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December 31, 2012

Fiscal Cliff -- Just Theatrics?

With the so-called 'fiscal cliff' looming, Matt Smith of CNN*Politics reported earlier this evening, "The fiscal cliff is nigh; Senate still talking, House won't vote." The lede of his story:

"The feared fiscal cliff was at hand Monday night, with nothing expected to pass Congress before a combination of tax increases and spending cuts starts to kick in at midnight.

"A deal to avert that combination, which economists warn could push the U.S. economy back into recession, was "within sight" on Monday afternoon, President Barack Obama said. And in the Senate, Minority Leader Mitch McConnell told members that they were "very, very close" to a deal, having worked out an agreement on taxes."

Two weeks ago, however, James Pethokoukis posted a chart (below) at AEIdeas, the blog of the American Enterprise Institute showing "why JPMorgan calls the fiscal cliff 'nothing but theatrics'. Pethokoukis explains the chart this way:

"Economist Michael Feroli of JPMorgan makes a great point in a new report about the fiscal cliff. Almost whatever the outcome, he points out, it will do little to nothing to change the nation’s lethal long-term budget trajectory. Focusing, as the current negotiations do, on a completely arbitrary ten-year budget window is a complete distraction. The national debt will still be rocketing higher."

In case the chart needs further clarification, Pethokoukis includes the following explanation in the economist's own words, which were (emphasis in the original):

"Thus, the ten-year horizon may bias policymakers toward policy options that do little to address the projected explosion in debt coming in fifteen years. We’ll continue to closely track the fiscal cliff theatrics, more because of how the outcome could affect near-term growth rather than the implications for long-run sustainability; the focus on the ten-year window almost guarantees that longer-run sustainability will not be attained in the current budget battle."

Speaking of theatrics and optics, why was it necessary for the President to have a "background of citizens" standing behind him during his speech about the status of the 'fiscal cliff' this afternoon (watch especially the first few seconds of the video in this ABC News story? Inquiring minds would like to know! Should one assume the 2012 presidential campaign hasn't ended?

UPDATE (12/31/12): The Washington Post's Lori Montgomery et al reported at 9:01 P.M. this evening that "Obama, Republicans reach deal on fiscal cliff; Senate vote expected tonight." Their lede:

"President Obama and Senate Republicans reached a sweeping deal late Monday that would let income taxes rise significantly for the first time in more than two decades, fulfilling Obama’s promise to raise taxes on the rich and averting the worst effects of the “fiscal cliff.”

"Vice President Biden arrived at the Capitol just after 9 p.m. to explain the details of the pact he negotiated with Senate Minority Leader Mitch McConnell (R-Ky.). A Senate vote on the package could be held by the midnight deadline, Democratic aides said. The Republican-controlled House will begin considering the bill on Tuesday, with a final vote expected in the next day or two."

December 30, 2012

Still Spending Like Spendoholics

While the Congress and the President are now in the midst of resolving the so-called "fiscal cliff," and although the federal government borrows north of 33% of every dollar spent, The Hill newspaper reported less than two weeks ago, "A House-Senate deal on defense legislation omits a GOP-backed plan to thwart military purchases of biofuels." (HT John Lott's blog, 12/25/12)

According to Zack Colman, who reported the story for The Hill:

"Republicans in the Senate and the House had previously added amendments to the authorization bills that blocked the military from spending on biofuels.

"They argued the fuels were too expensive with sequestration set to shave $500 billion from the Pentagon's budget through the next 10 years. And others, such as Sen. James Inhofe (R-Okla.), said the Energy Department — not Defense (DoD) — should be investing in such fuels."

It really is hard to find words to describe the ways that Congress and the President finds to waste our tax dollars. Or, is that our borrowed dollars?

UPDATE (12/30/12): To see this Growls as a cartoon by the inimitable Michael Ramirez, click here.

December 29, 2012

Redistributive Politics and Zero-Sum Assumptions

The inimitable P.J. O'Rourke had one of his usual funny yet thought-provoking opinion pieces in Friday's Wall Street Journal advising the President that "zero-sum doesn't add up." He also asks, "Is life like a pizza, where if some people have too many slices, other people have to eat the pizza box?"

The entire op-ed is worth reading, but the morsel for me were these two paragraphs:

"While redistribution—or "plagiarism," as we writers call it—is a bad idea, zero-sum is even worse. Zero-sum assumptions mean that a country that doesn't pursue a policy of taking things from other countries is letting its citizens down. That's pretty much the story of all recorded history, none of which needs to be repeated. It has taken mankind millennia to learn that trade is more profitable than pillage. And we don't have to carry our plunder home in sacks and saddlebags when we're willing to accept a certified check.

"The Chinese don't seem to understand this yet. They think trade is a one-way enterprise, the object of which is for China to have all the world's money. They've got most of ours already. Mr. President, validating China's economic notions isn't a good thing."

O'Rourke closes by writing, "When you embrace a belief in the zero-sum nature of what's under the Christmas tree and propose to redistribute everything that's in our Christmas stockings, you're asking the world to go sit on the Grinch's lap instead of Santa's."

December 28, 2012

Clinton Era Spending

In a short paper posted at the Mercatus Center, Veronique de Rugy, senior research fellow, writes, "There is a lot of talk about going back to Clinton-era tax rates to achieve fiscal solvency. But how about going back to Clinton-era spending levels, too?" She points out, for example:

"During his two terms in office, President Clinton reduced spending as a share of gross domestic product from 21.0 percent of GDP in fiscal year 1994 to 18.2 percent in 2001. Today, spending stands at 24.3 percent of GDP."

Ms. de Rugy explains it this way:

"According to the Office of Management and Budget, Obama’s two-term average spending level is projected at 23.4 percent of GDP, as opposed to 19.6 percent for Clinton. During his two terms, Clinton grew spending by 12.3 percent in real terms—a sharp contrast with the Reagan years and the Bush years.

"When Clinton left office in January 2001, total spending was close to $2 trillion, and the federal government registered a surplus of $142 billion in real terms. In fiscal 2012, federal spending was $3.2 trillion, and our deficit was $1.1 trillion.

"For all the talk about returning to Clinton-era policies, the president is disappointingly silent about his predecessor’s spending levels. To be fair, the only way that we could go back to those spending levels is if Congress finally reformed Social Security, Medicare, and Medicaid. Reforming those entitlement programs is also the only way to put the United States back on a sustainable fiscal path."

The chart below is from Ms. de Rugy's short Mercatus paper:

Here is a more detailed explanation; it appeared as a column in the Washington Examiner. You can also download the data from the link at the top.

December 23, 2012

Best Wishes for a Merry Christmas

Over the next few days, El Growler Grande will be visiting family out of town. I wish ACTA members and all readers of Growls a blessed Merry Christmas. I hope to be back in time to do a bit of growling before the start of the New Year.

December 21, 2012

Taxpayers Take Loss as Government Bails on GM

At the National Taxpayers Union's blog, Government Bytes, on Wednesday, Doug Kellogg reports the government is closing it's bailout of Government Motors (oops, General Motors). According to Kellogg:

"The Treasury Department announced their exit strategy from the GM auto bailout today, and the bill taxpayers will receive will be in the billions.

"According to the Detroit News, if Treasury sells their remaining shares at the current market price, taxpayers would lose $13 billion on the sale. ZeroHedge.com puts the total cost to taxpayers at more than $40 billion.

"Needless to say, taxpayers got run over by the the government and powerful special interests. The question that remains is: will this all just happen in the future when, once again, the unsustainable business models and benefits of these companies drive them into a ditch."

The Detroit News, in their story, reported that:

"The exit timetable signals the end of one of the most extraordinary government interventions in the U.S. economy in history — the rescue and partial nationalization of two U.S. automakers and their finance arms supported by two U.S. presidents.

"Still, taxpayers will almost certainly lose billions of dollars in the $49.5 billion GM bailout - and the government would need to sell its remaining shares for about $70 each to break even. If the government sold the rest of its stock at current prices, taxpayers would lose more than $13 billion. But profits from the bank and AIG bailouts will largely offset the auto bailout losses."

Meanwhile at Forbes, Steve Schaefer adds:

"The announcement comes just days after the Treasury Department sold its remaining stake in AIG to exit its equity position in the insurer the government rescued in 2008.

"GM will buy Treasury’s initial slug of 200 million shares for $27.50 apiece, raising $5.5 billion and leaving taxpayers with a stake of 300.1 million shares, or slightly more than 19%,  worth $8.3 billion at that price. The remaining position will be sold over a period of time, beginning as soon as January 2013. A similar strategy was used to sell the Treasury’s stake in Citigroup in 2010.

"The government put $49.5 billion into the automaker in 2008 and 2009, and says it has recovered more than $28.7 billion of that investment including the proceeds from the sale announced Wednesday and those from GM’s 2010 initial public offering, which priced shares at $33 apiece."

An editorial in today's Washington Examiner asserted that "GM is alive and taxpayers got ripped off." Further, they wrote the bailout "didn't turn around America's manufacturing sector either. Since July of this year, the U.S. economy has lost, not gained, 26,000 manufacturing jobs," but added:

"No, what the bailout did was save Obama's allies in the United Auto Workers, whose "sacrifices" amounted to putting all of the pain on the company's new hires while protecting existing employees from losing the pay and benefits that helped make the company uncompetitive in the first place. People who actually invested money in the company took a bath. Just like the taxpayers now.

"That and the bailout gave Obama a persuasive talking point for voters in Rust Belt states Ohio and Pennsylvania.

"But it did cost taxpayers some dimes. About 310 billion of them, in fact."

At the same time, however, 24/7 Walll Street reported today:

"Profit-sharing bonuses for United Auto Workers’ members at Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) are expected to be at least as large as last year’s payout at General Motors and larger than the year-ago bonuses paid at Ford. Approximately 55,000 GM hourly workers and 40,000 Ford employees are in line for the payments. (emphasis added)

"GM workers can expect bonuses of between $5,500 and $7,000, and Ford’s employees could receive a payment of more than $8,000 each, according to a report in The Wall Street Journal. The payments are based on a formula that gives workers a $1 bonus for every $1 million in North American operating profit at the two companies."

Finally, in a press release yesterday, the Competitive Enterprise Institute said:

"It is good news the government is winding down its misguided involvement in Government Motors. It has announced an 15-month plan to divest its stock. It also is good news the auto industry is expanding – though most of the growth has been enjoyed by foreign automakers who have built plants in right-to-work Southern states and had nothing to do with the bailout.

< . . . >

"What we do know is it is long past time for the Obama administration to stop meddling in this or any other industry. We know its meddling – such as the Corporate Average Fuel Economy Standards – will harm GM's top-selling Buicks, Cadillacs, and trucks and lighter vehicles and more vehicle deaths. We know that after the bailout, GM added less than 10,000  net new jobs, and that the bailout perhaps indirectly destroyed as many as 100,000 mostly blue-collar jobs through the administration’s insistence on rapid closures of auto dealerships. We do know the administration’s policies in Michigan favored the United Auto Workers over bondholders, stockholders – including the American people – employees and others.

"And we do know, once and for all, this is not the path to economic recovery."

And economic recovery is needed to get the country on the path to economic growth.

December 20, 2012

Commonwealth Budget Still Not Under Control

In a story for the Watchdog.org's Virginia Bureau, Kathryn Watson writes:

"Gov. Bob McDonnell has yet another Christmas gift for taxpayers: He plans to spend more of your hard-earned money and issue more debt to saddle your children’s generation.

"McDonnell’s budget amendments for 2014 and a new report on state spending from 2003 to 2012 have a running theme. The former is a blueprint for spending more taxpayer dollars, the latter is proof that the commonwealth is already spending said dollars at a rate faster than inflation and population growth."

According to Watson:

"While McDonnell proposed $524 million in agency savings and cuts in his budget amendments this week, he still managed to add $735 million in new spending, and $200 million net, to the budget. Never mind that he requested $200 million in new bonds for improving water quality, adding to the state’s roughly $64 billion debt."

At Bacon's Rebellion on Monday, Jim Bacon adds:

"Over the last decade, Virginia’s operating budget increased by $15.4 billion (62%) — a 35% increase in general funds and an 86% increase in non-general funds. When controlling for growth in population and inflation, total budget growth was 18% over the ten-year period.

"So says “The Review of State Spending: 2012 Update” released November by the Joint Legislative Audit and Review Commission (JLARC). After adjustments, General Fund spending actually declined 1% over the decade but non-general fund spending more than made up the difference."

The following graphic was included in Bacon's blog post; it comes from the JLARC report on spending.

The report by the Joint Legislative Audit and Review Commission (JLARC) is required by Section 30-58.3 of the Code of Virginia. It covers 10 years, and is the 12th in a series. The latest report, for FY 2003-FY2012, includes such key findings as:

  • "Overall budget growth was largely the result of growth in non-general funds in FYs 2008-2011, led in part by an infusion of federal stimulus funds in FYs 2010-2011. (pp. 7-10)"
  • "The ten largest state agencies (of 151 agencies) accounted for 70% of the entire state budget in FY 2012 and 73% of all budget growth between FYs 2003 amd 2012. (pp. 11-12)"
  • "Growth in budget programs was also concentrated in a few large core programs: nine programs (of 196) in health care, education, and transportation accounted for 78% of total budget growth over the ten-year period. (p. 17)"

The governor's press release announcing all proposed amendments to the 2012-2014 budget is here. We growled after the release of previous JLARC reports on state spending, including April 19, 2011 and March 10, 2008.

The good news is the General Assembly is getting better at keeping spending within the limits of inflation and population increases.. The bad news is they still have a ways to go.

December 19, 2012

On the Latest 'Budget Deal'

In an editorial today, the Wall Street Journal says: "Higher taxes now for notional reform later is worse than nothing." The lede paragraph pretty much says it all:

"It's clear by now that the budget talks are drifting in a drearily familiar Washington direction: Tax and spending increases now, in return for the promise of spending cuts and tax and entitlement reform later. This is a bad deal for everyone except the politicians who want more money to spend."

On the matter of tax reform, the Journal editorial says:

"What about tax reform next year? A final judgment on this prospect depends on the fine print, but it's already looking grim. The GOP has prepared the ground for a genuine tax reform, on the Simpson-Bowles model, that lowers rates in return for fewer deductions. In what is shaping up as this budget deal's prototype, tax reform looks like it means both higher rates and fewer deductions.

"This isn't reform. It's another tax increase next year disguised as reform. The Fortune 500 CEOs who are lobbying Republicans don't mind because they hope to get a cut in the corporate tax rate. But small businesses will be stuck with a huge immediate tax increase, at least until their owners can scramble to reorganize as corporations instead of Subchapter S companies or LLCs." (emphasis added)

While on the matter of spending and the roll of Tea Party members in the House, here's what the Journal writes:

"The biggest insult to the public's intelligence is Mr. Obama's demand for more spending now. We thought this exercise was about deficit reduction. But as always in Washington, the method is to put deficit "savings" into the future as part of a fanciful 10-year budget estimate while adding to the deficit in the near term by spending more now. (emphasis added)

"Mr. Obama wants an extension of jobless benefits worth $30 billion a year, plus $50 billion for public works (at union wage rates). He also wants to lift the sequester—the automatic spending cuts set to hit on January 1. And he wants the debt limit increased for at least two years, if not permanently. Oh, and he wants a permanent fix for the Alternative Minimum Tax that Democrats invented but now threatens blue-state middle-class voters.

"Remind us again what achievement the Tea Party Republicans could point to in all this? A smaller tax increase than Mr. Obama wants, as long as Republicans put their fingerprints on it too? Congratulations." (emphasis added)

Kudos to the Journal for an outstanding editorial that "tells it like it is." (HT Mark Levin Show, listen to his December 19, 2012 audio)

December 18, 2012

Thoughts on the Separation of Powers

"For decades, Democrats and Republicans alike have invested heavily in governance schemes that erode the Constitution’s separation of powers and mar its proper functioning. The Federal judiciary has uniformly rubber-stamped these schemes. The consequence has been an unsustainable spree of borrowing, spending and overregulation at the Federal level, cyclical fiscal crises at the state level, and less accountable and less representative government at every level. (emphasis added)

"These governance schemes are generally of two kinds: one erodes the separation of powers between Federal and state governments, while the other erodes the separation of powers within the Federal government. In the first category is “cooperative federalism”, whereby the Federal government uses monopoly powers to coerce and subvert the prerogatives of state governments. In the other is Congress’s delegation of vast rule-making authority to administrative agencies.

"These two categories of concern are often treated as being entirely distinct, but they share profound similarities. Both are methods for Congress to escape accountability by hiding its power in other institutions of government. Cooperative federalism allows Congress to hide its power within the decision-making of state governments, while its delegation of rule-making authority allows it to hide its power in the far-flung bureaucracy of the Executive Branch."

~ Mario Loyola

HT Read the Remainder of his "Federal-State Crack-up" Essay at American Interest

December 17, 2012

U.S. Drops From Top Ten Most Prosperous Nations

Small Business Trends reports on the 2012 Prosperity Index (HT Power Line) produced by the London-based think tank, Legatum Institute, and writes:

"Over the past four years, prosperity has increased around the globe, while it has remained stagnant in the United States, the Legatum Institute reports. As a result, the Institute ranked the United States 12th out of 142 countries on its 2012 Prosperity Index, putting the country outside the top ten for the first time."

On October 29, 2012, Bloomberg News reported:

" The U.S. slid from the top ten most prosperous nations for the first time in a league table which ranked three Scandinavian nations the best for wealth and wellbeing.

"The U.S. fell to 12th position from 10th in the Legatum Institute’s annual prosperity index amid increased doubts about the health of its economy and ability of politicians. Norway, Denmark and Sweden were declared the most prosperous in the index, published in London today.

< . . . >

"The six-year-old Legatum Prosperity Index is a study of wealth and wellbeing in 142 countries, based on eight categories such as economic strength, education and governance. Covering 96 percent of the world’s population, it is an attempt to broaden measurement of a nation’s economic health beyond indicators such as gross domestic product."

The Legatum Institute identified in an October 30, 2012 press release the following "key findings" from its 2012 Prosperity Index:

  • US drops out of global prosperity ‘top ten’ for the first time, and falls eight places in ‘Entrepreneurship & Opportunity’ sub-index.
  • Fewer US citizens agree that working hard results in success.
  • Asian ‘Tiger Cub’ countries climbing Index rankings quickly.
  • European Economy score drops as Euro crisis continues.
  • Scandinavian countries lead worldwide prosperity rankings.
  • Legatum Prosperity Index redraws world map, grouping new continents together according to shared attributes between nations.

Especially troubling is the following portion from the reporting of Small Business Trends:

"Returning us to prosperity is central to the agenda of our newly elected and reelected leaders. But doing so requires an understanding of the causes behind our stagnant wellbeing. The Legatum Institute finds that a decline in entrepreneurship and economic opportunity, rather than slippage in education, health, safety or personal freedom, is to blame.

"In particular, the authors say that the fall in prosperity:

“. . .is driven by a decline in the number of US citizens who believe that hard work will get them ahead.”

"Quite a change from traditional American attitudes."

At Power Line, John Hinderaker concludes:

"Consistent with this finding is the fact that for the first time in history, the average Canadian is wealthier than the average American. Canada has a conservative government, and they have passed us like we are standing still. Which we are, at best.

"All of which raises the question: do Barack Obama and his minions want America to be one of the world’s ten most prosperous countries? If you believe, as I do, that actions speak louder than words, the answer is No."

Finally, at American Thinker's blog today, Rick Moran concludes, "This is incomprehensible to someone my age who grew up in a country that would always be free, prosperous, and strong." And, as Instapundit (who gets the "original HT") quips, "How's that hopey-changey stuff workin' out for ya?"

Readers can obtain more detailed information about the Prosperity Index at its own website, e.g., methodology, countries, data, findings, and various "snapshots."

UPDATE (12/28/12): In the second of three editorials in the December 19, 2012 Washington Times, Nita Ghei does a wonderful job of analyzing and summarizing the findings from the Legatum Institute. Her summary paragraph:

"America is headed down the same path as France, with heavy and ineffective regulation. To avoid a continued erosion of prosperity, we need to start thinking now about repairing the fraying fabric of civil society, rather than going with the easy but ultimately ineffective path of assuming greater government intervention and red tape can fix the economy. Entrepreneurs are the critical ingredient for a prosperous society, and by allowing them to enjoy the fruits of their labor, they helped create the largest single economy in the world. We stand to lose it all if we abandon the American dream that made it happen."

Research Note: Thankfully the results were reported by Power Line and Instapundit. A just-completed search of the New York Times and Washington Post resulted in NO hits although BusinessInsider reported the story one day before the election. And, Legatum's press release provides links to the Bloomberg story, London's Daily Telegraph, and the Wall Street Journal ($)

December 16, 2012

"Use of Food Stamps Skyrocketing in Northern Virginia"

Michael Lee Pope, reports in the weekly newspaper Arlington Connection, on the significant growth in the use of food stamps in Northern Virginia. He says their use “doubles in Arlington, triples in Fairfax and quadruples in Alexandria” since 2012. In the lede. Pope writes:

"Over the course of the last decade, anti-poverty programs have been quietly expanding eligibility. And as more and more people qualify, local governments have been aggressively seeking out individuals who may meet the requirements to let them know what benefits are available. Now, as a result of those trends, about half of the recipients of food stamps live above the poverty federal poverty level.

< . . . >

“In 2010, the federal government spent more than $68 billion on food stamps. Of the 40 million who receive food stamps, slightly more than half were above the poverty line as measured by the U.S. Census. With members of Congress facing the so-called “fiscal cliff,” Armor estimates that the federal government could save as much as $200 billion a year by tightening eligibility of anti-poverty programs to those who live at or below the federal poverty level — not just food stamps, but health insurance, housing and income support. Others disagree.”

Pope reports that relaxed eligibility explains a lot of the growth in the skyrocketing use of food stamps, writing:

“ . . . the increased spending in Northern Virginia is part of a larger national trend. During the eight years of Republican President George W. Bush, federal spending on anti-poverty programs grew by $100 billion. In the first to years of Democratic President Barack Obama, they grew another $150 billion. Much of that increase has come from broadened eligibility.

“All of those stringent verifications we used to get we don’t have to get anymore,” said Linda Horn, manager for the public assistance benefits program in Alexandria. “Right now, we take your word on your bank account for example.”

“Government officials no longer consider whether or not applicants have an automobile. They no longer consider whether or not applicants have educational loans. More homeless people are now eligible than in previous years. The result of all these relaxed eligibility requirements is that a drastically increased number of people are eligible for food stamps, formally known as Supplemental Nutrition Assistance Program. Local governments have also been working with the U.S. Department of Agriculture to reach out to individuals who qualify for benefits but have not applied.”

The following chart is from Pope’s story:

We've growled frequently about the the use of food stamps and growing welfare dependency. For example, on August 9, 2012, we growled that over 100 million Americans now received federal welfare in one form or another, including food stamps, and on November 4, 2012 we growled the use of food stamps was growing 75 times faster than job creation. Other growls in 2012 included October 1, December 11, and December 14.

First they relax the eligibility requirements to received food stamps, and then they increase our taxes. How stupid do the politicians think we are? Are we seeing the creation of a permanent dependent class? Sheesh!

For an answer to the question of whether a permanent dependent class is being created, I offer Paul Kengor's recent column at American Spectator. Kengor writes:

"Recently at The American Spectator, I wrote about this new government class. It is being nurtured by the vision and policies and programs of President Obama and his fellow “progressives”/liberals. The current class — the one that re-elected Obama — is comprised of federal employees; of state, county, and municipal workers; of dues-payers in public-sector unions like SEIU and AFSCME; of the teachers’ class and its ringleaders at the NEA and AFT; of Americans collecting food stamps, welfare, and unemployment; of those looking to government for healthcare; and much more. Unbelievably, there is even the surreal spectacle of a rising group of easily agitated young women demanding that Uncle Sam (i.e., taxpayers) pay for their contraception and abortions.

"This new breed of American constitutes a huge segment of the population (and voters) who are becoming not merely dependent upon government but dependent upon Democrats. The more dependent they become, the more their dependency redounds to the political enshrinement of liberal politicians.

"Worse, this class of progressive citizens — basically, Democrat constituencies — is accelerating at breakneck speed . . . ."

December 15, 2012

The President and the Speaker Could Learn from States

The message in an op-ed in the weekend Wall Street Journal ($) is that "states that spend less, tax less -- grow more." Written by the president and a fiscal policy analyst of Kansas' free market think tank, Kansas Policy Institute, Dave Trabert and Todd Davidson, respectively, argue:

"In the midst of a dismal recovery where every job counts, one fact stands out: States that tax less achieve better economic performance. Conventional thinking (at least within government) says that low state taxes are dependent upon having access to unusual revenue sources, but that's not it. A state could be awash in oil and gas severance taxes and still have a high tax burden if the government will not exercise restraint.

"The secret to having low taxes is controlling spending, and that's exactly what low-tax-burden states do."

Trabert and Davidson go on, and write:

"States with an income tax spent 42% more per resident in 2011 than the nine states without an income tax. States in the bottom 40 of the Tax Foundation's Business Tax Climate Index (which assesses business, personal, property and other taxes) spent 40% more per resident. In the American Legislative Exchange Council's "Rich States, Poor States" Economic Outlook (based on 15 policy variables), the bottom 40 spent 35% more than the top 10 states." (emphasis added)

So, as President Barack Obama and Speaker John Boeher continue their argument over the fiscal cliff of whether to raise tax rates for "the rich" (the President's primary argument) or to cut federal spending (the Speaker of the House's primary argument), we urge them to study closely the article by Trabert and Davidson. The President and the Speaker could learn a thing or two.

On Thursday, we growled that the Fiscal Cliff tax hikes risked doing serious economic damage, and included links to obtain contact information for President Obama and Speaker Boehner. Please contact them, and tell them ACTA sent you.

December 14, 2012

A Thought on Inflation and Taxing the Poor

"If you define a tax as only those things that the government chooses to call a tax, you get a radically different picture from what you get when you say, “If it looks like a tax, acts like a tax and takes away your resources like a tax, then it’s a tax.”

"One of the biggest, and one of the oldest, taxes in this latter sense is inflation. Governments have stolen their people’s resources this way, not just for centuries, but for thousands of years.

< . . . >

"No wonder the Federal Reserve uses fancy words like “quantitative easing,” instead of saying in plain English that they are essentially just printing more money.

"The biggest and most deadly “tax” rate on the poor comes from a loss of various welfare state benefits — food stamps, housing subsidies and the like — if their income goes up."

~ Thomas Sowell

HT His recent American Spectator column

December 13, 2012

Arlington County Not No. 1, But At Least No. 6

An online story at the Arlington Sun Gazette website today reported that "Arlington ranks sixth nationally in 2011 household income." The Sun Gazette writes:

"The median household income in Arlington in 2011 was $98,060, up 5.1 percent from the $93,231 reported a year before, according to new figures released by the federal Census Bureau."

Numbers 1 through 5 were:

  • Loudoun County -- $119,525
  • Los Alamos County, N.M. -- $110,204
  • Fairfax County --$105,409
  • Hunterdon County, N.J. -- $99,216
  • Howard County, Md. -- $99,040

In comparison, the median household income nationally for 2011 was $50,502. For the same period, Virginia's was $61,877.

Additional resource: U.S. Census Bureau press release of "2011 Income and Poverty Estimates for All Counties and School Districts." CNS News also reported on this story, saying "5 of 10 wealthiest U.S. counties surround Washington, D.C." The online news service also pointed out that "(t)he five counties have median household incomes that are roughly double the national median of $50,502." The Washington Examiner on Tuesday includes a table with both 2010 and 2011 median household incomes.

December 12, 2012

'Fiscal Clff' Tax Hikes Risk Economic Damage

While the mainstream media overflows with reports about the so-called "Fiscal Cliff," the news that an open letter from 185 leading economists hasn't gotten much attention. Released today, the letter was organized by the National Taxpayers Union. The letter calls for three concrete actions: "oppose higher taxes, set budget priorities, and get to work on reforming America’s tax and entitlement programs."

NTU's press release announcing the economists' "open letter," also said:

“At this critical point for our nation’s financial future, the strong support from so many economists for a cautious approach to tax hikes and for meaningful spending restraint should serve as a clear warning to Congress,” said NTU Executive Vice President Pete Sepp. “Resorting to tax hikes, particularly without budget or entitlement reform, is not just a raw deal for taxpayers, it’s also a losing hand for the American economy.”

"In their statement, the diverse group of 185 members of the economics community advised against allowing the 2001 and 2003 tax relief laws expire for “some or all taxpayers.” They further contended broad tax and budget reform offers a better route that would avoid the negative consequences, such as job losses, of short-term revenue grabs."

Separately, but also on the topic of taxes and economic damage, today's Wall Street Journal contains an op-ed by Edward Prescott and Lee Ohanian in which they argue that "taxes are much higher than you think." They begin the op-ed saying:

"President Obama argues that the election gave him a mandate to raise taxes on high earners, and the White House indicates that he won't compromise on this issue as the so-called fiscal cliff approaches.

"But tax rates are already high—much higher than is commonly understood—and increasing them will likely further depress the economy, especially by affecting the number of hours Americans work.

"Taking into account all taxes on earnings and consumer spending—including federal, state and local income taxes, Social Security and Medicare payroll taxes, excise taxes, and state and local sales taxes . . . the U.S. average marginal effective tax rate is around 40%. This means that if the average worker earns $100 from additional output, he will be able to consume only an additional $60."

HT to NTU's blog, Government Bytes for the alert about the economists' open letter. In her blog post, Manzanita McMahon points out, "Those seeking to raise taxes often cite the billowing debt to support their calls for new revenue. However, according to new numbers from the minority side of the Senate Budget Committee, 75% of the tax revenue in the President’s Fiscal Cliff proposal would go to new spending, not to pay down the debt." She also included the following chart, which is "from the Weekly Standard using CBO and OMB data:"

Will any of the wisdom of the 185 economists or that of Messrs. Prescott and Ohanian inform the debate and discussion of the 'Fiscal Cliff' between the President and the Speaker? For the sake of our country, let us hope and pray that it does.

Have you told President Obama and Speaker Boehner what you think they should do to resolve the 'Fiscal Cliff' issue? Use these links to obtain specific contact information.

December 11, 2012

A Thought on the New Government Class

"(T)he vision and policies and programs of progressives/liberals are rapidly generating a new government class that relies on government for its livelihood. The current such class -- the one that re-elected Barack Obama -- is comprised of federal workers; of state, county, and municipal workers; of employees in public-sector unions; of Americans collecting food stamps, welfare, and unemployment benefits; of those looking to government for their healthcare; and still more. They don't all vote Democrat, but many of them do. Incredibly, there is even a growing group of young women -- supple prey to demagogic Democrat politicians -- who are angrily expecting Uncle Sam to pay for their contraception and abortions."

~ Paul Kengor

HT: his column at The American Spectator

December 10, 2012

Streetcar 'Deals' in the Works?

On Friday, we growled, and asked whether there is a conflict of interest on the Arlington County Board, based upon a story in the Arlington Sun Gazette. In the Growls, we wrote, "Sure sounds as if the taxpayers of Arlington County need an Inspector General to watch over county operations."

Now comes this online story in today's Arlington Sun Gazette headlined, "Streetcar Proponents Deny Any Deals are in the Works." According to the Sun Gazette's Scott McCaffrey:

"For those who think the fix is in and the County Board is greasing the skids for a pre-selected private firm to swoop in, build and operate Arlington’s planned streetcar network, several elected officials have a message: There’s no hidden agenda playing out.

"Plans to endorse the concept of public-private partnerships for transportation projects is simply “putting a new tool in Arlington’s toolbox,” County Board Chairman Mary Hynes said on Dec. 5, five days before board members were slated to consider the measure at a rare Monday board session.

"The issue took on heightened awareness after board member Libby Garvey publicly voiced concerns that the County Board’s moving forward with endorsement of Virginia’s Public-Private Transportation Act was premature. She cited “serious concerns affecting not only out streetcar decision, but also decisions on large projects in the future.”

"Other board members, who appeared ready to move forward at the Dec. 10 meeting, said voting on the partnership guidelines didn’t obligate the county to do anything down the road, but merely opened up options. County Attorney Stephen MacIsaac called it a “procedural device.”

"County Board Vice Chairman Walter Tejada, speaking to the monthly meeting of the Arlington County Democratic Committee, said public-private partnerships could be considered to address a host of transportation matters, from building a parking garage to operating the proposed streetcar network."

How's this? On November 29, we growled about the lack of citizen oversight over a large pot of transportation money. Now one of the Board masterminds talks about "a host of transportation matters" that could be resolved through public-private partnerships. Be sure you know how to spell corruption? One day soon, it may be necessary.

UPDATE (12/10/12): Last week, the Washington Post's Patricia Sullivan posted the story that "Columbia Pike streetcar options being mulled." She began the story noting:

"While Arlington County awaits word on whether it will receive federal transit funds for the planned Columbia Pike streetcar, elected officials have been weighing their options on who will manage the project and the size and type of streetcars they prefer.

"No sooner had Chairman Mary Hynes declared Tuesday night’s workshop a “learning journey,” then board member Libby Garvey called for an independent cost-benefit analysis of a streetcar system versus a bus rapid transit alternative. “There’s never been an informed and public conversation about this,” Garvey said."

December 09, 2012

Welfare Spending Equals $168 Per Day Per Household

You read that correctly. According to budget background data from the U.S. Senate Budget Committee (Minority) Website (HT Power Line, December 7, 2012):

“Based on data from the Congressional Research Service, cumulative spending on means-tested federal welfare programs, if converted into cash, would equal $167.65 per day per household living below the poverty level. By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty. The median household hourly wage is $25.03. After accounting for federal taxes, the median hourly wage drops to between $21.50 and $23.45, depending on a household’s deductions and filing status. State and local taxes further reduce the median household’s hourly earnings. By contrast, welfare benefits are not taxed.”

The background document points out that for FY 2011, “CRS identified roughly 80 overlapping federal means-tested welfare programs that together represented the single largest budget item in 2011—more than the nation spends on Social Security, Medicare, or national defense.” When state contributions of $280 billion are included, the total amounts to “roughly $1 trillion.” The graph below is from the budget background document:

As John Hinderaker concludes his post at the Power Line blog:

“This doesn’t mean that families on welfare live better than the median American family, but it does mean that they have more money spent on them. In part, this is a tribute to the remarkable inefficiency with which the federal government does just about everything. When it comes to welfare, it is time to get out the knife and start cutting.”

Kudos to Sen. Jeff Sessions (R-Alabama) for focusing on this significant federal spending.

December 08, 2012

Ronald Reagan on Liberty and the Role of Government

"As government expands, liberty contracts."

~ Ronald Reagan

"Government's first duty is to protect the people, not run their lives."

~ Ronald Reagan

HT Republican Study Committee

December 07, 2012

A Conflict of Interest on the Arlington County Board?

The Arlington Sun Gazette's Scott McCaffrey posted a story today about the "latest spat" on the Arlington County Board. The title of his story included the question: "conflict of interest, or tempest in teapot?" Here's the lede from McCaffrey's story:

"The increasingly contentious battle over the future of a streetcar line throughout the Columbia Pike corridor took another twist Thursday, with one County Board member saying the process needs to be halted in order to fully vet her concerns about a potential conflict of interest by a board colleague.

"At issue: A consulting contract between board member and streetcar advocate Chris Zimmerman and AECom Canada East, which has provided services related to Arlington’s transit planning along with other consulting and project-management services to the county government.

"In a Dec. 5 letter to board colleagues, county manager and county attorney, County Board member Libby Garvey – the lone opponent of the streetcar among the five-member body – said there were enough red flags raised by the relationship to delay moving forward next Monday, when the board will consider adoption of rules governing public-private partnerships on transportation matters.

"Garvey said she wasn’t accusing Zimmerman of any wrongdoing. But in both her letter and in follow-up comments, she said the time needs to be taken to get answers to the questions she is raising."

At the Washington Post's blog, Virginia Politics, today Patricia Sullivan wrote about the conflict of interest charges, writing:

"Arlington County Board member Libby Garvey is questioning whether fellow board member Chris Zimmerman should vote on a matter related to the Columbia Pike streetcar project because he is a consultant with a major international construction firm that has worked for Arlington on transit issues."

Separately from the conflict of interest charges, on Thursday, the Washington Post's Patricia Sullivan wrote about the options being debated by the County Board masterminds for the Columbia Pike streetcar initiative. In the lede, she wrote:

"No sooner had Chairman Mary Hynes declared Tuesday night’s workshop a “learning journey,” then board member Libby Garvey called for an independent cost-benefit analysis of a streetcar system versus a bus rapid transit alternative. “There’s never been an informed and public conversation about this,” Garvey said."

Sure sounds as if the taxpayers of Arlington County need an Inspector General to watch over county operations.

UPDATE (12/10/12): Over the weekend, the Washington Post's Patricia Sullivan posted a story saying the "Arlington board publicly rejects conflict-of-interest charge by fellow member." Her story's lede said:

"The majority of the Arlington County Board on Saturday publicly rejected member Libby Garvey’s charge that another board member has a potential conflict of interest that could compromise board decisions on transportation projects.

"But board Chairman Mary H. Hynes, in a statement co-signed by board members J. Walter Te­jada and Jay Fisette, reaffirmed the county attorney’s opinion that Chris Zimmerman has no conflict of interest. The three board members declared themselves “dismayed” by Garvey’s decision to release her e-mails on the topic to the news media. Zimmerman consults for a company that is working on Arlington transportation projects, including portions of the Columbia Pike streetcar system."

December 06, 2012

So You Thought They Wanted to Just Tax 'The Rich'

An editorial posted this evening at Investor's Business Daily (IBD) reports that comments by 2004 Democratic presidential candidate Howard Dean "exposes Obama's need for middle class tax hike." (HT Mark Levin Show, December 6, 2012, approximately 4:15 mark) The applicable portion from the editorial says:

"The president says all he wants is for "the wealthiest Americans to pay a little more." But far-left Howard Dean just reminded us Obama wants a lot more from all taxpayers.

"Interviewed by MSNBC's Lawrence O'Donnell on Wednesday, the ex-Vermont governor and 2004 Democratic presidential candidate shocked many with comments that really should have shocked no one.

"This is, initially, gonna seem like heresy from a progressive," Dean said. "The truth is, everybody needs to pay more taxes, not just the rich. That's a good start, but we're not gonna get out of this deficit problem unless we raise taxes across the board."

"Dean added, "I actually have mixed feelings about striking a deal where the rich folks pay more taxes," preferring to go over the cliff at the end of the year."

It's not just Howard Dean's comments, however. The editorial includes a number of other admissions from the Leftstream Media, including the following three "voices:"

  • "In 2010, the New York Times editorial page warned that "more Americans — and not just the rich — are going to have to pay more taxes.
  • "New York Times economics columnist Eduardo Porter, in an August column bemoaning "America's Aversion to Taxes," noted that "virtually every economist knows that just maintaining Medicare and Medicaid benefits will require raising taxes on the middle class."
  • "In July, the Washington Post editorial page declared "it's impossible to tackle the federal debt by taxing only the wealthy . . . the middle class is going to have to pay more . . ."

The editorial ends by saying, "Howard Dean confirmed the obvious.  Americans may think they re-elected Obama to force the rich to "pay a little more," but they really voted for a Euro-American future for which they themselves will pay."

Is that what Americans voted for just one month ago? Thanks IBD for your "must read" editorial.

December 05, 2012

Two Thoughts on Fiscal Cliffs and Baseline Budgets

The following are the first three paragraphs from an editorial in today's Wall Street Journal:

"If the fiscal cliff talks make Lindsay Lohan look like a productive member of society, perhaps it's because President Obama and John Boehner are playing by the dysfunctional Beltway rules. The rules work if you like bigger government, but Republicans need a new strategy, which starts by exposing the rigged game of "baseline budgeting."

"Both the White House and House Republicans are pretending that their goal is "reducing the deficit," which they suggest means making real spending choices. They are talking about a "$4 trillion plan," or something, regardless of how that number is reached.

"Here's the reality: Those numbers have no real meaning because they are conjured in the wilderness of mirrors that is the federal budget process. Since 1974, Capitol Hill's "baseline" has automatically increased spending every year according to Congressional Budget Office projections, which means before anyone has submitted a budget or cast a single vote. Tax and spending changes are then measured off that inflated baseline, not in absolute terms."

Below is an excerpt from a column by Cato senior research fellow Michael Tanner. It was originally posted at National Review (Online) December 5, 2012:

For all those who think that our deficit is caused by a dearth of revenue, consider this thought experiment. In 2012, the federal government will spend $3.56 trillion. Last week’s Powerball jackpot was a reported $587.5 million, the largest winning Powerball payout ever. In order to finance current spending, the federal government would have to hit that jackpot 6,570 times.

"As recently as fiscal year 2001, President Clinton's last budget, federal spending amounted to just $1.9 trillion. If spending since 2000 had simply increased at the rate of inflation plus population growth, spending this year would have been less than $2.69 trillion. Our budget deficit this year, despite those Bush tax cuts and a recession-driven decline in revenue, would have been just $241 billion, compared with an actual deficit of more than $1.1 trillion.

"To continue this thought experiment, if this inflation- and population-adjusted spending path from 2001 continued to 2022, spending in 2022 would be only $3.61 trillion, compared with the $5.51 trillion the current baseline predicts. This spending path would have seen budget deficits top out at a little less than $400 billion in 2009 and then return to surplus by 2014.

"In fact, even starting from today's spending levels, if future spending grew at inflation plus population, it would be only $4.8 trillion in 2022. The budget deficit in that year would be $199 billion, with deficits decreasing each year.

"Compare this to President Obama's proposed fiscal-cliff deal, which would increase spending to $5.5 trillion in 2022, the same as the current baseline. That's right: The president's proposal does not reduce spending at all. There are no net cuts, not even in the Washington sense of reductions from the baseline . . . ."

Just asking, but could the political establishment and the Leftstream media start telling us the truth?

December 04, 2012

Taxpayers Supporting Sports Stadiums

At the National Taxpayers Union's website, Government Bytes, today, Mazanita McMahon says that according to a new study, taxpayers have footed 61% of the cost of building sports stadiums. She writes:

"Since 1909, taxpayers have forked over a jaw-dropping $32.2 billion in inflation-adjusted dollars to fund the construction of sports stadiums for the NFL, MLB, NBA, and NHL, according to an article by Reuben Fischer-Baum from deadspin.com. What’s more, 65 of these venues are no longer in use, costing taxpayers a total of $6.6 billion."

She included the following infographic so readers could visualize "the dollar amount of public and private finds used for construction and upkeep of stadiums - based on research from a variety of sources including that of Judith Grant Long of Rutgers University."

In addition, she provides the link to a 2007 policy paper by NTUF which discussed the burden of construction costs that taxpayers shoulder.

December 03, 2012

A Thought About Tax Rates

"The argument we hear today over and over is that if we take from the rich who have so much, and do so through high tax rates, we can help the poor. President Obama says these rich people -- the millionaires and billionaires -- "don't need the money." So this evidently gives license to the government to take it. In reality, a lesson . . . is that high tax rates stifle individual initiative, chase capital and businesses away, and often hurt the poor the most. The rich in America are generally business owners and investors . . . output is usually higher when tax rates are lower. So high tax rates may lead to more equality, but at the price of less growth and less to divide."

~ Stephen Moore, page 14, "Who's the Fairest of Them All?"

HT Barnes & Noble

December 02, 2012

Secrets of the Bush Tax Cuts

First a bit of context. The following is the lede from a November 14, 2012 Associated Press article by Ken Thomas that appeared in the Huffington Post.

“In a challenge to Republicans, President Barack Obama urged Congress on Wednesday to extend expiring tax cuts immediately for all but the nation's highest income earners as a way to eliminate half of the so-called "fiscal cliff" that threatens to send the economy back into recession.

"What I'm not going to do is to extend Bush tax cuts for the wealthiest 2 percent that we can't afford and according to economists will have the least positive impact on the economy," the president said at his first news conference since his re-election last week.”

I know the Left has trouble with facts, but let’s look at a few presented by John Merline in his Investor’s Business Daily article last week. According to Merline:

“It's been more than 10 years since President Bush signed his first round of tax cuts into law. And in the years since, those cuts have been the source of constant attacks. Critics charge they gave away too much to the rich, exploded the deficit, contributed to income inequality, did little to spur economic growth, and so on.

“President Obama has for years attacked the Bush cuts, and demanded that the top two income tax brackets return to Clinton-era levels.

“But a decade of debate and discussion has managed to shed little light on what the Bush tax cuts actually did.”

What are these facts, which Merline writes about? Let’s look at a few:

“The rich paid more. Despite endless claims by critics that Bush's tax cuts favored the rich, the fact is the rich ended up paying more in taxes after they went into effect.

“In fact, IRS data show that the richest 1% paid $84 billion more in taxes in 2007 than they had in 2000 — that's a 23% increase — even though their average tax rate went down.

“What's more, their share of the overall income tax burden grew, climbing from 37% in 2000 to 40% in 2007."

Readers are invited to read Merline’s entire column for more facts about the Bush tax cuts. If you prefer the proverbially picture, here’s the chart from Merline’s column:

So which do you prefer, the ephemeral pleasure of President Obama's concept of fairness, or the additional revenues produced by lowering tax rates?

December 01, 2012

Hey, Harry, Did You Focus-Group That First?

Mark Steyn’s weekend column is now posted at National Review Online. We’ve cited Mark Steyn  columns most recently in Growls on June 14, August 26, and September 1, 2012.

After walking through the introduction, Steyn sets up the issue this way:

“Generally speaking, functioning societies make good-faith efforts to raise what they spend, subject to fluctuations in economic fortune: Government spending in Australia is 33.1 percent of GDP, and tax revenues are 27.1 percent. Likewise, government spending in Norway is 46.4 percent and revenues are 41 percent — a shortfall but in the ballpark. Government spending in the United States is 42.2 percent, but revenues are 24 percent — the widest spending/taxing gulf in any major economy.

“So all the agonizing over our annual trillion-plus deficits overlooks the obvious solution: Given that we’re spending like Norwegians, why don’t we just pay Norwegian tax rates?”

He then notes a calculation that “if Washington were to increase every single tax by 30%, it be be enough to balance the books -- in 25 years,” before mentioning the offer of U.S. Senator Harry Reid (D-Navada):

“If you don’t want that, you need to cut spending — like Harry Reid’s been doing. “Now remember, we’ve already done more than a billion dollars’ worth of cuts,” he bragged the other day. “So we need to get some credit for that.”

“Wow! A billion dollars’ worth of cuts! Washington borrows $188 million every hour. So, if Reid took over five hours to negotiate those “cuts,” it was a complete waste of time. So are most of the “plans.” Any “debt-reduction plan” that doesn’t address at least $1.3 trillion a year is, in fact, a debt-increase plan.”

No wonder there hasn't been a budget in the U.S. Senate in almost four years.