Tag Archives: Budget

Commentary

Why do leftists prefer to cut essential services instead of trimming waste?

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Thomas Sowell, an economist for the people
Thomas Sowell, an economist for the people

Conservative/libertarian economist Thomas Sowell explains it.

Excerpt:

Back in my teaching days, many years ago, one of the things I liked to ask the class to consider was this: Imagine a government agency with only two tasks: (1) building statues of Benedict Arnold and (2) providing life-saving medications to children. If this agency’s budget were cut, what would it do?

The answer, of course, is that it would cut back on the medications for children. Why? Because that would be what was most likely to get the budget cuts restored. If they cut back on building statues of Benedict Arnold, people might ask why they were building statues of Benedict Arnold in the first place.

The example was deliberately extreme as an illustration. But, in the real world, the same general pattern can be seen in local, state and national government responses to budget cuts.

At the local level, the first response to budget cuts is often to cut the police department and the fire department. There may be all sorts of wasteful boondoggles that could have been cut instead, but that would not produce the public alarm that reducing police protection and fire protection can produce. And public alarm is what can get budget cuts restored.

The Obama administration is following the same pattern. The Department of Homeland Security, for example, released thousands of illegal aliens from prisons to save money — and create alarm.

The Federal Aviation Administration says it is planning to cut back on the number of air traffic controllers, which would, at a minimum, create delays for airline passengers, in addition to fears for safety that can create more public alarm.

 

He’s not going to do the right thing for America, because he doesn’t see that as his job. He wants to grow government and shrink the private sector.

News

State Department report finds that Keystone XL pipeline is safe for the environment

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The Heritage Foundation reports.

Excerpt: (links removed)

In Washington, a presidential Administration releases news it doesn’t like at 5 p.m. on Fridays. So it pays to pay attention when everyone is leaving work for the weekend.

Late last Friday, the State Department released a positive environmental review of the Keystone XL pipeline. President Obama has been delaying this pipeline—which would carry oil from Canada to refineries in Texas—for more than three years.

The delay has meant that America is still waiting on an additional 700,000 to 830,000 barrels of oil per day from a close ally, not to mention 179,000 American jobs.

Why has this taken so long, when all environmental reports thus far have been positive? Heritage’s Nicolas Loris, the Herbert and Joyce Morgan Fellow, explains:

Given the need for jobs and more oil on the global market to offset high prices, the permit application had been moving along positively with bipartisan support without much attention until environmental activists made blocking the Keystone XL pipeline their issue to rally around for 2011. Although President Obama and the Department of State (DOS) said they’d make a decision at the end of 2011, they ultimately catered to a narrow set of special interests, punting the decision until after the 2012 elections.

The State Department, which is overseeing the pipeline because it crosses a U.S. border, has “already conducted a thorough, three-year environmental review with multiple comment periods,” Loris reported last year.

The review has been comprehensive:

DOS studied and addressed risk to soil, wetlands, water resources, vegetation, fish, wildlife, and endangered species. They concluded that the construction of the pipeline would pose minimal environmental risk. Keystone XL also met 57 specific pipeline safety standard requirements created by DOS and the Pipeline and Hazardous Materials Safety Administration.

This confirms the previous assessment done by the Nebraska government, which concluded that the Keystone XL pipeline was safe for Nebraska’s environment as well.

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Obama’s fiscal cliff deal leaves us on a path to 200% debt to GDP

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From The Hill.

Excerpt:

The nation’s long-term fiscal outlook hasn’t significantly improved following the recent agreement between Congress and the White House over tax and spending issues, according to a new analysis.

The “fiscal cliff” deal, combined with the debt-limit agreement of August 2011, only slightly delays the United States reaching debt-to-gross domestic product levels that would damage the economy and risk another fiscal crisis, according to a report from the Peter G. Peterson Foundation released on Tuesday.

The agreement “may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem,” said Michael A. Peterson, president and COO of the Peterson Foundation.

“The primary goal of any sustainable fiscal policy is to stabilize the debt as a share of the economy and put it on a downward path, and yet our nation is still heading toward debt levels of 200 percent of GDP and beyond,” he said.

The report concludes that the recent round of deficit-reduction measures won’t make major improvements because they fail to address most of the major contributors to the debt and deficit, including rapidly rising healthcare costs. 

[…]At a House Ways and Means Committee hearing last week, lawmakers and budget experts agreed that rising healthcare costs, such as Medicare, must be addressed this year as part of efforts to overhaul the tax code and entitlement programs.

“Until spending in those areas is reduced, tax revenues are increased, or policymakers implement a combination of both, the United States will continue to have a severe long-term debt problem,” the report said.

“Reforms should be implemented gradually, and fiscal improvements must be achieved before our debt level and interest payments are so high that sudden or more draconian reforms are required to avert a fiscal crisis.”

The latest deal that stopped income tax increases for those making $400,000 a year or less may have only improved the burgeoning debt situation by a year.

Scheduled spending cuts from the 2011 budget deal, combined with the fiscal cliff agreement, put the debt on track to reach 200 percent of GDP by 2040, five years later than was projected prior to the passage of the two deals. 

The recent deficit-reduction measure gave the nation an additional year before hitting that 200 percent threshold, the report showed. 

I saw an interesting interview featuring Captain Capitalism in the Washington Times. He thinks that the debt spiral is irreversible.

Excerpt:

DDG: What was your take on the “solution” we saw earlier this month to the so-called fiscal cliff crisis?

Clarey: Band-Aid put on a cut aorta.

DDG: My concern is that inflation is distorting all levels of American society. For example, as prices skyrocket from monetary dilation at the Fed, we have this effect where as Rose Wilder Lane says, everything becomes increasingly more expensive and government starts creating laws and fines just for the purpose of revenue generation. So the formation of a police state and this loss of freedoms is in large part a result of government wanting to get more and more revenues to finance outlays that are being dilated as a result of the inflation they themselves are creating. What’s your take on this?

Clarey: I don’t know if it would be at the police state yet where the federal government comes in and confiscates wealth, as much as it is something much more clandestine. The government likes inflation in that it increases asset prices. Thus when somebody sells an asset – land, stocks, bonds, et cetera – they have to pay a capital gains tax.

Forget whether there was an actual real rate of return for the investor, the government gets to tax the real capital gains and the inflationary capital gains. Inflation also erodes the value of the federal debt, forcing the costs on US treasury holders. However, unless things change, the government will be forced [to cope with] with a simplified problem: Does it inflate its way out of its debts or does it confiscate wealth to pay for it?

I can’t read Paul Krugman and Barack Obama’s minds – if any exist – but I believe they will opt to go the inflationary route to solve the country’s debt problems. If they went the wealth-confiscation route, that would mean nationalizing people’s IRAs, 401(k)s and brokerage accounts much like they did in Argentina and Bulgaria. I fear however, because of their political ideology they have no problems doing both.

I am expecting inflation to continue in the near term, followed by seizing retirement accounts if the Democrats take back the House in 2014. The amnesty of 12 million illegal immigrants should give them that. So, if you have a plan to escape this, you’d better execute it in the two years. The clock is ticking.