I just love that title.
I just love that title.
The Financial Times published my letter to the editor [$]:
Sir, “Imminent ‘ObamaCare’ ruling poses challenge for Republicans” [$] (May 25) doesn’t quite capture my views when it reports that I believe “resurrecting protections for patients with pre-existing conditions would be wrong.” ObamaCare is wrong precisely because those provisions will not protect patients with pre-existing conditions.
Those “protections” are nothing more than government price controls that force carriers to sell insurance to the sick at a premium far below the cost of the claims they incur. As a result, whichever carrier attracts the most sick patients goes out of business. The ensuing race to the bottom will even harm sick Americans who currently have secure coverage.
The debate over ObamaCare is not between people who care and people who don’t care. It is between people who know how to help the sick, and those who don’t.
The Labor Department just released its monthly employment report and the White House is probably not happy.
There are several key bits of data in the report, such as the unemployment rate, net job creation, and employment-population ratio.
At best, the results are mediocre. The unemployment rate generally gets the most attention, and that was bad news since the joblessness rate jumped to 8.2 percent.
What makes that number particularly painful is that the Obama Administration claimed that the unemployment rate today would be less than 6 percent if the so-called stimulus was adopted. But as you can see from the chart, squandering $800 billion on a Keynesian package hasn’t worked.
While that chart is probably embarrassing to the White House, I think the most revealing numbers come from the Minneapolis Federal Reserve Bank’s interactive website, which allows users to compare employment data and GDP data for different business cycles.
I looked at those numbers a couple of months ago, so I could compare Reaganomics and Obamanomics, and the difference is startling. The Reagan policies of lower tax rates, spending restraint, deregulation, and tight money generated much better results than the statist policies of Obama.
The most recent numbers, shown below, aren’t any better for the Obama Administration.
But I suppose the good news is that the United States is not Europe. Government is even bigger on the other side of the Atlantic and many of those nations are in the middle of a fiscal crisis and the unemployment rate averages 11 percent.
Sort of makes you wonder whether there’s a lesson to be learned. Maybe, just maybe, bigger government means weaker economic performance.
This new Cato Institute video explains why it is in no state’s interest to create an ObamaCare Exchange.
Many thanks to Cato’s very talented Caleb O. Brown and Austin Bragg.
Last week, I jumped into the surreal debate about whether Obama has been the most fiscally conservative president in recent history.
I sliced the historical data from the Office of Management and Budget a couple of ways, showing that overall spending has grown at a relatively slow rate during the Obama years. Adjusted for inflation, both total spending and primary spending (total spending minus interest payments) have been restrained.
Good questions. It turns out that Obama’s supposed frugality is largely the result of how TARP is measured in the federal budget. To put it simply, TARP pushed spending up in Bush’s final fiscal year (FY2009, which began October 1, 2008) and then repayments from the banks (which count as “negative spending”) artificially reduced spending in subsequent years.
The combination of those two factors made a big difference in the numbers. Here’s another table from my prior post, looking at how the presidents rank when you subtract both defense and the fiscal impact of deposit insurance and TARP.
But this ranking is incomplete. At that point, I was trying to gauge Obama’s record on domestic spending, and the numbers certainly provide some evidence that he is a stereotypical big-spending liberal.
But the main debate is about which president was the biggest overall spender. So I’ve run through the numbers again, and here’s a new table looking at the rankings based on average annual changes in inflation-adjusted primary spending, minus the distorting impact of deposit insurance and TARP.
Obama is still in the second-to-last position, but spending is increasing by “only” 5.5 percent per year rather than 7.0 percent annually. This is obviously because defense spending is not growing as fast as domestic spending.
Reagan remains in first place, though his score drops now that his defense buildup is part of the calculations. Clinton, conversely, stays in second place but his score jumps because he benefited from the peace dividend after Reagan’s policies led to the collapse of the Soviet Empire.
Let’s now look at these numbers from a policy perspective. Rahn Curve research shows that government is far too big today, so the goal of fiscal policy should be to restrain the burden of government spending relative to economic output.
This means that policy moves in the right direction when government grows more slowly than the private sector, as it did under Reagan and Clinton.
But if government spending is growing faster than the productive sector of the economy, as has been the case during the Bush-Obama years, then a nation eventually will become Greece.
A financial columnist named Rex Nutting recently triggered a firestorm of controversy by claiming that Barack Obama is not a big spender.
Here’s the chart he prepared, which certainly seems to indicate that Obama is a fiscal conservative. Not only that, it shows that Republicans generally are the big spenders, while Democrats are frugal with other people’s money.
In some ways, these numbers don’t surprise me. I’ve explained before that Bush bears a lot of blame for the big expansion in the burden of government this century, and I’ve specifically pointed out that he deserves the blame for most of the higher spending from the 2009 fiscal year (which began October 1, 2008).
That being said, Nutting’s numbers seemed a bit nutty. Sorry, couldn’t resist. Nutting’s numbers actually seem accurate, including the fact that he decided that Obama should be responsible for $140 billion of the spending in Bush’s last fiscal year (a number he may have taken from one of my posts).
But sometimes accurate can be misleading, so I decided to dig into the data.
I went to the Historical Tables of the Budget from the Office of Management and Budget, and I calculated all the numbers for every President since LBJ (with the exception of Gerald Ford, whose 2-year reign didn’t seem worth including).
As you can see, this changes the results. My chart isn’t as pretty, but based on the inflation-adjusted average annual growth of outlays, it shows that Clinton was the most frugal president, followed by the first President Bush and Obama.
With his guns-n-butter Keynesianism, it’s no big surprise that LBJ ranks last. And “W” also gets a very low grade.
But then I figured we should take interest payments out of the budget and focus on inflation-adjusted “primary spending.” After all, Presidents shouldn’t be held responsible for the national debt that existed before they took office.
Looking at these numbers, it turns out that Obama does win the prize for being the most fiscally conservative president in recent memory. Reagan jumps to second place. Clinton is in third place, which won’t surprise people who watched this video, while W and LBJ again are in last place.
But I don’t want my Republican friends to get too angry with me, so let’s expand our analysis. Just as we don’t want to blame Presidents for net interest payments on debt that was accrued before their tenure, perhaps we should make sure they don’t get credit or blame for defense outlays that often are dictated by external events.
There’s obviously room for disagreement, but most people will agree that the Cold War and 9/11 meant higher defense spending, regardless of which party controlled the White House. Similarly, the collapse of the Soviet Empire inevitably meant lower military expenditures, regardless of whether Republicans or Democrats were in charge.
So let’s now look at primary spending after subtracting defense outlays (still adjusting for inflation, of course). All of a sudden, Reagan jumps to the top of the list by a comfortable margin. LBJ and W continue to score poorly, but Nixon takes over last place.
But it’s also worth noting that Obama still scores relatively well, beating Clinton for second place. Inflation-adjusted domestic spending (which is mostly what we’re measuring) has grown by 2.0 percent annually during his three years in office.
So does that mean Obama deserves re-election? Well, before you answer, I want to make one final calculation. Just as there are good reasons to exclude interest payments because they’re not something a president can control, we also should take a look at what spending would be if we don’t count the cost of bailouts.
To be sure, these types of expenditures can be controlled, but if we go with the assumption that the federal government was going to re-capitalize the banking system (whether using the good FDIC-resolution approach or the corrupt TARP approach), then it seems that Presidents shouldn’t get arbitrary blame or credit simply because some financial institutions failed during their tenure.
So let’s take the preceding set of numbers and subtract out the long-run numbers for deposit insurance, as well as the TARP outlays since 2009. And keep in mind that repayments of TARP monies (as well as deposit insurance premiums) show up in the budget as “negative spending.”
This is because there was a lot of TARP spending in Bush’s last fiscal year (FY2009), which created an artificially high benchmark. And then repayments by banks during Obama’s fiscal years counted as negative spending.
When you subtract out the big TARP spending surge, as well as the repayments, then Bush 43 doesn’t look quite as bad (though still worse than Carter and Clinton), while Obama takes a big fall.
In other words, Obama’s track record does show that he favors an expanding social welfare state. Outlays on those programs have jumped by 7.0 percent annually. And that’s after adjusting for inflation! Not as bad as Nixon, but that’s not saying much since he was one of America’s most statist presidents.
Allow me to conclude with some caveats. None of the tables perfectly captures what any president’s fiscal record. Even my first table may be wrong if you want to blame or credit presidents for the inflation that occurs on their watch. And there certainly are strong arguments that bailout spending and defense spending are affected by presidential policies rather than external events.
And keep in mind that presidents don’t have full power over fiscal policy. The folks on Capitol Hill are the ones who actually enact the bills and appropriate the money.
Moreover, the federal government is akin to a big rusty cargo ship that is traveling in a certain direction, and presidents are like tugboats trying to nudge the boat one way or the other.
But enough equivocating. The four different tables at least show more clearly which presidents presided over faster-growing government or slower-growing government. More importantly, the various tables provide a good idea of where most of the new spending was taking place.
We can presumably say Reagan and Clinton were comparatively frugal, and we can also say that Nixon, LBJ, and Bush 43 were relatively profligate. As for Obama, I think his tugboat is pushing in the wrong direction, but it’s only apparent when you strip out the distorting budgetary impact of TARP.
Later today the U.S. Department of Commerce is expected to announce preliminary antidumping duties on solar panels from China. This case might normally be met with an exasperated sigh and chalked up as just another example of myopic, self-flagellating, capricious U.S. antidumping policy toward China.
But in this instance the absurdity is magnified by the fact that Washington has already devoted billions of dollars in production subsidies and consumption tax credits in an effort to invent a non-trivial market for solar energy in the United States. Imposing duties only undermines that objective. With brand new levies on imports to add to the duties already being imposed on the same products to “countervail” the lower prices afforded U.S. consumers by the Chinese government’s production subsidies, the administration’s already-expensive mission will become even more so – perhaps prohibitively so.
It’s not that President Obama and the Congress woke up one morning and agreed to craft policies that simultaneously promote and deter U.S. solar energy consumption. But that’s what Washington – with its meddling ethos and self-righteous politicians – has wrought: policies working at cross-purposes.
The Economic Report of the President in 2010 (published before Solyndra became a household name) boasts of the administration’s tens of billions of dollars in subsidies for production and tax credits for consumption of solar panels. This industrial policy continues to this day and there is no greater cheerleader for solar than the president himself. In this year’s State of the Union address, President Obama said:
I’m directing my administration to allow the development of clean energy on enough public land to power three million homes.
One month later, noting that 16 solar projects have been approved on public land since he took office, the president said:
[Solar] is an industry on the rise. It’s a source of energy that’s becoming cheaper. And more and more businesses are starting to take notice.
The president has couched his support for solar in terms of what he sees as the environmental imperative of reducing carbon emissions and slowing global warming. Thus his policy aim is to encourage consumption by making solar less expensive to retail consumers with production subsidies and consumption tax credits. (Of course, lower-cost solar is a mirage – accounting smoke and mirrors – because the subsidies come from current taxpayers and the tax credits deprive the Treasury of revenues already earmarked, forcing the government to borrow, burdening future taxpayers with principle and interest debt, which is paid with higher taxes down the road).
However, the president also sees solar and other green technologies as industries that will create great value, spawn new ideas and technologies, keep the United States at the top of the global value chain, and serve as reliable jobs creators going forward. And he seems to think that realization of that objective requires his running interference on behalf of U.S. producers. He says:
Countries like China are moving even faster… . I’m not going to settle for a situation where the United States comes in second place or third place or fourth place in what will be the most important economic engine in the future.
There is nothing incompatible about holding the simultanous beliefs that greater use of solar power could reduce carbon emissions and that a solar industry has great potential to spur innovation, create value, and support good-paying jobs. But promoting the realization of both premises simultaneously through policy intervention is a fools errand, and we are caught in its midst.
Efforts to protect and nurture these chosen industries by keeping foreign competitors at bay is incompatible with the president’s environmentally-driven objective of increasing retail demand for solar energy. Intervening to reduce the supply of solar panels will cause prices to rise and rising prices (particularly in light of abundant cheap alternatives like natural gas) will cause demand to fall. Sure, we may be left with some protected producers in the short-run, but how will they endure without customers.
That question is, apparently, far from minds of perennial interventionist Senator Chuck Schumer (D-NY) and arch-protectionist Senator Sherrod Brown (D-OH). Just this week, the duo released a proposal that would make ineligible for the 30% tax credit, solar panels made outside of the United States, claiming that “Chinese solar panel producers’ eligibility for tax credit undercuts Amercian companies and jobs.” The senators should tell that to the American business owners and employees in the much larger and more economically significant downstream industries that install and service solar panels in the United States. The proposal would cause a dramtic increase in the retail price of solar panels and imperil livelihoods in these downstream industries.
This Cato video should be required viewing for Washington’s meddling policymakers.
This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.