Thursday, November 17, 2011
Tuesday, November 15, 2011
Suppose that year after year, you spend more than you earn. You are worried that you've become fiscally irresponsible. Which of the following could be paths back to fiscal sanity for your household?
A) Spend less.
B) Earn more.
C) Stop at the ATM more often so you'll have more cash in your pocket.
Do we all understand why C is a really bad answer? Good. Now let's try another one.
Suppose that year after year, your government spends more than it collects in taxes. You are worried that it's become fiscally irresponsible. Which of the following could be a path back to fiscal sanity for your government?
A) Spend less.
B) Collect more tax revenue.
Spending less—at least spending less on things you don't need—can be a first step toward sanity for a government just as it can for a household. So A is a pretty good answer. What about B?
As the deadline looms for the congressional super committee, there's seems to be a growing sense that tax revenue for the government is like income for the household. That's wrong. Raising taxes is nothing at all like earning income. Instead, it's a lot more like visiting the ATM.
The government's debt is the American people's debt. If we pay down that debt through higher taxes, we will, for the most part, pay those taxes by drawing down our savings. That's no more "responsible'' than drawing down those savings to finance overconsumption within the household.
The notion persists that an extra trillion in federal spending can be converted from "irr esponsible'' to "responsible'' as long as it's accompanied by an extra trillion in tax hikes. That's like saying a $500 haircut can be converted from "irresponsible'' to "responsible'' as long as you withdraw the $500 from your bank account. If the super committee loses sight of this fundamental truth, it is doomed to fail.
Wednesday, November 9, 2011
The indictment of seven Long Island Rail Road workers for disability fraud last week cast a spotlight on a troubled government agency. Until recently, over 90% of LIRR workers retired with a disability—even those who worked desk jobs—adding about $36,000 to their annual pensions. The cost to New York taxpayers over the past decade was $300 million.
As one investigator put it, fraud of this kind "became a culture of sorts among the LIRR workers, who took to gathering in doctor's waiting rooms bragging to each [other] about their disabilities while simultaneously talking about their golf game." How could almost every employee think fraud was the right thing to do?
The LIRR disability epidemic is hardly unique—82% of senior California state troopers are "disabled" in thei r last year before retirement. Pension abuses are so common—for example, "spiking" pensions with excess overtime in the last year of employment—that they're taken for granted.
Collective-bargaining rights have made government virtually unmanageable. Promotions, reassignments and layoffs are dictated by rigid rules, without any opportunity for managerial judgment. In 2010, shortly after receiving an award as best first-year teacher in Wisconsin, Megan Sampson had to be let go under "last in, first out" provisions of the union contract.
America should ban political contributions by public unions, by constitutional amendment if necessary. Government is supposed to serve the public, not public employees.
Monday, November 7, 2011
The Occupy Wall Street protesters aren't good at articulating what they want, but one of their demands is "end corporate welfare." Well, welcome aboard. Some of us have been fighting crony capitalism for decades, and it's good to have new allies if liberals have awakened to the dangers of the corporate welfare state.
Corporate welfare is the offer of special favors—cash grants, loans, guarantees, bailouts and special tax breaks—to specific industries or firms. The government doesn't track the overall cost of these programs, but in 2008 the Cato Institute made an attempt and came up with $92 billion for fiscal 2006, which is more than the U.S. government spends on homeland security.
That annual cost may have doubled to $200 billion in this new era of industry bailouts and subsidies. According to the House Budget Committee, the 2009 stimulus bill alone contained more than $80 billion in "clean energy" subsidies, and tens of billions more went for the auto bailout and cash for clunkers, as well as aid for the mortgage industry through programs to refinance or buy up toxic loans.
This industrial policy model of government as a financial partner with business can sound appealing, but the government's record in picking winners and losers has been dreadful.
As important as this economic damage is the corrosive effect that corporate welfare has on public trust in government. Americans understand that powerful government invariably favors the powerful, who have the means and access to massage Congress and the bureaucracy that average citizens do not. This really is aid to the 1% paid by the other 99%.
With American federal debt headed toward the worst European levels, this is an issue that should unite the tea party, the Occupy Wall Street protesters and Congressional deficit-cutters.
Tuesday, November 1, 2011
Peggy Noonan has a decent article about Paul Ryan and Obama’s campaign of class warfare (link below); however, I’m also including the link to Paul Ryan’s speech that Peggy discusses and I recommend reading that above the article. I think Ryan’s speech is an excellent exploration of some of our nation’s problems and a solid foundational explanation of a serious approach to solve these problems. Serious thinkers from any political side will benefit from carefully considering his speech.
Here’s Paul Ryan’s recent speech [read or watch]:
Mr. Ryan receives much praise, but I don't think his role in the current moment has been fully recognized. He is doing something unique in national politics. He thinks. He studies. He reads. Then he comes forward to speak, calmly and at some length, about what he believes to be true. He defines a problem and offers solutions, often providing the intellectual and philosophical rationale behind them. Conservatives naturally like him—they agree with him—but liberals and journalists inclined to disagree with him take him seriously a nd treat him with respect.