Tag: federal budget

Nonintervention: the New Isolationism?

Today, the Obama administration released its FY 2012 budget, and with it the Pentagon’s spending request.  Regrettably, the Pentagon’s plan shows that the federal government’s 4th consecutive $1 trillion-plus annual deficit has not quelled an appetite for a continued quasi-imperial foreign policy that subsidizes a multitude of rich allies around the globe.

Unfortunately, if you argue against such a massive budget, you are immediately labeled an “isolationist.”  Take the example of Senator Rand Paul’s (R-KY) crusade to cut the federal budget by $500 billion.  Among many other substantive cuts, Senator Paul called for ending U.S. foreign aid around the globe. And when pressed, he included aid to Israel.

Aid to Israel represents less than one percent of his proposal, but the reaction was swift and immediate.  The Senator was labeled a “neo-isolationist,” and condemned widely, while his argument for ending aid to Israel was not addressed.  Benjamin Friedman wrote about this episode in the Daily Caller and presented his own arguments for ending aid to Israel.

Expanding on this theme, over at The Skeptics I have written a piece citing the vociferous attacks on Senator Paul as the latest example of modern conservatives—often of the neo-conservative variety—and liberals coming together to label anyone with a noninterventionist foreign policy outlook an isolationist:

Conservatism once was cautious, urged prudence, and emphasized fidelity to the Constitution. Conservatives saw responsibility as the flip-side of liberty, opposed the transfer society, and detested welfare dependence. On international affairs conservatives believed in defending America, not promoting social engineering overseas.

Liberals responded by tarring traditional conservatives as “isolationists.” Skeptical of joining imperial wars in the name of democracy, unwilling to risk American lives in dubious foreign crusades, and unenthused about transferring U.S. wealth abroad, traditionalists were treated as somehow disreputable. After all, progressive thought required turning Americans into warriors on behalf of a new global ethic.

Now neoconservatives toss the same epithet at conservatives who oppose promiscuous war-making and endless foreign aid. Never mind that many opponents of today’s hyperinterventionist foreign policy favor free trade, cultural exchange, liberal immigration, and political cooperation. If you do not believe in bombing, invading, and occupying adversaries and subsidizing allies, then you be an isolationist.

Click here to read the entire article.

To Fix the Budget, Bring Back Reagan…or Even Clinton

President Obama unveiled his fiscal year 2012 budget today, and there’s good news and bad news. The good news is that there’s no major initiative such as the so-called stimulus scheme or the government-run healthcare proposal. The bad news, though, is that government is far too big and Obama’s budget does nothing to address this problem.

But perhaps the folks on Capitol Hill will be more responsible and actually try to save America from becoming a big-government, European-style welfare state. The solution may not be easy, but it is simple. Lawmakers merely need to restrain the growth of government spending so that it grows slower than the private economy.

Actual spending cuts would be the best option, of course, but limiting the growth of spending is all that’s needed to slowly shrink the burden of government spending relative to gross domestic product.

Fortunately, we have two role models from recent history that show it is possible to control the federal budget. This video from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to demonstrate the fiscal policy achievements of both Ronald Reagan and Bill Clinton.

Some people will want to argue about who gets credit for the good fiscal policy of the 1980s and 1990s.

Bill Clinton’s performance, for instance, may not have been so impressive if he had succeeded in pushing through his version of government-run healthcare or if he didn’t have to deal with a Republican Congress after the 1994 elections. But that’s a debate for partisans. All that matters is that the burden of government spending fell during Bill Clinton’s reign, and that was good for the budget and good for the economy. And there’s no question he did a much better job than George W. Bush.

Indeed, a major theme in this new video is that the past 10 years have been a fiscal disaster. Both Bush and Obama have dramatically boosted the burden of government spending – largely because of rapid increases in domestic spending.

This is one of the reasons why the economy is weak. For further information, this video looks at the theoretical case for small government and this video examines the empirical evidence against big government.

Another problem is that many people in Washington are fixated on deficits and debt, but that’s akin to focusing on symptoms and ignoring the underlying disease. To elaborate, this video explains that America’s fiscal problem is too much spending rather than too much debt.

Last but not least, this video reviews the theory and evidence for the “Rahn Curve,” which is the notion that there is a growth-maximizing level of government outlays. The bad news is that government already is far too big in the United States. This is undermining prosperity and reducing competitiveness.

Obama the Born-again Budget Cutter?!?

Chalk up another victory – at least on the rhetorical level – for the Tea Party.

President Obama will release his fiscal year 2012 budget tomorrow and he’s apparently become a born-again fiscal conservative. Here are some excerpts from a Washington Post story:

President Obama will respond to a Republican push for a drastic reduction in government spending by proposing sharp cuts of his own in a fiscal 2012 budget blueprint that aims to trim record federal deficits by $1.1 trillion over the next decade. …two-thirds of the savings would come from spending cuts that are draconian by Democratic standards… When it lands Monday on Capitol Hill, Obama’s plan will launch a bidding war with Republicans over how deeply and swiftly to cut, as the two parties seek a path to fiscal stability for a nation awash in red ink.

I’m skeptical of battlefield conversions, particularly when politicians utilize the dishonest Washington definition of a budget cutincreasing spending by less than previously planned. So the first thing I’ll do when the budget is released is to visit the Historical Tables of the Budget website and see what spending is projected to be in 2011 and what Obama is asking for in 2012.

Those numbers probably won’t be accurate since the Obama administration (like previous ones) will use best-case assumptions, but at least we’ll get a sense of whether:

a) spending actually is being cut (I’m not holding my breath for this miracle), or

b) spending is frozen at current levels (this approach would balance the budget by 2017, but it’s almost as unlikely at the first option), or

c) spending is being restrained (perhaps 2 percent growth, enough to keep pace with inflation), or

d) spending is growing far too fast (say 4 percent growth, pushing America quickly in the wrong direction), or

e) spending is continuing to explode (5 percent growth, 6 percent growth, or even more, meaning we’ll be Greece sooner than we think).

My guess, for what it’s worth, is that the Obama administration will claim (d) but will actually be proposing (e) if more realistic assumptions are used.

Needless to say, I hope I’m wrong. But other parts of the Washington Post story give me little reason for hope. The White House apparently is ignoring entitlements. Heck, the administration apparently isn’t even planning on meeting the President’s own deficit goal.

The blueprint ducks the harder task of tackling the biggest drivers of future deficits: Social Security, Medicare and Medicaid… Obama’s blueprint does not even hit the short-term goal he set for his commission - reducing deficits to 3 percent of the economy by 2015.

The White House also plans to play a shell game with certain parts of the budget. Supposed spending cuts in health care won’t generate taxpayer savings. Instead, they’ll be used to finance more spending on Medicare, enabling the President to cancel savings that were promised as part of Obamacare. The interest groups win and the taxpayers lose.

The Obama blueprint also seeks to eliminate two budget gimmicks that Congress has long used to mask the true depth of the red ink: His proposal would offset higher Medicare payments to doctors by cutting $62 billion from other areas of federal health spending. And it would adjust the alternative minimum tax through 2014 to prevent it from hitting middle-class taxpayers, covering the cost by limiting the value of itemized deductions such as charitable contributions and mortgage interest for wealthy households.

The same shell game takes place on the tax side of the fiscal ledger. The White House plans to cancel one future tax increase and “pay” for that change by imposing another future tax increase. Once again, taxpayers get the short end of the stick.

Unless the Washington Post story is completely inaccurate, the Obama administration is not changing course. There may not be any major initiatives to expand the burden of government, like the failed stimulus or the budget busting government-run healthcare scheme, but it certainly does not seem like there are any plans to reverse direction and shrink the burden of government.

Slashing Popular Programs Contest

House Republicans proposed some (tiny) spending cuts this week and the Obama administration will likely propose some (tiny) cuts next week in the federal budget.

So get ready for a barrage of slasher stories! National Journal started us off yesterday with the headline “WH Slashes Heat for the Poor.”

Coming down the pike are dozens of stories about how policymakers are planning deep, vicious, and inhumane cuts that will undermine the foundations of the republic. A 5 percent cut to a program that has risen 50 percent in recent years will not be a simple “trim,” but a brutal, gouging “slash.”

Every single one of the upcoming cuts will be to “popular” programs. So policymakers will propose a $1 million cut to mohair subsidies, and the headline will be “Congress Slashes Popular Mohair Program.”

In reality, government spending has soared over the last decade, but I don’t want to spoil the fun. So let’s enjoy the coming crop of over-the-top slasher stories, and treat them as a genre of modern publishing art.

I propose a “Slasher Story of the Month” contest for February. Send me an email if you see a great slasher story, and I’ll get my crack assistant, Amy, to analyze the rhetorical content. The winning story will have the most frequent uses of “slash” and “popular” to describe the programs that the godless heathens in Congress and the White House plan to ransack and decimate.

(Bonus points for any editorial cartoon showing Attila the Hun with the word “GOP” on his helmet hacking away at a defenseless child with “nutrition subsidies” on her shirt).

The 1993 Clinton Tax Increase Did Not Lead to the Budget Surpluses of the Late 1990s

Proponents of higher taxes are fond of claiming that Bill Clinton’s 1993 tax increase was a big success because of budget surpluses that began in 1998.

That’s certainly a plausible hypothesis, and I’m already on record arguing that Clinton’s economic record was much better than Bush’s performance.

But this specific assertion it is not supported by the data. In February of 1995, 18 months after the tax increase was signed into law, President Clinton’s Office of Management and Budget issued projections of deficits for the next five years if existing policy was maintained (a “baseline” forecast). As the chart illustrates, OMB estimated that future deficits would be about $200 billion and would slightly increase over the five-year period.

In other words, even the Clinton Administration, which presumably had a big incentive to claim that the tax increase would be successful, admitted 18 months after the law was approved that there was no expectation of a budget surplus. For what it’s worth, the Congressional Budget Office forecast, issued about the same time, showed very similar numbers.

Since the Clinton Administration’s own numbers reveal that the 1993 tax increase was a failure, we have to find a different reason to explain why the budget shifted to surplus in the late 1990s.

Fortunately, there’s no need for an exhaustive investigation. The Historical Tables on OMB’s website reveal that good budget numbers were the result of genuine fiscal restraint. Total government spending increased by an average of just 2.9 percent over a four-year period in the mid-1990s. This is the reason why projections of $200 billion-plus deficits turned into the reality of big budget surpluses.

Republicans say the credit belongs to the GOP Congress that took charge in early 1995. Democrats say it was because of Bill Clinton. But all that really matters is that the burden of federal spending grew very slowly. Not only was there spending restraint, but Congress and the White House agreed on a fairly substantial tax cut in 1997.

To sum things up, it turns out that spending restraint and lower taxes are a recipe for good fiscal policy. This second chart modifies the first chart, showing actual deficits under this small-government approach compared to the OMB and CBO forecasts of what would have happened under Clinton’s tax-and-spend baseline.

Robert Kagan for the Defense

The calls for cutting the federal budget continue to build in Congress as the new GOP members try to make good on their promise to rein in the deficit.  And, right on time, the latest issue of the Weekly Standard features an article by Robert Kagan critiquing the chorus of calls for cuts to military spending. 

I think Kagan’s critique is reasonably fair, certainly more so than others of the recent past.  But his basic premise, that national security spending is unrelated to the national debt, simply is not true.  At the The Skeptics, I address this:

It is of course true that entitlements and mandatory spending pose the greatest threat to the nation’s fiscal health, but $700+ billion [in defense spending] isn’t chump change. The question of what we should spend on the military ought to take into account the trade-offs, an argument that Dwight Eisenhower advanced in his farewell address just over 50 years ago, and that Charles Zakaib and I highlighted last week. (See also James Ledbetter’s discussion on this point.)

Actually, it is a question of fairness, but not the one that [Kagan] proposed. Because security is a core function of government (I think one of the only core functions of government), it would be a mistake to treat military spending as synonymous with spending on, say, farm subsidies. But Kagan’s writings presume that other countries’ governments do not – and should not – see their responsibilities in the same way. Kagan contends that American taxpayers should be responsible for the security of people living in Europe or East Asia or the Middle East. Or anywhere in the world, really… It simply isn’t fair to ask Americans to pay for something that other people should pay for themselves. For reference, the average American—every man, woman and child—spends two and a half times more on national security than the French or the British, five times more than citizens living in other NATO countries, and seven and a half times as much as the average Japanese.

Justin Logan is in the process of authoring a lengthier response for publication, but in the mean time click here to read the full post at The National Interest.

Rep. Brady’s CUTS Act

Rep. Kevin Brady (R-TX) has introduced the Cut Unsustainable and Top-heavy Spending Act, which would cut spending by $44 billion annually.  Brady’s effort moves in the right direction but it is a very modest fiscal reform effort.

The legislation, which Brady calls a “down payment on getting America’s financial books in order,” chooses targets that have already been proposed by the Obama administration or the president’s Fiscal Commission. Therefore, the proposal should have bipartisan appeal. For example, Brady’s bill would cut Pentagon spending and eliminate subsidies to the Corporation for Public Broadcasting.

Many of the targets represent “house cleaning cuts” that would reduce spending on bureaucratic activities such as printing and federal travel. The legislation would also reduce the federal workforce by 10 percent per the Fiscal Commission’s recommendation. While there’s nothing wrong with a little house cleaning, these types of cuts would occur on their own if entire government agencies and programs were eliminated.

Eliminating federal agencies and programs should be the ultimate goal. Annual savings of $44 billion only amounts to about 3 percent of the project budget deficit this year, and less than 10 percent of the annual amount needed to be cut to stabilize the debt by 2020. (See this Cato spending cut plan for more details on what is needed to get our budgetary situation under control.)