Topic: Government and Politics

The Final Nail in the Keynesian Coffin?

I wrote earlier this year about the “perplexing durability” of Keynesian economics. And I didn’t mince words.

Keynesian economics is a failure. It didn’t work for Hoover and Roosevelt in the 1930s. It didn’t work for Japan in the 1990s. And it didn’t work for Bush or Obama in recent years. No matter where’s it’s been tried, it’s been a flop. So why, whenever there’s a downturn, do politicians resuscitate the idea that bigger government will “stimulate” the economy?

And I specifically challenged Keynesians in 2013 to explain why automatic budget cuts were supposedly a bad idea given that the American economy expanded when the burden of government spending shrank during the Reagan and Clinton years.

I also issued that same challenge one day earlier, asking Keynesians to justify their opposition to sequestration given that Canada’s economy prospered in the 1990s when government spending was curtailed.

It seems that the evidence against Keynesianism is so strong that only a fool, a politician, or a college professor could still cling to the notion that bigger government lead to more growth.

Fortunately, it does appear that there’s a growing consensus against this free-lunch theory.

How Hawkish Are Republican Voters?

William Kristol tells the Washington Post that Sen. Rand Paul is a “lonely gadfly” on foreign policy:

“Rand Paul speaks for a genuine sentiment that’s always been in the Republican Party, but maybe it’s 10 percent? 15 percent? 20 percent? I don’t think he’s going to be a serious competitor for guiding Republican foreign policy.”

At the Huffington Post I suggest that Kristol read the polls. They show rising non-interventionist sentiment among Republicans and especially among independents. I argue:

Americans, including Republicans, are getting tired of policing the world with endless wars. Support for the Iraq war is almost as low as approval of Congress.

Worst Congress Ever? You Must Be Kidding

The Establishment media really love laws and government. NPR, the Washington Post, Huffington Post, Pew Research, NBC, Politico – they’re all lamenting the “least productive Congress” ever. Or more precisely noting that the just-concluded 113th Congress was the second least productive Congress ever, second only to the 2011-12 112th Congress. But what’s the definition of a “productive Congress”? One that passes laws, of course, lots of laws. Congress passed only 286 laws in the past two years, exceeded in slackerdom only by the 283 passed in the previous two years of divided government.

Now journalists may well believe that passing laws is a good thing, and passing more laws is a better thing. But they would do well to mark that as an opinion. Many of us think that passing more laws – that is more mandates, bans, regulations, taxes, subsidies, boondoggles, transfer programs, and proclamations – is a bad thing. In fact, given that the American people pondered the “least productive Congress ever” twice, and twice kept the government divided between the two parties, it just might be that most Americans are fine with a Congress that passes fewer laws. 

Is a judge “less productive” if he imprisons fewer people? Is a policeman less productive if he arrests fewer people? Government involves force, and I would argue that less force in human relationships is a good thing. Indeed I would argue that a society that uses less force is a more civilized society. So maybe we should call the 112th and 113th Congresses the most civilized Congresses since World War II (the period of time actually covered by the claim “least productive ever”).

Dana Milbank of the Washington Post ups the ante from “least productive” to “by just about every measure, the worst Congress ever.” Seriously? Since I am confident that Mr. Milbank is not historically ignorant, I assume he’s just being rhetorically provocative. But just in case any of his readers might actually believe that claim, let me suggest a few other nominees for “worst Congress ever”:

The 31st Congress, which passed the Fugitive Slave Act in 1850

The 5th Congress, which passed the Alien and Sedition Acts in 1798

The 21st Congress, which passed the Indian Removal Act in 1830

The 77th Congress, which passed Public Law 503, codifying President Franklin D. Roosevelt’s Executive Order 9066 authorizing the internment of Japanese, German, and Italian Americans, in 1942

The 65th Congress, which passed the Eighteenth Amendment (Prohibition), the Espionage Act, and the Selective Service Act, and entered World War I, all in 1917

Worst Congress ever? The 113th isn’t even in the running. 

A Practical (and Semi-Optimistic) Plan to Tame the Federal Leviathan

Like a lot of libertarians and small-government conservatives, I’m prone to pessimism. How can you be cheerful, after all, when you look at what’s been happening in our lifetimes.

New entitlement programs, adopted by politicians from all parties, are further adding to the long-run spending crisis.

The federal budget has become much bigger, luring millions of additional people into government dependency.

The tax code has become even more corrupt and complex, with more than 4,600 changes just between 2001 and 2012 according to a withering report from outgoing Senator Tom Coburn of Oklahoma.

And let’s not forget the essential insight of “public choice” economics, which tells us that politicians care first and foremost about their own interests rather than the national interest. So what’s their incentive to address these problems, particularly if there’s some way to sweep them under the rug and let future generations bear the burden?

And if you think I’m being unduly negative about political incentives and fiscal responsibility, consider the new report from the European Commission, which found that politicians from EU member nations routinely enact budgets based on “rosy scenarios.” As the EU Observer reported:

EU governments are too optimistic about their economic prospects and their ability to control public spending, leading to them continually missing their budget targets, a European Commission paper has argued. …their growth projections are 0.6 percent higher than the final figure, while governments who promise to cut their deficit by 0.2 percent of GDP, typically tend to increase their gap between revenue and spending by the same amount.

Needless to say, American politicians do the same thing with their forecasts. If you don’t believe me, just look at the way the books were cooked to help impose Obamacare.

But set aside everything I just wrote because now I’m going to tell you that we’re making progress and that it’s actually not that difficult to constructively address America’s fiscal problems.

First, let’s look at how we’ve made progress. I just wrote a piece for The Hill. It’s entitled “Republicans are Winning the Fiscal Fight” and it includes lots of data on what’s been happening over the past five years, including the fact that there’s been no growth in the federal budget.

Senate Leaders Demand Treasury, HHS Inform Consumers About Risks Of HealthCare.gov Coverage

The Obama administration is boasting that 2.5 million Americans have selected health insurance plans for 2015 through the Exchanges it operates in 36 states under the Patient Protection and Affordable Care Act, and that they are well on their way to enrolling 9.1 million Americans in Exchange coverage next year. But there’s a problem. The administration is not warning ObamaCare enrollees about significant risks associated with their coverage. By mid-2015, 5 million HealthCare.gov enrollees could see their tax liabilities increase by thousands of dollars. Their premiums could increase by 300 percent or more. Their health plans could be cancelled without any replacement plans available. Today, the U.S. Senate leadership – incoming Majority Leader Mitch McConnell (R-KY), Majority Whip John Cornyn (R-TX), Conference Chairman John Thune (R-SD), Policy Committee Chairman John Barrasso (R-WY), and Conference Vice Chairman Roy Blunt (R-MO) – wrote Treasury Secretary Jacob J. Lew and Health and Human Services Secretary Sylvia M. Burwell to demand the administration inform consumers about those risks.

First, some background.

  • The PPACA directs states to establish health-insurance Exchanges and requires the federal government to establish Exchanges in states that fail to do so.
  • The statute authorizes subsidies (nominally, “tax credits”) to certain taxpayers who purchase Exchange coverage. Those subsidies transfer much of the cost of ObamaCare’s many regulations and  mandates from the premium payer to the taxpayer. For the average recipient, Exchange subsidies cover 76 percent of their premium.
  • But there’s a catch. The law only authorizes those subsidies “through an Exchange established by the State.” The PPACA nowhere authorizes subsidies through federally established Exchanges. This makes the law’s Exchanges operate like its Medicaid expansion: if states cooperate with implementation, their residents get subsidies; if not, their residents get no subsidies.
  • Confounding expectations, 36 states refused or otherwise failed to establish Exchanges. This should have meant that Exchange subsidies would not be available in two-thirds of the country, and that many more Americans would face the full cost of the PPACA’s very expensive coverage.
  • Yet the Obama administration unilaterally decided to offer Exchange subsidies through federal Exchanges despite the lack of any statutory authorization. Because those (illegal) subsidies trigger (illegal) penalties against both individuals and employers under the PPACA’s mandates, the administration soon found itself in court.
  • Two federal courts have found the subsidies the administration is issuing to 5 million enrollees through HealthCare.gov are illegal. The Supreme Court has agreed to resolve the issue. It has granted certiorari in King v. Burwell. Oral arguments will likely occur in February or March, with a ruling due by June.
  • If the Supreme Court agrees with those lower courts that the subsidies the administration is issuing through HealthCare.gov are illegal, the repercussions for enrollees could be significant. Their subsidies would disappear. The PPACA would require them to repay the IRS whatever subsidies they already received in 2015 and 2014, which could top $10,000 for many enrollees near the poverty level. Their insurance payments would quadruple, on average. Households near the poverty level would see even larger increases. Their plans could be cancelled, and they may not be able to find replacement coverage.
  • The Obama administration knows it is exposing HealthCare.gov enrollees to these risks. But it is not telling them.

Senator Coburn’s Final Report

One the best U.S. senators of recent decades is leaving. No one has spotlighted the ongoing waste in federal spending more than Tom Coburn of Oklahoma. In his farewell address, he advised his colleagues: “Your whole goal is to protect the United States of America, its Constitution and its liberties … it’s not to provide benefits for your state.” As if to underline Coburn’s point, the Washington Post yesterday described how Senator Roger Wicker helped pour $349 million down the drain on an unused NASA facility in his home state of Mississippi.

One of Coburn’s strategies has been to use his expert staff to write investigative reports on federal activities. The huge collection of reports his staff has produced is remarkable. Each one is a big fat indictment of malfunctioning government.

Seeing this stream of high-quality and fun-to-read reports over the years has made wonder what the staffs of the other 99 senators do with their time. Every senator ought to be using his taxpayer-funded staff to try to save taxpayer money. Every senator ought to be digging into the giant $3.6 trillion spending empire that they have collectively created and trying to cut out some of the fat.

Coburn’s final report released last week is another impressive document. Coming in at 320 pages, Tax Decoder digs through the massive federal tax code and highlights hundreds of special deals, carve-outs, and illogical breaks. Tax Decoder’s findings are too voluminous to summarize here, and even seasoned tax wonks will find interesting stuff that they did not know.

Consider the chapter on nonprofit organizations, which spans 42 pages and is buttressed by 462 endnotes. This part of the tax code is a complex mess rife with abuse. Coburn’s staff found that Lady Gaga’s charity raised $2.6 million and handed out just $5,000 one year in benefits, while spending the rest on salaries, promotions, and parties. The Kanye West Foundation spent $572,383 one year, but not a dime on charity.The Cancer Fund for America raised $80 million, but handed out just $890,000 to cancer patients.

While the GAO—an arm of Congress—investigates federal activities, its reports are usually dry and timid. The agency’s role is not to upset its political masters. Similarly, most members of Congress don’t want to upset their colleagues, and so they shy away from criticizing wasteful spending directed to any state, not just their own. It’s easier for them to follow the herd, play the game, grab benefits, and hopefully cruise to safe reelection. Many outside groups and reporters do a great job investigating the government, but senators are in a uniquely powerful and privileged position to lead the charge. 

That’s why Senator Coburn and his staff filled a void with their reports. They uncovered idiocy in the budget, and they informed the public with the juicy details. Many members of Congress say that the government spends too much, but they shy away from specifics. But now that Tom Coburn is going, which members are willing to step up to the plate?   

Congress Sacrifices U.S. Security with New Sanctions Against Russia

In the midst of negotiations to avoid another government shutdown, Congress rammed through new sanctions against Russia as part of the misnamed “Ukraine Freedom Support Act of 2014.”

Congress appears determined to turn an adversary into an enemy and encourage retaliation against more significant American interests. Observed my colleague Emma Ashford: “the provisions in this bill will make it all the more difficult to find a negotiated settlement to the Ukraine crisis, or to find a way to salvage any form of productive U.S.-Russia relationship.”

Last year, the corrupt but elected Viktor Yanukovich was ousted by protests backed by rabid and sometimes violent nationalists. The United States and Europe flaunted their support for the opposition. Indeed, American officials openly discussed who should take power after his ouster.

Russian President Vladimir Putin still was not justified in dismembering Ukraine, but America would have reacted badly had Moscow helped overthrow a Washington-friendly government in Mexico.

Ukraine’s fate is not a serious security interest for the United States. The conflict raises humanitarian concerns, but no different than those elsewhere around the globe.

Kiev’s status matters more to Europe, largely for economic reasons. If the European Union and its members want to confront Russia over Ukraine, they should do so—without Washington’s involvement.