What Some Real Cuts in Government Might Look Like

I'm not a Ron Paul fan, but I do like his economic plan that calls for cutting 1 trillion in spending in one year, as well as slashing the size of government.

a 10% reduction in the federal work force, ... lower the corporate tax rate to 15% from 35% ... end taxes on personal savings and extend “all Bush tax cuts.” ... also allow U.S. firms to repatriate capital without additional taxes ... Mr. Paul would eliminate the Departments of Education, Commerce, Energy, Interior and Housing and Urban Development.

My list of federal departments to be eliminated is similar: Education, Energy and HUD. But I'd shut-down the Department of Homeland Security rather than Commerce and Interior. Unfortunately there is as much chance of these cuts taking place as there is of Ron Paul being elected. The only way something like this will ever happen is if it's forced by some sort of economic collapse.

The New Debit Card Fees

Today we got yet another example of the unintended consequences of poorly-thought out and unnecessary legislation. Bank of America is now charging $5 per month for its debit cards, with other banks sure to follow suit. Why is it doing so? Awhile back, Congress, then led by Democrats, passed new regulations restricting the fees banks could charge merchants for accepting debit cards. The new restrictions go into effect on Saturday. Naturally banks are not going to passively accept a huge cut in income, and are now looking for ways to make up the difference from customers.

This is the sort of thing that happens when you have clueless government officials, primarily Democrats, interfering in business operations, and passing unnecessary regulations. If, like me, you make regular use of debit cards, you know they are extremely useful. One of the things that makes them so useful is the lack of fees. If they start to come with a monthly charge or other restrictions, they become another expense which lessens their overall utility.

You might wonder why it is any business at all of the government what fees banks should charge merchants for using debit cards. Why can't banks just set whatever fees they want and merchants decide whether or not they want to pay them, pass them on the customers, or reject them entirely? Was there some sort of major problem with debit card use that even required government action? No, there wasn't. There was no need whatsoever for this sort of overbearing big government regulation. And now consumers are going to pay for it. Here's one of the sponsors of the regulation, one of the biggest idiots in Congress, Democrat Dick Durbin of Illinois,

"After years of raking in excess profits off an unfair and anticompetitive interchange system, Bank of America is trying to find new ways to pad their profits by sticking it to its customers. It's overt, unfair, and I hope their customers have the final say."

What are "excessive profits" and who are you to decide what businesses should make? Bank of America is not trying to pad their profits, they are attempting to preserve them from being cut by arbitrary regulation. It may be "overt," but there's nothing unfair about it. Banks are not obligated to provide free debit card use. They were doing so until you decided to interfere. It's an obvious reaction to your attempt to slash their profits, one which was abundantly clear to anyone with the slightest clue when this legislation was under discussion.

Obama's Latest Anti-Business Proposal

I wrote about the president's new massive government spending proposal, misnamed as a job's bill, a couple of weeks ago. Now we find that it includes an idea that would encourage frivolous lawsuits against employers.

Mr. Obama’s jobs bill would prohibit employers from discriminating against job applicants because they are unemployed.

Under the proposal, it would be “an unlawful employment practice” if a business with 15 or more employees refused to hire a person “because of the individual’s status as unemployed.”

Unsuccessful job applicants could sue and recover damages for violations, just as when an employer discriminates on the basis of a person’s race, color, religion, sex or national origin.

Naturally this idea also involves giving more power to the government to scrutinize business hiring practices.

Under Mr. Obama’s proposal, the employment commission would be given new power to enforce the proposed ban on discrimination against the jobless.

What a great idea. If unemployed people fail to get a particular job, why not give them the ability to allege that they were discriminated against because they are unemployed? I'm sure greater government involvement and the threat of lawsuits if they turn someone down will do wonders to make businesses more interested in hiring instead of just deciding to do without that extra worker. Businesses love attention from government agencies and the threat of lawsuits.

Taxing the Rich

Once again President Obama is engaging in standard class warfare tactics by proposing new taxes on the rich in general -- as defined by him -- and on millionaires in particular, pretending that the people who already provide the vast majority of U.S. tax money are somehow not paying their fair share. It's such a transparent political ploy that you might think such demagoguery wouldn't get any traction at all. Yet it does. Why?

Demonizing the rich and proposing to forcibly extract more money from them appeals to at least two powerful human motivators: envy and self-interest. And it has the virtue of simplicity. Many people are envious of those who make more money than them, even though the relative difference doesn't affect their lives in the least. They are reflexively suspicious of rich people, and tend to see them as cheating somehow, people who are gaming the system to get more than their fair share. Class warfare naturally appeals to those with that attitude. It's a lot easier to believe bad things about the rich than to accept that in most cases they are just smarter and harder-working. Envy helps explain how it is possible to believe that people who pay more in taxes than you'll earn in your lifetime are in some way not paying enough.

Even those less envious and hostile to the rich can be taken in by class warfare schemes out of self-interest. Here you have those who think that if the government raises taxes on the rich, they won't need to tax ordinary people any more. Why should those of us who aren't rich care about people with tons of money? They've got more money than they'll ever spend, why not get more tax money from them? Just leave us alone. In my experience this is a common attitude among those who don't really follow politics closely, and know little about economics. Raising taxes on the rich sounds like a nice simple solution. It's clear and easy to understand.

Envy, self-interest, and simplicity to the point of simple mindedness, those things are the underlie the appeal of raising taxes on the rich. This latest attempt by Obama is no different. Fortunately the GOP controls the House. Thanks to all those who voted Republican in 2010 and have helped prevent Obama from inflicting even more damage on the U.S. economy.

More of the Same from Obama

President Obama unveiled his new $447 billion government spending package, falsely labeled as a "jobs" program. In Obama-world there is no problem that can't be fixed by more government spending. It doesn't matter that it didn't work before, we need more of the same. Here are the actual proposals.

1. Cutting the 6.2% payroll tax paid by both employees and employers to 3.1% next year. Wow, a temporary payroll tax cut. I'm sure that will do a whole lot.

2. Spending $140 billion to save the jobs of state and local teachers and first responders, repair deteriorating schools and rebuild roads, railways and airports. If federal money is required to "save" these jobs because the states are unwilling or unable to pay for them, then maybe those jobs aren't really that necessary. The infrastructure spending will most likely be political payouts to buy votes in various areas.

3. Extending jobless benefits to the unemployed, with special emphasis on those out of work at least six months and those in low-income neighborhoods. Let's see if I have this straight. As part of a supposed jobs package, we are going to pay people who don't have jobs. Yeah, that makes sense.

In summary, for our $447 billion in new spending we get a temporary payroll tax cut, money for some government jobs, money to repair some government buildings, some work on various infrastructure projects, and a bunch more money paid to the long-term unemployed.

UPDATE

Here is a good summary of the actual speech.

Obama Smears Congressional Republicans as Unpatriotic

President Obama used labor day to engage in some demagoguery, and implied that Congressional Republicans are unpatriotic partisans who put their party above the country.

Obama said that with widespread suffering, “the time for Washington games is over” and lawmakers must move quickly to create jobs.

“But we’re not going wait for them,” he said at an annual event sponsored by the Metropolitan Detroit AFL-CIO. “We’re going to see if we’ve got some straight shooters in Congress. We’re going to see if congressional Republicans will put country before party.”

Here's a hint Obama, opposing your policies doesn't mean someone isn't putting the country first. The president's remarks are typical of the double standard in politics. Despite the fact that a significant minority of the left is actually unpatriotic or outright anti-American, on the rare occasion that some prominent figure on the right dares point out any example, there will be howls of outrage regarding questioning someone's patriotism. But questioning the patriotism of those on the right when they refuse to sign on with a leftist political agenda is quite alright. If you haven't been paying attention, here are a couple more examples.

The president has a clear record of making things worse. His policies haven't worked, and there is no reason to believe that more of the same will work any better. The best thing Republicans can do for the country is block Obama's proposals and policies, and submit their own instead. Hopefully we can count on the Congressional GOP to do just that and not be swayed by ridiculous attacks.

Trivial Cuts But No New Taxes

That's my one-line summary of the debt ceiling deal. It's nothing great, but it's the best that could be expected given the political situation. We will continue to borrow and spend ridiculous amounts of money, but we will make some minor cuts over ten years to offset this particular increase in the debt ceiling. Despite all the nonsense about "hostage-taking" and "extortion" from big government types, the House GOP did the right thing in attempting to force some fiscal reform. They didn't succeed, but at least they were able to block new taxes.

There will be no actual cuts to government, no programs closed down, no departments eliminated, or anything else that would indicate a serious attempt to scale back the size of government and its out-of-control spending. In fact, this deal even creates yet another commission to try and agree on part of the cuts specified in the agreement. But at least for now, there will be no new taxes to give the government even more money to spend.

Good Advice From Fred Thompson

Former senator Fred Thompson has some good advice for the House GOP in the debt-limit situation. He's a little premature in declaring victory, since nothing has been agreed upon, but he believes that Republicans have forced a situation where Democrats will have no choice but to agree to some cuts, without tax increases, in order to raise the debt ceiling. Here's the key advice at the end of his open letter.

We will never achieve entitlement or tax reform with a doctrinaire liberal in the White House. Any agreements to do so in “out years” would probably be unenforceable even if agreement were achieved. And we can only do so much while controlling one half of one branch of government. Ladies and Gentlemen of the House Republicans, you have laid some great groundwork to rectify both of those situations. Now it is the time to accept a well-won victory and move on.

I think he's exactly right. Block tax increases, get some spending cuts, and raise the debt ceiling to avoid default and/or credit rating downgrade. With Obama in the White House, and Democrats controlling the Senate, grandiose reform plans that really address the deficit & the debt are just not feasible. Democrats do not want to cut spending. They want to spend more. Republican focus right now should be to block Obama from further increasing the size of government and its spending, and on the 2012 elections. Serious fiscal reform will require a Republican president and more Republicans in Congress.

Riddle of the Day

From Stephen Green at Vodka Pundit,

"Q: What is it called in Washington when you lose $1.6 billion dollars?

A: 'A major accomplishment.'"

Biggest Impediment to Job Growth?

What's the biggest impediment to job growth in the U.S.? The government. So says the co-founder of Home Depot, Bernie Marcus.

Having built a small business into a big one, I can tell you that today the impediments that the government imposes are impossible to deal with. Home Depot would never have succeeded if we'd tried to start it today. Every day you see rules and regulations from a group of Washington bureaucrats who know nothing about running a business. And I mean every day. It's become stifling.

Talk to pretty much any business owner and you'll hear the same thing. Obama routinely talks about the need to create jobs, when his policies have the opposite effect. That's why he has to resort to using imaginary numbers when talking about jobs he's supposedly created or saved.

Top Reasons I'm Skeptical of Any Budget Deal

Tax increases will be real, cuts will be mostly budget gimmicks.

The use of imaginary numbers and various projections.

Only a portion of the GOP, found mostly in the House, really wants significant cuts. I have no faith in the GOP leadership.

Most Democrats want increased taxes and spending, not cuts (except to defense).

The president is a proven, blatant liar who cannot be trusted.

Politicians in general prefer short-term solutions that enable them to pretend to be solving problems, without addressing long-term issues.

The unintended consequences of any plan which will be completely ignored, as usual.

Reality vs. Democratic Scare Tactics

In the past I've repeatedly laughed at those who accused the GOP of so-called "fearmongering," and pointed out that scaring voters with worst-case scenarios (and outright falsehoods) is a standard political tactic used by both sides. We've seen dishonest scare-tactics used repeatedly by Democrats in the struggle over the debt ceiling, with the most dramatic being President Obama's attempt to make seniors believe that might not get their social security checks because of those evil, irresponsible Republicans. Scaring seniors is a time-honored Democratic political move.

There's an excellent article at Reason.com by Veronique de Rugy called, "The Facts About the Debt Ceiling." It counteracts the myths being spread point by point. The bottom line is that the U.S. can use various fiscal maneuvering to stave off a default, even if an agreement isn't reached. The August 2 deadline is arbitrary. Eventually there has to be an agreement, the debt ceiling has to be raised, or spending has to be cut dramatically. I'd be willing to bet that despite the GOP's valiant stand, the last option is the least likely.

The Myth of Republican Intransigence on the Debt Ceiling

The Democratic narrative is that Republicans are being intransigent and unreasonable regarding the debt ceiling. This myth is debunked in a good article by Michael D. Tanner called, "The Intransigent Meet the Unserious."

Republicans have clearly drawn a line in the sand, opposing any tax increase. But Democrats have been even more unbending, resisting any serious structural reform of entitlements or deep spending cuts, while insisting on huge tax hikes as part of any deal.

There is no reason that a deal on raising the debt ceiling has to include tax hikes -- other than Democratic insistence. In addition, the planned cuts aren't even that significant, yet Democrats still demand tax hikes.

the deal that the Republicans are currently offering would actually allow federal revenue, federal spending, and the national debt all to increase over the next decade. They have abandoned structural changes to entitlement programs — anything like Paul Ryan's Medicare reform is off the table — and appear to have dropped calls for a balanced-budget amendment or a spending cap.

This is radical? This is intransigence? If only.

The whole article is worth reading as a contrast to Democratic propaganda.

Mitch McConnell: Typical Weasel Politician

The GOP establishment is not more much interested in tackling the nation's financial problems than Democrats, who are totally uninterested. This is particularly true in the Senate, where Republican minority leader Mitch McConnell and other GOP senators are considering a new plan to weasel out of any responsibility, purely in the interests of political expediency.

the debt ceiling would grow in three increments over the remainder of this Congress unless lawmakers approve a veto-proof resolution of disapproval.

In effect lawmakers would be surrendering the very power of approval that the GOP has used to force the debt crisis now. But by taking the disapproval route, Republicans can shift the onus more onto the White House and Democrats since a two-thirds majority would be needed to stop any increase that President Barack Obama requests.

McConnell and his cohorts are well aware that Obama and the Democrats don't want to make any sort of serious cuts, and that the only reason cuts are even under consideration is because of the threat of the debt ceiling. The party of big government isn't about to cut government in any substantial way. But rather than forcing the president to make cuts, they'd rather just give up -- as long as they can do it in such away as to place the blame solely on Obama.

More Imaginary Numbers From Obama

President Obama is a big fan of using imaginary numbers to tout the imaginary success of his policies. We got some more today.

The report from the White House Council of Economic Advisers said the stimulus added 2.3 to 3.2 percent to gross domestic product in the first quarter relative to what it otherwise would have been.

The stimulus package also increased employment relative to what it otherwise would have been by between 2.4 and 3.6 million jobs, the report said.

Note the twice-used phrase, "relative to what it otherwise would have been." This phrase alerts you to the fact that the White House is using imaginary numbers. We do not know what would or would not have happened if there had been no stimulus package, because there was a stimulus package. The economy could have gotten worse, or it could have improved had the government not borrowed and spent a bunch of money we didn't have. We just don't know for sure. And since we don't know, the numbers the president is pushing are completely imaginary. He could just as easily have claimed the stimulus raised GDP by 5% "relative to what it otherwise would have been," or that it increased employment by 6 million jobs. Since the numbers aren't real, it doesn't matter. These numbers were chosen to appear somewhat plausible, and to convince those gullible enough to believe them.

The GOP Should Stand Firm Against New Taxes

President Obama came out today spouting the usual Democratic demagoguery about the debt ceiling and calling for Republicans to agree to new taxes. In return he made vague promises.

he is willing to cut spending on a range of programs by more than $1 trillion, to trim the defense budget and to look for ways to control entitlement costs.

Every member of the GOP should know by now what Obama's promises are worth. Any Republican paying even the slightest bit of attention should also be aware that Democrats don't want to make even the most minor cuts -- except to defense of course. If Republicans were stupid enough to go along with the president, new revenue would just provide Democrats with even more reason to resist making substantial spending cuts. The GOP should continue to block new taxes of any kind until the president and Democrats in Congress sign off on significant cuts to government spending -- real ones, not empty promises. Once government spending starts falling, then there will be time to talk about ways to increase revenue. Voters in 2010 didn't elect Republicans to help Obama pass new tax hikes.

Bachmann & Cain Are Right About the Minimum Wage

Various outlets on the left are making a big deal about Michele Bachmann and Herman Cain wanting to repeal the federal minimum wage. Greg Sargent of the Washington Post argues that it's such a radical position for a presidential candidate that only Ronald Reagan supported it, while later backing away from that position. It shows you how entrenched big government has become in the U.S. that even the suggestion that we roll back unwarranted and unnecessary federal interference with the free market is now a radical position.

Even if you support minimum wage laws you don't need the federal government involved. Since minimum wage laws are popular, most states already have their own laws. And if states don't wish to have a minimum wage, there's no reason for federal interference. Bachmann and Cain are right to support repealing the federal minimum wage.

Why Republicans Oppose New Taxes

The front page of the Washington Post online leads with the headline story, "For GOP, no new taxes — and no compromise." The article is a thinly-disguised anti-Republican propaganda piece pretending to be analysis. It goes something like this. Back in the old days the GOP used to be fiscally responsible, but today's Republicans are unreasonable, blind ideologues who oppose all tax increases for no good reason that we can possibly imagine. How did this rigid orthodoxy on taxes come to be? And look, here are some "good" Republicans who agree with us.

Since it is not really any sort of objective analysis, the article fails to point out the main reasons Republican oppose tax increases, even ones that will supposedly help reduce the deficit.

1. There is no evidence that giving the government more money will help reduce the deficit, instead of just giving it more reasons not to cut spending. There is no political will to pass even the most modest spending cuts.

2. Democrats do not want to cut spending, with the exception of defense. In fact, most Democrats want to spend more money on social programs, government schemes that supposedly stimulate the economy, and all sorts of other things. When you are the party of big government, cutting government spending strikes at the heart of your political philosophy.

3. The large budget deficit and astronomical debt are the only reasons why much of the political class even gives lip service to ideas about fiscal responsibility. If they are provided with new tax revenues, there will then be no impetus to address our long-term fiscal situation. They will gladly pretend they are addressing the problems, while gleefully finding new ways to spend the increased taxes. In the absence of any serious resolve to cut government and limit spending, giving the government more money is clearly counterproductive.

In summary, since the political class as a whole, and the Democratic Party in particular, is still not serious about addressing the deficit, let alone the debt, there is simply no reason to increase the tax burden on Americans. All that will do is give the government more money to spend, which will preserve and strengthen big government. Far from being some sort of irrational, blind orthodoxy, Republican opposition to tax increases is based on reason, and an accurate assessment of political reality.

Vulgar Keynesianism

There's an excellent article at Mises.org called, "Six Fundamental Errors of the Current Orthodoxy." The author, Robert Higgs dissects what he calls the "vulgar Keynesianism" that dominates current economic analysis. Here's a couple of excerpts.

Most of the people who purport to possess expertise about the economy rely on a common set of presuppositions and modes of thinking. I call this pseudointellectual mishmash "vulgar Keynesianism." It's the same claptrap that has passed for economic wisdom in this country for more than 50 years and seems to have originated in the first edition of Paul Samuelson's Economics (1948), the best-selling economics textbook of all time and the one from which a plurality of several generations of college students acquired whatever they knew about economic analysis. Long ago, this view seeped into educated discourse, the news media, and politics, and established itself as an orthodoxy.

AND

people who think along such lines are currently working to continue a policy that contributed greatly to producing the unsustainable boom of 2002–2006, namely, subsidized lending to would-be homeowners who cannot meet normal commercial qualifications for receiving such loans. It does not occur to the vulgar Keynesians that too many resources have been directed into house and condo construction and that lending to homeowners who cannot afford to purchase homes unless they are subsidized to do so signals an uneconomic use of resources at the expense of the taxpayers who directly or indirectly finance these subsidies.

The whole thing is well-worth reading.

There's No Such Thing as "Economic Fairness"

If you are a parent, chances are that at some point you have heard your child whine, "But that's not fair," when told they have to do something they don't like. You'll hear that same childish whine if you read almost anything from the left regarding the economy. A good case in point is a column by Steven Perlstein at the Washington Post.

One of the more comical features of the budget debate is to watch the ways in which Republicans refuse to engage on the issue of economic fairness.

No, what's comical is someone who actually believes that "economic fairness" means anything.

Is it fair that the market economy has directed virtually all of the benefits of economic growth to the top 10 percent of households? No answer.

The answer is a combination of who cares, and that's a ridiculous question.

Given this increasingly unequal distribution of incomes, isn’t there room to make the tax code slightly more progressive? No answer.

This question illustrates the silliness and lack of logical reasoning capacity of the "fairness" crowd. It's just as easy to ask why it is fair that successful people have more of their money taken by force and redistributed to the less successful. Is it fair that nearly half the country pays no income taxes, and that the tax burden is already borne disproportionately by the wealthy? Is it fair that people who have worked hard all their lives have to support a significant number of people who won't work, do nothing to better their situations, and view the government as a never-ending source of money that they are entitled to?

In deciding what to spend and whom to tax, lawmakers’ fights over budgets are always fights about values and priorities in which fairness has as rightful a place as fiscal rectitude and economic efficiency.

No, it doesn't. Economic fairness is a purely arbitrary concept that depends entirely on your point of view. Obviously if you are the one being taxed to pay for other people, your viewpoint on economic fairness might differ greatly from someone who thinks they are entitled to more of your money. People who don't understand that fairness depends on perspective, and that many aspects of life are fundamentally unfair -- for good reason -- are fools. When those fools want to use the government to force others to conform to an arbitrary conception of fairness they become dangerous fools.