United Liberty

Washington doesn’t have a spending problem, according to House Minority Leader Nancy Pelosi (D-CA). During an interview yesterday on Fox News Sunday, the former Speaker of the House told Chris Wallace that Congress has already cut spending and called for more tax revenue to flow to Washington:

House Minority Leader Nancy Pelosi says the tens of billions of dollars of spending cuts under sequestration that kicks in on March 1 can be avoided through eliminating tax subsidies for oil companies.

“The fact is we’ve had plenty of spending cuts, $1.6 trillion in the Budget Control Act. What we need is growth,” Pelosi said in an interview on “Fox News Sunday.” Slashing spending indiscriminately, she said, would hurt growth prospects for the U.S. economy.

“It is almost a false argument to say we have a spending problem,” the California Democrat asserted.

As you can see in the chart below from the Heritage Foundation, there is still a river of red ink following from Washington, Despite what Pelosi said yesterday:

What planet is Pelosi living on?

Don’t look now, but the economic recovery that we’ve been constantly told is upon us may unsurprisingly be fading away. The Commerce Department released less-than-stellar numbers this earlier today showing that gross domestic product (GDP) contracted in the last quarter of 2012:

The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.

The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That’s a sharp slowdown from the 3.1 percent growth rate in the July-September quarter.

Oh, and by the way, you’re taxes have gone up. That’s right, Americans will have less money to spend as the affects of the tax increases that hit at the beginning of the year are felt. When money is removed from the economy, it will translate into slower economic growth or even, given that the economy contracted, a recession.

Rick Santelli, the CNBC contributor whose rant on the floor inspired the Tea Party movement in 2009, summed up the news best:

“Hey Joe,” Santelli said, “when you act like Europe, you get growth rates like Europe, and our discussions with economists sounds like we’re in Europe. They have the same discussions constantly.”

Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.

There aren’t many fiscal policy role models in Europe.

Switzerland surely is at the top of the list. The burden of government spending is modest by European standards, in part because of a very good spending cap that prevents politicians from overspending when revenues are buoyant. Tax rates also are reasonable. The central government’s tax system is “progressive,” but the top rate is only 11.5 percent. And tax competition among the cantons ensures that sub-national tax rates don’t get too high. Because of these good policies, Switzerland completely avoided the fiscal crisis plaguing the rest of the continent.

President Barack Obama and Democrats, as well as a handfull of Republicans, are completely fixated on the raising taxes on top-income earners as part of any “fiscal cliff” deal that is eventually worked out.

The insistence is troubling because the issue at hand isn’t taxes. Sure, the recession and subsequent slow recovery has caused tax revenues to dip, but that is to be expected of any economic downturn. What has led to our current situation is Washington’s addiction to spending.

We hear President Obama and his apologists talk about Clinton-era tax rates, as if that were some sort of “holy grail.” However, Peter Suderman explains that if we’re going to get Clinton-era taxes, we should get Clinton-era spending as well:

Most of us can agree that the Clinton years, which saw growing median incomes as well as tiny deficits and steady economic growth, were economic good times, and we’d all like to see that sort of economic performance repeated. If that’s the case, then why should we limit ourselves to just replicating one tiny fragment of Clinton-era governance—higher tax rates on a fairly small number of earners? Why not replicate other aspects of Clinton’s policy mix as well?

Probably because that would entail mentioning something that Obama’s frequent invocations of the Clinton years always ignore: that Clinton’s spending levels were far, far lower than they have been for the last four years—or than President Obama has called for them to be in the years to come.

That’s true no matter how you measure it.

House Republicans have stood firm on their opposition to President Barack Obama’s proposed tax hikes, which would come at a time when the economy is growing at an anemic pace. Back in August, the House passed a one-year extension of all current tax rates, hoping that Obama and Senate Democrats would come to their senses, reach a  compromise with Republicans and avoid the economic troubles raising taxes would bring in these tough economic times.

Unfortunately, that hasn’t happened. What’s worse was a Washington Post report from September noting House Republicans were preparing to retreat on taxes should President Barack Obama win re-election.

While Republicans are still urging Obama to compromise since raising taxes would hamper an already tepid economic recovery — if not make it worse, House Speaker John Boehner said yesterday that he expects some sort of a deal to be reached during lame-duck session, which will be defined by the outcome of the election:

House Speaker John Boehner doesn’t expect a grand bargain avoiding the fiscal cliff to materialize in a lame duck session of Congress, but that doesn’t mean the country is headed over the edge. Instead, Boehner said Sunday, he thinks Congress and the White House will find a way to punt the looming deadlines on the debt ceiling, the Bush tax cuts and the budget sequester into 2013.