A libertarian primer on the real meaning of the phrase “campaign finance reform.” For more, read John Samples’ book, The Fallacy of Campaign Finance Reform.
- New report shows that Head Start, a sacrosanct (and very expensive) federal education program, doesn’t work. So what should we do about it? Give it more money of course!
- “In his State of the Union address, President Obama proposed spending another $4 billion annually on K–12 public education. He did not mention that state, local, and federal governments already spend well over twice what they did in 1980, or that there has been no discernible improvement in student achievement during that period.” Just sayin’.
- Michael Tanner on Obama’s faith-based boondoggle: “The faith-based initiative was a typical example of Bush-style “big-government” conservatism. It has been co-opted by the Obama administration as another weapon for social engineering.”
How the Washington Post Covers Education
Yesterday, the president proposed yet another big increase in federal education spending. The Washington Post quoted ”senior White House officials” as saying that the spending would boost “the nation’s long-term economic health.”
I sent the story’s authors a blog post laying out the evidence that higher government spending hasn’t raised student achievement, and that if you don’t boost achievement, you don’t accelerate economic growth.
Today, there is an updated version of the original WaPo story. It no longer mentions the stated goal of the spending increase. It doesn’t mention that boosting gov’t spending has failed to raise achievement, and so will fail to help the economy.
But it does cite a single non-government source for comment on the president’s plan: the Committee for Education Funding. The Committee is described by the Post as “prominent education advocates,” and as an organization that “represents dozens of education groups.”
Here’s how the CEF itself measures its accomplishments: “The… Committee [has] been very successful in championing the cause of increasing federal educational investment. Through strong advocacy… [it has] won bipartisan support for over $100 billion in increased federal education investment over the last five years.” Its members, if you haven’t guessed already, include virtually every public school employee organization you can name, including, of course, the national teachers unions.
That’s the source, the one source, the Washington Post asked to weigh in on a new federal education spending gambit.
I asked the author of the revised version of the story to comment for this blog post. At the time of this writing, I’ve received no response.
State of the Union Fact Check
Cato experts put some of President Obama’s core State of the Union claims to the test. Here’s what they found.
THE STIMULUS
Obama’s claim:
The plan that has made all of this possible, from the tax cuts to the jobs, is the Recovery Act. That’s right — the Recovery Act, also known as the Stimulus Bill. Economists on the left and the right say that this bill has helped saved jobs and avert disaster.
Back in reality: At the outset of the economic downturn, Cato ran an ad in the nation’s largest newspapers in which more than 300 economists (Nobel laureates among them) signed a statement saying a massive government spending package was among the worst available options. Since then, Cato economists have published dozens of op-eds in major news outlets poking holes in big-government solutions to both the financial system crisis and the flagging economy.
CUTTING TAXES
Obama’s claim:
Let me repeat: we cut taxes. We cut taxes for 95 percent of working families. We cut taxes for small businesses. We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college. As a result, millions of Americans had more to spend on gas, and food, and other necessities, all of which helped businesses keep more workers.
Back in reality: Cato Director of Tax Policy Studies Chris Edwards: “When the president says that he has ‘cut taxes’ for 95 percent of Americans, he fails to note that more than 40 percent of Americans pay no federal incomes taxes and the administration has simply increased subsidy checks to this group. Obama’s refundable tax credits are unearned subsidies, not tax cuts.”
Visit Cato’s Tax Policy Page for much more on this.
SPENDING FREEZE
Obama’s claim:
Starting in 2011, we are prepared to freeze government spending for three years.
Back in reality: Edwards: “The president’s proposed spending freeze covers just 13 percent of the total federal budget, and indeed doesn’t limit the fastest growing components such as Medicare.
“A better idea is to cap growth in the entire federal budget including entitlement programs, which was essentially the idea behind the 1980s bipartisan Gramm-Rudman-Hollings law. The freeze also doesn’t cover the massive spending under the stimulus bill, most of which hasn’t occurred yet. Now that the economy is returning to growth, the president should both freeze spending and rescind the remainder of the planned stimulus.”
Plus, here’s why these promised freezes have never worked in the past and a chart illustrating the fallacy of Obama’s spending claims.
JOB CREATION
Obama’s claim:
Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. 200,000 work in construction and clean energy. 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, and first responders. And we are on track to add another one and a half million jobs to this total by the end of the year.
Back in reality: Cato Policy Analyst Tad Dehaven: “Actually, the U.S. economy has lost 2.7 million jobs since the stimulus passed and 3.4 million total since Obama was elected. How he attributes any jobs gains to the stimulus is the fuzziest of fuzzy math. ‘Nuff said.”
Filed under: General; Government and Politics; Tax and Budget Policy
Wednesday Links
- Cato experts will live-blog Obama’s State of the Union Address tonight. Join in, submit questions, and watch the speech right here on Cato@Liberty at 9:00 PM EST.
- A quick, ten-point libertarian State of the Union Address.
- One “Great Canard”: Federal Reserve Chairman Ben Bernanke argues that the Fed’s monetary policy was not responsible for the U.S. housing bubble.
- Podcast: “Obama’s Fiscal Right Fake” featuring Chris Edwards.
Obama’s Spending Freeze
President Obama is apparently planning to freeze a portion of federal spending for three years. The portion to be frozen is discretionary spending less spending on defense, homeland security, and veteran’s affairs. That portion of spending–about 13 percent of the overall budget–would be held to $447 billion between FY2010 and FY2012.
The chart puts the freeze in context by illustrating the recent growth in this portion of the federal budget. The data is in “budget authority,” which is the amount of new spending authorized each year. Note that a portion of that authorized spending usually splashes over into subsequent years.
The first thing to note is that the portion of the budget to be frozen grew 60 percent between 2000 and 2008, during a period of low inflation. And since this portion of spending excludes defense, homeland security, and veterans affairs, it has nothing to do with the reponse to 9/11 or various foreign wars.
Then comes 2009 and the massive “stimulus” bill, which pushed up spending on this part of the budget to $699 billion. Finally, the figure shows the freeze at $447 billion, which is 71 percent higher than the level of authorized spending in 2000.
Here’s the important point: a very large part of the 2009 spending spike of $699 billion will be sloshing forward into 2010 and later years. (As illustrated by my fancy arrow in the chart). The new CBO budget estimates (Table A-1) show that only 18 percent of authorized stimulus funding will be spent in 2009, with the rest sloshing forward.
Obama is ”freezing” the budget only because he already has a large amount of cash floating around from the stimulus bill that he can spend on all his favorite big government projects in 2010 and beyond. In budget-speak, federal spending measured in “outlays” will be far from frozen.
Finally, a president’s proposals for discretionary spending beyond the current budget year are meaningless. Obama will be back with a new budget in February 2011, no doubt with a whole new set of assumptions and priorities.
Data note: chart data of budget authority from OMB, Mid-Session Review, Table S-14, and budget historical tables.
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