budget

Some thoughts on the looming government shutdown

It looks like we’re only 10 to 12 hours away from a shut down of the federal government. Neither side has come to an agreement on what the final budget bill would look like, though it looks like another Continuing Resolution – a measure that would carry over spending from the previous year for a specified amount of time – will be taken up in the Senate. It passed the House yesterday with some Democratic members support it (Georgia Dems John Barrow and Sanford Bishop were among the affirmative votes).

Here are some thoughts and observations on the possible shutdown:

- If Republicans make this about social issues, as it is being suggested they are, they will take a hit. Republicans are right to object to taxpayer funding of abortion. However, social issues are not on the mind of the electorate. This angle, as principled as it may be, is a political loser. The focus should be on how Democrats and President Barack Obama cannot find any program worth cutting at a time when we are running a $1.6 trillion deficit.

- Republicans holding out for $31 billion in spending cuts is like putting a band-aid on a gunshot wound. As my good friend Doug Mataconis said today, wasting political capital on a short-term budget solution is pretty dumb. Rep. Paul Ryan (R-WI) just presented an ambitious, though intriguing, budget plan that is going to take an enormous amount of political will and capital to push through, even if there are compromises along the way. Not to mention that the current budget fix only takes us through the end of the current fiscal year. The 2012 budget battle is next up and the ground work is just being laid into place.

Ryan Plan? Ho-hum!

So Paul Ryan announced his plan to balance the budget, cut trillions from proposed spending, and put America on a path to paying off the deficit.  Republicans around the country are hailing it as the second coming of Ronald Reagan, and Democrats continue to call any reasonable idea extreme.

Me?  I am not at all excited.

Let me explain.  Paul Ryan’s proposal continues to run a deficit for the next 26 years.  That means that even if the plan was adopted as is, and we know it won’t be, the best we can possibly hope for is a deficit that continues to swell for 26 more years before the first dollar is paid off.

Add to this that his projections also rely on unemployment reaching 3%, and you can quickly see that the the whole thing is just not that realistic.

I am glad that Representative Ryan has taken some leadership where there has been none, and I do not want to beat up on the guy, but this plan just isn’t enough.  It is time to get real.  And it is time to make some really tough choices.

We shouldn’t be looking at 26 years of additional deficits as the best we can do.

SOTU: Obama wants to cut deficit while “investing”

If you were looking for a substantive discussion of the problems facing the United States, last night’s State of the Union address was a let down.

President Barack Obama spent 62 minutes speaking in mostly generalities and explaining to us how great government spending is, but also warning the Congress that he will veto bills containing earmarks – special projects that are inserted into legislation that go bypass the normal budget process. President Obama also pledged to take measures to cut spending by enacting a five-year freeze on non-defense discretionary spending. While he may consider this to be some great feat, Obama’s proposal will only save $400 billion during that time. This is a drop in the bucket compared to the $6 trillion in budget deficits projected by the Congressional Budget Office.

Obama noted in his speech that non-defense discretionary spending represents a relatively small portion of the budget – around 12 percent, using his numbers, and added that “we have to stop pretending that cutting this kind of spending alone will be enough.”

Don’t Trust Those CBO Numbers

The Washington Post, of all places, explains today why the CBO numbers released yesterday should not be trusted:

The latest estimate of what health-care reform would mean for the government’s finances was such a hot document Thursday that at times the Congressional Budget Office’s Web site couldn’t handle the traffic.

But as much as the 25-page “score” of the legislation was treated as holy writ in Washington — Democrats eagerly flagged its conclusion that the package they aim to pass this weekend would cut the deficit by $138 billion over the coming decade — the reality is considerably messier.

Budget experts generally have high praise for the work of CBO analysts, the non-ideological technocrats who crunch the numbers to estimate the fiscal impact of legislation. But their work is often more art than science, and although the forecasts that accompany legislation are always filled with uncertainty, this one contains more than most.

One major reason is the sheer complexity of the legislation. If Congress were considering, say, a 20-cent increase in the gasoline tax, the CBO could easily analyze how that would affect gas consumption and do some simple math to calculate how much money it would raise. The same goes for figuring out the cost of legislation that offers a new benefit, such as an expansion of food stamps.

Is The PAYGO Rule Fiscally Responsible?

On Thursday, the US Senate voted to restore pay go rules on a party line vote. President Obama praised the restoration of the PAYGO rule. Obama supporter Andrew Sullivan used the vote as a club to attack Republicans. Republicans opposed the restoration of pay go calling it a backdoor attempt to raise taxes. However, the PAYGO rule is at best a dual edged sword. While PAYGO is an excellent for controlling and limiting deficit spending, it does very little to limit the size and growth of the Federal government.

The PAYGO or “pay as you go” rule simply calls for any increase of mandatory spending or reduction in revenue (ie. taxes) must be offset by decreases in discretionary spending or increases in revenue (taxes). Mandatory spending is things like Medicaid, Medicare, Social Security, pay for Federal employees, paying debt, and other welfare programs such as Food Stamps and Veterans benefits. Mandatory spending is nearly 60% of the Federal budget. Discretionary spending is everything that Congress has to pass legislation to authorize.

How PAYGO Is Fiscally Responsible:

Obama proposes freeze on non-defense discretionary spending

Politico is reporting that President Barack Obama will call for a freeze on non-defense discretionary spending in the run up to his State of the Union address to Congress on Wednesday:

President Obama plans to announce a three-year freeze on discretionary, “non-security” spending in the lead-up Wednesday’s State of the Union address, Hill Democratic sources familiar with the plan tell POLITICO.

The move, intended to blunt the populist backlash against Obama’s $787 billion stimulus and an era of trillion-dollar deficits — and to quell Democratic anxiety over last Tuesday’s Massachusetts Senate election — is projected to save $250 billion, the Democrats said.

The freeze would not apply to defense spending or spending on intelligence, homeland security or veterans.
[…]
The move would likely be welcomed by Blue Dog Democrats and deficit hawks, but party liberals would likely bridle at baselining a wide array of popular domestic spending programs.

It sounds like a big deal, but this will only save $250 billion over the next 10 years. Non-defense discretionary spending makes up only a small portion of the overall annual budget. In the $3.5 trillion FY 2010 budget, only $477 billion is non-defense discretionary spending. That’s around 14% of total spending and less than half of total discretionary spending (including defense).

This freeze would not effect “mandatory spending,” including Medicare, Medicaid and Social Security, which accounts for over $2 trillion in spending.

Ron Paul Explains Earmarks to Cavuto on Fox

See Video

Dr. Paul explains the truth behind earmarks and the responsibility Congress has to earmark every single dollar.

Intra-Party rift on funding bill shows serious cracks in Democrat Party’s unified front

Obama and Pelosi

The mainstream media spends an inordinate amount of time reporting on the conservative/grassroots versus “Establishment” rift within the Party. Meanwhile, Democrats tend to lock arms and tackle policy initiatives in a unified manner — until now.

Congress avoided a government shutdown last night when they passed a $1.1 trillion spending bill to keep the government open through the end of the year. For a moment, it looked like Massachusetts Senator and liberal darling Elizabeth Warren would be the face of the government shutdown.

First, let’s take a look at the notion of a government shutdown. When Senator Ted Cruz pushed a government shutdown last year, it was the end of the world for the media. In reality, not many Americans realized the government even shuttered its doors.

Kevin Glass at Townhall has a great piece about how the media covered the possible Warren-fueled shutdown versus the Cruz-fueled shutdown of October 2013. Glass writes:

During last year’s government shutdown when Republicans and Democrats couldn’t come to a compromise on spending provisions to continue to fund the government, the media portrayed it as Ted Cruz’s fault - Ted Cruz’s shutdown, because he wanted to defund Obamacare. This year, Sen. Elizabeth Warren wants to reject the bipartisan spending compromise to get rid of business-friendly deregulatory provisions.

What? The new Republican majority wants to keep the Democrat-appointed CBO Director

CBO Director Douglas Elmendorf

Since I’ve accused the Congressional Budget Office of “witch doctor economics and gypsy forecasting,” it’s obvious I’m not a big fan of the organization’s approach to fiscal analysis.

I’ve even argued that Republicans shouldn’t cite CBO when the bureaucrats reach correct conclusions on policy (at least when such findings are based on bad Keynesian methodology).

So nobody should be surprised that I think the incoming Republican majority should install new leadership at CBO (and the Joint Committee on Taxation as well).

So why, then, are some advocates of smaller government – such as Greg Mankiw,Keith HennesseyAlan Viard, and Michael Strain – arguing that Republicans should keep the current Director, Doug Elmendorf, who was appointed by the Democrats back in 2009?

Just what we need: Flights even more pricey due to asinine bipartisan blunder. Thanks, Congress!

Shortly after House Budget Committee Chairman Paul Ryan (R-WI) reached a budget deal in December with his Senate counterpart, Patty Murray (D-WA), he declared that the agreement “reduces the deficit — without raising taxes.” Well, that depends on your definition of a tax.

Thanks to the Ryan-Murray budget deal, the fee tax passengers pay to fly to fund the Transportation Security Administration (TSA) — known as the “September 11th security fee” — more than doubled on Monday, from $2.50 to $5.60 per one-way flight:

The current fee is $2.50 for a non-stop flight or $5 for a connecting flight. The new fee will be $5.60 for all flights, with any connection longer than four hours counting as a separate flight.
[…]
Congress agreed to the increase in December to raise $12.6 billion to cut the deficit. TSA estimates the hike will generate $16.9 billion more than current collections.

“In accordance with federal law, the revenue generated from the security fee will be deposited in the general fund of the Treasury,” said David Castelveter, a TSA spokesman. “The revenue is to be used to offset TSA costs for providing civil aviation security services, after stipulated amounts are applied to reduction of the federal deficit.”


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