Wash​ing​ton​Watch​.com has done the math.

Government is busy trying to protect us from ourselves. It tosses nearly a million people in jail every year for marijuana offenses. City councils, state legislators, and Congress all add ever more restrictions on cigarette smoking. Legislators demand action to stop steroid use by athletes. And the Senate Finance Committee is considering a “fat tax” on sugared drinks.

This isn’t the first time legislators have considered trying to squeeze a little money out of us while micro-managing our lives. Editorializes the Boston Herald:

Earlier this year Gov. Deval Patrick proposed a 5 percent tax (more if the sales tax is raised) on sweetened drinks and candy bars under the pretext of battling obesity (while thinning out our wallets). Happily we haven’t heard much about it lately. But yesterday on Capitol Hill the Senate Finance Committee heard testimony about helping to fund President Barack Obama’s massive health care expansion in part with a similar tax.

The Congressional Budget Office estimates that a 3‑cent tax per 12-ounce sweetened drink — including sports drinks and iced teas — would bring in $24 billion over four years.

“Soda is one of the most harmful products in the food supply,” said Michael Jacobson, head of the Center for Science in the Public Interest, which gives you some idea of the mindset here. Jacobson would also like to raise taxes on alcoholic beverages.

If the American people don’t start saying no, there won’t be much liberty left to preserve.

Yes, I know. It’s hard to believe. Fannie Mae continues to lose money and, even more surprisingly, isn’t likely to ever pay taxpayers back for all of the billions that it already has squandered. Rather, it says it will need more bail-out funds — probably another $110 billion this year alone.

Reports the Washington Post:

Fannie Mae reported yesterday that it lost $23.2 billion in the first three months of the year as mortgage defaults increasingly spread from risky loans to the far-larger portfolio of loans to borrowers who have been considered safe.

The massive loss prompts a $19 billion investment from the government to keep the firm solvent, on top of a $15 billion investment of taxpayer money earlier this year.

The sobering earnings report was a reminder of the far-reaching implications of the government’s takeover in September of Fannie Mae and the smaller Freddie Mac. Losses have proved unrelenting; the firms’ appetite for tens of billions of dollars in taxpayer aid hasn’t subsided; and taxpayer money invested in the companies, analysts said, is probably lost forever because the prospects for repayment are slim.

But the government remains committed to keeping the companies afloat, because it is relying on them to help reverse the continuing slide in the housing market and keep mortgage rates low.

Even as the government bailout of banks appears to be leveling off, the federal rescue of Fannie and Freddie is rapidly growing more expensive. Fannie Mae said that the losses will continue through at least much of the year and that it “therefore will be required to obtain additional funding from the Treasury.” Analysts are estimating that the company could need at least $110 billion.

Freddie Mac, which has been in worse financial shape than Fannie Mae and has obtained $45 billion in taxpayer funding, will report earnings in coming days.

The response of policymakers in the administration and Congress to this fiscal debacle? Silence. No surprise there, since many of them helped create the very programs that continue to bleed taxpayers dry.

Alas, this isn’t the first time that the federal government has promoted a housing boom and bust. Instead, writes Steven Malanga in Investor’s Business Daily:

This cycle goes back nearly 100 years. In 1922, Commerce Secretary Herbert Hoover launched the “Own Your Own Home” campaign, hailed as unique in the nation’s history.

Responding to a small dip in homeownership rates, Hoover urged “the great lending institutions, the construction industry, the great real estate men … to counteract the growing menace” of tenancy.

He pressed builders to turn to residential construction. He called for new rules that would let nationally chartered banks devote a greater share of their lending to residential properties.

Congress responded in 1927, and the freed-up banks dived into the market, despite signs that it was overheating.

The great national effort seemed to pay off. From mid-1927 to mid-1929, national banks’ mortgage lending increased 45%. The country was becoming “a nation of homeowners,” the Times exulted.

But as homeownership grew, so did the rate of foreclosures, from just 2% of commercial bank mortgages in 1922 to 11% in 1927.

This happened just as the stock market bubble of the late ’20s was inflating dangerously. Soon after the October 1929 Wall Street crash, the housing market began to collapse. Defaults exploded; by 1933, some 1,000 homes were foreclosing every day.

The “Own Your Own Home” campaign had trapped many Americans in mortgages beyond their reach.

Financial institutions were exposed as well. Their mortgage loans outstanding more than doubled from the early 1920s to 1930 — $9.2 billion to $22.6 billion — one reason that about 750 financial institutions failed in 1930 alone.

The only serious option is to close down all of the money-wasting federal programs and laws designed to subsidize home ownership. A stake through the hearts of Fannie Mae, Freddie Mac, Federal Housing Administration, and Community Reinvestment Act, to start. Otherwise the cycle is bound to be repeated, again to great cost for the ever-suffering taxpayers.

Photo by Peter Holden Photography for AEI

I was a panelist at an American Enterprise Institute forum today discussing the proliferation of federal tax credits, particularly for low-income families.

AEI scholars Kevin Hassett, Larry Lindsey, and Aparna Mathur have a draft paper that looks at the idea of consolidating current individual credits into one supercredit. The idea would be to simplify the system and reduce the economic distortions created by these credits, which are valued at about $170 billion in 2009.

My observations included:

• Obama’s Make Work Pay credit is valued at about $60 billion per year, much of which is “refundable.” (That means it is partly a spending increase not a tax cut). Coincidentally, Obama’s proposed tax hikes for higher-income individuals are also about $60 billion per year. So Obama is damaging the economy with “Make Work Not Pay” tax increases at the top in order to fund dubious work incentives at the bottom. It makes no economic sense.
• The AEI scholars provide interesting calculations about how we could make the $170 billion of redistribution in these credits simpler. That’s fine as far as it goes, but I’d like to end the redistribution altogether. Let’s provide a large basic exemption in the tax code for folks at the bottom, but we don’t need any complex credits. Instead, let’s repeal federal policies that damage the budgets of struggling families at the bottom, such as import barriers that raise the price of clothing and federal milk cartels that raise the price of dairy products.
• Here’s my compromise redistribution plan. Let’s chop the $170 billion in tax credits in half and use the extra funds to cut the corporate income tax rate. With a purely static calculation, that would allow cutting the corporate rate from 35% to 25%. Assuming some behaviorial feedbacks, the $85 billion in credit savings would easily allow us to reduce the corporate rate to 20% or so.
• What do corporate taxes have to do with the workers who currently get all these tax credits? As Hassett and Mathur explained in a 2006 paper, corporate tax cuts would increase investment, improve productivity, and that in turn would raise wages of average American workers. We don’t need President Obama’s fancy new Make Work Pay credits. Instead, we need to cut the corporate tax rate to make the economy boom and raise worker’s wages and incomes in the private marketplace.

Bashing big business about “shipping job offshore” may be good politics, but the real-world evidence shows that Obama’s tax hike on American multinationals is spectacularly misguided. I would say it is so bad that it leaves me speechless, but I did manage to pontificate for almost nine minutes in this new video:

One of my goals is to make sure viewers actually understand an issue after watching, so the goal is education rather than just providing soundbites against a particular proposal. As always, feedback is appreciated.

That didn’t take long. Tad DeHaven yesterday took a look at the president’s truly pitiful half percent cut (I hesitate to even use the word) from $3.4 trillion in planned spending. But the administration isn’t likely to get even that. Alas, no one seems to have talked to congressional Democrats first.

Reports the Washington Post:

President Obama’s modest proposal to slice $17 billion from 121 government programs quickly ran into a buzz saw of opposition on Capitol Hill yesterday, as an array of Democratic lawmakers vowed to fight White House efforts to deprive their favorite initiatives of federal funds.

Sen. Dianne Feinstein (D‑Calif.) said she is “committed” to keeping a $400 million program that reimburses states for jailing illegal immigrants, a task she called “a total federal responsibility.”

Rep. Mike Ross (D‑Ark.) said he would oppose “any cuts” in agriculture subsidies because “farmers and farm families depend on this federal assistance.”

And Rep. Maurice D. Hinchey (D‑N.Y.) vowed to force the White House to accept delivery of a new presidential helicopter Obama says he doesn’t need and doesn’t want. The helicopter program, which cost $835 million this year, supports 800 jobs in Hinchey’s district. “I do think there’s a good chance we can save it,” he said.

The news releases began flying as Obama unveiled the long-awaited details of his $3.4 trillion spending plan, including a list of programs he wants to trim or eliminate. Though the proposed reductions represent just one-half of 1 percent of next year’s budget, the swift protest was a precursor of the battle Obama will face within his own party to control spending and rein in a budget deficit projected to exceed $1.2 trillion next year.

Oh well. Billions, trillions, quadrillions. As a buddy of mine says: “It’s only money!”

Tad DeHaven does a fine job of exposing the mere window dressing that are the cuts in President Obama’s FY 2010 budget proposal. I’ll not add much to that other than to say that while Tad gives Obama’s predecessor a deserved hard time for his own paltry efforts to rein in spending, President Bush’s Education Department budgets looked downright Draconian compared to what the Obama team just produced.

Bush’s FY 2009 ED budget proposal included nearly $3.3 billion in cuts, generated by eliminating 47 programs. Given the dismal performance of all federal education efforts, this was obviously far too little, but compare it to Obama: His proposed budget would cut just twelve measly programs from ED’s budget, for a puny savings of about $551 million. And if that doesn’t give you a powerful feel for just how unserious this administration seems to be about saving taxpayers even a thin dime or two, look what program is not among those proposed to be cut:

EDUCATIONAL, CULTURAL, APPRENTICESHIP, AND EXCHANGE PROGRAMS FOR ALASKA NATIVES, NATIVE HAWAIIANS, AND THEIR HISTORICAL WHALING AND TRADING PARTNERS IN MASSACHUSETTS

The purpose of this program is to develop culturally based educational activities, internships, apprentice programs, and exchanges to assist Alaska Natives, native Hawaiians, and children and families living in Massachusetts linked by history and tradition to Alaska and Hawaii, and members of any federally recognized Indian tribe in Mississippi.

For this whale of a waste – and so many others in the ED budget – to have survived portends nothing but ill for the nation. Nothing but ill.