Deficit

State of the Union Promises Millennials the Short End of the Stick

Contained within last night’s speech were many examples of how young people lose out in the big-government status quo.

It’s easy to lampoon the State of the Union address. A speech full of pomp and circumstance but relatively devoid of specifics is difficult to take seriously.

Few can see through the charade more clearly than younger generations. Marketers and ad execs know that traditional TV marketing techniques are ineffective with Millennials, so it’s obvious last night’s promises are liable to fall particularly flat with 20-somethings.

Young people today face a government that is more bloated, more invasive, and less efficient than ever. Tuesday night’s speech promised to continue this status quo.

The State of the Union was a study in contrasts and omitted information, and young people can see right through it. The President praised a low unemployment rate – leaving out the fact that the job-seeking numbers are low because many people have given up on finding work. He touted a reduced deficit – while praising the end of the Budget Control Act and sequester that led to the reduction.

Spending Proposals Down in 112th Congress, Fiscal Irresponsibility Still a Washington Habit

It’s no secret that Washington is addicted to spending. Though, it’s true that the budget deficit is expected to decline this year, after four consecutive years of $1+ trillion deficits, the decline is spending isn’t because of any actual spending restraint, it’s a result of gridlock in government.

But declining budget deficits don’t reflect the desires of many members of Congress. According to a new report from the National Taxpayers Union Foundation (NTUF), the net-cost of legislation introduced in 112th Congress (proposed increases less proposed cuts) would have increased the federal budget by $1.3 trillion.

Despite the large increase in federal spending proposed last year, the “BillTally” report has some encouraging findings. Demian Brady, director of research at NTUF, noted that there was a increase in legislation to cut spending.

“The 112th Congress saw a sharp rise in the number of bills to reduce federal spending, with 221 introduced in the House and 127 in the Senate,” wrote Brady. “This is the highest number of spending-cut bills NTUF has recorded since the 105th Congress (1997-1998) when there were 265.” The report also found that legislation to increase federal spending is “being introduced at a much slower pace than in the previous Congress.”

Tax Breaks Are Not Tax Expenditures

budget

“Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property.” — John Locke, Second Treatise of Government (1690)

What is “spending through the tax code?”  This is an important question in light of the Obama FY 2014 budget proposal finally unveiled last week.  We already know it raises taxes by more than $1 trillion.  Much of this is done by eliminating so-called “tax expenditures.”

Here is how the Joint Committee on Taxation defines a tax expenditure:

Tax expenditures are defined under the Congressional Budget and Impoundment Control Act of 1974 (the “Budget Act”) as “rev­enue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross in­come or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.”

CBO report shows high-cost per stimulus job

President Barack Obama and Democrat have time and time again repeated the talking point that the $831 billion American Recovery and Reinvestment Act, passed in early 2009, helped save the economy, which was suffering the effects of a severe recession, and helped create jobs.

However, a new report from the Congressional Budget Office (CBO) via James Pethokoukis shows that the stimulus bill was largely wasteful considering its affects on unemployment, with a high cost for what jobs were created:

When [the American Recovery and Reinvestment Act] was being considered, the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation estimated that it would increase budget deficits by $787 billion between fiscal years 2009 and 2019. CBO now estimates that the total impact over the 2009–2019 period will amount to about $831 billion.

By CBO’s estimate, close to half of that impact occurred in fiscal year 2010, and more than 90 percent of ARRA’s budgetary impact was realized by the end of March 2012. CBO has estimated the law’s impact on employment and economic output using evidence about the effects of previous similar policies and drawing on various mathematical models that represent the workings of the economy. …

On that basis CBO estimates that ARRA’s policies had the following effects in the first quarter of calendar year 2012 compared with what would have occurred otherwise:

– They raised real (inflation-adjusted) gross domestic product (GDP) by between 0.1 percent and 1.0 percent,

– They lowered the unemployment rate by between 0.1 percentage points and 0.8 percentage points,

McClintock: Squaring Social Security and the Payroll Tax Cut

As Congress debates the extension of the payroll tax cut, a measure that the White House said would stimulate the economy and create jobs, I offered my own thoughts on alternatives that would encourage economic growth and protect Social Security.

Topping the list of unfinished business this year is the impending collision of two closely related crises: the expiration of the payroll tax cut and the acceleration of Social Security’s bankruptcy.

Last year, Congress voted for a payroll tax cut that averages roughly $1,000 for every working family in America.

As warned, it failed to stimulate economic growth and it accelerated the collapse of the Social Security system. But as promised, it threw every working family a vital lifeline in tough economic times.

We need to meet three conflicting objectives: we need to continue the payroll tax cut; we need to stimulate real economic growth and we need to avoid doing further damage to the Social Security system.

But first, we need to understand that not all tax cuts stimulate lasting economic growth. Cutting marginal tax rates does so because this changes the incentives that individuals respond to. Cutting infra-marginal tax rates - such as the payroll tax - does not.

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.”

State of the Union Live-Blog

Doug Mataconis, Brett Bittner, Mike Hassinger, Tom Knighton and Jason Pye will be live-blogging President Barack Obama’s State of the Union address and the Republican response given by Rep. Paul Ryan (R-WI). We’ll kick things off around 8:30pm (EST).

Our friends at the Cato Institute are also live-blogging this evening.

You can full text of President Obama’s prepared speech here. Excerpts from Rep. Ryan’s speech are available here.

Welcome Instapundit readers!

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.

Cutting Taxes = Increasing Revenue

Around 150 BC, Emperor Ching Ti came to power in China and immediately faced a major problem: his treasury was empty.

Taxes were very high, but no real revenue was coming in. That’s because the system of taxes at that time was an early form of income tax that centered on the government taking a large percentage of a farmer’s crops.

So Ching Ti did something bold and innovative: he cut taxes.

Overnight, taxes went from over 50% down to about 3%. Farmers, who had fled to the hills to escape draconian tax rates, now came home and began farming again. To make a long story short, Ching Ti’s greatest problem while governing was trying to keep all the grain in his barns from spoiling.

It seems that ancient Chinese history is good for more than just cutesy script on a fortune cookie.

Cato Scholars Respond to the 2014 State of the Union Address

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Cato Institute scholars Alex Nowrasteh, Aaron Ross Powell, Trevor Burrus, Benjamin H. Friedman, Simon Lester, Neal McCluskey, Mark Calabria, Dan Mitchell, Justin Logan, Patrick J. Michaels, Walter Olson and Jim Harper respond to President Obama’s 2014 State of the Union Address.


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