Tag: big government

Obama’s Spending Freeze: Is It Real or Is He Copying Bush?

As reported by the Wall Street Journal, the Obama Administration will propose a three-year freeze for a portion of the budget known as “non-defense discretionary” spending. Many critics will correctly note that this is like going on a drunken binge in Vegas and then temporarily joining Alcoholics Anonymous. Others will point out that more than 80 percent of the budget has been exempted, which also is an accurate criticism. Nonetheless, even a partial freeze would be a semi-meaningful achievement.

But don’t get too excited yet. It is not clear whether the White House is proposing a genuine spending freeze, meaning “budget outlays” for these programs stay at $447 billion for three years, or a make-believe freeze that applies only to “budget authority.” This is an enormously important distinction. Budget outlays matter because they represent the actual burden of government spending. Budget authority, by contrast, is a bookkeeping measure that – at best – signals future intentions. During the profligate Bush years, for instance, apologists for the Administration tried to appease fiscal conservatives by asserting that budget authority was growing at ever-slower rates. In some cases, they were technically correct, but their arguments were deceptive because real-world spending kept climbing to record levels. And needless to say (but I’ll say it anyhow), future intentions never became reality.

Domestic discretionary spending soared from less than $350 billion to more than $600 billion during the Bush years (and rose almost another $100 billion in Obama’s first year!). If the Obama Administration proposes a genuine outlay freeze, he will be taking a genuine (albeit small) step in the right direction. If the “freeze” applies only to budget authority, however, that will be another indication we are in George W. Bush’s third term.

To attack the $1.4 trillion deficit, the White House will propose limits on discretionary spending unrelated to the military, veterans, homeland security and international affairs, according to senior administration officials. Also untouched are big entitlement programs such as Social Security and Medicare. The freeze would affect $447 billion in spending, or 17% of the total federal budget, and would likely be overtaken by growth in the untouched areas of discretionary spending. It’s designed to save $250 billion over the coming decade, compared with what would have been spent had this area been allowed to rise along with inflation. …administration officials acknowledged the freeze is directed at only a small part of overall spending, but that fiscal discipline has to start somewhere. President Obama had requested a 7.3% increase last year in the areas he now seeks to freeze.

Making Government Bigger Is Not Stimulus - and It Won’t Create Jobs

This new video from the Center for Freedom and Prosperity explains how last year’s so-called stimulus was a flop - and also reveals why politicians are pushing for another big-government spending bill.

Interestingly, since last year’s stimulus was such a disaster, the redistributionists in Washington are calling their new proposal a “jobs bill.” But as I say in the video, this is akin to putting perfume on a hog.

For further background, here is a video explaining why Keynesian economics is wrong and another predicting (in advance!) that last year’s stimulus would be a mistake. And just in case anyone actually wants the economy to grow faster, here’s one about policies that actually increase prosperity.

Thursday Links

  • Nat Hentoff: If you’re looking for reform in Cuba, don’t rest your hopes on Raul Castro.
  • Tim Carney, author of Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses gives the inside scoop on why big government is good for big business.

H&R Block and the IRS: An Unholy Alliance to Ransack Taxpayers

The late George Stigler, winner of the Nobel Prize in economics, is famous in part because of his work on “regulatory capture,” which occurs when interest groups use the coercive power of government to thwart competition and undeservedly line their own pockets. A perfect (and distasteful) example of this can be found in today’s Washington Post, which reports that the IRS plans to impose new regulations dictating who can prepare tax returns. Not surprisingly, the new rules have the support of big tax preparation shops such as H&R Block and Jackson Hewitt, which see this as an opportunity to squeeze smaller competitors out of the market. The IRS and the big firms claim more regulations are needed to protect consumers from shoddy work, but this is the usual rationale for licensing laws and other government-imposed barriers to entry and the Institute for Justice has repeatedly shown such rules are designed to benefit insiders rather than consumers.

Tax preparers do make many mistakes, to be sure, but that is a reflection of a nightmarish tax code, and the annual tax test conducted by Money magazine showed that even the most-skilled professionals – such as CPAs, tax lawyers, and enrolled agents – were unable to figure out how to correctly fill out a hypothetical family’s tax return. But since the IRS routinely makes major mistakes as well, perhaps the moral of the story is that we need fundamental tax reform, not IRS rules to create a cartel for the benefit of H&R Block and other big firms. Would any of this be an issue if we had a flat tax or national sales tax?

Great Moments in Foreign Government

German politicians apparently have been hot on the trail of evil evaders who did not pay tax on coffee ordered over the Internet. To address this terrible crisis, the government spent 800,000 euro and tracked down 4000 dangerous criminals. Shockingly, a few cynics, including the folks at Reuters, are trying to diminish this triumph by pointing out that the government spent 30 times more than it collected:

Germany spent more than 30 times as much collecting taxes on coffee beans ordered online from abroad than it received in the tax revenues, the accounting office said on Tuesday. Some 4,000 Germans who bought coffee over the Internet from other EU countries but failed to pay the coffee tax have been charged between a few cents to 10 euros ($14.81) in taxes and fees, said Dieter Engels, head of Germany’s Federal Accounting Office. Tax collectors ended up with just 25,000 euros, way below the 800,000 euros in the costs of staff charged with collecting the payments, Engels said.

The Global Warming Shakedown

Pat Michaels and others are working heroically to save America from global central planning for purposes of combatting global warming (or climate change, or whatever they’re calling it now). But let’s also be thankful this holiday season for our Founding Fathers, who wisely created a system based on separation of powers. If the United States had a parliamentary system, there would be no hope of derailing some of the statist schemes being discusssed in DC, even if Pat worked 24 hours a day.

The secretary of state, for instance, is issuing pronouncements about putting American tapxayers on the chopping block to help finance $100 billion per year of new “climate change” foreign aid. This money can only be squandered, however, if the House and Senate agree to do so. That’s a real possibility, of course, but at least there’s some hope that common sense will prevail since the fiscal burden of government already is far too large.

Here’s a NY Daily News report on what’s happening in Copenhagen, including worrisome signs that politicians who don’t pay for their own travel are planning to make the rest of us pay more for ours:

The U.S. is prepared to work with other countries toward a goal of jointly mobilizing $100 billion a year by 2020 to address the climate change needs of developing countries,” Secretary of State Hillary Clinton said.

…While she would not disclose how much the U.S. would be contribution to the climate fund, Clinton said there would be a fair amount contributed to the pot that would be made available in 2020. The finances will reportedly be raised partially by taxing aviation and shipping, as proposed by the European Union.

Deficit Commission: Wrong Target, Wrong Approach

Legislation being considered on Capitol Hill would create a supposed deficit reduction commission. If politicians were bound by truth-in-advertising, this proposal would be called a tax increase commission. It creates a mechanism that will – at best – replicate the 1982 and 1990 budget summits, both of which were fiscal disasters from the perspective of those who favor limited government. The inevitable result of a “bipartisan” process is a 50/50 deal of “spending cuts” and “tax increases,” but the spending cuts are off the “baseline” (which assumes spending goes up), so even if the changes are real (and they rarely are), they are merely reductions in increases. The tax increases, meanwhile, are real and come on top of all the revenue growth built into current law. Moreover, many of the so-called spending cuts are actually increases in revenue (the “offsetting receipts” charade). Last but not least, this legislation is a stalking horse for VAT (that’s what all the talk about an “antiquated” tax system that needs to be “modernized” is all about).

What’s remarkable about this proposal is how Democrats are almost transparent in their desire to lure Republicans into committing political suicide. As demonstrated by the 1982 and 1990 budget deals, everything is examined through the prism of distribution tables once a budget summit or commission commences and the GOP inevitably comes across as the bad guys who try to protect the rich at the expense of the poor. Of course, if Republicans are really stupid enough to travel down this path, they’ll deserve exactly what happens. But some people in Washington are aware that the proposed commission is a recipe for a major tax hike. The Financial Times cites Cato’s Chris Edwards in its report:

The push for a bipartisan commission to deal with the fiscal challenges facing the US gained momentum on Wednesday as 27 senators sponsored revised legislation that would create such a task force. The bill, introduced by Democrat Kent Conrad and Republican Judd Gregg, both fiscal hawks, would charge an 18-member group of serving legislators and administration officials with coming up with a plan to solve what they called “the nation’s long-term fiscal imbalance”. …In a sign that the concept of such a commission is gaining ground politically, anti-tax activists immediately attacked the proposal, saying it would lead to tax increases. Grover Norquist, head of Americans for Tax Reform, published an open letter saying the “commission is unacceptable from a taxpayer perspective” because “it would lead to a guaranteed tax increase”. …Chris Edwards, director of tax policy at the small-government Cato Institute, said a commission was likely to put too much emphasis on tax increases when “long-term projections reveal a spending catastrophe, not a revenue challenge”.

One final comment. It is utterly absurd to categorize Senator Kent Conrad as a fisal hawk. This term supposedly suggests a member who actively pursues deficit reduction. Yet according to the vote rating of the National Taxpayers Union, Conrad’s most recent rating is an F. Which is the same grade he got the previous year, and the year before that, and the year before that. Indeed, Conrad “earned” failing grades in 14 out of 17 years, and got a D in the other three years.