Tag: economy

Taxpayers Deserve Better from the President

President Obama’s estimated $17 billion budget cuts for fiscal year 2010 amounts to a measly .5 percent of the president’s total proposed spending, and 1.5 percent of the president’s proposed deficit for the coming fiscal year. His offerings to cut the budget should be dismissed as unserious. In fact, this is reminiscent of the Bush administration’s annual list of minuscule proposed cuts in the face of profligate spending and mounting federal debt.

President Obama says his efforts “are just the next phase of a larger and longer effort needed to change how Washington does business and put our fiscal house in order.” Promising more spending and more debt while celebrating relatively insignificant cuts and ignoring the looming entitlement crunch represents businesses as usual, not change. Current and future taxpayers deserved a serious proposal to reduce the government’s burden on their wallets and the struggling economy. Instead, the president’s first budget represents an attempt to shove the government’s hand deeper into the American peoples’ pockets and lives.

The president made several questionable statements in his address earlier today. He promised “long overdue investments” in education. But federal spending on education has already increased dramatically with no positive results. He spoke of “undertaking health care reform so that we can control costs while boosting coverage and quality” and “investing in renewable sources of energy.” Yet we know any type of reform will mean higher taxes, government rationing, and slower economic growth.

The Cost of Flu Fears - and Our Ongoing Vulnerability

The ever-sensible Shaun Waterman has begun to tally the cost of overreaction to the fear outbreak inspired by the H1N1 flu strain. He reports in ISN Security Watch:

Even the precautions that you take against this kind of global flu pandemic could knock about 1.9 [or] 2 percent off global [economic production]. That’s about a trillion dollars,” according to journalist Martin Walker, who cited World Bank figures from a study last year.

The Economist reported last week that the crisis in Mexico was costing Mexico City’s service and retail industries $55m a day - not because of the handful of deaths but because of people’s reactions. And that was even before the national suspension of non-essential public activities called for this week by the authorities there, which was expected to double that cost.

Waterman also cites my joke about moving Vice President Biden to an undisclosed location in future crises - not for his protection or government continuity, but to keep him away from the media.

It’s comedic wrapping on a substantive point: As long as people look to government leaders in times of crises, leaders have a responsibility to communicate carefully, according to a plan, and with message discipline. If they don’t, the damage can be very high.

Even if all Americans knew to dismiss the words of the Vice President as if he’s a “Crazy Uncle Joe” - and they don’t - foreign tourists certainly don’t know that. Biden harmed the country simply by speaking off the cuff.

Here, an outbreak of flu appears to have caused billions of dollars in damage to the world economy. One billion lost to the U.S. economy is about 145 deaths (using the current $6.9 million valuation for a human life). When overreactions restrict economic activity, that reduces wealth and thus health and longevity.

Now, imagine what might happen if the United States encountered a novel, directed threat - some kind of attack that inspires widespread concern. Will Vice President Biden and officials from a half-dozen agencies rush forth with personal observations and speculation? The results could be devastating, especially to a country that is already suffering economically.

People die from poor situation management, and it makes Americans worse off. Political leaders should not get a free pass for failing to communicate well just because it’s hard to do.

The Obama Administration should learn from its many errors in handling the rather benign H1N1 flu situation. It should train up for communicating in the event of a real emergency. If the Obama Administration fails to soothe nerves in the event of some future terrorist attack, that will be a clear failure of leadership.

Brother, Can You Spare A Trillion?

With the economy in a deep recession and policymakers turning to massive government intervention in an attempt to create jobs and bolster the financial system—it feels like the 1930s all over again.  Today’s new New Deal is rapidly unfolding, with the Obama administration and many lawmakers making it clear that any question of the success of FDR’s New Deal policies was resolved long ago: government intervention worked, and history bears repeating.  

However, there are deep disagreements about the New Deal, and whether Roosevelt’s policies deepened the depression and delayed recovery. 

Join us at the Cato Institute on June 1 to be a part of a highly informative half-day conference. Recognized national experts will discuss the economic and legal impact of the New Deal, and how its legacy is being used and misused to shape policy responses to current economic hardships.

So Much for the Obama Administration’s Fiscal Free Lunch

So far the Obama administration has been enjoying the ultimate fiscal free lunch.  Massive borrowing, massive spending, lower taxes, and low interest rates.

Alas, all good things must come to an end.

Reports the New York Times:

The nation’s debt clock is ticking faster than ever — and Wall Street is getting worried.

As the Obama administration racks up an unprecedented spending bill for bank bailouts, Detroit rescues, health care overhauls and stimulus plans, the bond market is starting to push up the cost of trillions of dollars in borrowing for the government.

Last week, the yield on 10-year Treasury notes rose to its highest level since November, briefly touching 3.17 percent, a sign that investors are demanding larger returns on the masses of United States debt being issued to finance an economic recovery.

While that is still low by historical standards — it averaged about 5.7 percent in the late 1990s, as deficits turned to surpluses under President Bill Clinton — investors are starting to wonder whether the United States is headed for a new era of rising market interest rates as the government borrows, borrows and borrows some more.

Already, in the first six months of this fiscal year, the federal deficit is running at $956.8 billion, or nearly one seventh of gross domestic product — levels not seen since World War II, according to Wrightson ICAP, a research firm.

Debt held by the public is projected by the Congressional Budget Office to rise from 41 percent of gross domestic product in 2008 to 51 percent in 2009 and to a peak of around 54 percent in 2011 before declining again in the following years. For all of 2009, the administration probably needs to borrow about $2 trillion.

The rising tab has prompted warnings from the Treasury that the Congressionally mandated debt ceiling of $12.1 trillion will most likely be breached in the second half of this year.

Last week, the Treasury Borrowing Advisory Committee, a group of industry officials that advises the Treasury on its financing needs, warned about the consequences of higher deficits at a time when tax revenues were “collapsing” by 14 percent in the first half of the fiscal year.

“Given the outlook for the economy, the cost of restoring a smoothly functioning financial system and the pending entitlement obligations to retiring baby boomers,” a report from the committee said, “the fiscal outlook is one of rapidly increasing debt in the years ahead.”

While the real long-term interest rate will not rise immediately, the committee concluded, “such a fiscal path could force real rates notably higher at some point in the future.”

Alas, this is just the beginning.  Three quarters of the spending in the misnamed stimulus bill (it would more accurately be called the “Pork and Social Spending We’ve Been Waiting Years to Foist on the Unsuspecting Public Bill”) occurs next year and beyond, when most economists expect the economy to be growing again.  Moreover, much of the so-called stimulus outlays do nothing to actually stimulate the economy, being used for income transfers and the usual social programs.

However, we will be paying for these outlays for years.  Even as, the Congressional Budget Office warns, the GDP ultimately shrinks as federal expenditures and borrowing “crowd out” private investment.  Indeed, the CBO figures that incomes will suffer a permanent decline–even as taxes are climbing dramatically to pay off all of the debt accumulated by Uncle Sam.

And you don’t want to think about the total bill as Washington bails out (almost $13 trillion worth so far) everyone within reach, “stimulates” (the bill passed earlier this year ran $787 billion) everything within reach, and spends money (Congress approved a budget of $3.5 trillion for next year) within reach.  Indeed, according to CBO, the president’s budget envisions increasing the additional collective federal deficit between 2010 and 2019 from $4.4 trillion to $9.3 trillion.)  Then there will be more federal spending for wastral government entities, such as the Federal Housing Administration; failing banks, which are being closed at a record rate by the FDIC; pension pay-offs for bankrupt companies, administered by the Pension Benefit Guaranty Corporation; and covering the big tab being up run up by Social Security and Medicare, which currently sport unfunded liabilities of around $100 trillion.

Oh, to be an American taxpayer – and especially a young American taxpayer – who will be paying Uncle Sam’s endless bills for the rest of his or her life!

Congressional Priorities and the FY2010 Budget Resolution

Yesterday the House and Senate passed a bloated $3.5 trillion budget blueprint for fiscal year 2010.  According to House Speaker Nancy Pelosi (D-CA), “What is important to us as a nation is reflected in this budget. It’s a very happy day for our country.”

Included in the blueprint is language that calls for an equal pay raise between military employees and civilian federal employees.  President Obama had originally proposed slightly higher pay for members of the armed services.  The exact pay raise for bureaucrats will be determined in the appropriations process, but it’s likely to be a hike of anywhere from 2.9% to 3.9%.  This would come on top of last year’s 3.9% raise.

Omitted from the blueprint was language included in the Senate version by Sen. Tom Coburn (R-OK) that would have “required agency managers to report to Congress within 90 days of the bill’s passage on any programs that are ‘duplicative, inefficient or failing, with recommendations for eliminating and consolidating these programs.‘ “  A simple report to be issued by the agencies themselves. That’s it.  There would be no guarantee that anything would actually be cut or consolidated.

Is it really a happy day for our country when Congress passes a blueprint to add another $1 trillion plus to the skyrocketing national debt?  Is it really good for the struggling economy that the parasitic bureaucrats already living comfortably at the expense of the productive members of society are going to get another fat pay raise?  Is it really “important to us as a nation” to make sure federal agencies are not instructed to pick out the particularly woeful programs under their watch?

It may be a happy day for politicians and bureaucrats, but it’s another kick in the teeth for taxpayers.

How Protectionism Crashed the World Economy…and How to Stop It This Time Around

A coalition of more than 70 groups around the world, from Canada to Brazil to Kyrgyzstan to Germany to China to Japan to Kenya, has joined together to stop the dangerous stirrings of protectionism.  The FreedomToTrade.org coalition (coordinated internationally by the Atlas Economic Research Foundation and the International Policy Network) has circulated a petition (signed by over 1,000 economists and thousands of others) and is now producing documentaries to alert the public to the dangers posed by protectionism.  This one is on the role the Smoot-Hawley Tariff played in turning a serious recession into the Great Depression.

The mini-documentary is also being made available in 12 other languages.  The Spanish version will be available on Cato’s Spanish-language project, ElCato.org. Others are available on YouTube.

This information is important and needs to be widely shared.  Pass it on…

The Stimulus Feeding Frenzy

Billions and billions of dollars! Get yours today!

I’ve written before about the massive lobbying game in Washington to get your own special interests written into the stimulus and budget bills. And about the efforts to pressure governments into spending that money NOW.

Today a friend sent me a new piece of the incredible expanding stimulus economy. A publishing company has created a new newsletter on how to keep up with “ever-changing opportunities and the complex requirements to apply for them” – The Money for Main Street Monitor. Yes, for only $229 a year, with this special offer, you can keep up with the lucrative and ever-changing “new stimulus funding opportunities.”

I’m omitting the specifics so as not to give this parasitical industry any more publicity, but here’s the text of the email advertisement:

Dear Nonprofit Professional,

Billions of dollars from the Obama stimulus plan are becoming available daily for funding thousands of new state, local and nonprofit programs!

And while it’s extremely time consuming and difficult to keep up with the ever-changing opportunities and the complex requirements to apply for them, we can help make that task easier than you’d imagine.

That’s why [the company] is proud to introduce our newest and much-needed online service: The Money for Main Street Monitor.

Just click on or cut and paste the following link into your Web browser to take advantage of a special one-week offer on this continuously updated service:

Continuous Stimulus Funding Updates

While we have diligently kept our readers up to date on the billions of dollars in funding coming from the Obama stimulus package, many tell us they need much more coverage!

Consequently, we have assigned a team of experienced Washington, DC-based editors to focus exclusively on new stimulus funding opportunities for health care, family services, education, mental health, disabilities and substance abuse programs, housing and community development!<

Through continuously updated articles, subscribers to this new online service will be kept up to date on the latest funding opportunities as soon as they emerge. And with our online format, subscribers will have access to our user-friendly search tools to instantly find the funding opportunities most suited for their organizations!

Plus, our updates – unlike those on government Web sites – are in plain English and easy to find.  And, we’ve included a wealth of grant-writing tips designed to help your organization get its share of stimulus funding!

We know how important it is for every organization to watch their dollars closely these days, and we’re doing are best to help. That’s why we are offering you a specially reduced rate for this much-needed publication, The Money for Main Street Monitor.

Just click on or cut and paste the following link into your Web browser to find out more about this special one-week offer:

Or you can call in your order toll free at 1-800-[GET OTHER PEOPLE’S MONEY].

This isn’t the only company making such offers. Lobbyists, consultants, newsletter publishers, and others will be making money this year guiding their clients to the pot of gold at the end of the stimulus. But in economic terms, all this effort is deadweight loss. Instead of devoting time and talent and resources to the production of real economic value, these people are being lured into the parasite economy, jockeying for money extracted from productive workers and businesses and redistributed by a Washington bureaucracy and the lobbyists that revolve around it.