SAFE’s “hit nail on head” blogs:   2014

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10/13/14 (E minus 22) – Making sense of the debate about sea level rise        Read a Reply

Several years ago, SAFE posted a hypothetical debate about how to bring down gasoline prices at the pump.  Our idea was to relax restrictions on US oil production and thereby boost supply; big government advocates (Side A) would predictably argue otherwise.  Tip for fiscal visionaries: be persistent or get run over, 4/25/11.

Your intellectual opponents will change the subject, shift the blame, and/or urge you to shut up.  They will, in other words, say almost anything except that you have made a valid point that should be considered, accepted, and acted on.

Sure enough, Side A suggested policies designed to constrain demand, shift to alternative (and higher cost) energy sources, punish the oil companies for purported profiteering, and avert threats to wildlife as a result of drilling in new areas.

The fiscal visionary knocked down one argument after another and ended by saying it was time to “talk about relaxing the current restrictions that have been impeding US oil production for the past four decades” and “if we still can’t agree, maybe that is what elections are for.”   

Our position has been vindicated since 2011, and it happened faster than we were expecting.  Major gains in US oil production have resulted from the fracking boom, contributing to lower prices at the pump.  US gas production is also up, which has accelerated the retirement or conversion of coal power plants (a prime goal for environmentalists although they still aren’t satisfied).  Free enterprise achieved these results, but at least the government managed to stay out of the way.  Good show!

Now here is another issue, the implications of sea level rise (SLR) – both globally and along the Mid-Atlantic coast.  Side A insists that SLR is a major threat to low-lying Delaware, as will be seen, and skeptics should be prepared for a long and hard battle.  Instead of a hypothetical debate this time, we’ll recap some of the actual conversation in the First State.

A. Background – Among those actively concerned about SLR are environmental groups like the Sierra Club, Delaware’s largest newspaper (the News Journal), academia (notably the University of Delaware), government agencies including Delaware’s Department of Natural Resources and Environmental Control (DNREC), and most of the political leaders in the state.  SLR is often attributed to global warming, rather than the sinking of coastal land, and SLR alarmists typically subscribe to the manmade global warming (MMGW) theory that the burning of fossil fuels is increasing CO2 levels in the atmosphere with potentially disastrous consequences.

A handful of conservative groups, e.g., SAFE, Climate Common Sense, and the Positive Growth Alliance, and a few scientists, journalists, and political leaders see things differently.  Our side views the MMGW theory as unproven, considers predictions of future SLR exaggerated, and suspects that global warming/SLR alarmists may have ulterior motives, e.g., expansion of the government and doing favors for alternative energy firms.

In August 2012, the News Journal ran a series of articles and hosted a public forum on SLR.  SAFE posted a review that suggested the articles/forum had exaggerated the SLR threat, ignored its primary cause (coastal land in the region is sinking), and offered “solutions” without any regard for practicality.  Don’t panic about sea level rise, 8/27/12.

Since 2012, the News Journal has continued to run alarmist news reports on SLR and global warming.  It has also published letters and columns (commendably representing both sides of the argument).

Established by DNREC in 2010, the Sea Level Advisory Committee held numerous meetings, conducted a series of public engagement sessions, and proposed a SLR adaptation plan for Delaware.  The Committee’s final report, with 55 recommendations, was published in October 2013. http://tinyurl.com/kyabwhv (download report as PDF).

Most of the recommendations in the report are quite general – e.g., 3.3 “consider use of a Transfer of Development Rights tool to direct future growth away from vulnerable areas” or 3.5 “incorporate sea level rise into the Transportation Operations Management Plan.” The effects will likely depend on the assumed magnitude of future SLR. 

In this regard, the report recites expectations that the historic rate of SLR – about a foot per century as measured by the long-term tide gauge in Lewes – will accelerate in coming decades “due to climate change which is expected to increase the rates of glacier and ice sheet melt as well as rates of ocean water expansion.”  According to a DNREC technical workgroup established in 2009, such acceleration could “cause the level of Delaware’s oceans, bays and tidal rivers to rise between [1.6 feet and 4.9 feet above their present levels]” by 2100.

Count Rich Collins of the Positive Growth Alliance as a skeptic.  His 8/14/13 letter (included in Appendix B) suggests that these global warming and SLR projections are unreliable and that a policy of “remaining flexible and taking action when the need clearly presented itself” would make more sense.

Daily, there are new reports coming out, including from the UN, that the earth has not warmed for approximately 15 years.  In fact, climate models are being revised to try and accommodate this apparently unexpected situation.  It is no surprise to us that 100-year climate predictions based on computer models are difficult.  What is surprising is that our small state has chosen to put its economy at risk on the basis of such predictions.

The Sea Level Advisory Committee had not been charged with implementation, and it was disbanded after completing the adaptation plan.  Follow-up will be up to the normal instrumentalities of the federal, state and local governments, with no clear consensus as to the path forward.

B. Ongoing discussion – The News Journal recently ran another story in its seemingly endless reporting on SLR, which once again painted this phenomenon as a major threat. Dire flood warning: Report says Delaware will soon see worse, more frequent flooding, Jeff Montgomery & Molly Murray, 9/16/14.

The current “news” is a report by a national environmental group called Climate Central to the effect that SLR will put at risk “hundreds of thousands of people, billions of dollars in property and roads, schools and power plants.” 

The report includes “an interactive, online mapping tool that allows home and business owners and state and local planners to assess the localized impacts of climate change, find the most vulnerable citizens and plan for the future.” Susan Love, a coastal programs planner with DNREC, called the online mapping feature “a national tool” and stressed the importance of seeing SLR as a national issue.

“The first rule in risk mitigation is that you make contingency plans for worst-case scenarios,” adds Penn State professor Michael Mann, who cites estimates that “increases along the mid- Atlantic will exceed 6 feet [by ??].” 

Wendy Davis of UD is already working with coastal officials to develop hazard mitigation plans. Planning for the future needs to start now, she says, because “a significant amount of time is required” to change public attitudes, build consensus, develop a plan and reach long-term goals.  “Being proactive now simply makes sense. *** There’s no benefit from waiting to see” what happens.

John Greer, P.E., of Climate Common Sense wrote to the editor re the NJ story.  Soberly fact-based and logical, his letter attacked the conclusion that SLR along the Delaware coast is likely to accelerate from the historical rate of about one foot per century to the dramatically higher rates being cited. Depend on real science, not propaganda [NJ’s title], 9/30/14. http://tinyurl.com/kppak8e

The News Journal misinforms readers by gross exaggerations regarding sea level rise and not saying what sea level rise has actually been.  The paper has relied on misinformation from environmental groups instead of information from scientific journals.

A recent article, “Dire Flood Warning” shows a map of Wilmington with areas flooded by a 9-foot sea level rise in 20 years based on a report by Climate Central, a rate rise of 45 feet per 100 years. Climate Central’s website claims they do “data driven research,” that sea level rise [global average] has risen 8 inches since 1880 “because of global warming,” and that “the rate of rise is accelerating.” 

But the actual data show that sea level rise at Lewes, Delaware, has only been about 1 foot per 100 years and is not accelerating.  At this rate, sea level would rise less than 3 inches in 20 years, not 9 feet.

A report, “Tide gauge location and the measurement of global sea level rise,” in the May 2014 issue of the journal Environmental and Ecological Statistics, statistically examined data from over 1,000 tide gauges worldwide, with data from 1807 to 2010.  They found that the average sea level rose only about 4 inches per 100 years over this time and found no evidence of sea level rise acceleration.

The authors also found that sea level rise is local rather than global, and concentrated in a few areas including the Atlantic coast of the US.  Sea levels were not changing in 61 percent of tide gauge locations, rising in 35 percent of locations, and even falling in 4 percent of locations.

The local nature and lack of acceleration indicates that relative sea level change is primarily the result of land height changes, not global warming which would result in more universal sea level rise.  In the Atlantic coast area, the land is thought to be sinking slowly due to post-glacial rebound – look it up.

Before deciding on policy, we should better understand the real science of sea level change and not be misled by grossly false information.

It seemed unlikely that the other side would let this viewpoint stand unanswered, although it wasn’t clear what they could say in rebuttal.  Sure enough, a letter from a member of the former Sea Level Rise Advisory Committee was soon published.  The facts about sea-level rise, Chad Tolman, 10/7/14. 

This response cites a page on Climate Central’s website that “clearly says the projected [SLR for Delaware] by 2050 is 14 inches.”  So “where the author got 9 feet in 20 years is a mystery” and “perhaps he didn’t carefully read or understand the News Journal article or the Climate Central report.”

Kudos to the News Journal for doing “an outstanding job of reporting on Delaware’s vulnerability to [SLR] and bringing it to the attention of the public.”

A mystery, really? The NJ story had cited a 6-foot SLR figure (albeit by an unspecified date), which Professor Michael Mann of Penn State had paired with the suggested need to make contingency plans for worst-case scenarios.

The story had also prominently displayed a map of flooding in the Wilmington area showing “value per acre inside areas with a 9-foot sea level rise,” which was said to indicate “what’s at risk in 20 years.”  Perhaps the presentation conflated SLR with the assumed surge from a future storm equivalent to the record Ash Wednesday storm in 1962 (Flooding in Delaware, National Weather Service. http://tinyurl.com/krzgufs), but if so this was not made clear.

And if Climate Central was merely projecting 14 inches of SLR by 2050 (representing a tripling of the historical SLR rate), wasn’t their reported finding that SLR will put at risk “hundreds of thousands of people, billions of dollars in property and roads, schools and power plants” a bit exaggerated? 

Shortly thereafter, the News Journal doubled down with another news story along the lines that, far from merely being something to worry about in 20+ years, SLR is already a big problem. Del. coastal flood issues to get worse; Report says nuisance events will become even more common, Molly Murray, 10/9/14.

This story leads with a statement by state planner Susan Love to the effect that “over the last 30 days, there’s been minor flooding in low areas of Lewes six times.”  And according to a new Union of Concerned Scientists report issued on Wednesday, such nuisance flooding will reportedly “get worse in coastal areas along both the Atlantic and Gulf coasts over the next 15 and 30 years.” 

Although “the report doesn’t tell us anything that we don’t already know in Delaware,” Love is quoted, “it helps put a vision on the short term.”  (Thus, per UCS estimates, the incidence of nuisance flooding in Lewes will increase to 90 tidal flooding events by 2030 and more than 200 flooding events a year by 2045.) 

Among the difficult conversations that need to take place, according to Love, are the tradeoffs between allowing land development in vulnerable areas now (increasing tax base) and the future costs of bailing out landowners when flooding becomes “a regular event.” And alas, “most of Delaware’s coastal towns are small and don’t have the resources to hire a planner to help them prepare for the future.” 

Livening up the text are two pictures of a sign that has been erected in the Lewes area. It displays previous benchmark high tides from severe storms, topped by the 7.8 feet above mean sea level record set in 1962.  In one picture, the sign is sticking far above the floodwater during a storm in November 2009.  In the second, a scale has been added at the top of the sign showing hypothetical water levels in 2050 (assumes the 1962 storm plus 1.7 foot SLR), and two cases for 2100 (assumes the 1962 storm plus 3.2 foot SLR or alternatively 4.9 foot SLR)

C. Now what? We have not convinced our intellectual opponents, obviously, nor have they convinced us.  But although it may just be our imagination, the general public seems to be swinging our way on this issue.  Why?  Official data show that the global warming trend stopped around 1998, and perhaps some people are beginning to notice that it’s not getting warmer and warmer as they were led to expect.

A majority of Americans continue to tell pollsters that global warming is happening, but political affiliation strongly influences the responses.  Thus, in one poll, 58% of Republicans (but only 11% of Democrats) characterized the MMGW theory as dishonest.  Poll: Majority of Republicans believe global warming a hoax, Ben Geman, The Hill, 4/3/13. http://tinyurl.com/la9ypma

Judging from comments they have made, global warming alarmists may be nervous about the state of public opinion.  Climate change expert [Katharine Hayhoe]: public perception lags, Jeff Montgomery, News Journal, 12/10/13

According to Dr. Hayhoe, the “global science of human-caused climate” is getting better all the time, but the public’s understanding of the topic “is definitely a worry.”  In terms of scientific certainty we’re down to the decimal points, but “in public opinion, we could be advancing by tens of percent” through outreach and better communication

Such worries may tempt SLR/global warming alarmists to cut corners and make attention-grabbing claims instead of seeking a better understanding of these phenomenon so that well-informed decisions can be made.  If and when they do so, our side should continue to call them on it.

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I couldn't agree more.  Beware those people -- especially politicians -- who have an agenda. – Retired judge (NJ)

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10/6/14 (E minus 29) – Running an effective government is tough work            Read a Reply

Remember the old saw about whether it’s better to do the right things or do things right?  The first answer is often given on grounds that an organization fixated on functional excellence won’t achieve overall success.  Doing the right thing is more important than doing things right, bothsidesofthe table.com, 7/14/10. http://tinyurl.com/nfv4836

Consider the difficulties of agreeing on “the right things” for a government to do, however, when Side A thinks government action can solve most of the problems of mankind while Side B believes just the opposite.

Even the best plans can go awry due to poor execution, moreover, and incompetence or worse is common in government service.  Thus, the 2010 dismissal rate for 168,000 federal workers in the Washington area was 0.26%.  And appalling failures have occurred without anyone being fired, e.g., the GovCare website fiasco or denial of requests for upgraded security at US installations in Benghazi.  Wrong ideological choice has cost Obama dearly, Jonah Goldberg, Townhall.com, 10/3/14.  http://tinyurl.com/kmxjn33

If Obama wanted to restore faith in government, he would have pushed for mercilessly firing bad government workers and ending stupid government programs. And while he paid a little lip service to such things, his priorities were all in the other direction. That is because he had to dance with the girl that brung him. The Democratic Party isn't simply the party of government, it is the party for government.

Our answer would be that one should try to do the right things and do them right.  A series of examples follows, which may help to make that point.

1. Presidential security – A man with a knife climbed the fence at the White House on September 19, entered the presidential residence by the front door, and ran through several rooms before being apprehended.  The incident was seen as a shocking failure on the part of the Secret Service, and it sparked many questions as to how something like this could have happened.  White House intruder got far past front door, Alicia Caldwell & Josh Lederman, abcnews.com, 9/29/14. http://tinyurl.com/no73ch4

The president initially expressed full confidence in the Secret Service and its director – who had been appointed to head the agency in 2013 (the previous director retired, with the timing possibly related to disclosures that Secret Service agents had consorted with prostitutes while in Colombia to do advance work for a presidential visit).   After Julia Pierson got a bipartisan congressional grilling and then an earlier security breach came to light, however, her resignation was tendered and accepted.  Secret Service director resigns under pressure about breaches, Michael Shear & Michael Schmidt, New York Times, 10/1/14. http://tinyurl.com/n5owlhw

In the wake of Pierson’s departure, the Secret Service is seen as needing a top-to-bottom overhaul. Morale at the agency is poor; agents feel overburdened, distrust the higher ups, and have been frustrated by orders that they viewed as compromising security needs. Pierson failed to provide fresh start for Secret Service that administration wanted, Carol Leonnig, Washington Post, 10/1/14.  http://tinyurl.com/npzsp9q

The 6,700-member agency [with a $1.5 billion annual budget], long an elite class of skilled professionals who prized their jobs, now suffers from diminished luster and historically high turnover rates. Officers in charge of protecting the White House say they have grown resentful at being belittled by their bosses and routinely forced to work on off-days. Some agents who have sworn to take a bullet for the president and his family have little faith in the wisdom or direction of their ­senior-most leaders.

A conservative senator sagely attributed this situation and others to a pattern of excessive delegation.  He went on to say “the federal government is dysfunctional, ineffective, [and] inefficient so my suggestion is to stop growing it.”  Sen. Ron Johnson [R-WI]: Obama’s inability to manage at root of Secret Service problems, Melissa Clynne, newsmax.com, 10/1/14.  http://tinyurl.com/mawdpxk

2. Redskins – We will refrain from opining as to whether or not Washington, DC’s pro football team is appropriately named.  The answer depends on whether Native Americans feel demeaned by the Redskins long-time name, and what do we know about that?

It does seem, however, that some of the people raising this issue have an agenda of promoting White Liberal Guilt.  And instead of making their point and moving on they keep raising it, as though determined to get their way.  The second biggest issue in America, Bruce Bialosky, Townhall.com, 10/27/13. http://tinyurl.com/lez5qy5

One particularly persistent critic is the Senate majority leader, who insists that the team’s name is racially derogatory.  Harry Reid says NFL and “Redskins” need to clean up their act after NBA punished Sterling’s racism, Seattlepi.com, Brett LaGiurato, 4/30/14. http://tinyurl.com/otvun98

The nation’s leader has also weighed in on the subject.  President Obama: [If I owned the team,] “I’d think about changing” Redskins name, Mike Jones, Washington Post, 10/15/13. http://tinyurl.com/lwcmcrq  Perhaps it’s just a coincidence, but since the president said this two administrative agencies have proposed actions that would hurt the team owners.

First, the U.S. Patent and Trademark Office decided to revoke the Redskins name and logo trademark, as it had unsuccessfully attempted to do in years past.  The team’s response was effectively “see you in court.” Redskins defy trademark ruling, say they’ll defend name, Sean Higgins, Washington Examiner, 6/18/14.  http://tinyurl.com/ot35gjq

Then it was the Federal Communications Commission’s turn. Citing a listener complaint, the FCC said it might impose fines on broadcasters for referring to the Washington Redskins by name.  FCC considers fines for on-air use of Washington Redskins name, Lisa de Moraes, Wall Street Journal, 9/30/14. http://tinyurl.com/kzvu4ul

The commission is charged with fining broadcasters for obscenities and indecencies by responding to viewer/listener complaints; in this case, it received a petition from legal activist John Banzhaf III asking that regulators strip a local radio station of its broadcasting license when it comes up for renewal because it used the team’s name. Banzhaf insists the word is racist, derogatory, profane and hateful, making its use “akin to broadcasting obscenity.”

For the record, a majority of Americans feel otherwise.  The percentage of supporters is down to 71%, however, versus 89% in 1992.  Poll: Most Americans think Redskins should keep name, newsmax.com, 9/3/14. http://tinyurl.com/k2o5xx7

How ironic, that the government doesn’t seem able to take care of core responsibilities like keeping intruders out of the White House, yet can so doggedly go after a dubious issue like this one.  

3. Global warming – Will there ever be an end to the efforts to combat global warming, which is blamed on human burning of fossil fuels and supposedly threatens the future of the human race?  We hope so, but the current administration and environmentalist activists are pursuing this issue relentlessly and with minimal regard for economic and social costs.  Global warming cures that aren’t needed and would cost a bundle, 9/1/14.   

On September 21, protestors assembled in New York to protest global warming and whatever ills might conceivably be associated with it – and demand recompense. Climate justice now!  Occupy the climate!  Byron York, Washington Examiner, 9/22/14. http://tinyurl.com/ottsa3v

Put it all together — all the justice demanders, the tax Wall Streeters, and the spirit of Occupy symbolized by the angry pacifist — and the People's Climate March was one long, loud, loosely organized demand that vast sums of money be taken from the wealthy and given to the clients of the coalitions and alliances and networks and task forces that make up today's environmental justice movement. They've had enough of debating climate models. They want to start taking — now.

On September 23, in a speech at the UN Climate Change Summit, the president called climate change (aka global warming) “one issue that will define the contours of this century more dramatically than any other.” The marching of protestors was also duly noted.  http://tinyurl.com/kb7u6wg

So the climate is changing faster than our efforts to address it.  The alarm bells keep ringing.  Our citizens keep marching.  We cannot pretend we do not hear them.  We have to answer the call.  We know what we have to do to avoid irreparable harm.  We have to cut carbon pollution in our own countries to prevent the worst effects of climate change.  We have to adapt to the impacts that, unfortunately, we can no longer avoid.  And we have to work together as a global community to tackle this global threat before it is too late. 

On September 25, EPA Director Gina McCarthy touted the clean energy agenda (which is the basis for the proposed Clean Power Plan, or CPP, that the EPA published on June 2) in a speech at Resources for the Future, a nonprofit research organization.  Her speech glossed over resulting energy price increases and argued that the overall economic effects would be positive rather than negative.  Predictably, some critics were underwhelmed.  EPA chief’s climate pitch ignores rising electric prices, Ben Wolfgang, Washington Times, 9/25/14.  http://tinyurl.com/ktptczl

“I think President Obama and the EPA must live on a different planet,” said Sen. David Vitter, Louisiana Republican and the ranking member on the Senate Environment and Public Works Committee. “What people want is for them to back off of their attacks on our economy. Their benefits calculations are bogus because the costs for their most recent mandates will be astronomical, and their federal takeover of the electricity grid could kill hundreds of thousands of jobs in Louisiana and across the country.”

We previously suggested that (1) “the CPP is ill advised from a scientific, economic or political standpoint,” and (2) it would be best to “countermand this proposal instead of allowing a legal battle over it to play out in the courts.”  Accordingly, our analysis concluded, Congress should “promptly pass legislation, by a veto-proof majority, revoking the authority that the EPA claims to have been granted to impose and enforce increasingly stringent limits on CO2 emissions.”  SAFE to Congress: Bin the Clean Power Plan, 6/16/14 (a one-page summary was sent to every member). 

Nice words, but the only concerted congressional reaction to the CPP of which we are aware was a letter to Director McCarthy requesting a 60-day extension of the 4-month comment period “so that states and utilities can provide the most detailed assessments on how to meet the targets while maintaining reliability in the grid.”   Dated September 11, the letter was signed by 53 senators (mostly Republicans). http://tinyurl.com/q3t8ynx (download PDF).

The EPA’s ensuing 45-day extension (until December 1) of the comment period was painted as a major concession.  Obama delays key power plant rule of signature climate change plan, Suzanne Goldenberg, the Guardian, 9/16/14. http://tinyurl.com/n9b45dp

. . . a delay puts the EPA on an even tighter deadline to finalise the rule before Obama leaves office in 2016. Even before Tuesday’s extension, the initial comment period for the new EPA rule was already longer than the norm.

Moral: When government officials are pursuing a cherished objective, they may go after it pretty hard – even though it’s the wrong thing to do.  Hit them over the head! 

4. Ebola – An outbreak of this disease has reached alarming proportions in several West African countries.  First identified in 1976, Ebola is highly infectious but not highly contagious since it does not spread through the air but only via direct contact.  The fatality rate has been over 50%, e.g., 3,048 cases had been reported in Liberia through September 23 with 1,830 deaths.  Ebola fast facts, CNN.com, updated 10/3/14. http://tinyurl.com/mbwrmmz

The United States and other countries have responded by sending medical professionals, support workers (including some 3,000 military personnel from the US), supplies, and funds to assist in fighting the Ebola outbreak.  The president’s weekly address, 9/27/14. http://tinyurl.com/pjflzqu

America is leading the fight to contain and combat the Ebola epidemic in West Africa. We’re deploying our doctors and scientists -- supported by our military -- to help corral the outbreak and pursue new treatments. From the United Kingdom and Germany to France and Senegal, other nations are stepping up their efforts, too, sending money, supplies, and personnel. And we will continue to rally other countries to join us in making concrete commitments to fight this disease, and enhance global health security for the long-term.

The administration’s point man for this effort has been Thomas Frieden, director of the Centers for Diseases Control and Prevention in Atlanta.  “Ebola the most urgent challenge,” says CDC director, Brian Hughes, Washington Examiner, 10/4/13. http://tinyurl.com/q7vz5kf

Frieden was among the earliest proponents of an aggressive US plan to handle a virus that by January could afflict 1.4 million people in West Africa. He has pledged that a similar outbreak won’t happen here.

Concerns that Ebola might reach the US have been downplayed, notably in a speech the president gave at the CDC headquarters on September 16 after meeting with Dr. Frieden et al. http://tinyurl.com/q5s3rt4

. . . our experts, here at the CDC and across our government, agree that the chances of an Ebola outbreak here in the United States are extremely low.  We’ve been taking the necessary precautions, including working with countries in West Africa to increase screening at airports so that someone with the virus doesn’t get on a plane for the United States.  In the unlikely event that someone with Ebola does reach our shores, we’ve taken new measures so that we’re prepared here at home.  *** working to help flight crews identify people who are sick *** working with hospitals to make sure that they are prepared, and to ensure that our doctors, our nurses and our medical staff are trained, are ready, and are able to deal with a possible case safely.

Things didn’t work out quite so smoothly, however, when the first US case of Ebola surfaced.  In just two weeks, Obama proven completely wrong about Ebola, Byron York, Washington Examiner, 10/2/14. http://tinyurl.com/mfu5tun

A Liberian infected with the virus, Thomas Eric Duncan, flew from Monrovia to Brussels to Virginia to Dallas. No screening at any airport stopped him, nor did any flight crews. *** when Duncan arrived in Dallas, the doctors, nurses and medical staff at the hospital he entered were not prepared and in fact released him back into the Dallas population where, fully symptomatic, he had contact with lots of people.

It turns out that the screening procedures at the airports in Africa may leave something to be desired.  Top Ebola virologist: Liberia’s airport checks “useless” and a “disaster,” Frances Martel, breitbart.com, 10/3/14. http://tinyurl.com/mzzpklu

And although Duncan said he had come from Africa when he went to a Dallas hospital complaining of flu-like symptoms, he was not initially admitted for treatment.  Ebola victim told ER nurse he had been in African outbreak zone - but was sent home with antibiotics for a “low grade virus” TWO days before he was finally quarantined, Daily Mail, 10/1/14. http://tinyurl.com/mpfndj5

Another worry: the Ebola virus could mutate, acquiring the capability of attaching to receptors in the human respiratory system, at which point the disease could become highly contagious. Although regarded by some experts as unlikely, such a development cannot be ruled out as Ebola spreads to more and more human hosts.    Doomsday warning: UN Ebola chief raises “nightmare” prospect, Corey Charlton & Lucy Crossley, Daily Mail, 10/2/14. http://tinyurl.com/mbx9czz

Could it be that it’s time to impose travel bans from West Africa?  So far, the administration has insisted that such restrictions are unnecessary and could prove counterproductive. White House: Travel ban would “impede” Ebola response, Brian Hughes, Washington Examiner, 10/3/14. http://tinyurl.com/mczbrgg

Best defense is to combat Ebola in West Africa, which entails sending people over to help with an assurance they can return – screening procedures have prevented “dozens and dozens” of presumably infected people from getting on planes there – “our healthcare infrastructure in the United States is well equipped to stop Ebola in its tracks.”

Americans would like to believe that government experts know what they are talking about and are exercising good judgment, but Ebola is not something to be taken lightly and the way in which this problem and others have been handled lately does not inspire a lot of confidence.  Brett Baier show, panel discussion, Fox News, 10/2/14. http://tinyurl.com/jwlknu9

RON FOURNIER, SENIOR POLITICAL COLUMNIST, NATIONAL JOURNAL: Look, I'm not a doctor, I'm not even a medical reporter.  [So] I have to trust my government and that's why I have to trust the healthcare system. [Unfortunately], we really have lost faith in all our institutions. And the medical system in particular has given us reason to have doubt even in this particular incident. So if there was ever a time where we need to be able to keep our heads about us and trust the people leading us this would be the kind of incident that we should. But the problem is it's rather hard to do so.

Moral: government leaders should do their homework and remember who they are working for.

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Very good blog. Then this report, although the child in Delaware probably does not have Ebola. http://tinyurl.com/k7alqhl  - Retired investment adviser

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9/29/14 (E minus 36) – The budget is on autopilot, and so are a lot of other things        Read a Reply

After assembling in Washington on September 8, the members of Congress acted on a handful of items while putting off many others, engaged in some political posturing, and then recessed a week earlier than scheduled.  They will not return until after the elections in November.  Congress heads home after exhausting eight days of work, Russell Berman, thewire.com, 9/18/14. http://tinyurl.com/kxemt9s

The president did not seek congressional authorization for air strikes against Islamic State terrorists in Iraq and Syria, but funding was approved to begin training “moderate” Syrian rebels for the ground fighting.  Senate passes Syria resolution, clearing it for Obama’s signature, Susan Ferrechio, Washington Examiner, 9/18/14. http://tinyurl.com/mumxp5z It’s unclear, however, whether the moderates are actually on board. Syrian rebels slam US, conservativebyte.com, 9/25/14. http://tinyurl.com/mhxr2rr

The charter of the Export-Import Bank was extended until 6/30/15, which was in line with SAFE’s earlier prediction that politics (strong big business support) might trump conservative zeal to shut the EIB down. Corporate welfare has nine lives, 7/11/14

Finally, a continuing resolution was enacted that will keep government funds flowing until December 11. H.J. Res. 124, http://tinyurl.com/oaew55w

The text of the CR is obscure, but its general thrust is simple.  The government will begin fiscal year 2015 on October 1 without a detailed budget for “discretionary” expenditures ($1+ trillion per year), let alone effective controls over “mandatory” expenditures, which make up the larger part of total outlays (nearly $4 trillion per year).

Such fiscal laxity has become habitual in recent years, and last fall there was a “government shutdown” when Republicans attempted to extract concessions for supporting a CR/debt limit increase.  The public reaction was unfavorable, and GOP leaders vowed they would not fall into the shutdown trap again.

There is no reason to believe the situation will improve after the election. Another continuing resolution during the “lame duck” session is a near certainty, with more CRs likely to follow.

For all of SAFE’s sage advice, our political leaders don’t seem to have grasped the importance of spending the taxpayers’ money wisely.  If any candidates in the upcoming elections favor a balanced federal budget, they haven’t been very vocal about it.

To demonstrate, let’s review where the parties stand on the issues being talked about – and then critique the Republican (challengers’) approach on the fiscal problem.

A. Issues matrix – The key issues are the economy, international threats, GovCare, immigration, deficits, and leadership.  We have attempted to synthesize the Democratic vs. Republican positions, in some cases using blunter language than the party leaders do.

DEMOCRATIC POSITION

REPUBLICAN POSITION

Economy: Took a while, but now we’re rolling.  4.2% GDP growth rate in 2nd quarter, manufacturers coming back to US, stock market at record highs.  If Congress would just raise the minimum wage to $10.10 per hour, recovery would be assured. We must also safeguard the future of our children & grandchildren by combating climate change. Republicans are in denial on this issue.

Economy contracted in first quarter, expected growth for full year is less than 2% - and that’s just not good enough.  Only high earners and the wealthy are doing well; everyone else has been losing ground – and more government handouts cannot change that.  The government should think twice before issuing costly regulations. Fears about manmade global warming are overstated.

International: World is messy, always has been, but US can cope with targeted military operations and diplomacy. Wars are expensive, waste resources, and engender hatred.  Together with our allies, however, we will take the necessary military actions.

International: Threats were underestimated, US weakness is perceived, and we must take a stronger stance. Diplomacy is all very well, but without military strength it won’t work.  Also, the president should heed military advice and avoid micromanaging.

GovCare: Good start, give it time.  We’d be glad to consider Republican ideas – but all they seem to think about is passing “repeal” resolutions and filing lawsuits.

GovCare was a blunder; many Americans are getting inferior insurance just to enroll a few more people in the system (who were getting care already).

Immigration: It’s time to enact comprehensive immigration reform, but GOP conservatives are blocking it

Immigration: Enforce the current laws and then we’ll talk about “reforms,” but fancy promises aren’t going to cut it

Deficits: Being reduced to a safe level, good enough for now. No point working on a budget unless the Republicans agree to tax increases.

Deficits: House passed a budget that would eliminate the deficit in 10 years – where’s the Senate on this?  We need tax reform, not tax increases.

Leadership: President deserves more respect than he’s been getting; he has to act when Congress won’t.  As for Harry Reid, he’s just one of 100 senators.

Leadership: Fire Harry Reid, rein in the president who doesn’t seem to pay attention to key problems or understand the Constitution.

Does the foregoing place more stress on criticizing the opposition than offering positive solutions?  Sure, but politics often works that way, as shown by the vast amount of money spent on attack ads.  Why do negative political ads work?  Discovery.com, 5/16/12. http://tinyurl.com/lwe3vc9

One reason that negative messages are so compelling is that we are emotional creatures, wired to pay attention to harmful information, said Joel Weinberger, a psychologist at Adelphi University in New York and owner of Implicit Strategies, a consulting firm that investigates unconscious influences on behavior. *** People are more focused on negative information. People stop for a car wreck, but there are no traffic jams for beautiful flowers."

Heavy campaign spending is bolstering vulnerable Democratic candidates this year, and could potentially thwart the Republican attempt to pick up six seats and win control of the Senate.  Why a GOP Senate majority is still in doubt, Karl Rove, 9/18/14. http://tinyurl.com/ouw3q6y

As of this writing, between Sept. 1 and election day, Democratic Senate candidates, party committees and outside groups have run or placed $109 million in television advertising, while Republican candidates, party committees and groups have $85 million in television time. *** In Alaska, Democrats have spent $6.4 million, Republicans $3.6 million. In Arkansas, Democrats have spent $6.2 million for TV ads, Republicans $4.6 million. In Colorado, it's $8.5 million for Democratic ads, $7 million for Republicans. In Iowa it's $8.5 million for Democrats, $5.6 million for GOP spots. In Louisiana, it's $5.7 million for Democrats, $5.6 million for Republicans. North Carolinians will see more than twice as many Democratic ads as Republican spots—$17.6 million to $7.8 million.

In both these races and others, moreover, many of the political ads have a sharply negative thrust. 

•Democratic themes include the purported GOP war on women, stingy education spending, and suggestions that Republicans might cut entitlement programs.  See, e.g., “Outrageous and false, Democratic attack ads reek of desperation,” Andrew Stiles, Washington Free Beacon, 9/3/14.  http://tinyurl.com/npn34ln

•GOP ads have targeted GovCare, the IRS, and most recently national security concerns, while reminding voters that Democratic legislators will invariably vote to support the president.  Republicans shift attack ads to national security, Janet Hook, WSJ/Washington Wire, 9/19/14. http://tinyurl.com/pnqxgo8

People are seeking leaders and ideas to believe in, however, so a positive campaign message is ultimately essential.  Among Republicans making this point is former House Speaker Newt Gingrich, the architect of his party’s Contract with America in 1994.  GOP heads into midterms without detailed conservative manifesto, Joseph Lawler, Washington Examiner, 9/19/14. http://tinyurl.com/pubh9cz

“The fact that we do not have positive themes and positive issues is going to cost us seats this fall because moderates and independents aren’t going to turn out. It’s an enormous mistake,” said Gingrich.  He went on to warn that Republican candidates need to embrace a proactive agenda.  “You just have to sound like you’re more than anti-Obama and you’re more than some pathetically narrow, negative politician whose primary role in life is to raise money for your consultant to buy attack ads.”

Reacting to such criticism, Speaker John Boehner recently laid out a five-point plan to reboot the US economy.  Fix our tax code – solve our spending problem – reform our legal system – rein in our regulatory system – improve our education system.  Remarks to the American Enterprise Institute, 9/18/14. http://tinyurl.com/kk3dncv

B. GOP position on the fiscal problem – Opinions about Speaker Boehner’s plan varied, but many conservatives (including us) felt that it was very bland and provided little reason to vote Republican except “trust us rather than them.”  Certainly that was true when it came to the fiscal problem, or other areas in which disconcerting changes may be needed to secure longer-term benefits. 

Instead of being at the top of the list presented to the AEI, ideas to “solve our spending problem” were preceded by a series of generalities about fixing the tax system. http://tinyurl.com/kk3dncv

Boehner blamed “spending more money than we’ve brought in” for 53 of the last 60 years on demographic trends without mentioning a woefully deficient budget system and/or failures of the political leaders concerned.

And instead of proposing a concerted attack on wasteful government spending, wherever it might reside, Boehner offered a solitary suggestion that was so vague as to be obviously non-actionable. 

We need to put [entitlement programs] on a more sustainable path, which we can do without making radical changes.   

AARP is currently stoking opposition to any significant cutbacks in Social Security, Medicare, etc.  Take a look at this communiqué, which is representative of their tireless efforts, and the task of putting these programs on a more sustainable path may seem a bit more difficult than Boehner made it sound. http://tinyurl.com/o6uf6av

Also, public anxiety about GovCare seems to be receding, at least for the moment, and Republicans have been dialing back their attacks in this area out of fear of being cast as ogres who want to deprive people of healthcare benefits.  Republicans shift gears on Obamacare attack ads, Matt Vespa, Townhall.com, 8/20/14. http://tinyurl.com/ltvk7jr

[The] more people enroll under the Affordable Care Act, the harder it’ll be for conservatives to campaign against Obamacare and say it's a lousy law.  It's definitely true, but whether we like it or not, the larger electorate will see these ads as Republican attempts to take away their healthcare. That problem will be magnified once more Americans are enrolled under the ACA by 2016. Will our 2016 GOP nominee really campaign on a platform that seeks to take away insurance from millions of Americans–or at least that’s how the media will frame it? If that’s the case, Election Day 2016 will be a short night, with a Democrat back in the White House.

Even the resolution just approved to keep the government going may have had an effect the members of Congress were not anxious to disclose, namely bumping up previously agreed spending levels.  Retiring Senator Tom Coburn: Congress lied to America about spending, Patrick Howley, Daily Caller, 9/25/14. http://tinyurl.com/kez3wq9

“The reason Americans have such poor view of Washington is because we’re dishonest with the American public in what we do,” Coburn told [radio host Laura] Ingraham. “In the continuing resolution [...] we’re $47 billion above what we said we would be [in the Ryan-Murray bill].”

One pundit suggested that the GOP should make up for lost time by tackling the fiscal problem and other issues aggressively at the start of the new Congress. Republicans must act with urgency if party captures Senate, Hugh Hewitt, Washington Examiner, 9/29/14. http://tinyurl.com/orxs8el

[Republicans] ought to plan to present and pass through both chambers a GOP variation of Rep. Paul Ryan's budget on day one of the new Congress in January — one modified from last year's House budget only primarily by a major increase in Pentagon spending.

Such a move seems wildly improbable under John Boehner’s leadership, so the election of a new Speaker would presumably be a prerequisite.  House conservatives are said to be talking about such a change, although similar talk has come to naught in the past.  The plot to seize the speakership from John Boehner, Rick Moran, American Thinker, 9/24/14.  http://tinyurl.com/k5clga6

Finally, the expiration of the continuing resolution in December may set the stage for a bargain that will set spending levels for the balance of the fiscal year before the new congressional lineup (presumably more favorable to the GOP) takes effect.  It’s shocking that House Republicans voluntarily put their party in such a position; they should have known better. Beware the lame duck budget, Robert Romano, netrightdaily.com, 9/3/14. http://tinyurl.com/o4pysl3

An amendment to extend the CR until April 17, 2015 was proposed in the Senate, along with a passel of other amendments, but by then it was too late.  Sen. Cruz opposes continuing resolution, press release, 9/18/14. http://tinyurl.com/o72m53r

Whatever happens in the upcoming elections, don’t expect serious action on the fiscal problem – or other major issues - any time soon.  No wonder the focus is already shifting to 2016, when conditions may be right for a serious debate about the need for a change in direction – if a fiscal meltdown or some other disaster doesn’t strike in the meantime.  2014 & 2016: A tale of two elections, Steve Deace, Townhall.com, 9/27/14. http://tinyurl.com/ot37fa2

•The conservatives I talk to believe two things are likely to occur as a result of November 4th: (1) Republicans will re-take the U.S. Senate. (2) Nothing will change.

•It's a good thing the energy level for 2016 is already high. Conservatives are going to have to coalesce behind their champion early on if they want to avoid a repeat of the last two cycles, which saw a weak establishment candidate take advantage of a GOP base splintered among several different options.

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You certainly took the GOP to task, and I agree completely. There is just no marketing of ideas like '94, as you mentioned.  Take   GovCare.  Unless the GOP has a comprehensive alternative, we won't get anywhere simply calling for repeal.  – SAFE director

top      wwhipple3@verizon.net


9/22/14 – Trivializing the Constitution

The Constitution must be frustrating for big government fans, for it doesn’t clearly support Side A’s ideas about how the country should be run.  No wonder they invest so much energy in attempting to give this document their own spin.

Much is written about the process by which the Constitution came to be without saying much about what it provides – boring!

And to the extent that content must be discussed, the tendency is to focus on the preamble, reading into it what one will, while ignoring or glossing over most of what follows.  Here are the 52 words in question:

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

Thus, the News Journal (Wilmington, DE) ran half a dozen Constitution Day essays last week (Sept. 14-Sept. 17).  One might have expected a lively discussion about the limits of presidential authority, recent Supreme Court decisions including the 9-0 slap-down of illegal recess appointments, etc., but instead readers were provided with “a series of essays examining our progress” in “putting ‘We the People’ in charge.”

No surprise, the participants (all liberals or moderates) seemed to feel that “we the people” are doing just what the founders intended by supporting the Side A agenda.  Several acknowledged that the goal of “a more perfect union” remains somewhat elusive, but their ideas to fix this were primarily directed to beating down the opposition.

Here is a recap showing how the impression that things are on track was created, contrary to the belief (based on polls) of a majority of Americans that the country is headed in the wrong direction, and where we think the logic fell short.

1. Are “We the People” meeting our responsibilities? Widener law professor Alan Garfield.

All of us collectively constitute “the current generation,” which is charged with keeping the American experiment with popular government going and preserving it for future generations.  So how are we doing?  Too often, “our political system, paralyzed by partisanship, [seems to be] stuck in neutral.  And it’s not just politicians at fault.  Americans themselves are deeply divided between red and blue,” with “the most strident among us” thinking that “their counterparts in the other party are endangering the nation’s welfare.” 

Our challenge is to “reawaken . . . that spirit of collaboration that made it possible, 227 years ago, to adopt the Constitution.”  Which is not to say the Constitution is “a perfect document,” especially as (1) it took the Civil War to fix the slavery issue, and (2) “the Constitution today contributes to our paralysis with a system of checks and balances that invites gridlock.” But “in a popular sovereignty,” we in Delaware and elsewhere should be able to “demonstrate how it’s possible to respect one another’s legitimate concerns and still find room for compromise.”

As for “the contentious issues” that need to be solved, here is the writer’s list: Manmade global warming (“glaciers are melting, species are dying, storms are destroying our coastlines”); a criminal justice system that produces “one of the highest incarceration rates in the world” with “a vastly disproportionate number of inmates [who] are people of color;” the tradeoff between national security and individual liberty in this “age of big data;” and the purportedly excessive competition between the political parties that is blocking progress on “the people’s agenda.”

Who should be in charge of divining “the people’s agenda” and identifying counterproductive political rivalry, e.g., the hopelessly biased media, university professors, government officials, or the president?  Frankly, we would prefer to decide these matters for ourselves.

And the ideological divide is not simply a matter of holding different views; Side A and Side B aren’t even concerned about the same set of issues.  Notably absent from the writer’s list, for example, are the main items on the SAFE agenda: cutting wasteful government spending - streamlining taxes - eliminating unnecessary regulatory burdens on the private sector - balancing the budget and keeping it that way except in times of genuine national emergency.

2.  Do we still benefit from the two-party system? Chuck Durante (an attorney in Wilmington).

Thank goodness for “the Democratic Republican Party” that was organized to oppose the Federalist Party; without it, Thomas Jefferson might not have been elected president in 1800.  But the two-party system, which has been “essentially frozen into place since the Civil War,” leaves much to be desired.  It’s a duopoly, in which “a party’s leaders can lose touch with their constituents” and “a fervent minority can poison the health of the party.” As a result, “their lackluster nominees fail; the other party rejoices; the public suffers from constricted choices.”

Organizing a third party is dicey, however, because it generally winds up putting the other side in office.  As a result of Ralph Nader’s run for president in 2000, for example, “a modestly liberal electorate” found itself electing “a deeply conservative [??] president.” The answer is an instant runoff system, or “preferential voting,” which could employ modern electronic technology to make a vote for a third party “a rational act.”  Voters would choose candidates in order of preference, and if there was no majority winner, the candidates with the lowest numbers of votes would be eliminated and second choices of the voters in question would be reflected. 

The preferential voting idea is currently used in some countries. Unlike proportional representation, it typically preserves the power of the two major parties rather than promoting third parties.  Australianpolitics.com,  http://tinyurl.com/pzrw974

Circumstances can be imagined in which a third party candidate would win as a result of preferential voting.  Thus, Theodore Roosevelt’s run as the Bull Moose candidate in 1912 would probably have succeeded, rather than tipping the balance to Woodrow Wilson.  More commonly, however, as in the examples cited (Perot in 1992, Nader in 2000), the influence of third party candidate(s) would be negated.

Absent persuasive evidence that preferential voting would address a problem that needs to be solved, we don’t favor the idea.  The potential for voter confusion should be evident, and manipulation of the voting results in the manner described could give rise to security concerns.

3. Are we living up to desires of the Founding Fathers? Helen Foss (board member of ACLU of Delaware, long-time focus on education including serving as education adviser to former Governor Mike Castle).

The Constitution doesn’t mention education, but giving power to “we the people” requires “an educated public” as the Founders surely knew. “We the people” initially meant men “who were over 21 and owned property,” but this interpretation left out many people and has wisely been expanded. Also, there is “a far richer mix of ethnicities” now “than [was] ever imagined in 1787,” making it all the more important that the public be well educated so as “to elect leaders who can serve us and our country well.”

And yet: “Delaware’s students from low-income families are consistently scoring very poorly on achievement tests” -  “minority school suspension and expulsion rates are disproportionately high” – we are “spending more per year per prisoner than the cost per year for a college student” – prison inmates are not taught job skills or helped when they return to the general population so recidivism is high – despite having spent a bundle on education, Delaware is still “challenged to help far too many children who have not reached target levels.”

How do we expect citizens to “feel the civic responsibility to be involved in decisions – whether they be regarding community health or rezoning or groundwater use or voting regulations or school board decisions about attendance zones or curriculum?”  And “even the most self-serving of us senior citizens should appreciate the benefits of today’s children entering the workforce and helping to pay our Social Security and Medicare.” 

So let Constitution Day be “a reminder of the need for all of us to give voice to our opinions on civic matters, at minimum by voting, and why an effective school system is critical to our democracy.” (emphasis added)

Encouraging all citizens to vote, whether they know anything about the candidate and issues or not, won’t promote better government.  Let them stay home if they want to!

If this sounds cynical, consider how little many Americans know about the workings of the political system.  And without such knowledge, how can they have an informed opinion about who is responsible for the oft-maligned political gridlock and other problems in Washington?  The survey that proves the republic is unsalvageable, Becket Adams, Washington Examiner, 9/19/14. http://tinyurl.com/pqe27hv

According to a poll from the Annenberg Public Policy Center of the University of Pennsylvania: only 36% of respondents could name all three branches of government – 35% couldn’t name a single branch – only 27% said they are aware that Congress needs a 2/3 majority to override a presidential veto.

We are also skeptical about the transformative potential of an effective school system.  Many “low information voters” are reasonably well educated; they have simply decided that, for whatever reason, they aren’t going to bother about politics. 

A more promising idea would be to require that all voters have some skin in the game, e.g., contribute to the general cost of government (by paying at least a bit of income tax). Otherwise, what incentive do low-income voters have to vote for fiscally responsible leaders?

As it would be politically unthinkable to disenfranchise people who are currently entitled to vote, the indicated course would be change the tax law.  Our suggestions for requiring most workers to pay at least some income tax are spelled out in SAFE’s SimpleTax proposal, November 2010. http://tinyurl.com/nv9urbf

4. The Constitution and pollution: Federalism at work, Widener law professor David Hodas.

In addition to being “the protector of important individual rights from government deprivation” (the Bill of Rights), the Constitution “provides the necessary structure for our democracy so the nation and citizens can cooperate and prosper.”  While federal law can be made supreme when necessary, “national solutions require local implementation [and] the Supreme Court has made clear that the national government cannot command state governments to fulfill the federal mandate.” 

The answer is “cooperative federalism,” in which the federal and state governments work together.  Take the control of pollution, where Congress (A) “set national goals and policies and general nationwide standards,” (B) authorized the EPA “to establish pollutant specific rules, and to implement and enforce the law,” and then (C) “allowed states to volunteer to administer the law themselves, using state laws that meet [or if desired exceed] the minimum federal standards” and acting through “state agencies, state environmental staff and state lawyers.” 

This approach “has proven to be remarkably successful,” and  great environmental progress has been achieved as a result.  Which goes to show that, as Justice John Marshall observed in McCulloch v. Maryland [1819 decision striking down a state tax on the Bank of the United States], the Constitution was “intended to endure for ages to come, and consequently, to be adapted to the various crises of human affairs.”

What about the aggregate burden on businesses and individuals of having federal and state regulators imposing and enforcing overlapping and in many cases unnecessary requirements?  The burden of regulation on business has been estimated to run as high as $1.8 trillion a year, which cost is passed on to hard pressed consumers.  Regulatory common sense requires eternal vigilance, 11/22/10.

And suppose the EPA is effectively making policy, while deliberately not asking for congressional approval because they know it would not be forthcoming?  Such behavior could hardly be described as “cooperative federalism,” and in our view it should be viewed as illegal.  The Clean Power Plan: another proposed power grab, 6/9/14.       

5. What We the People really means: The time of the rule of kings was in decline, and in the newly formed “United States” the Founding Fathers made sure that, for generations to come, the power would be with the people, John Sweeney.

This was a nicely designed two-page spread, with pictures of various Founders and details on the historical context and mechanics of writing, inscribing, and gaining approval (through state conventions, not state legislatures) of the Constitution.

Query, however, how much light it sheds on the significance of the Constitution today.  

6. “We the People” is Delaware’s glory, challenge as well, Governor Jack Markell.

“While the preamble to our national constitution sets out the mission of our federal government, its vision cannot be realized without the leadership of the states.”  Our brave first responders – the National Guard – state courts – “[promoting] the general welfare and [securing] the blessings of liberty by providing access to housing, healthcare and schools.” 

In the words of Justice Louis Brandeis, the states can act as “laboratories of democracy.”  Being “small and nimble,” Delaware is well suited for this role, and it’s also “diverse” so “what works in Delaware can work anywhere.” 

A series of past, present or potential state initiatives (all related to education) are cited: provide “access to early learning” for “low-income” children – Common Core standards – free SAT testing for all high school students that will help “us know who is on track for college” and provide all of our “college-ready students” with information and resources – desegregation lawsuit that helped pave the way for Brown v. Board of Education – Jobs for Delaware Graduates program founded by former Gov. Pete DuPont. 

“Now, Delaware has an opportunity to help America become a more perfect union by securing our nation’s future.”

It was originally envisioned that the federal government (especially Congress, which was granted exclusive legislative power) would exercise its specifically enumerated powers, with all other powers being reserved to the states.  The notion that the preamble was meant to establish “a national mission” to promote “the general welfare” is erroneous.

This is not to say the Enumerated Powers Doctrine can be revived, far too much water has flowed under the bridge for that, but executive branch incursions on the powers of Congress can and must be resisted or the current system will morph into a dictatorship. Reflections on the Constitution at the 225-year mark, 9/24/12

Also, it’s curious that this column says not one word about preserving economic liberty and property rights.  If the government serves only to redistribute wealth versus encouraging its creation, that doesn’t augur well for the future of either the First State or the USA.

top      wwhipple3@verizon.net


9/15/14 – Shareholder value is OK, but cronyism is a problem            Read a Replies

It’s an article of faith in some quarters that economic problems are generally caused by deficiencies of the private sector and can best be addressed by giving more power to government regulators.

Financial crises (e.g., dot.com bubble, mortgage/housing bubble, financial system chaos) and scandals (e.g., Enron, Madoff) fuel the narrative, as do purported threats like global warming.  A typical conclusion is that the government should fix matters.  The “failure” of capitalism, Nicholas Vardy, humanevents.com, 12/4/09. http://tinyurl.com/pu6yq2w

Thus, former Senator Ted Kaufman has written column after column for the News Journal advocating SEC regulation of corporate stock buybacks (9/7/14), supporting EPA restrictions on carbon emissions (6/29/14), demanding further financial reforms because the Dodd-Frank Bill didn’t fix the “too big to fail” (TBTF) problem (6/8/14), etc.

For the record, SAFE contacted the members of Congress from Delaware (including Senator Kaufman) in 2010, urging them to vote against Dodd-Frank because, among other things, it didn’t address TBTF. http://tinyurl.com/mnf5zp6

Assuming that the financial crisis of 2008 resulted from private sector malfeasance, never mind government policies that enabled marginal borrowers to acquire houses they couldn’t afford and Federal Reserve monetary ease, this 2,300-page bill granted sweeping new powers to half a dozen regulatory agencies (including the newly created Consumer Financial Protection Bureau) without much guidance as to what Congress wanted done.  The regulators have been floundering ever since.  Four years of Dodd-Frank damage, Peter Wallison, Wall Street Journal, 7/21/14. http://tinyurl.com/k2pwtsz

As of July 18, only 208 of the 398 regulations required by the act have been finalized, and more than 45 percent of congressional deadlines have been missed. *** Even after regulations have been finalized, interpreting them can be a trial. For example, the regulations implementing the inconsistent Volcker Rule, which prohibited banks and their affiliates from trading securities for their own account, took more than three years to write, but key provisions are still unclear.

A learned business critic concurs that ever more regulations won’t enhance the quality of corporate decision-making. His approach would be to change the nature of the corporation, thereby dethroning “shareholder value” as the primary criterion for business decisions.  Firm Commitment lecture, Professor Colin Mayer, voicesfromoxford.com, 2/6/13. http://tinyurl.com/kn3839o (41 minute video)

We tend to disagree, but it may be instructive to consider the logic involved.

1. Has corporate behavior changed for the worse, and why? – There is “nothing new under the sun,” as the saying goes, and it would be safe to say that fraud and chicanery have been around for a long time in the business and financial world. 

Thus, a federal statute providing for whistleblower suits (qui tam) against suppliers, etc. seeking to cheat the government was enacted during the Civil War.  Charles Ponzi’s investment pyramid schemes were perpetrated during the 1920s, as is mentioned in the lecture.  All manner of securities wheeling and dealing came to light as result of investigations of the stock market crash of 1929, etc., leading to creation of the Securities and Exchange Commission.  And so forth.     

While the scandals of recent years have been quite significant, it’s not clear that they represent a major change – as Professor Mayer seems to suggest - from the way things used to be.

Still, Mayer reels off one recent corporate disaster after another, including, since the 2008 financial crisis, the LIBO scandal (Barclay’s Bank and others were found to have systematically fudged quotations in the London Interbank loan market), the BP drilling platform disaster in the Gulf of Mexico (due to compromising safety standards), and the nuclear reactor meltdown at Fukushima (Tokyo Electric Power Co. failed to adequately anticipate and prepare for earthquake/tsunami risk). 

And he offers a cogent explanation, which is that corporate ownership has over time become increasingly dispersed and transient, with the legal duty of corporate managers to shareholders leading them to focus on wealth transfers (cutting corners, clever financial deals, quick payouts to shareholders) versus long-term value creation.  So long as the results don’t backfire, triggering public fury and political intervention, “the stock market rejoices” and corporate executives are rewarded with “outrageous pay.”    

In a somewhat similar vein, see: Sell your soul to Goldman or save the world at Google?  Vivek Wadhwa, linkedin.com, 11/5/13.  http://tinyurl.com/pmxwtug

There has been an effort to resolve such problems via government regulation, which basically means substituting the morality of the state for the morality of corporations.  Public opinion polls show, however, that trust in politicians and regulators is in short supply.  Also, regulations often exacerbate the very problems they are supposed to solve by shifting the focus from doing the right thing to doing the minimum necessary to satisfy the government’s rules. So perhaps it’s time for a different approach.

2. Does the stress on shareholder value shortchange other stakeholders? – We would agree that corporations should be run in a way that seeks to respect the interests of all of the parties concerned, e.g., suppliers, customers, employees, and the general public.  But the point should not be carried too far, for it will never be possible for a human organization to completely satisfy everyone. 

Furthermore, in our view, Mayer exaggerates the tension between maximizing shareholder value and serving other stakeholders.  If a corporation fails to produce products and services that satisfy customer needs and wants, it won’t be in business very long – no matter how clever its financial advisers may be.  Enlisting the willing support of suppliers and employees is obviously a good business practice.  And the penalties for being perceived to have acted irresponsibly can be catastrophic, including loss of business as a result of the bad publicity, enormous legal liabilities (just ask BP, Bank of American, JPMorgan Chase, et al.), and/or sweeping new regulations.

This is not to say “greed is good,” but it’s not clear greed can or should be eliminated.  Consider the analogy of an “invisible hand” that can produce constructive results when all the players in a free economy are focused on pursuing their individual interests.  An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith, 1776, investopedia.com, http://tinyurl.com/p6uw2de

Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it ... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

In any case, it would seem ill advised to ditch the shareholder value model without a clear understanding of what would replace it.

3.  Is there a practical way to create more moral corporations? – Mayer’s suggestions along these lines were not covered in the lecture, but they may be found in his book. Firm commitment: Why the corporation is failing us and how to restore trust in it, Oxford University Press (2013). http://tinyurl.com/m89qe47

Here are some of the suggestions (review by John Gibbs, http://tinyurl.com/oc8lkar), along with our reactions.

•Require shareholders to register for the period for which they intend to hold shares, with voting rights being awarded pro rata to the length of time remaining before the shareholder can dispose of the shares. The paperwork costs could be substantial, and we wonder what would happen if a shareholder sold early.  Also, do investors necessarily know how long they plan to hold a stock when they buy it? 

•Corporations should become "trust firms," with boards of trustees who ensure that the firm has clearly articulated values and principles and abides by them, but who do not otherwise interfere in the day-to-day running of the firm.  Eliminating the role of the board in overseeing major decisions would be a mistake; having two boards would be even worse.

•The tax system should be changed so “corporations that demonstrate a public purpose, and an effective governance mechanism for upholding it, would be recipients of subsidies funded from corporation tax levied on corporations that have no public purpose.”  We can hardly imagine the IRS administering such a scheme; it wouldn’t be pretty.

•Rather than being considered agents of the shareholders, “corporations should be seen as independent entities which make credible commitments to other parties.”  Would the directors and top corporate managers stop being selected by the shareholders?

Mayer’s specific suggestions aside, we’re not convinced that attempting to reinvent corporations as morally driven institutions is practical.  Perhaps capitalism (based on the profit motive) is the best system available, as economist Milton Friedman argued in this interview (date unknown) on “greed.” http://tinyurl.com/2tcq2s

. . . where in the world [do] you find these angels that are going to organize society for us?  I don’t even trust you [the interviewer] to do that.

That’s not to say SAFE is satisfied with the behavior of “big business.”  To the contrary, we are deeply disappointed by the rent seeking and jockeying for political favors that is in vogue.  Corporate welfare has nine lives, 7/11/14

At the risk of overgeneralization, many [business leaders] seem to have adopted a pattern of pushing for all the special favors they can get while doing less and less to support the free enterprise and political liberty that have enabled this country to prosper.  If so, the longer-term implications are disturbing.

But necessary adjustments can more readily be made by our political leaders than by business leaders who have grown accustomed to besieging the government for favors because that’s how one gets ahead in a government-led economy.  Note also that business leaders can’t make agreements in restraint of trade; government involvement is required to legalize the arrangement.  The rise and decline of nations, Mancur Olson, Yale University Press (1982). http://tinyurl.com/kd662nk

. . . special interest groups (privileged classes, producer cartels, labor unions, etc.) rig prices and/or output so as to advance their own interests, typically with the approval or support of the government. This leads to misallocation of resources and lower economic output than would otherwise be realized, but people in the favored class or group will still be better off.

The crux of the needed changes is not to eliminate all government regulations, which in many cases are OK provided they aren’t carried too far, but to have the government refrain from dictating economic choices.  The kind of light bulbs people use in their homes, the fuel efficiency (versus size and performance) of vehicles on the road, the kinds of food served in school cafeterias and even what food can be brought from home, the accommodations required for supposedly endangered species, and so on.

Make no mistake, these and other unnecessary regulations have pernicious economic effects – and their elimination would be a big plus.  This is what crony capitalism [aka cronyism, state-directed corporatism, or fascism] looks like, Veronique de Rugy, Washington Examiner, 7/20/12.  http://tinyurl.com/lshgb9k

In a new paper called "The Pathology of Privilege: The Economic Consequences of Government Favoritism," my colleague Matt Mitchell explains that "Whatever its guise, government-granted privilege [to private businesses] is an extraordinarily destructive force. It misdirects resources, impedes genuine economic progress, breeds corruption, and undermines the legitimacy of both the government and the private sector."

One of the benefits would be to restore balanced public discussion of policy issues, which affected firms often fear to talk about if the government is calling the shots – as for example in the healthcare industry due to GovCare.  None dare call it fascism, John Goodman, Townhall.com, 1/16/13. http://tinyurl.com/n8qsnwe

And just as some observers worry about the wasted human potential of having top graduates go to work for Goldman Sachs et al., there are plenty of arguably useless jobs in a government-dominated economy.  Check out the video (1:40) showing children saying what they would like to be when they grow up, it’s wickedly funny.  Cronyism: Crushing the free market and promoting rent-seeking, Romina Boccia, Daily Signal, 8/28/12. http://tinyurl.com/n42jfwr

Realistically, however, cutting back the government regulatory apparatus wouldn’t be an easy sell.  Politicians benefit greatly from the current system, and it won’t be changed without pressure from the general public.  Cronyism: By-product of big government, National Center for Policy Analysis, 11/1/12. http://tinyurl.com/mjzemrw

First, politicians can expand their own personal wealth by giving favors to wealthy businesses that need something accomplished in Washington. Second, politicians can rely on the large support that businesses provide in election campaigns. And because the public can be largely unaware of the nuances in regulations, politicians have an incentive to cater more toward businesses in a regulated industry rather than making tough decisions for the public good.

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Didn’t have a link, but could it be the Phil Donahue interview?  Watch that one – it is pure gold!!! - Joe Hilliard, PA

Bingo!  The interview was in 1979 (Friedman was promoting his book “Free to Choose”), ran 46 minutes, and here is the link. http://tinyurl.com/k4z4zag

While lauding the corporation as “one of the most important institutions in the world” in his book review, Professor Mayer also calls it “the cause of immense problems and suffering” and “a source of poverty and pollution.” The failures of corporations “are increasing,” according to him, and “while governments are subject to repeated questioning and scrutiny” corporations receive “relatively little attention.”  I don’t believe government actions are monitored more rigorously than corporate actions, certainly that’s not evident from the generally accepted explanations for the 2008 financial crisis, but even if they were so what?     It would be a big mistake to abandon corporations to the whims of left wing academics. – SAFE director

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9/8/14 – Global economic data raise questions about current policies

Advocating ways to “Secure America’s Future Economy” tends to be a full time job, so we generally don’t pay much attention to the global economy.  But let’s consider the global picture this week, for two reasons: (a) Growth elsewhere in the world can boost (or detract from) US economic prospects, which should be considered in assessing current predictions of a US rebound, and (b) Regional differences provide some interesting evidence on the most effective ways to boost economic performance.

An overall data set is recapped below (additional details are provided in the IMF report).  The measurement of economic output is probably not fully consistent around the globe, and we would be inclined to view the indicated shares of global output, for instance China surpassing the US already, with some degree of skepticism.

Also, the projected improvement for advanced economies in 2014 (rest of year) and 2015 may be overly optimistic, particularly for the Eurozone (with likely spillover effects for other advanced economies).  Don’t bet the ranch on 3% growth in the US next year!  

Place in global economy

Output

Output growth %

 

2011

2012

2013

2014P

2015P

Advanced Economies

44%

1.4

1.3

1.8

2.4

US

17%

2.8

1.9

1.7

3.0

Eurozone

12%

(0.7)

(0.4)

1.1

1.5

Japan

5%

1.4

1.5

1.6

1.1

UK

2%

0.3

1.7

3.2

2.7

Emerging Markets & Developing countries

56%

5.1

4.7

4.6

5.2

China

16%

7.7

7.7

7.4

7.1

India

7%

4.7

5.0

5.4

6.4

Asean-5

NA

6.2

5.2

4.6

5.6

Sub-Saharan Africa

5%

5.1

5.4

5.4

5.8

Middle East, Pak. & Afghan., North Africa

14%

4.9

2.5

3.1

4.8

Latin America & Caribbean

9%

2.9

2.6

2.0

2.6

Russia

3%

3.4

1.3

0.2

1.0

Global Economy

100%

3.5

3.2

3.4

4.0

International Monetary Fund, July 2014. http://tinyurl.com/o3dtn86

Although the IMF data are at best only approximately “accurate,” they suggest some interesting questions.

(1) Why aren’t the advanced economies (“AEs”) growing faster?

The AEs are wealthier and have more advanced technology than the emerging markets & developing countries (DCs).  Assuming they are following sound economic policies, one would expect them to be forging ahead.

But that’s not what seems to be happening.  In both 2012 and 2013, the DCs were growing over three times faster.  And even if the AEs improve as projected by 2015, the DCs will still be growing over twice as fast.

Judging from the pronouncements of policy makers and economic seers, the anemic growth of the AEs is not due to lack of trying.  Consider, for example, this statement by the US president.  Weekly address, 8/2/14. http://tinyurl.com/nhkf4xr

My top priority as president is doing everything I can to create more jobs and more opportunities for hardworking families to get ahead.  *** All told, our businesses have created 9.9 million jobs over the past 53 months.  That’s the longest streak of private-sector job creation in our history. 

Many Americans are unimpressed, however, because such progress as is being achieved does not seem to be helping the average worker.  US wages down 23% since 2008, Wynton Hall, Breitbart.com, 8/11/14. http://tinyurl.com/mqzw9dz

U.S. jobs pay an average 23% less today than they did before the 2008 recession, according to a new report released on Monday by the United States Conference of Mayors. ***Jobs lost during the recession paid an average $61,637. As of 2014, jobs in the same sectors paid an average of $47,171 annually. 

The outlook in the Eurozone has been even more somber of late, with the growth rate shrinking to zero in the second quarter.  Europe is teaching the world a terrible economic lesson, James Pethokoukis, AEI-ideas.org, 8/26/14. http://tinyurl.com/k7msa9a

Europe’s $13 trillion economy — nearly a fifth of world GDP — failed to grow in the second-quarter, losing whatever smidge[n] of momentum it had after escaping a double-dip recession. (Germany actually shrank.) Private consumption and investment are still below 2007 levels. French unemployment is at an all-time high, and a desperate and unpopular President Francois Hollande just formed a new government.

Here are some excuses that have been offered: secular stagnation (inadequate private sector demand), too much emphasis on austerity (reining in government deficits), and low inflation that risks tipping over into deflation.  How convenient for big government fans (Side A), as this line of reasoning tends to justify greater control of the government over the economy and monetary system.  Keynesian economist admits it’s a depression, politicaloutcast.com, 9/3/14. http://tinyurl.com/lxmc43c

If big government spending programs and ultra relaxed monetary policies were the ticket to economic salvation, the AEs should have come roaring back from the “Great Recession” by now – which hasn’t happened.

Also, the DCs are continuing to grow much faster than the AEs, so it figures that they must be doing something better than the AEs are.

(2) Can the DCs keep up this blistering pace, and if so can there be any doubt that they will dominate the global economy in due course? 

The effects of compounding are simple but powerful.  Let’s assume that the AEs currently comprise 50% of the global economy, and are growing at an average rate of 2% per year vs. 5% per year for the DCs.  If these trends continued, the AEs would be reduced to junior partner status within a human generation.

 

Year 0

Year 5

Year 10

Year 15

Year 20

AEs

500

552

609

673

743

DCs

500

638

814

1,039

1,327

Total

1,000

1,190

1,423

1,712

2,070

The DCs have several potential advantages in the global economic competition, which however are likely to become less significant in time.

Some of them have access to valuable resources that can be sold to the AEs, such as cheaply produced oil in the Middle East.  In due course, however, these resources will be exhausted and/or rendered less valuable by new technology (such as the fracking boom in the US).

They may be able to copy existing technology rather than having to develop it from scratch.  As they catch up, however, this advantage will inevitably dwindle.

Their workers are paid a lot less than workers in the AEs, although pressure for increased compensation can be expected in time.

Some DCs are starting off with a lesser burden of the government spending programs and regulations (safety, environmental, consumer protection, etc.) than is typical in the AEs.  As a result, business entrepreneurs in these DCs can retain and reinvest more of the economic value being created.  And this is not merely a theory, there is plenty of evidence to support it.  The simple lesson we should learn from global economics, Daniel Mitchell, Townhall.com, 9/3/14. http://tinyurl.com/lhugb38

In countries with statist (government calling the shots) economies, such as Venezuela, France, Argentina, Greece, and the US (currently), one finds economic stagnation and decline.

Better economic results are apparent for countries with relatively pro-market policies, such as Estonia, Switzerland, Chile, Singapore, and the US (back in the 1980s).

While it’s true that many European nations remain rich by global standards despite having large governments, Mitchell suggests that they had small governments when they grew rich in the first place.  Also, “some of them have wisely compensated for large public sectors by maintaining ultra-free market policy in other areas.” 

Last but not least, the benefits of economic freedom (aka unfettered capitalism) can do  more for people than government policies to redistribute wealth.  Consider this chart of per capita income in Hong Kong vs. France over the past half-century.

Time will tell, but we think many of the DCs are likely to keep growing rapidly.  So if the AEs want to maintain their place in the global scheme of things, it would behoove them to improve their own economic practices rather than waiting for their competitors to fail.

(3) If the advanced economies want to up the level of their game, how should they go about it?

Side A’s economic approach features government programs to meet perceived economic or social needs.  Raise the minimum wage – promote inflation to ensure adequate liquidity – support favored economic activities (such as renewable energy or electric cars)  – provide benefits for nonproductive sectors of the economy – subject business firms to ever more regulations to curb purportedly undesirable practices - pay for the foregoing by raising taxes and/or borrowing.

These ideas have not worked terribly well elsewhere, e.g., in Europe, and they don’t seem to be working too well here either.  A survey of the US economy, SAFE, August 2013. http://tinyurl.com/l4uj7yw

GROWTH 

JOBS

INFLATION

GOV’T SVCS

TAXES

Economic growth (GDP): 1929-01 (3.5%); 2002-13 (1.8%); 1st half of 2013 (1.8%). GDP deflator to purge inflation has been questioned. If adjustments for inflation are too small, growth rates are overstated.

Unemployment rate of 7.4% in July 2013 compares to 10% peak in 2009, but other measures may be more meaningful.  Millions of people have stopped looking for work, and many added jobs are part time.

Inflation estimates (CPI): 1961-2012 (4.0%); 2001-2012 (2.4%); last 12 mos. (2.0%). Without changes in methodology made since 1990, however, current estimate might be about 5%.

Some examples (federal, state & local): roads & bridges, parks, schools, police & fire fighters, and potentially crippling cuts to defense (per Defense Secretary Chuck Hagel).

Taxes have been raised during an economic slump, and further increases are demanded.  All Americans would bear the burden, not just big business and the wealthy.

Our suggestion would be to make the country more of a free market economy, as it used to be, by implementing the SAFE agenda.  Eliminate wasteful spending programs - streamline the tax system - restructure “entitlement” programs - rationalize regulations.     

Otherwise, how can this country expect to stay on top while China, India, et al. are catching on?

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9/1/14 – Global warming cures that aren’t needed and would cost a bundle        Read a reply

Big government fans (Side A) have been known to dismiss the arguments of smaller government fans (Side B) as equivalent to opposing “any and all government regulations.”  Why are humans endangering their future with climate change denial? Ted Kaufman, News Journal, 6/29/14.

This isn’t how SAFE thinks, or most conservatives for that matter.  The point is not whether some regulations are needed, but whether regulators will stop when the incremental costs of further regulation start outweighing the benefits. Green monster, John Stossel, Townhall.com, 8/27/14. http://tinyurl.com/komunul

•Thanks, Environmental Protection Agency! You've required sewage treatment plants, catalytic converters on cars and other things that made the world cleaner than the world in which I grew up. Good work.

•But we don't need what we've got: 16,000 environmental regulators constantly trying to control more of our lives. *** Like all bureaucracies -- regulatory, poverty-fighting and military -- the EPA [Enough Protection Already] spends every day hunting for new things to do, even if its new efforts cost much more and accomplish far less.

We recently reviewed the EPA’s proposal to force carbon emission reductions from power plants on a state-by-state basis and concluded that the plan was misguided from a policy standpoint and of dubious legality besides.  SAFE to Congress: Bin the Clean Power Plan, 6/16/14.

This is not the EPA’s first misadventure.  Indeed, they have become an ideologically driven organization that seems to be trying to tank the economy.  See, e.g., “Dear EPA: Shape up or ship out,” 11/29/10 and “Regulate or subjugate,”12/9/13.

Now we read there may be electric power outages this winter as a result of the proposed Clean Power Plan (CPP) and other actions that have accelerated the shutdown of coal power plants. Winter blackouts could hit Midwest, Mid-Atlantic, regional grid operator warns, Zack Colman, Washington Examiner, 8/27/14. http://tinyurl.com/ob5jgcj

Americans have not been advised of this risk by the EPA or our elected political leaders, let alone accepted it.  The lengthy text of the CPP does not even mention the prospect of electric power outages.  Clean Power Plan, EPA, 6/2/14. http://tinyurl.com/ma4uml5 (on line version in Federal Register, 6/18/14)

Could it be that we understated our case?  Some further analysis seems in order, which will also cover several recent developments.

1. Fewer coal power plants – How could the CPP have anything to do with electric power outages this winter?  It is merely a proposed plan, after all, which even if approved would not be finalized until 2015 and implemented between then and 2030.         

Bear in mind, however, that the CPP is only one of the EPA initiatives that will impact coal power plants.  Here are several others, all but the last of which are further along.

•Cross-border pollution – Based on perceived injury to downwind states, the EPA issued a rule in 2011 requiring upwind states (some 28 in the East, Midwest and South) to cut back on sulfur and nitrogen emissions from coal-fired power plants within their boundaries.  A legal challenge was ultimately rejected (6-2) by the US Supreme Court.  Court upholds cross-state air pollution rule, Laura Barron-Lopez, The Hill, 4/29/14. http://tinyurl.com/mcjtph6

 
•Mercury, etc. pollution – The MATS (Mercury and Air Toxins Standards), adopted in 2012, require all electric generation units to meet sharply reduced mercury emission levels by 2016.  The EPA estimated that 4% of coal-fired units would be shut down because of MATS, but the actual effect has been considerably greater. “The US Energy Information Agency reported retirements of 8% of the fleet in 2012, and . . . now estimates the total will more likely reach 17%. It is simply not cost effective to retrofit older, smaller generating facilities.” War on coal threatens electrical grid reliability, Caesar Rodney Institute, http://tinyurl.com/k8lfgfb.

 
•New power plants – The CPP issued in June 2014 is applicable to existing power plants.  Parallel rules for new power plants have been in the works for some time, and a revised proposal was issued in September 2013. The gist of it is to require new coal-fired plants to emit less than 1,100 pounds of C02 per Megawatt hour, representing a 38% reduction from CO2 emissions of existing US coal plants.  Under this rule, one would not expect any more coal power plants to be built. Natural gas power plants could meet the proposed standards without much problem since they emit about half as much CO2 as coal power plants. US EPA issues revised rules for new power plants, Jeff Postelwait, renewableenergyworld.com, 9/30/13. http://tinyurl.com/q7omny3

 
•Ozone standards - Restrictions on ground level ozone (3-atom molecules of Oxygen) from power plants, fuel exhausts, and other sources are not new, but an ecpected proposal to raise the bar (by cutting permissible ozone levels to 60 parts per million versus the 75 ppm standard adopted in 2008) has been attacked as unjustified on any rational cost/benefit perspective. New EPA ozone regulations could be costliest in US history, Jamie Hennigan, NAM, 7/31/14. http://tinyurl.com/o2v4gwt

A new study by NERA Economic Consulting and commissioned by the National Association of Manufacturers (NAM) reveals that a more stringent ozone standard from the Obama Administration could reduce GDP by $270 billion per year and carry a compliance price tag of $2.2 trillion from 2017 to 2040, increasing energy costs and placing millions of jobs at risk.  ***“We are rapidly approaching a point where we are requiring manufacturers to do the impossible,” added NAM Vice President of Energy and Resources Policy Ross Eisenberg. “The EPA is considering setting ozone levels below what exists at national parks, such as Yellowstone and Denali.

Investors and managers can read the handwriting on the wall.  The administration is on the warpath against coal power plants, so it would be smart to phase such facilities out sooner rather than later.  Who wants to carry on, earning the displeasure of regulators and adverse publicity, when the government will surely insist on getting its way in the end.

2. Grid operation – In conjunction with rules that will make coal power plants an endangered species over the next few years, electric grid operators will be required or at least “encouraged” to change their procedures for determining which power plants should be chosen to meet power needs.

The traditional rule was that the cheapest (variable cost basis) reliable (or dispatchable) power sources available would be called on; until the fracking boom lowered natural gas prices, that generally meant coal or nuclear power plants.  The new thinking is that grid operators should seek to use the lowest carbon emission power sources available versus minimizing electric power costs for consumers.

That’s not to say “renewable energy” sources would have priority, as wind and solar power are intermittent and can’t reliably serve consumer and business needs on a “when wanted” basis.  But it would mean giving priority to natural gas plants over coal plants, even under circumstances in which coal power would be favored on a strict cost basis.

The EPA explains the policy shift at some length in the CPP.  The basic idea is to factor an imputed cost for carbon emissions into the calculations, as is already being done in the case of states that (like Delaware) participate in the Regional Greenhouse Gas Initiative (RGGI).  See discussion of “building block 2,” dispatch changes between electric generating units (EGUs). CPP, 6/2/14. http://tinyurl.com/ma4uml5

•This system of security-constrained economic dispatch assures reliable and affordable electricity. Electricity demand varies across geography and time in response to numerous conditions, such that EGU owners and grid operators are constantly responding to changes in demand and “re-dispatching” to meet demand in the most reliable and cost-effective manner possible.

•Operators of EGUs subject to CO2 emissions limits in RGGI now include the cost of RGGI CO2 allowances in those EGUs' variable costs, creating economic incentives to replace generation at higher-emitting EGUs with generation from lower-emitting sources . . . through the process of least-cost economic dispatch.

•The amount of re-dispatch from coal-fired EGUs to NGCC [combined cycle natural gas] units that takes place as a result of this competition [between dispatchable EGUs] is highly relevant to overall power sector GHG [greenhouse gas] emissions, because a typical NGCC unit produces less than half as much CO2 per MWh [Megawatt hour] of electricity generated as a typical coal-fired EGU.

Viewing this thrust from a consumer standpoint, say hello to higher electric power prices.  And for power companies, here is one more reason to shut down coal power plants.

3. Grid reliability – Concerns about chronic power shortages are understandable and deserve to be taken seriously, but we think the real concern should be cost versus the availability of electric power. 

As was demonstrated during the winter of 2013-14, electric power demand and rates soar during periods of frigid weather.  Northeast and Mid-Atlantic power prices react to winter freeze and natural gas, Energy Information Agency, 1/21/14. http://tinyurl.com/meklts4

There were lots of power outages, although this was probably due to lines being downed by ice, etc. versus power demand exceeding available capacity.  Some could go days without power in cold Northeast, Michael Pearson & Margaret Conley, CNN, 2/6/14.  http://tinyurl.com/lasssh8

And many coal power plants that helped avoid much bigger problems will be shut down soon due to the EPA’s current and proposed policies. EPA coal rules leaving US vulnerable to power blackouts?  Mike Emanuel, Fox News, 4/12/14. http://tinyurl.com/q8jb92h

"Regulation from five years ago is closing about 20 percent of the coal plants. Regulations being proposed now could close an additional 20 percent of coal plants. And that creates huge stresses -- we're just not ready for anything like that in this country," Mike Duncan, from the American Coalition for Clean Coal Electricity, told Fox News. 

Government officials deny there will be serious problems, however, and in this instance we are inclined to believe them – if nothing else because bureaucrats have an instinct for survival and a full-blown power crisis would energize Americans to demand a rollback of the EPA’s cherished policies. 

Asked about future regulations, EPA Administrator Gina McCarthy suggested the agency is trying to be careful.   "Nothing we do can threaten reliability. We have to recognize that in a changing climate like the one we have recently been experiencing, it is an increasing challenge to maintain a reliable energy supply," McCarthy said. 

As coal power plants are shut down, in some cases prematurely, they will be replaced with natural gas power plants versus attempting to do the impossible and run the grid on intermittent wind and solar power.  Germany’s energy poverty: How electricity became a luxury good, Der Spiegel, 9/14/13. http://tinyurl.com/ms5tvbq

This year, German consumers will be forced to pay €20 billion ($26 billion) for electricity from solar, wind and biogas plants -- electricity with a market price of just over €3 billion. Even the figure of €20 billion is disputable if you include all the unintended costs and collateral damage associated with the project.

On the other hand, we do not accept the EPA’s characterization of the CPP as essentially cost-free.  There is little question that this proposal would result in higher electric power prices, in our view, and the resulting benefits seem to be greatly exaggerated.  SAFE to Congress: Bin the Clean Power Plan, point 3 (“no free lunch”), 6/16/14.

4. Environmental justice – One of the more puzzling arguments for the EPA’s anti-carbon policies is that they will help people in the lower socio-economic levels.  See, e.g., “EPA chief: Co2 regulations are about “justice” for “communities of color,” Michael Bastasch, Daily Caller, 8/27/14. http://tinyurl.com/mjllynv

Actually, lower income Americans will suffer the most from higher electric power prices and associated decline in industrial sectors.  Is Obama just trying to tank the economy?  Stephen Moore, Heritage Foundation, 6/5/14.  http://tinyurl.com/nnb8cn6

How ironic that a president who has talked endlessly about income inequality for the past two years will impose one of the most regressive taxes imaginable — and this is a tax — on the nation’s poor. *** And which Americans will lose jobs from these energy regulations? Hundreds of thousands of coal miners, construction workers, pipefitters, truckers, and manufacturing workers.

And when electric power prices are high, the effects on the economically vulnerable can be traumatic.  How not to shut down coal plants, Lydia DePillis, Washington Post, 7/21/14.  http://tinyurl.com/ow9m2ls

Ever since her power was shut off in 2010, [Sharon] Garcia has adopted a Depression-era obsessiveness: She doesn’t use the oven in the summer, because it heats up the house, and uses only one small air conditioner. Even the aquarium goes dark when someone’s not in the room.  “If we’re not in here looking at the fish, it shouldn’t be on,” she says. Oh, and forget about machine-washed dishes; Garcia does them by hand (the battle is evident in the pile at the sink). The toaster and microwave bear sticky notes ordering the user to unplug them afterward, lest they continue drawing energy from the sockets. “You think turning it off is enough, and it’s not,” she admonishes.

5. Accountability – We have previously urged that the administration be required to seek congressional approval for the CPP.  Such approval would not be forthcoming, of course, as Americans are growing increasingly skeptical of making economic sacrifices based on the manmade global warming theory.  Too bad, that does not justify the president’s “go it alone” approach.  Under the Constitution, Congress – not the president, let alone administrative agencies like the EPA – is supposed to make the nation’s laws.

Now a new plan to skirt constitutional norms is under consideration, namely an international agreement for the reduction of carbon emissions that would arguably not constitute a treaty and therefore would not be submitted to the Senate for ratification. Obama reportedly planning end-run around Congress on global climate change deal, Fox News, 8/27/14. http://tinyurl.com/mf2qb5p

To borrow a line from the British, this scheme sounds “too clever by half.”  And if there is an overwhelming scientific consensus in favor of the manmade global warming theory, as has often been claimed, then why is Side A so anxious to avoid an honest debate about energy policies?

Side B has been a bit slow to grasp the potential of this issue, but may finally be waking up.  Thus, in the Aug. 30 response of Rep. Larry Buchson (R-IN) to the president’s weekly address (calling again for an increase in the minimum wage), pro-energy policies are identified as a means of “lowering costs at home” and thereby boosting the economy. http://tinyurl.com/krc7v63 (video, 3:37).

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The EPA seems to be engaged in a power grab! [pun intended] – SAFE director

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8/25/14 – Watch out for a power grab on immigration

What ever happened to the surge of youthful would-be immigrants that some saw as a breakdown of law and order and others labeled a humanitarian crisis?  Revisiting the illegal immigration problem, 7/7/14

The situation along the southern border has become chaotic due to a surge of some 10,000 unaccompanied youngsters (many of them teenagers, so we won’t call them children) per month, predominantly from Central American countries rather than Mexico, who are being taken into custody after crossing the border.

This latest manifestation of the illegal immigration problem has since been overshadowed by other stories, notably the turmoil in Ferguson, Missouri following the fatal shooting of an unarmed black teenager by a white police officer. That’s the way things seem to go these days in our crisis du jour culture.

But nothing has been done that will stop the illegal influx of youngsters or deal with it in an effective way, let alone solving the overall problem of illegal immigration that has been brewing for decades.  Barring such action, the woes of the US immigration system will be back in the headlines soon enough.

The president initially requested additional funding for accommodating the youthful immigrants and processing their cases in a leisurely fashion; the GOP-controlled House responded by passing legislation to expedite their deportation to the countries from where they came. If the Senate went along, this could represent the start of an enforce the law approach on immigration.

Such an approach is anathema to Democrats, and they are likely to balk at the House legislation.  Thus, in a press conference on August 1, the president called the House bills “extreme” and “unworkable.”  He is reportedly considering an executive order on immigration, which would be justified by the failure of Congress to enact comprehensive immigration reform (along the lines of the Senate bill passed in June 2013) rather than the youthful immigrant problem per se.  Don’t give up on Congress, the alternative could be far worse, 8/11/14.   

Will the outcome be a legislative solution, administrative action of some kind, or continuing gridlock?  Read on for our predictions.

I. Legislative solution – It wasn’t easy or pretty, but the House passed two bills re youthful immigrants before adjourning for the August recess. House passes $694 million border security bill, Newsmax.com, 8/1/14. http://tinyurl.com/nf3xods

•Bill one would amend a 2008 law so as to permit the quick deportation of new arrivals from noncontiguous home countries, e.g., Guatemala, Honduras, and El Salvador.  It also provided some funding for deploying National Guard troops along the border, probably intended to reimburse Texas, which has already taken this step on its own authority. 

•Bill two would wind down an administrative program that shields certain categories of already resident minors from deportation. Who needs Congress if the Executive Branch can make the laws?  7/28/12.

The Department of Homeland Security program [announced in June 2012] somewhat resembled the Dream Act that had previously died in Congress, and no convincing legal justification was cited.  Prosecutorial discretion may quite properly affect the handling of specific cases, but it should not determine the treatment of a large class of individuals over an extensive period of time.

The Senate could and hopefully will take up the House-passed bills in September.  Let’s say bill two was defeated, but bill one was passed and sent to the president for signature (he has threatened to veto it, but never mind).  Such an outcome would put the youthful immigrant issue to rest, we think, because once it became clear that illegally entered youngsters were going to be promptly deported the flow of new arrivals would dry up.

The illegal immigration problem would not be solved, of course, only this limited part of it.  Differences of opinion run too deep for a one-time solution to be possible.  But in our opinion, the passage of bill one would be a step in the right direction.    

What do the American people think should be done?  The answers from polls are not very clear-cut and probably depend importantly on how the questions are phrased. See, e.g., “What do Americans say should happen to child border crossers?  Sarah Dutton et al., CBSNews, 8/7/14. http://tinyurl.com/pnrf24a

When asked what should happen to the Central American children who have recently crossed the border into the U.S. illegally, 50 percent of Americans [including “most Republicans”] say they should be returned to their home country as soon as possible, while 43 percent [including “most Democrats”] think these children should stay in the U.S. while awaiting an immigration hearing, according to a new CBS News poll.

II. Administrative action – For months, there has been one indication after another that the president might issue an executive order on immigration if legislation that he favored was not forthcoming from Congress. 

Statements to this effect initially came from immigration advocates, while the president was said to be waiting to see what kind of immigration reforms the GOP-controlled House would come up with.  Obama resists pressure to act alone on amnesty, AP, Washington Examiner, 2/8/14. http://tinyurl.com/m335c5o

But new rights continued to be created for various categories of illegal immigrants.  Immigration change gives legal status to undocumented relatives of US military, William La Jeunesse & Dan Gallo, Fox News, 3/10/14. http://tinyurl.com/pgkwq6v  TSA admits lying about illegal aliens flying without proper ID [using “notice to appear” forms instead], Kristin Tate, breitbart.com, 8/22/14.http://tinyurl.com/pt9qzcj

And despite claims to the contrary, the volume of deportations has been tailing off.  Obama’s deportation rate hits record low, not record high, Ernest Istook, Washington Times, 4/1/14. http://tinyurl.com/k43xflb

Federal agents are discouraged from enforcing the immigration laws against illegal immigrants living in the interior of the country, and the administration has released thousands of illegal immigrants with serious criminal records instead of deporting them.  Immigration enforcement isn’t smart, Obama says, Neil Munro, Daily Caller, 5/13/14. http://tinyurl.com/lcwdoxs

After House Speaker John Boehner advised that there would be no immigration “reform” bill from the House in this session of Congress, blaming the outcome at least in part on distrust of the president’s intention to enforce the law, the president announced that he would explore options for acting on his own.  Remarks by the president on border security and immigration reform, Rose Garden, 6/30/14. http://tinyurl.com/ppru4md

•As a first step, I’m directing the Secretary of Homeland Security and the Attorney General to move available and appropriate resources from our interior to the border.  Protecting public safety and deporting dangerous criminals has been and will remain the top priority, but we are going to refocus our efforts where we can to make sure we do what it takes to keep our border secure. 

 

•I have also directed Secretary Johnson and Attorney General Holder to identify additional actions my administration can take on our own, within my existing legal authorities, to do what Congress refuses to do and fix as much of our immigration system as we can.  If Congress will not do their job, at least we can do ours.  I expect their recommendations before the end of summer and I intend to adopt those recommendations without further delay. 

So far, there is no clear indication as to what an executive order on immigration might cover, but some expect it to be pretty sweeping.  Amnesty as impeachment bait, Charles Krauthammer, Washington Post 8/7/14. http://tinyurl.com/od4j4cu

The White House is coy as to exactly what the president will do. But the leaks point to an executive order essentially legalizing an enormous new class of illegal immigrants, perhaps up to 5 million people.

Moreover, groups hoping to benefit from liberalization of the current immigration rules have not been shy about lobbying the White House.  Obama prepares executive orders behind closed doors, Elliot Jager, Newsmax, 8/19/14.  http://tinyurl.com/p2n7r3j

•The president's approach has led technology companies to lobby the White House for more visas for foreign workers.  The Wall Street Journal reported that the president could decide to effectively double the number of green cards available.

•Interest groups are pushing the White House to expand the president's 2012 executive order authorizing children brought into the United States illegally by their parents to stay so that it covers millions of other undocumented immigrants . . .

•The American Farm Bureau is urging the administration to ease enforcement against tracking down illegal farm workers needed by the industry. And building contractors are pressing for illegal migrants to be given work permits  . . .

The timing of an executive order is uncertain, but has variously been described as by the end of summer (Sept. 21) or after Labor Day (Sept. 1).  For tactical reasons, we would expect the president to act before Congress returned to Washington on Sept. 8.   Stay tuned for further developments.

III. Our assessment – For discussion purposes, let’s begin with the president’s statements as to when he should  bypass Congress and take administrative action on his own.  Rose Garden, 6/3014. http://tinyurl.com/ppru4md

I take executive action only when we have a serious problem, a serious issue, and Congress chooses to do nothing.  And in this situation, the failure of House Republicans to pass a darn bill is bad for our security, it’s bad for our economy, and it’s bad for our future. 

Also note the president’s subsequent admission, in response to a reporter’s question at a press conference, that there at least a few things he cannot do on his own, e.g., only Congress has “the power of the purse.” Remarks at press conference after the US-Africa leaders summit, 8/6/14. http://tinyurl.com/m9tgf78

Well, I think that I never have a green light.  I’m bound by the Constitution; I’m bound by separation of powers.  There are some things we can’t do. *** But I promise you the American people don’t want me just standing around twiddling my thumbs and waiting for Congress to get something done. 

With these points in mind, it would seem difficult to make a case that Congress has failed to act on the youthful immigrants situation.  That issue only came to the fore recently, and what’s more the House did pass legislation designed to address it.  Perhaps the president and his party do not approve of the approach, but that’s hardly the same as saying there has been inaction. 

The real basis for executive action, if one exists, is that the GOP-controlled House has had over a year to vote on the Senate immigration bill or pass its own immigration bill.  The House has taken no action, nor is it expected to do so in this session of Congress, which on its face sounds like unreasonable delay.  So let’s consider that case.

A serious problem, check – However, does it follow that the president’s judgment about the effects of the House’s inaction on the Senate bill – “[it’s] bad for our security, it’s bad for our economy, and it’s bad for our future” – must be accepted? In our opinion, the answer is clearly “no.”

Congress has chosen to do nothing – Bear in mind that two chambers are involved.  While the House has been criticized for not taking up the Senate bill, it would be equally logical to fault the Senate for wasting the time of all concerned by passing this deeply flawed legislation in the first place.  Immigration reform, SAFE, June 2013. http://tinyurl.com/mp686rk

No green light – We agree that the provisions of the Constitution must be followed, and in this case they seem pretty clear.  Congress is empowered to make the country’s laws, while the president is primarily responsible for ensuring the laws are enforced. 

Many observers seem complacent about the executive order on immigration that is being worked on. It is as though they do not appreciate the threat of increasingly bold executive action to our constitutional system of government.  A handful, however, share our perception that this is a serious matter.  Consider the following comments:

•Charles Krauthammer - If the order lived up to expectations, it would be “deeply unconstitutional.”  The president’s real intention, apparently, is not to fix the immigration problem, but rather to dupe Republicans into talking about impeachment, which would gin up campaign contributions and voter turnout for the Democrats in the mid-term elections.  Amnesty as impeachment bait, 8/7/14. http://tinyurl.com/od4j4cu

•Jonathan Turley (liberal law professor) - “We will have to wait to see the specific unilateral actions to judge their constitutionality. However, for those of us who are uncomfortable with the rise of the über presidency in the United States, the suggestion of a president dictating a massive change in the status of millions of people raises many of these same concerns.” The executive over-reach debate turns to immigration, 7/28/14. http://tinyurl.com/pflho22

•Washington Post (whose views on the substantive issues differ greatly from ours) - “Obstinate, hopelessly partisan and incapable of problem-solving, Congress is a mess. But that doesn’t grant the president license to tear up the Constitution.” Frustration over stalled immigration action doesn’t mean Obama can act unilaterally. Editorial, 8/5/14.  http://tinyurl.com/p6ucfg2

•New York Times - “Mr. Obama’s increasingly expansive appetite for the use of unilateral action on issues including immigration, tax policy and gay rights has *** opened the president, already facing charges of executive overreach, to criticism that he is presiding over opaque policy-making, with the potential to reward political backers at the expense of other interests . . .” Behind closed doors, Obama crafts executive actions, Julie Hirschfield Davis, 8/18/14.http://tinyurl.com/oa659nt

All things considered, we would greatly prefer a legislative solution on immigration to aggressive executive action.  Indeed, the president has already gone farther than he should have in changing existing policies.  The result has been to substitute compassion (aka politics) for the national interest in setting this country’s immigration laws, which we think is clearly the wrong way to go.

By coincidence, the SAFE board is meeting on September 4, and if the executive order is out by then we anticipate a lively discussion of how SAFE’s views should be conveyed to DC.  If you readers have thoughts, please let us know.

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8/18/14 – An update on the Social Security shortfall

Some people regard Social Security as the crown jewel of the New Deal; others see it as an intergenerational Ponzi scheme.  One could make a case for either of these viewpoints, but in practical terms the program is in trouble.

The problem: outlays are rising faster than dedicated tax revenue and there is no ready way to close the gap.  Thus, two observers – one conservative and the other liberal – recently wrote columns (to be identified later) suggesting that the situation is or could become a “nightmare.”

The long-term funding problem for Social Security is well known, and there has been a running debate about what to do about it since the 1990s.  Nothing has happened, however, because some liberals envision one solution (save Social Security by implementing a combination of tax increases and benefit cuts), some conservatives favor a very different solution (reform Social Security by permitting participants to acquire personal retirement accounts), and many politicians would prefer to avoid taking a position on what is seen as a “no win” issue.

Over time the outlook has deteriorated – both for Social Security and for the government’s overall budget – and a destructive fiscal and/or political crisis looks increasingly likely at some point.

Accordingly, we decided to take a fresh look at Social Security.  In light of the latest projections, this entry will review the basic policy options and provide a current assessment.

A. The outlook – Our last status report for Social Security was as of its 75th anniversary (8/14/10).  Only 27 years after a 1983 overhaul (primarily tax increases) that had been billed as ensuring the program’s solvency for the next 75 years, Social Security was running in the red (excluding book-kept interest income) and its trust funds were projected to run dry by 2037. Clamor builds for another Social Security fix, 8/16/10

Based on current projections, the Social Security trust funds will only last until 2033.  This assumes credits from the retirement income fund to the disability fund; on a stand-alone basis, the disability fund would be exhausted in 2016.  Social Security trustees report, 2014.  http://tinyurl.com/mvgafby (download PDF).

Why has the outlook darkened in recent years?  The anemic economic recovery is one factor; another is a surge in Social Security disability awards. Once reserved for people unable to work, disability has become an early retirement program for people who are not motivated to keep working. As shown on the following chart, over 12 million Americans are now drawing disability versus about 5 million in 1990.  Social Security’s futile attempt to help disabled people go back to work, Joseph Lawler, Washington Examiner, 8/15/14.  http://tinyurl.com/l2v6qc8

The Social Security trust funds are merely a device to keep track of temporarily excess tax revenues that were spent for other purposes instead of being banked to meet future program costs.  To grasp the true impact of the Social Security problem, one should ignore the trust fund accounting and focus on net cash outflows, which will represent a steadily growing drain on the government for years to come. Social Security’s looming fiscal nightmare, Daniel Mitchell, Townhall.com, 8/11/14. http://tinyurl.com/mjyme9j

Some liberals are concerned about the Social Security funding gap too, notably a former US senator who urges readers to pressure their elected representatives to get started on Social Security & Medicare reform and seek other ways to shore up retirement income so as to head off “a political war between the shrinking number of workers (predominately by then nonwhite and perhaps Democrat) and the growing number of retirees (predominately white and perhaps Republican).” Looming retirement nightmare we can no longer ignore, Ted Kaufman, News Journal, 8/10/14.

B. Policy options – Liberals typically think Social Security can be fixed with a bit of tweaking, meaning a combination of tax increases (hike or eliminate payroll tax ceiling for high earners) and benefit cuts (especially for high earners who “don’t need” the money).  Saving Social Security: A balanced approach, Peter Diamond and Peter Orzag, 2004. http://tinyurl.com/n93z2pq

The opposing view is that the system should be changed (excluding retirees and workers who are nearing retirement) so as to permit younger workers to start personal retirement accounts (PRAs) instead of being forced to accept traditional Social Security coverage. The 6.2 percent solution: A plan for reforming Social Security, Michael Tanner, Cato Institute, February 2004. http://tinyurl.com/kdxpoz6

Here’s a report that shows how liberals reacted to the Cato plan.  Peter Orzag, then of the Brookings Institute, was the lead presenter at the AARP event.  Social Security is solid – stock market is risky – corrective adjustments should be relatively painless –Social Security belongs to us liberals so don’t mess with it.  Our breakfast with AARP, SAFE newsletter, Fall 2004. http://tinyurl.com/n47bflp

For the record, the Cato plan did not call for the dismantlement of Social Security, as some critics suggested at the time, nor would this plan have given rise to an unwarranted bonanza for Wall Street. The 6.2 percent solution, op. cit. http://tinyurl.com/kdxpoz6

•Workers could only invest their own payroll tax contributions for Social Security (6.2%) in their PRAs.  The matching contributions of employers (6.2%) were to be reserved for disability and survivor benefits plus system transition costs.

•Investment in PRAs was voluntary.  Younger workers who wanted to stick with traditional Social Security would be allowed to do so.

•PRAs were to be invested in diversified index funds with modest administrative costs rather than allowing individual participants to acquire whatever investment assets they fancied or might be induced to buy by fast talking sales representatives. 

In 2005, the Bush administration floated a watered-down (only for part of a worker’s contribution) personal retirement account proposal.  The messaging was poorly handled, many conservatives took a hands off attitude, and the opposition was withering.

One of the most effective objections to the Bush plan was that some $2 trillion would have to be borrowed to fund personal accounts in the first few years (a departure from the norm of funding Social Security outlays on a pay as you go basis), even though this “cost” would be made up and then some in later years.  SAFE wrote to all members of the US Senate urging cuts in wasteful spending to offset the initial fiscal shortfall, but this is not what Congress wanted to hear and our letter (SSF) had no apparent impact.

The PRA proposal failed to gain traction, and within a few months it was abandoned.  Since 2005, discussion about fixing Social Security has focused almost exclusively on raising taxes and/or trimming retirement benefits.  That’s too bad, because participating in the existing Social Security program is a sucker’s bet.  Why not attempt to improve this program instead of treating it as sacrosanct? Straight thinking about Social Security, 4/7/08.

# Benefits are on a “pay as you go” basis, with nothing to back them up except the bare promise that they will be paid.  Congress can change the rules of the game at any time. Thus, as the U.S. Supreme Court has expressly held, the payment of Social Security taxes does not give rise to a legal right to receive benefits. Flemming v. Nestor, 1960. http://tinyurl.com/p4cercc

#For all the promises that Congress will never renege on Social Security, it might very well do so if the government’s financial situation got bad enough. The true fiscal day of reckoning would not come when the Social Security trust funds ran dry, but rather when the government was no longer able to fund the aggregation of commitments (Social Security, Medicare, etc.) that it has taken on, which could happen much earlier.

# There is no clear-cut connection between the taxes a worker pays and the benefits received.  Thus, a worker can pay Social Security taxes for his or her entire life, die young, and receive nothing. 

# OK, the system may provide spousal and survivor benefits under such circumstances, but only in cases where couples get married and stay that way for at least ten years. Why should people who do not meet these criteria lose out?

Re the haphazard nature of Social Security benefits, consider a case pointed out by SAFE member Harry Thompson of Arizona.  It involved a passionate advocate who called Social Security “the most successful government program in history” and “one of America’s proudest accomplishments.”  The People’s Trust Fund,” Senator Paul Wellstone (D-MN), The Nation, 7/27/98. http://tinyurl.com/qbgahj7

Americans need to be made aware that they will get no return on their investment] if they don’t live to collect any benefits or have eligible survivors.  Even prominent politicians aren’t exempt from this fraud, as the late MN Senator Paul Wellstone became a victim of the FICA Death Tax, when he was killed in a tragic plane crash (2002), along with his wife, a daughter, an aide, & the pilots.  How ironic, bilked by the very political scheme he so dearly loved.

As a prime example of current thinking about how to fix Social Security, consider the recommendations put on the table by the Fiscal Commission (co-chaired by Erskine Bowles and Alan Simpson) in 2010.  In a nutshell, the proposed solution was redistribution. The moment of truth, December 2010.  http://tinyurl.com/lertotq

The most fortunate will have to contribute the most, by taking lower benefits and paying more in payroll taxes. Make retirement benefit formula more progressive.  Gradually increase the taxable maximum to cover 90% of wages by 2050.   

•Middle-income earners who are able to work will need to do so a little longer. Gradually increase early and full retirement ages, based on increases in life expectancy, e.g., the “normal retirement age” would reach 68 in about 2050 and 69 in about 2075.  Also, prune benefits for all recipients by using the chained CPI, supposedly a “more accurate measure of inflation,” to calculate cost of living adjustments for beneficiaries. 

Social Security must do more to reduce poverty among the very poor and the very old who need help the most.  Provide an enhanced minimum benefit for low-wage workers.  Add a “20-year benefit bump up” to protect retirees who have potentially outlived their personal retirement resources.  Direct the Social Security Administration to design a hardship exemption for those who cannot work past 62 but don’t qualify for disability benefits.

Nothing was said about the idea of screening disability awards more effectively, a seemingly obvious way to rein in abusive claims.

As for PRAs, a “serious bipartisan conversation” was proposed about “incentives to generate personal retirement savings that supplement Social Security and [address] the gap between what Americans need for retirement and what they currently have.”

Translation: Let’s raise taxes and start a new retirement income program, while leaving “the pay-as-you-go Social Security system” intact.  Starting new programs, after all, is more fun (and politically rewarding) than trying to make existing programs work properly.  In a similar vein, see the suggestions in Ted Kaufman’s column.  Looming retirement nightmare, op. cit., 8/10/14.

We need to do “far more to encourage or even compel Americans to plan for retirement,” so the rest of us won’t get stuck with the tab.  This might entail “compelling tax incentives [refundable tax credits, since many of the people involved aren’t paying income taxes in the first place?], some kind of forced savings plan, or a combination of both.”

This doesn’t make sense to us!  The government needs to slash spending on existing social programs, not start new ones, and most Americans aren’t enthusiastic about paying more taxes.  Watch out for creative proposals, however, which could be represented as something other than a tax increase. 

One proposal might be guaranteed retirement accounts (GRAs), which would operate under government supervision and be funded by repealing existing tax breaks for private investment funds (401-Ks and IRAs).  It has also been rumored that the government will attempt to seize existing private funds, citing market instability or other exigent circumstances, as has been known to happen elsewhere.  How to keep big government going (for a while), 3/14/11.

Maybe it is time for a “serious bipartisan conversation,” but if and when it takes place we would urge that the following points be on the agenda:

1. What is being done to balance the budget and keep it that way, as SAFE has repeatedly urged? Letter to all members of Congress, 6/2/13. http://tinyurl.com/ltmv5pd

We are appalled by the relentless rise in government spending and debt, and can see little indication that Congress is trying to set things right. *** SAFE has proposed an 8-step strategy to address the fiscal problem. [5/6/13] What we would stress in this letter, however, is not the points in our plan as such but rather the goal the plan is aimed at – balancing the budget within say three years and keeping it that way.

2. High priority should be given to rebooting the economy, using a three-pronged approach: cut wasteful spending (including restructuring of “entitlement” programs), streamline the tax system, and rationalize regulations.  Secular stagnation is a cover-up; failed Keynesian policies have blocked growth, Lawrence Kudlow & Stephen Moore, Washington Times, 8/15/14. http://tinyurl.com/nfxpcal

. . . secular stagnation is all wrong. It’s a cover-up for mistaken economic policies that began in the Bush years and intensified during the Obama administration.

3. Why is there such intense resistance to any proposals designed to make Social Security a viable program versus simply tinkering with it?  The real reactionaries, Michael Tanner, National Review, 8/13/14.  http://tinyurl.com/kd2tdgd

The term [reactionary] is almost always applied to conservatives. Certainly there is a strain of conservatism that feels an undue nostalgia for a less tolerant, less diverse, 1950s-style America. But more and more often these days, “reactionary” would better apply to those ostensible liberals who oppose virtually any change to any government program that has ever existed.

4. Why shouldn’t younger workers be allowed to establish personal retirement accounts, thereby giving them ownership, inheritability and choice? It’s your money: A citizen’s guide to Social Security reform, Cato Institute, 2005, no link available (but we have plenty of copies, just ask). 

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8/11/14 – Don’t give up on Congress, the alternative could be far worse

Our national legislature is often faulted for inaction during periods of divided government, and this year has been no exception.  Worst Congress ever?  Alexander Bolton, The Hill, 3/10/14. http://tinyurl.com/ldlxjoq

It is not that passing lots of laws necessarily makes a “good Congress,” and many people would argue that the opposite is true. But even measures that both parties’ leaders want to get done, such as immigration reform, tax reform and transportation legislation have scant chance of reaching Obama’s desk.

In late April, one source predicted that only two significant items would be addressed before the elections.  Congress returns to Capitol Hill with full agenda, but limited desire to make big changes in election year, Fox News, 4/27/14. http://tinyurl.com/l4skf37

Atop Congress’ must-do list is pass a short-term spending bill to keep the government running past [Oct. 1], which is the start of the new budget year [and find] more money for the Highway Trust Fund to keep afloat road- and bridge-construction projects. *** Passing the two bills is probably all that will happen before Election Day.

 

Not quite right! Several significant measures were passed before Congress disbanded for a five-week break at the end of July, two of which were not on the radar screen at the end of April.

 

In other areas, both parties may want to address certain problems, e.g., illegal immigration, but have very different solutions in mind.  This being so, Congress should take its time in considering proposed legislation instead of rubber-stamping it on the assumption that the authors had good motives and knew what they were doing.

 

And the notion that the Executive Branch can fill the void by acting on its own should be rejected as an improper infringement on the powers of Congress – which the Democratic leadership of the Senate is perversely facilitating.

 

I. Got done – It wasn’t pretty, but the HIGHWAY TRUST FUND has been shored up for now.  Some Democrats (notably Senator Tom Carper of Delaware) wanted to address the issue by hiking motor fuel taxes, but there wasn’t much appetite for this course (nor for cutting back other programs) in an election year and a diversion of $11 billion from general revenues was approved to postpone the day of reckoning.  Ten-month highway patch heads for Obama, Adam Snider, Politico, 8/1/14. http://tinyurl.com/puy7zz7

 

Then there was the VETERANS ADMINISTRATION MESS, which unexpectedly came to light in May and, given the depth and breadth of public outrage, cried out for a quick response – if lawmakers could just figure out what to do.  Was the proper response to fire the head of the agency, sanction lawbreakers, give the VA more money, or redesign the VA healthcare system?  Thoughts about the VA scandal, 5/26/14

The answer that emerged was a bit of all four. Eric Shinseki (a retired general) was replaced as the VA secretary by Robert McDonald (a former Procter & Gamble executive).  New latitude was provided to fire high-level managers who failed to meet performance expectations.  $12 billion was provided to cover new medical facilities, hire more doctors and nurses, and launch a new program that would permit some veterans to seek healthcare outside the VA system.  Obama signs Veterans bill into law, Austin Wright, Politico, 8/7/14. http://tinyurl.com/nhq3k3e

For the record, the added funding was not SAFE’s idea.  Given the rapid growth in VA spending in recent years, our May 26 analysis concluded, “VA funding is more than adequate” and “throwing money at the agency is not a solution.”  Politically speaking, however, it’s hard to see how a bill without some new money in it could have been approved.

The cost of the VA and highway trust fund legislation was partially covered by budgetary gimmicks. House Republicans adding to debt as balanced budget commitment wavers, S.A. Miller, Washington Times, 8/5/14. http://tinyurl.com/ouawrlq

 •Cost of the VA bill was partly offset by about $4 billion in “pension smoothing,” which temporarily boosts tax revenues by permitting companies to defer a portion of their tax- deductible pension contributions. 

•Cost of the highway trust fund bill was covered by “pension smoothing” plus a $3.5 billion extension of customs service user fees in 2024.   

No one saw the VA bill as solving all of the agency’s problems, and the situation will hopefully continue to be monitored.  But for a quick response, it wasn’t bad work – and was rightly hailed in the Politico story as a “rare display of bipartisanship amid the current congressional gridlock.”

Finally, $225 million in additional funding for Israel’s IRON DOME air defense system was provided during the course of a bitter military confrontation between Israel and Hamas in the Gaza Strip.  This despite stresses and strains in the US alliance with Israel, widespread concerns about Palestinian civilian casualties, and a very brief window of opportunity to address the issue before the congressional recess.  Congress approves more money for Israel’s Iron Dome, Dana Bash & Tom Cohen, CNN, 8/3/14. http://tinyurl.com/lblka2l

In the Senate, “the measure passed swiftly by unanimous consent on Friday morning [August 1] just as the latest attempt at a cease-fire in the Gaza conflict was disintegrating.”  Hours later, the House passed the measure by a vote of 395-8.

2. Hung upBoth parties talk of desired legislation that is being blocked by the other side and there isn’t a great deal of commonality between their respective talking points.  We’ll note some of the items and provide an update on two of them.

To hear the president tell it, Republicans are harming the economy by refusing to support more infrastructure investment and enlightened social legislation.  Weekly address, 8/2/14. http://tinyurl.com/ow7hvsv

. . . common-sense ideas like rebuilding our infrastructure in a way that supports millions of good jobs and helps our businesses compete.  Raising the minimum wage.  Making it easier for working folks to pay off their student loans . . . fair pay and paid leave.  ***All of [these policies] would help working families feel more stable and secure.  And all of them have been blocked or ignored by Republicans in Congress.

Meanwhile, he has supposedly been doing his best to work with both sides, plus do what he can on his own authority, but is getting precious little cooperation from the GOP.

House Republicans actually got together this week and voted to sue me for taking actions on my own.  And then they left town for the month without settling a bunch of unfinished business that matters to working families across America.

For their part, Republicans point to numerous “jobs bills” that have been passed by the House but are stalled in the Democrat-controlled Senate for political reasons.  At the top of the list is a bill to approve the Keystone XL pipeline, which the administration seems intent on studying to death.  Statement of Speaker of the House John Boehner, 5/8/14. http://tinyurl.com/lvfgy77

Since the beginning of this Congress, nearly 40 jobs bills have remained stalled in the Democrat-controlled Senate.  That’s nearly 40 bills that would improve education and build a stronger economy, promote innovation.  It’s 40 bills that would ease harmful regulations on small businesses, promote opportunities for veterans, and create sustained economic growth. 

There is an apparent consensus in favor of TAX REFORM, but the two parties are not on the same page.  Some Democrats are interested in raising taxes by eliminating tax preferences for the upper crust and international business, perhaps with modest tax rate cuts as window dressing, while others would just as soon maintain the status quo.  Many Republicans support the idea of revenue neutral tax reform, but when it comes to ending enough tax preferences to fund a healthy cut in tax rates their resolve is weak. 

We recently suggested that the best hope for some degree of tax reform this year is that a divided Congress will not renew a slew of temporary tax preferences (aka “extenders”) that expired at the end of 2013.  It’s not a slam-dunk, but some progress on tax reform may be possible, 6/2/14

Several major tax preferences will probably wind up being renewed (or made permanent), however, notably the Research and Child tax credits.  And don’t count out other popular tax breaks, from a $12 billion production tax credit for wind energy (which SAFE and like-minded groups petitioned to kill) to a 7-year write-off for motorsport complexes. Senate Finance Committee passes tax extenders bill praised mainly for being bipartisan, Dustin Siggins, hotair.com, 8/3/14. http://tinyurl.com/cjupa9x

So much for the myth that Congress won’t act when it wants to – the real issue is whether the right things will get done.

Finally, there is a standoff over IMMIGRATION REFORM – which both parties claim to favor, but on very different terms.  Two related issues are involved, (A) comprehensive immigration legislation (the Senate passed a bill in June 2013; it has not been taken up in the House), and (B) a situation described by some observers as “a humanitarian crisis,” which has been created by a wave of minors from Central Americans who cannot be quickly returned under a law enacted in 2008 because they are not from a contiguous country.  Revisiting the illegal immigrant problem, 7/7/14.

It’s pretty clear, we think, that comprehensive immigration legislation will not get enacted any time soon.  The partisan differences are stark, both in Washington and around the country, and there is no realistic way to resolve them through compromise.  Quite possibly, unless the deteriorating international situation takes center stage, the debate about what to do will be the top issue in the 2016 presidential campaign.

Quicker action is needed on the problem of underage immigrants, and somehow it will happen. 

The president opened the bidding with a $3.7 billion supplementary funding request that would mainly serve to accommodate the influx of youngsters instead of trying to stop it.  There was to be no amendment of the 2008 law so as to authorize prompt deportation of minors from Central America.   Five reasons Obama may not get his border money, Susan Ferrechio, Washington Examiner, 7/9/14. http://tinyurl.com/k99dm2v

Republicans made clear that they wanted a different approach, and eventually – after considerable GOP wrangling – the House stayed in Washington for an extra day and passed its own approach by a 223-189 margin.  Bill one provided funds for calling up the National Guard on the border and amended the 2008 law.  Bill two (aggressively supported by Senator Ted Cruz) countermanded a program authorized by the president in 2012 under which certain children already in the country, brought here by their parents, would be allowed to remain.  House passes $694 million border security bill, Newsmax.com, 8/1/14. http://tinyurl.com/nf3xods

This does not mean the administration will have no money to house or care for the recently arrived youngsters, as it plans to make do by moving funds between budgetary accounts.  Given that the situation had been labeled a “crisis,” however, will the president (or the Senate majority leader) recall the Senate to consider the legislation passed by the House?

Perish the thought!  The president has labeled the House approach “extreme” and “unworkable,” with a veto threatened, and there’s precious little chance that the House would agree to whatever legislation the Senate might offer.  Presidential press conference, 8/1/14.  http://tinyurl.com/ncdkuy7

We all agree that there’s a problem that needs to be solved in a portion of our southern border.  *** House Republicans, as we speak, are trying to pass the most extreme and unworkable versions of a bill that they already know is going nowhere, that can't pass the Senate and that if it were to pass the Senate I would veto.  They know it.   They’re not even trying to actually solve the problem. 

 

Conflating the current situation with the demand for comprehensive immigration reform, the president went on to claim that House Republicans have said he could solve the problem on his own and suggested that he may just do so.

And yesterday, even though they’ve been sitting on a bipartisan immigration bill for over a year, House Republicans suggested that since they don't expect to actually pass a bill that I can sign, that I actually should go ahead and act on my own to solve the problem.  Keep in mind that just a few days earlier, they voted to sue me for acting on my own.  And then when they couldn’t pass a bill yesterday, they put out a statement suggesting I should act on my own because they couldn't pass a bill.

This is not an isolated comment, either, there have been a number of statements to the effect that the president is growing impatient with Congress and may adopt a more aggressive stance.  He doesn’t have to stand for reelection, after all, so what does he have to lose?  How the House GOP lawsuit could lead to more executive actions, Susan Crabtree, Washington Examiner, 7/25/14. http://tinyurl.com/qhq6umb

“We certainly aren’t going to trim our sails,” White House senior adviser Dan Pfeiffer told reporters gathered for a breakfast hosted by the Christian Science Monitor, adding that White House staff are currently on the hunt for more areas for Obama to issue executive actions.  *** In the early fall, Obama is expected to issue one or more executive actions on immigration. Although Pfeiffer would not offer any hints on exactly what parts of the nation's immigration laws they would address, he said, “taking executive action will allow us to direct more resources to the border.”

Hmm, if the president plans to act on immigration and other matters whenever Congress does not pass the legislation that he wants, then the issue of congressional inaction becomes somewhat academic.  But is such a tactic either wise or legal?

3. The Senate’s role – The president’s prime duty under the Constitution is to ensure that the laws are faithfully executed, while Congress’s job is to make the laws.  But if a president goes off the reservation, what, short of impeachment, can be done about it?  There must be a better way to hold presidents accountable [than to subject them to a 20-minute interview by Bill O’Reilly on Super Bowl Sunday], 2/10/14.

One idea might be to require presidents to stand for reelection every two years so that accountability to the American public would be maintained. No one has seconded this suggestion to date, however, and there are admittedly some potential drawbacks. The Constitution: presidential term of office, 6/23/14.

Then there is the House Republican plan for a lawsuit against selected instances of presidential overreach (e.g.,,  delaying implementation of the employer mandate for GovCare).  Given the slow pace of judicial proceedings, this gambit is unlikely to have much effect.  A country on the wrong track, Doug Schoen, Washington Times, 8/8/14. http://tinyurl.com/kprfnyr

Mr. Obama’s use of executive authority has indeed been deeply troubling, but few see the GOP’s action as anything but a symbolic nod to a portion of the party’s base, which would like to see the president not sued, but impeached.

Consider the legal challenge to three recess appointments that the president made at a time when the Senate – under its rules – was clearly in session.  About those recess appointments, 1/9/12.  Two and a half years later the Supreme Court struck down the challenged appointments, 9-0, but by that time most people had forgotten about the issue so what should have been a stinging rebuke had essentially zero impact.

Finally, the members of Congress – both houses, regardless of which party is in control – should uphold its duties and prerogatives.  Some observers believe the Senate has shirked this duty in recent years, and thereby helped to undermine the effectiveness and prestige of the national legislature. The Senate Democrats and the obsolescence of Congress, Janine Turner, Washington Times, 8/7/14. http://tinyurl.com/o3p99em

With these kinds of continuous destructive antics, the people’s power will soon be obliterated. And when history tells the tale, it will be painfully obvious that this demise was accomplished by party politics, by representatives who cared more about their party than the people, more about their ego than their country, more about their progressive fundamental desires for change than the Constitution. And that blind ignorance will have led to a Republic that is now—obsolete.

Let’s hope Americans wake up in time!

top      wwhipple3@verizon.net


8/4/14 – American history redux 

A year ago, we took a look at the Common Core (CC) standards for K-12 schools and concluded that the critics are right.  The goal is national standards vs. state standards, the superiority of CC standards over existing standards is debatable, and they might do more harm than good.  Will Common Core standards enhance US education?  8/5/13.

Moreover, the initial focus on English and Math does not represent all that proponents of the CC standards are after.  Work is in progress on standards (which may be called state standards as the Common Core brand is becoming politically toxic) for science and social studies. 

In a recent appearance on the Sean Hannity Show, commentator Glenn Beck suggested that new social studies standards (SSS) will leave out much of the traditional US historical narrative.  Thus, the SSS might downplay the founding fathers (aside from George Washington’s farewell address), omit Lincoln’s Emancipation Proclamation and major battles during the Civil War, and talk about the civil rights movement in the 1960s without doing justice to Martin Luther King’s contribution.

Beck may be exaggerating somewhat, as he is prone to do, but we have found evidence that the traditional study of American history is being watered down while increasing attention is given to other concepts and activities.

There may also be an intent to undermine American pride by teaching the citizens of tomorrow that our country’s history and culture are nothing special, i.e., no better than the history and culture of other societies.

Such a surrender to moral relativism would be unwarranted, in our opinion, and it could have harmful consequences. 

1. US needs a national identity – A former senator from Oklahoma (now president of the University of Oklahoma) wrote a booklet a few years back that was intended to support the third party presidential campaign (which never materialized) of New York Mayor Michael Bloomberg.  Perhaps the most telling point was an explanation of the need for US citizens to have a common understanding of this nation’s history and political structure. A letter to America, David Boren, 2008. http://tinyurl.com/oasmlkd

For each of us, it is our life story that gives us our identity.  What we have experienced – our personal histories - define us.  If you were to lose your personal story, you would lose your personhood.  The same is true for our national story.  If we forget it, we lose our vision, our identity, our national soul.  Our national story unifies us, strengthens us, and inspires us.  The generation will have failed America if we let our national story die with us.  We must pass it on.   

To serve a unifying function, the message should be positive and upbeat.  Columbus did a great thing by discovering the New World, the colonists rightfully rebelled against the English crown, the Constitution established a unique and enlightened form of government that has worked well over the years (except for the Civil War), the US expansion (territorially, technologically and economically) was facilitated by personal liberty and individual responsibility, our nation has been unique among the great powers in helping other nations instead of trying to subjugate them, etc. 

One could debate any of these points, of course, and some people have devoted their lives to doing so.  Inferring guilt from national success, they claim that this country has prospered through exploitation and must be changed so as to make it up to the groups (native Americans, blacks, laborers, bilked consumers, other nations, etc.) that have been suppressed or taken advantage of.  America: Imagine a world without her, Dinesh D’Souza, 2014. http://tinyurl.com/nzou5qc

Similarly, it is argued, the “checks and balances” in our system of constitutional government tend to block the changes that are needed and thereby foster political gridlock. Obama blames Founding Fathers’ “structural” design of Congress, David Boyer, Washington Times, 5/23/14. http://tinyurl.com/ot48szj

We don’t find such arguments compelling, but in any case they can’t be expected to inspire pride and foster national unity.  And these tasks will require continuing attention, lest the underlying political unity that Americans have traditionally counted on should fail us at some point.  Out of many, two? Peggy Noonan, Wall Street Journal, 8/2/14 (no link available). 

While Noonan’s column focuses on how political leaders conduct themselves, e.g., “the president shouldn’t be using a fateful and divisive word like ‘impeachment’ to raise money and rouse his base,” the same principle applies to thought leaders, educators, and the public at large.  Criticism is OK, in fact essential because no human system or institution is anywhere near perfect, but it should be constructive rather than subversive.

2. Present situation – To our knowledge, there has not been a wave of new social studies standards since the Common Core initiative surfaced – but one may be in the making. Oregon adopted new SSS in 2011 http://tinyurl.com/l4hryaq, and some 20 other states (plus two affiliate members, Los Angeles County and the University of Delaware) are working on SSS.  A state led effort to develop standards in social studies, Tim Daly, NCSS, 3/31/11. http://tinyurl.com/q92p4fp

There is a limited amount of information available about what the new SSS might look like, but note these critical comments:

First, Common Core literacy standards (part of English standards) encourage a reading of the Constitution that would arguably omit the most important parts.  Hating the Constitution 101, Terrence Moore, Townhall.com, 1/6/14. http://tinyurl.com/kqk52mb

•A casual reader of the Common Core English Standards will note that parts of the Constitution are recommended at the middle-school level and again in high school. Under the 6th-8th-grade range for History/Social Studies, the document states “United States. Preamble and First Amendment to the United States Constitution (1787,1791).” For the 11th-12th-grade range under the category of English Language Arts one finds “United States. The Bill of Rights (Amendments One through Ten of the United States Constitution).”  [But] will the Constitution ever be read in its entirety? [And] why would you ever read the Constitution (or parts of it) in an English class?

•Also, some of the supplementary texts cited are virulently critical of the founders and what they accomplished. “If the purpose of including ‘informational texts’ and ‘literary non-fiction’ in the Common Core were to improve students’ thinking and to enlarge their understanding of their duties as human beings and citizens, then students’ reading of the entire Constitution would be supplemented by selections from The Federalist, Justice Story’s Commentaries, and speeches of Lincoln. [Instead, the scholars cited] are almost invariably liberal ideologues or are at least made to look that way.”

Second, under proposed SSS (K-8) for New York, students would be taught that this country “is founded on the democratic principles of equality, fairness, and respect for authority and rules.”  One might think these words more descriptive of an authoritarian state than of “the land of the free and the home of the brave.”  Proposed Common Core standards omit “liberty” from America’s founding principles, Kyle Olson, Townhall.com, 4/18/14. http://tinyurl.com/mv2hg37

3. An example close to home – Delaware’s current SSS were issued in 1995.  Most of them seem unexceptionable, and the one for civics strikes us as quite good.  Delaware Department of Education, http://tinyurl.com/ort7hgz

However, the Delaware standards for history are disappointing.  Studying history is only one of several activities prescribed in the area, and it is apparently not viewed as the most important one (listed last, with significant caveats). 

History Standard One: Students will employ chronological concepts in analyzing historical phenomena [Chronology]. –Students are expected to investigate ideas or trends that extend across space and time, such as continuing migration of a population, development of a religion or philosophy, or the gradual change in the social status of a particular group.  They should “construct accurate chronologies and draw logical conclusions regarding cause and effect.”

History Standard Two: Students will gather, examine, and analyze historical data [Analysis].

History Standard Three: Students will interpret historical data [Interpretation].

History Standard Four: Students will develop historical knowledge of major events and phenomena in world, United States, and Delaware history [Content]. – OK, high school graduates are expected to have some knowledge of historical events.  However, “individual periods, regions, or events should not be studied in isolation, but rather in comparison to one another.”  And “the broad sweep of events, or an emphasis on leaders, great works, and pivotal events” should not be allowed to “obscure the importance of seeking to understand the everyday life of ordinary people in other times and places.”

One can’t help but wonder how effective grade school or even high school students will be in “analyzing historical phenomena,” etc.  Copying of material posted on the internet is probably far more prevalent than the creative efforts that are implied.  Meanwhile, the students may not be learning a great deal of history. Will they truly develop an appreciation of our national identity before they graduate?

If and when new SSS are adopted in Delaware, they won’t necessarily improve the situation.  Here’s one indication of what may be coming. 

Re History Standard Three, which is said to anticipate that students will understand how a historian’s “choice of questions” may effect his or her conclusions, “a series of questions” has been developed “that may be asked of various topics in American history.”  A number of the questions (edited for brevity, and in some cases clarity) follow. Choice of questions, University of Delaware. http://tinyurl.com/oxep4of

•Was Columbus “one of history’s great heroes” or “one of history’s worst villains?”  Perhaps the latter, given the impact of his “discovery” on the people who were already living in the New World.

•Should the Puritans be viewed as “bigots” or “consensus minded-community builders?” Did Puritanism “give rise to a New England myth and later a national myth of manifest destiny?” Was Puritan devotion repressive or progressive?

•Was the American Revolution a conservative movement (to gain independence from an increasingly oppressive British monarchy) or an ideological phenomenon?  Was American society undemocratic at the time? Were the American men who fought in the Revolutionary War motivated by materialism or idealism?  What were the results of the American Revolution for women? 

•Did the Constitution result from a “republican synthesis” (ideological consensus) or does this generalization fail to describe “the diverse people of the new nation?” Did the Constitution fulfill or repudiate the ideals expressed in the Declaration of Independence?  Was the Constitution the work of a political and propertied minority who drafted it as an instrument to suit their own purposes?  Were the Anti-federalists (opponents of the Constitution) “tradition-minded classical republicans” or “enterprising proto-liberals?”

•At what point in the rapid economic development of the early nation did people’s values shift from communal to individualistic?  Were “westward migrants” seeking to escape or engage in “the market system?”

• Was abolitionism before the Civil War a unique event or part of a long-term trend or pattern.  What motivated the “reformists,” and did they envision the reforms being “confined to private endeavors” or “regard state intervention as an absolute necessity?” Why was it not until the emergence of a capitalist order that a powerful abolitionist movement was able to excite the revulsion of people toward an institution (slavery) that had existed throughout history?

• Re slavery, did the slaves establish a culture of their own and if so was it largely African or American?  Did slave owners treat slaves well or badly?  Have blacks “been able to overcome the pervasive evils of slavery?” 

•What caused the Civil War, the slavery issue or economic differences between North and South? Did the North share responsibility for causing the war, or was it all the South’s doing?  Should the outcome be criticized or uniformly praised? 

•Was the major issue during Reconstruction economic (as “revisionists” say) or moral (as “neo-revisionists” say)? Was this effort a “meaningless experiment” or a “brave but short-lived attempt to fashion real democracy in the South?”

Re the “triumph of capitalism” (period not specified), how was wealth produced, how evenly was wealth distributed, and how much opportunity existed to rise in the social hierarchy? Did labor unions and regulatory legislation represent “a democratic restraint on capital” or “a way to buy off radical protest?” Was corporate capitalism “an achievement” or “a betrayal of American democracy?”

Re American imperialism, did the US go to war (when, against whom?) due to internal problems or in response to events beyond its control?  Was our acquisition of world power status carefully planned, or haphazard? Did the US create a new form of “open door” imperialism through the use of its economic power, and “were the consequences of American policy harmful to those who experienced it as an intrusion?”

•Did the New Deal usher in an era of big government/ “imperial presidency” or simply create a “more effective and efficient state?”  Did it save capitalism or pave the way for an American version of socialism?  Did it represent a setback or a triumph for “workers and other have-nots?”

• When did the Cold War begin, e.g., before WWI or at the end of WWII? Was the Soviet occupation of Eastern Europe fueled by long-time Russian aspirations, the Nazi invasion, or a desire to advance “the revolutionary struggle of an international communist movement?”  Did the US want to maintain the global status quo or aggressively pursue hegemony and grab ever-expanding foreign markets – to check the Soviets or subjugate weaker nations?  In short, was the Cold War “our” fault or “their” fault?

•Was the Civil Rights Movement top-down or bottom-up?  Did Martin Luther King play an indispensable role, or was he simply one of many possible leaders?  Did the movement begin in Tuskegee in 1941, with the Brown decision, or when Rosa Parks refused to go to the back of the bus?  Given “a hostile white society,” was segregation or integration the best way for African-Americans to make it? Was a push for “economic rights” an appropriate part of the civil rights movement?

•Re the women’s movement, are the needs and interests of women different from those of men and if so do these needs and interests need fighting for?  Can/should “American history be written as women’s history?”

Some of the questions posed are interesting, but there seems to be an inordinate focus on problems versus accomplishments and opportunities.  Far from instilling pride in what this nation has accomplished, many of the questions seem directed to creating angst about areas in which the US has arguably fallen short.  Indeed, there is a striking resemblance between the negative answers called for by some of the questions and the revisionist theories analyzed in Dinesh D’Souza’s America.

Is there a better approach than inviting students to weigh in on issues like these?  While discussion questions are certainly a useful part of the educational process, parents might do well to ensure that the schools are acquiring well balanced American history texts and encouraging students to master them (instead of expending an inordinate amount of time and effort on “research” projects and self expression).  See, e.g., “Quiet: The power of introverts in a world that can’t stop talking,” Susan Cain. http://tinyurl.com/q6q3sgy

Ever wonder why Asian-American students do so well in US schools?  As a result of cultural conditioning, they are less inclined to talk (or participate) in class and more inclined to listen, study and think things through.  Come to think of it, the stress on socialization versus “book learning” may have a lot to do with the disappointing track record of the US educational system (K-12) versus those of other countries in the world. 

top      wwhipple3@verizon.net


7/28/14 – Don’t forget the fiscal problem!        Read Replies

If something is unsustainable, as economist Herb Stein famously noted, then eventually “it will stop.”  One reaction to the Congressional Budget Office’s recent report on the long-term budget outlook [7/15/14, http://tinyurl.com/l2b4jju - download PDF], therefore, might be, “ho hum, that isn’t how things will actually go.” 

A great deal of damage could result from a fiscal meltdown, however, for which reason it would seem prudent to take corrective action sooner rather than later - as SAFE has been saying for the past 18 years.  SAFE Newsletter #1, Spring 1996. http://tinyurl.com/ppojfeg

. . . we are very concerned about the growth of the federal government, and the huge debt being left for our children and grandchildren to pay. We believe this country is risking a financial disaster which will hurt everyone, including senior citizens. It is as if we are floating down a river and can hear a waterfall ahead. It is time to pull for the shore now.  The problem is big government, and the solution is to actually decrease the size of the government. Slowing down the growth of the government is not enough.

Most people who have studied the fiscal problem agree timely action is needed, but opinions vary as to what exactly should be done.  Advocates of big government (Side A) seem wedded to tax increases, advocates of smaller government (Side B) favor spending cuts, and some folks in the middle would do either or both.

Eager to get along with all members of Congress, the CBO avoids taking sides on policy issues.  However, the risks in deferring action are diplomatically noted from time to time.  Congressional Budget Office downgrades fiscal outlook, Joseph Lawler, Washington Examiner, 7/15/15.  http://tinyurl.com/mj8r7nx

As in recent years, the CBO estimates show that the fiscal situation is unsustainable, with the debt headed toward levels only seen once before in U.S. history -- after the military spending of World War II. *** Another possibility is that the country faces a debt-related crisis before then: It's “impossible to predict with any confidence” how long the run-up in debt could be sustained, according to the CBO. “At some point, investors would begin to doubt the government's willingness or ability to pay its debt obligations.”

Such reminders hopefully contribute to public awareness of a problem that many politicians have found it convenient to gloss over.  Candidly, however, the CBO doesn’t deserve much credit for conveying a sense of urgency or suggesting meaningful solutions.  Our thoughts follow on several key sections of the report.

1. Overview – Budget projections typically are for ten years, but this one is extended through 2039.  In relation to Gross Domestic Product (GDP), mandatory programs and interest consume a growing share of the fiscal pie while discretionary spending is cut “to the bone.”  Individual income taxes account for a growing share of total revenues.  Debt balloons after 2024 to cover widening deficits. 

Projected spending & revenues - % of GDP

 

2014

2024

2039

Social Security

4.9

5.6

6.3

Healthcare programs

4.9

5.9

8.0

Other mandatory

2.5

2.2

1.7

Interest (net)

1.3

3.3

4.7

Discretionary

6.8

5.1

5.2

TOTAL SPENDING

20.4

22.1

25.9

Individual income taxes

8.0

9.4

10.5

Payroll taxes

6.0

5.8

5.7

All other revenues

3.5

3.1

3.2

TOTAL REVENUES

17.6

18.3

19.4

DEFICIT

(2.8)

(3.7)

(6.4)

Public debt at end of year

74

78

106

Hmm, wonder how the members of Congress would like it if they were only able to control about 1/5 of the total budget versus an already paltry 1/3 now. And what’s the likelihood of maintaining a military second to none over the next 25 years when the US Army, Navy and Air Force are already being downsized due to budget pressures?

While there are certainly opportunities to cut wasteful government programs, and we are all in favor of exploiting them, spending cuts of the magnitude needed cannot be achieved without overhauling mandatory entitlement programs in some fashion. 

Growing reliance on the individual income tax is problematic for several reasons, including the fact that about half of the adult population is effectively exempt.  Pressure for new revenue sources – such as a national sales tax or value added tax – is a near certainty at some point.  And higher taxes could contribute to tanking the economy.

SAFE normally tracks “total debt” including obligations held by trust funds, which at $17.7 trillion exceeds 100% of GDP already. And the government’s total financial obligations (current liabilities plus the present value of unfunded promises) have been estimated as from 4 to 8 times GDP. Plumbing the depth of the fiscal hole, 2/13/12.

In an “extended alternative fiscal scenario,” certain spending and tax changes were assumed that would result in running public debt up to over 180% of GDP by 2039.  According to the CBO, which apparently believes in Keynesian economics, the spending increases and tax reductions would “raise output and employment in the next few years.”

The CBO also ran two deficit reduction scenarios: one had the effect of freezing public debt at about 75% of GDP, while the second cut this ratio to 42% by 2039.  It opined that the resulting deficit reduction would “reduce output and employment in the next few years,” whereas we are convinced that balancing the budget by cutting spending would have a positive impact on the economy.

2. Healthcare – The CBO report breaks down projected healthcare outlays between Medicare and all other.  Greater detail would have been helpful to show the anticipated cost of GovCare programs now being implemented. 

Projected healthcare outlays - % of GDP

 

2014

2024

2039

2014-39 Incr.

Medicare (net)

3.0

3.2

4.6

53%

Medicaid, CHIP & exchange subsidies

1.9

2.7

3.4

79%

TOTAL

4.9

5.9

8.0

63%

Total US healthcare expenditures

16%

N.A.

22%

38%

The projected data reflect an assumption that the slowing growth in overall healthcare expenditures in recent years will persist for some time.  This trend has variously been attributed to a weakened economy, an expansion of high-deductible healthcare insurance (HCI) plans, state efforts to control Medicaid spending, etc. 

Despite an aging population – 45M seniors (65+) in 2014, 62M in 2024 & 82M in 2039 - Medicare outlays over the next 10 years are expected to grow at about the same rate as the overall economy.  The “excess cost growth” expected during this period would primarily be due to GovCare implementation (resulting in Medicaid expansion & exchange subsidies).

“Excess cost growth” for Medicare is projected to resume after 2024 due to the soaring number of covered seniors, plus continuing for other healthcare programs. 

Over the period 2014-2039, the 63% increase in healthcare outlays as a percentage of GDP handily exceeds the projected growth (38%) in overall US healthcare spending. 

There are many questions about whether GovCare will be implemented as planned and, if so, what effects it will have.  At a minimum, a great deal of confusion and personal angst has been spawned without much progress towards getting everyone signed up for HCI.  Healthcare “reform” is a work in progress, 3/24/14.

Due to deferral of the employer mandate, initially for one year and now until 2016 for businesses with less than 100 employees, it’s hard to know how many employers will pay the fines, drop their HCI programs, and advise employees to seek coverage on the exchanges. 

Enrollees in GovCare compliant HCI are reportedly older and sicker than the norm, so insurance companies may be seeking relief.  Insurers warn of rate hikes if Obamacare “risk corridors” are kept budget-neutral, Philip Klein, Washington Examiner, 5/6/14. http://tinyurl.com/nm3e66x

Can the IRS legally recognize tax credits for HCI policies purchased on federal exchanges (versus state exchanges as the statute provides)? Interpreting the ACA in Halbig v. Burwell, Jonathan Adler, Washington Post, 7/22/14. http://tinyurl.com/kb4whtp

If not, GovCare might collapse of its own weight, although another circuit court upheld the IRS position and the US Supreme Court may reverse Halbig.  Why Affordable Care probably isn’t doomed, Tom Goldstein, News Journal, 7/24/14.

Surprise, there has already been an outbreak of fraudulent HCI subsidy claims as a result of slipshod computer programming and administrative enforcement. Obamacare enrollees faking for freebies; The subsidies are a hit with patients who don’t exist, Washington Times, 7/23/14. http://tinyurl.com/mf2dwwm

In short, GovCare was sold based on promises that couldn’t realistically be kept, and its deficiencies are becoming glaringly obvious.  No wonder this program continues to poll poorly, most recently with a 51-43 disapproval rating.  Despite enrollment success, health[care] law still unpopular, Andrew Dugan, gallup.com, 5/29/14. http://tinyurl.com/mvkgqbc

To do anything about the exorbitant outlays in this sector of the budget, new initiatives would be required.  There are two basic approaches: (1) reduce government subsidies, or (2) limit access to healthcare by denying reimbursement for certain expenditures, allowing long waiting periods, etc.  It’s unclear that Americans are in favor of either approach, e.g., many people would like “to have their cake and eat it too.”

3. Social Security – Viewed by some as the crown jewel of the New Deal, Social Security is the largest single program of the US government and will retain that distinction for the foreseeable future.  Unlike the major healthcare programs, moreover, Social Security’s problems are well defined and clearly understood.

Projected Social Security outlays - % of GDP

2014

2024

2039

4.9

5.6

6.3

 

 

Until recently, dedicated tax revenues for Social Security exceeded program outlays.  Rather than being invested, the funds in question were spent for other purposes.  The Social Security Trust Funds (with a current balance of $2.8 trillion, including book-kept interest) are of purely symbolic significance. 

Social Security has been spending over 100% of its dedicated tax revenue since 2010, with the balance coming out of general revenues. The excess of outlays over tax revenue will increase to about 1/3 by 2039.

Outlays for Social Security benefits are growing faster than the economy due to aging of the population, with more workers retiring and retirees living longer on average.  The ratio of seniors (65+) to juniors (20-64) currently stands at 24%; it is projected to hit 31% in 2024 and 39% in 2039.

Some 17% of current Social Security outlays are for disability benefits rather than retirement benefits.  Although the CBO report doesn’t say so, the disability program has expanded rapidly in recent years, becoming in effect an early retirement option for people no longer desiring to work.  See, e.g., “The Social Security disability con,” Washington Times, 3/31/14. http://tinyurl.com/loz7ha9

The CBO report goes on and on about the theoretical possibility of increases in dedicated tax revenues or global reductions in program benefits.  There is no discussion of concrete Social Security reforms, however, not even such an obvious idea as screening disability claims more carefully.

Our position has been and remains that Social Security can’t be regarded as exempt from changes if there is going to be a real effort to solve the budget problem. Social Security belongs on the table with everything else, 6/27/11

   *   *   *

SAFE has not been alone in trying to spark action on the fiscal problem; there have been a number of other efforts over the years.  Here are some of the highlights:

•Books have warned of the need for action to avert financial disaster, e.g., “The Coming Generational Storm” (Kotlikoff & Burns, 2004, http://tinyurl.com/m3rwarh) and “Running on Empty” (Peterson, 2004, http://tinyurl.com/lmhjtbj).

•David Walker et al. barnstormed the country in 2007-2008.  Two cheers for the fiscal wake-up tour, 11/5/07.

•A movie entitled “IOUSA” was released in the run-up to the 2008 elections.  Fiscal wake-up tour message goes nationwide, 8/25/08.

•There was a fiscal responsibility summit at the White House in February 2009, although a subsequent healthcare summit seemed like a more serious effort.  A tale of two summits, 3/16/09.

•The president appointed a Fiscal Responsibility Commission (chaired by Erskine Bowles & Alan Simpson) in 2010, which developed a deficit reduction package.  Fiscal Commission sets stage for further discussion, 12/6/10.  However, nothing ever came of the recommendations.

•A bitter battle about raising the debt limit in 2011 was ultimately resolved by enacting mandated across-the-board cuts in discretionary spending (sequestration) to avert a default.  Debt limit deal settled nothing, 8/8/11

•A Joint Committee on Deficit Reduction (chaired by Rep. Jeb Hensarling & Sen. Patty Murray) was appointed to develop an alternative to sequestration, but the members never got past a cut spending/no raise taxes impasse. Flattering and cajoling the “Super Committee,” 11/7/11.  The sequestration provisions subsequently went into effect.

•The “fiscal cliff” at the end of 2012 ended with agreement that Bush “tax cuts” would expire for upper echelon taxpayers and be made permanent for other taxpayers.  Budget war grinds on, SAFE Newsletter, Winter 2012, http://tinyurl.com/o4uk5da.

•In October 2013, there was a “government shutdown” as the result of disagreements over various fiscal issues and GovCare implementation. The government shutdown ends with unresolved issues aplenty, 10/21/13

Hmm, what could be done to get some action on the fiscal problem that hasn’t been tried already?  Readers, we’d welcome your suggestions!

*        *        *        This Blogs Replies        *        *        *

I think the end is nigh.  It is financially impossible for the Federal Reserve to withdraw the money injected into the money supply. If the economy starts to improve inflation presents itself.  If the Fed raises interest rates to control it, they throw the economy into a depression.  If they don't raise interest rates hyperinflation occurs. The only workable solution is for the Federal government to stop borrowing so much money, but there is no stomach for this in Washington.  The patient has already died; it’s just missing a death certificate. We are all living on borrowed time - literally and metaphorically. – Retired financial planner

Just to let you know that my involvement has not diminished, I attended the Texas Republican State convention to help Ted Cruz and, with the TEA party, to lobby the delegates to eliminate the guest worker (amnesty) plank from the platform. We succeeded, so the national Rep. Establishment cannot look to Texas as an example for that viewpoint.- Former SAFE president

The only way to stop this insanity is to elect more conservatives, starting this November when the American people have a chance to return the Senate to Republican control. – Retired judge

top      wwhipple3@verizon.net


7/21/14 – Mapping a perplexing political landscape

Our starting point will be a Pew Research Center study, which includes a national poll (January-March 2014, 10,013 respondents) and supplementary polling of a subset of the sample. 

Pew has published two analyses thus far: (Report One) Political polarization in the American public, 6/12/14, http://tinyurl.com/p4scahz (download PDF); (Report Two) Beyond red and blue: The political typology, 6/26/14, http://tinyurl.com/ob53ouh (download PDF).  Stay tuned for further analysis re the causes of political polarization, e.g., information environments, where people live, socioeconomic circumstances, generational change, and psychological factors.

Unlike SAFE, which is basically a think tank, Pew is “a nonpartisan fact tank that informs the public about the issues, attitudes and trends shaping America and the world” and “does not take policy positions.”  So how are their efforts relevant to ours? 

First, some observers see the political polarization confirmed by Pew’s study as a key obstacle to national harmony and prosperity.  We would like to understand the study results well enough to draw our own conclusions.  

Second, a better feel for the political landscape could be helpful in assessing the feasibility of a political coalition to pursue the SAFE agenda.   

Our review will begin by recapping Reports One and Two.  Questions put to respondents – their responses – Pew’s conclusions.  Then, in the assessment mode, we will consider unasked questions that might have been helpful and alternative interpretations that may have been overlooked. 

Before going on, readers are invited to take this political typology survey and see where their views fall in the Pew model. http://tinyurl.com/qgztqzd

1. Report One – What does it mean to be liberal (aka progressive) versus conservative?  One criterion might be satisfaction with the status quo, i.e., liberals are out to change things while conservatives typically want to keep things as they are (or in some cases push them back a bit).  Another is that liberals are typically more enthusiastic about growing the government than conservatives. 

Human beings are not energized by fuzzy generalizations, however, as opposed to issues that affect their lives or sense of security in tangible ways. Pew therefore uses ten pointed questions – which of these statements comes closest to expressing your view – to place respondents on the liberal versus conservative spectrum.

Here is the so-called Ideological Consistency Scale, which was used in the current study and in earlier studies going back to 1994.  If you took the political typology survey, you have seen all of these questions (plus a number of others) already.

Conservative position

Liberal position

Government is almost always wasteful and inefficient.

Government often does a better job than people give it credit for.

Government regulation of business usually does more harm than good.

Government regulation of business is necessary to protect the public interest.

Poor people today have it easy because they can get government benefits without doing anything in return.

Poor people have hard lives because government benefits don’t go far enough to help them live decently.

The government today can’t afford to do much more to help the needy.

The government should do more to help needy Americans, even if it means going deeper into debt.

Blacks who can’t get ahead in this country are mostly responsible for their own condition.

Racial discrimination is the main reason why many black people can’t get ahead these days.

Immigrants today are a burden to our country because they take our jobs, houses and healthcare.

Immigrants today strengthen our country because of their hard work and talents.

The best way to ensure peace is through military strength.

Good diplomacy is the best way to ensure peace.

Most corporations make a fair and reasonable amount of profit.

Business corporations make too much profit.

Stricter environmental laws and regulations cost too many jobs and hurt the economy.

Stricter environmental laws and regulations are worth the cost.

Homosexuality should be discouraged by society.

Homosexuality should be accepted by society.

In some cases, neither answer seems valid.  The presumed choice between “military strength” and “good diplomacy” is illusory, for example, because diplomatic results are often influenced by the military strength of the parties. Acceptance of a “both are important” answer would make it difficult to compile the results, however, so such a response, if given, would be counted as a non-answer.

Why should one expect correlation between views on such diverse matters as the social safety net, military strength, homosexuality, etc.?  Pew’s answer is that they are modeling political reality. “These views have a traditional ‘left/right’ association, and the scale measures this growing correlation over time.”

Several hot button issues are not reflected in the survey, e.g., domestic surveillance and the efficacy of “the war on terror.” Also, some answers seem dated, e.g., the debate about environmental laws and regulations these days is not whether we should have them but whether they are being carried too far.  These deficiencies are accepted in the political polarization survey so as to be able to compare the results to those of earlier surveys, but the political typology survey addresses them by adding some new questions. 

The scoring system for respondent answers was “-1” for a liberal response, “+1” for a conservative response, and “0” for don’t know/refused/alternative answer responses.  A respondent’s score could therefore range from -10 (ten liberal responses) to +10 (ten conservative responses). 

For analytical purposes, respondents were grouped into one of five categories: (A) consistently conservative (+10 to +7, allowing not more than one liberal answer); (B) mostly conservative (+6 to +3, allowing up to three liberal answers); (C) consistently liberal (-10 to -7, allowing not more than one conservative answer); (D) mostly liberal (-6 to -3, allowing up to three conservative answers); and (E) mixed (all other).

Pew reports growth of liberal categories over the past 20 years for the country as a whole.  Conservative categories shrank during the first decade, but rallied in the second (with an offsetting reduction in the mixed category).

US adults

1994

2004

2014

Consistently liberal

3%

8%

12%

Mostly liberal

18%

25%

23%

Mixed

49%

49%

39%

Mostly conservative

23%

15%

18%

Consistently conservative

7%

3%

9%

Similar trends are reported for Democrats (including Democrat-leaning independents) and Republicans (including Republican-leaning independents).

Democrats

1994

2004

2014

Republicans

1994

2004

2014

Consistently liberal

5%

13%

23%

Consistently conservative

13%

6%

20%

Mostly liberal

25%

35%

33%

Mostly conservative

32%

25%

33%

Mixed

49%

49%

39%

Mixed

49%

49%

39%

Crossover conservatives

21%

3%

5%

Crossover liberals

6%

20%

8%

The Pew report shows the first two lines of Democrat/Republican results without accounting for other respondents in these parties.  We added more lines in an effort to fill the void.  The mixed line results are based on national averages for these years; data on the crossover line are determined by difference so the party breakdowns will add to 100%.  (Conservative crossover in 1994 & liberal crossover in 2004 seem out of line.)

Based on the survey data, Pew paints a rather dismal picture of the national political situation.

•There is a growing ideological rift between the two parties, particularly among those members most engaged and active in political matters (as shown by not only registering to vote but also following the issues, writing letters, making political contributions, etc.). 38% of politically engaged Democrats are consistent liberals, today, and 33% of politically engaged Republicans are consistent conservatives.

•Democratic and Republican views once overlapped to a considerable extent, but this is no longer true. 92% of Republicans are now to the right of the median Democrat, and 94% of Democrats are to the left of the median Republican.

Mutual antipathy is on the upswing, and it goes beyond mere disagreement.  Thus, 27% of Democrats profess to see the Republican Party as a threat to the nation’s well being, while 36% of Republicans have the same view of the Democratic Party.

•With growing gridlock in DC, partisans on both sides feel that the other side’s leaders should make most of the concessions in political negotiations.  This is said to be counter to the general public’s perception that the two sides should meet in the middle.

•It is not necessarily true, however, that consistent liberals and conservatives are extremists.  Some people in the ideological middle also hold strong views on issues of particular interest to them, e.g., abortion or gun rights.

2. Report Two – To the extent it is possible to classify Americans in coherent political segments, what would the segments look like?  In seeking to answer this question, Pew augmented the 10 questions on its Ideological Consistency Scale with 13 additional questions to provide a richer assessment.  Here are the added questions:

Conservative position

Liberal position

Most people who want to get ahead can make it if they’re willing to work hard.

Hard work and determination are no guarantee of success for most people.

This country has gone too far in its efforts to protect the environment.

This country should do whatever it takes to protect the environment.

Using overwhelming military force is the best way to defeat terrorism around the world.

Relying too much on military force to defeat terrorism creates hatred that leads to more terrorism.

It’s best for the future of our country to be active in world affairs.

We should pay less attention to problems overseas and concentrate on problems here at home.

It IS necessary to believe in God to be moral and have good values.

It IS NOT necessary to believe in God to be moral and have good values.

The growing number of newcomers from other countries threatens traditional American customs and values.

The growing number of newcomers from other countries strengthens American society.

Society is better off if people make marriage and having children a priority.

Society is just as well off if people have priorities other than marriage and children.

The largest companies do NOT have too much power.

Too much power is concentrated in the hands of a few large companies.

Everyone has it in their own power to succeed.

Success in life is pretty much determined by forces outside of our control.

Americans need to be willing to give up privacy and freedom in order to be safe from terrorism.

Americans shouldn’t have to give up privacy and freedom in order to be safe from terrorism.

Government aid to the poor does more harm than good by making people too dependent on government regulation.

Government aid to the poor does more good than harm because people can’t get out of poverty until their basic needs are met.

Our country has made the changes needed to give blacks equal rights with whites.

Our country needs to continue making changes to give blacks equal rights with whites.

Problems in the world would be even worse without US involvement.

US efforts to solve problems around the world usually end up making things worse.

Based on responses to its survey questions, Pew characterizes the US adult population as having polarized wings and a diverse middle.

At one end of the political spectrum are steadfast conservatives and business conservatives.  At the other end are solid liberals.  These segments represent 37% of the adult population, or 57% of the population that is politically engaged.

In between are five diverse segments: young outsiders, hard-pressed skeptics, next generation left, faith and family left, and bystanders, which collectively constitute 63% of the population.  Here is a quick rundown on each of the eight segments:

#Steadfast conservatives (similar to consistent conservatives in Report One) – 12% of adult population/ 19% of very engaged. Hold conservative views on most issues, including size and scope of government; more prone than other segments to be angry at government.  Also critical of business and Wall Street, want immigration to be better controlled, and are not keen on US global involvement.  Overwhelmingly voted for Romney in 2012, have favorable impressions of several possible GOP candidates in 2016.  On average, the oldest segment (31% are 65 or older).  59% male.

#Business conservatives – 10% of adult population/ 17% of very engaged.  Economic conservatives, but have somewhat relaxed views on social issues.  In contrast with steadfast conservatives, approve of business and Wall Street, consider immigration a plus for the country, and favor US global involvement.  More likely than other segments to identify as libertarians, although only 27% say the term describes them well.  Have favorable impressions of several possible GOP candidates in 2016, notably Paul Ryan.  The most affluent segment, with 45% having family incomes of $75K+.  Mostly 50 or older, but a bit younger on average than steadfast conservatives.  62% male.

#Solid liberals (similar to consistent liberals in Report One) – 15% of adult population/ 21% of very engaged.  Strongly support the social safety net and “take very liberal positions on virtually all issues.”  Optimistic about nation’s future based on “its ability to change” versus “its reliance on long-standing principles.”  See peace as being ensured by “good diplomacy” versus military strength, and think excessive reliance on military force will lead to more terrorism.  Strongly backed President Obama in 2012, primed to vote for Hillary Clinton (or possibly Elizabeth Warren) in 2016.  Have negative opinions of many leading Republicans, especially Sen. Ted Cruz (only 2% view Cruz favorably, compared with 71% who view him unfavorably).  The most highly educated segment, and also the most urban (47% live in urban areas).  56% female.

#Young outsiders – 14% of adult population, 11% of very engaged.  Outsiders typically lean Republican, but express unfavorable opinions of both parties.  View government as wasteful and inefficient, yet diverge from conservatives in strongly supporting “the environment and many liberal social policies.”  Majority supports gun rights.  Only 42% follow developments in politics and government most of the time, and just 30% know that Democrats have a majority in the Senate and Republicans control the house.  No leading Republican is viewed more positively than negatively.  30% are under 30 and most are under 50.   Relatively secure financially for their age profile. 52% female.             

#Hard-pressed skeptics – 13% of adult population, 9% of very engaged. Financially stressed and distrustful of government.  On one hand, they want government to do more to solve problems, and doubt the ability of individuals to improve their lot through hard work.  On the other, 72% say government is wasteful and inefficient.  They also have a negative view of business and Wall Street, view immigrants as a burden on the country, and are wary of US global involvement. 62% voted for Obama in 2012 but only 44% currently approve of his job performance; 62% have a favorable impression of Hillary Clinton.  20% of segment is black and 9% Hispanic, 60% have no more than a high school education, lowest family income of any segment (56% have family income of less than $30K, and only 32% say they work full time). 58% female.

#Next generation left – 12% of adult population, 11% of very engaged.  Very liberal attitudes on many issues, e.g., homosexuality, abortion, environment and foreign policy, but wary of expanding the social safety net.  Typically lean Democratic, but view themselves as independents.  Although supportive of activist government, 49% think the Democratic Party “too often sees government as the only way to solve problems.”  Average age is 41 and 1/3 are younger than 30.  74% have “some college experience” and 62% are “financially satisfied.”  

#Faith and family left – 15% of adult population, 12% of very engaged.  Favors increased aid for the poor and believes government should do more to solve national problems, yet is conservative on social issues and views religion and family as at the center of their lives.  Typically vote Democratic, but 37% describe themselves as conservative.  Less than half know Republicans control the House and Democrats control the Senate.    Highest share of blacks (30%) and Hispanics (19%) of any segment; also have the highest share of foreign born (18%).  54% have no more than a high school education; 45% have family incomes of less than $30K.  51% are 50+.

#Bystanders – 10% of adult population, 0% of very engaged. Bystanders are on the sidelines of the political process, either by choice or because they are ineligible to vote. More likely to say they are interested in celebrities and entertainment than the public overall (64% vs. 44%).  32% Hispanic, 10% black.  38% under 30.  Low levels of education; 58% have family incomes of $30K or less. 

3. Summary and assessment – Report One indicates that the US population moved only slightly to the left over the past two decades, but there was a marked increase in consistent liberals and conservatives and a decline in Americans with mixed views.  Consistent liberals and conservatives now represent 21% of the adult population (versus 10% in 1994), and being more engaged in politics than others they exercise a disproportionate influence.

According to Report Two, committed conservatives (steadfast conservatives + business conservatives) outnumber solid liberals: 22% of adult Americans versus 15%. The liberals stick together, however, while conservatives waste a lot of time and energy in intramural battles.  Also, the conservative segments are older than other segments, and have proportionately lower numbers of blacks and Hispanics, so their clout will predictably wane as time moves on.  Racial politics could determine who controls the Senate in 2014, Star Parker, Townhall.com, 7/19/14. http://tinyurl.com/pjtgz3s

As previously noted, Pew paints a dismal picture of the national political situation.  Growing ideological rift – breakdown of communications – mutual antipathy on the upswing – unwillingness to engage in the kind of cooperation and compromise that a viable democracy requires.  See also “Divided America: Can the two sides be made whole?” John Sweeney, News Journal, 7/6/14.

Such concerns may be a bit overdone, however, because they are based on an implicit premise that is at best debatable.  The premise is that the views of both liberals and conservatives are overstated and the truth necessarily lies somewhere in between, wherefore the proper model for government is “let’s make a deal” rather than searching for the best answers.  Who says so?  Why the Americans in the diverse middle, of course, who represent nearly 2/3 of the total population and reportedly get nervous if our political leaders do not immediately agree on how to address the issues of the day.

Considering Pew’s unsparing profiles of the middle segments (young outsiders, hard-pressed skeptics, next generation left, faith and family left, and bystanders), it’s hard to see why the people in these segments should be looked to as arbiters for a host of political issues they haven’t bothered to follow and don’t much care about.

Furthermore, isn’t there a chance that one side or the other is right on most of the issues and splitting the difference would be a disastrous mistake?  We don’t necessarily agree with all of the “conservative positions” identified by Pew, but the “liberal positions” could run this country into the ground.  Automatic acceptance of ever “stricter environmental laws and regulations” – more handouts for needy Americans, “even if it means going further into debt” – unlimited immigration – gut the military and rely on diplomacy – punitive taxes on businesses that “make too much profit” – etc.

And then there are some questions Pew didn’t ask.  Perhaps this is because the issues involved don’t register on contemporary political radar screens, but America will ignore them at its peril. 

Conservative position

Liberal position

Federal budget should be balanced except in true national emergencies.

??

It is imperative to vastly simplify the tax law.

??

Many government programs are wasteful and should be eliminated.

??

Congress should exercise control over major new regulations.

??

The president is supposed to uphold the laws, not make them.

??

All told, we think that it’s time for an honest debate about where this country should be headed – and that can only happen if people speak their minds and the media starts reporting the news in an impartial manner.

top      wwhipple3@verizon.net


7/11/14 – Corporate welfare has nine lives

In line with its smaller, more focused, less costly government agenda, SAFE has often suggested the elimination of corporate welfare.  The starting point is spending programs that benefit businesses in narrow segments of the economy.

There is no corporate welfare category in the budget, of course, but total outlays of this nature are estimated to be on the order of $100 billion per year (see table below).  Throw in narrowly targeted tax breaks, loss exposure on government-backed financing, etc. and the total would be considerably higher.  Corporate welfare in the federal budget, Tad DeHaven, Cato Institute, 7/25/12.   http://tinyurl.com/d6dhoeq (download PDF)

2012 outlays, $ in millions

Agriculture

25.2

Interior

2.6

Commerce

4.1

State

5.2

Defense

4.7

Transportation

2.0

Energy

17.3

Other

20.5

HUD

16.0

TOTAL

97.6

Advocating the elimination of corporate welfare is good PR for fiscal conservatives, helping to belie claims that they are out to balance the budget on the backs of the poor.  Besides, many of the programs in this category are unjustifiable on a cost/benefit basis.   

In line with Ronald Reagan’s observation about the staying power of government, however, progress in eliminating corporate welfare has been agonizingly slow.

No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!

As a case in point, this entry will cover the current battle over whether or not to renew the charter of the Export-Import Bank.  Most Democrats are supportive of the bank, while Republicans are split between conservatives (against the bank as a matter of principle) and moderates (more intent on pleasing business supporters).

1. Rematch – When we reviewed the status of the Export-Import Bank (EIB) two years ago, the House had just approved an extension of its charter for 2+ years (vs. the 4-year extension that had been requested) with only token opposition.  The Senate and the president were expected to agree, as they subsequently did.  What about the Export-Import Bank? 5/14/12

The EIB’s charter is now scheduled to expire at the end of September, and the battle over extending it will be closer this time.  Why?  There may be other reasons, but the key point seems to be that Rep. Jeb Hensarling (R-TX), the new head of the House Financial Services Committee, views the bank as symbolizing a cozy relationship between government and the business community that needs to be broken up.

Not content to simply make a record, Hensarling has worked hard to line up support among conservatives in and out of Congress.  GOP committee chairman declares war on corporate welfare, Timothy Carney, Washington Examiner, 5/20/14.  http://tinyurl.com/p39o3hh

A Republican congressman bashing “crony capitalism” and “corporate welfare” is no longer a new thing. A Republican congressman actually trying to do something about corporate welfare, however, is nearly unprecedented.

2. Talking points - The case against the EIB goes something like this: It is a relic of the 1930s, which has long since outlived its usefulness. Most of the benefits go to a short list of big companies (Boeing, General Electric, etc.) who should be able to arrange export financing if such arrangements are necessary to sell their products abroad.  Involving the government in such transactions contributes to rent-seeking behavior by companies and tempts government officials to favor marginal business deals for political purposes. 

Here is how a SAFE member from Georgia put it (in a 2012 comment on our blog entry):  “The EIB is just another federal subsidizer for all sorts of unsavory institutions, plus part of the bailout network. It's a taxpayers' nemesis, and a counterforce to stable economic policy. If the Republicans support continuation of the EIB, they are part of the problem.  Abolish the EIB and all like it. They are millstones around the neck of legitimate enterprise.” 

A senior economic official in the previous administration seems to be thinking along similar lines. Kill export subsidies. Kill the Ex-Im Bank, Keith Hennessey, 7/1/14. http://tinyurl.com/l7q6q5n

Export subsidies are bad policy. Even when well-intentioned and designed to “level the playing field” to match other countries’ export subsidies, they create other tilted playing fields and do more harm to the economy as a whole than the problem they purport to solve for one firm. They also create opportunities for cronyism and other forms of influence-based rent seeking.

Although the EIB may be imperfect in theory, say supporters, it serves a useful purpose by enabling US firms to compete against firms in other countries with export support programs.  The bank has been reasonably well run, there haven’t been any big scandals, and the business community approves.  So why not be pragmatic about this and continue a program that by government standards has been reasonably successful?

Supporters also claim that the EIB makes money for taxpayers instead of contributing to the deficit, but this may depend on the accounting method.  Using fair value accounting, the bank would supposedly report modest losses.  End Ex-Im once and for all, PJ Austin, Citizens Against Government Waste, June 2014. http://tinyurl.com/kdxl8wk

By using the accounting method prescribed by the Federal Credit Reform Act (FCRA) of 1990 to evaluate the bank’s cost, proponents claim the bank will save taxpayers $14 billion over the next decade.  However, a May 2014 Congressional Budget Office (CBO) report found that when the more traditional fair value accounting method is used, Ex-Im Bank is estimated to have a 10-year cost of $2 billion. 

And even assuming that export-financing programs distort global trade, say EIB supporters, it would be folly for the US to renounce them unilaterally.   Put American foreign policy back on the pitch, Lawrence Summers, 7/6/14. http://tinyurl.com/pmfdqol

At a time when authoritarian mercantilism has emerged as the principal alternative to democratic capitalism, the US Congress is flirting with eliminating the Export Import Bank that, at no cost to the government, enables US exporters to compete on a more level playing field with those of competitor nations, all of whom have similar vehicles. Only by maintaining a capacity to counter foreign subsidies can we hope to maintain a level global trading system and to avoid ceding ground to mercantilists. Eliminating the Export Import Bank without extracting any concessions from foreign governments would be the economic equivalent of unilateral disarmament.

3. Strategy – Opponents of the EIB have an initial advantage: affirmative action would be required to save it, so if there is a stalemate they will win.  As matters stand in the House, legislation to extend the EIB charter is not likely to reach the floor.   

Undaunted, supporters aim to pass an EIB bill in the Senate with a big enough majority to pressure the House into action.  If they succeed, House Republicans will face a tough choice: go along with the Senate bill or risk widening the rift between Republicans and business interests. Democrats plan July vote on Ex-Im Bank, Vicki Needham, The Hill, 7/1/14.  http://tinyurl.com/nz7y4m7

[Senator Chuck] Schumer said the Ex-Im Bank is going down the same legislative path of other business priorities that have gained support in the Senate, such as the highway bill, tax extenders and immigration, only to stall in the House. “All of the sudden our Republican colleagues, particularly in the House, frightened by a small group that has a lot of power, the Tea Party, has changed their point of view in a way that really hurts the country and hurts the middle class and hurts jobs.”

Action on a Senate bill to extend the EIB charter is expected before the end of the month and supporters are hoping to equal the 78-20 approval mark set in 2012. Export-Import Bank supporters aim for show of strength in Senate, Kevin Cirilli & Vicki Needham, The Hill, 7/8/14.  http://tinyurl.com/qadvhzv

At every step, the business/EIB connection will be underscored. Political battle over export bank heats up; New House leadership, conservative groups seek to shut it down, Michael Crittenden, Wall Street Journal, 7/6/14. http://tinyurl.com/obyvk4n

Those backing the bank's reauthorization said they are scheduling factory tours and one-on-one meetings between business owners who benefit from the bank and their elected representatives, particularly when lawmakers return home for their annual August recess. *** Business owners also will be brought in for "fly-ins" to go office-to-office on Capitol Hill to make their case.

4. Assessment – If the EIB did not exist, justifying its establishment would be well nigh impossible. Likewise, in the actual situation, there are not many reasons to perpetuate it. 

Do export-financing subsidies determine whether US firms do or don’t make the export sales involved?  Probably not in most cases, and even if they did, the resulting benefits would be offset by burdens on other firms and/or the general public.

True, the EIB has not materially added to government deficits, but there is always the risk of losses on its loans and loan guarantees.  

No big scandals?  Perhaps, at least not lately, but the EIB’s record isn’t entirely spotless.  Corporate welfare in the federal budget, op. cit., page 11. http://tinyurl.com/d6dhoeq (download PDF)

[In the years before its financial problems surfaced in 2001,] Enron lobbied government officials to expand export subsidy programs, and it received billions of dollars [total of about $3.7B] in aid [financing] for its projects from the Export-Import Bank, the Overseas Private Investment Corporation, the U.S. Trade and Development Agency, the U.S. Maritime Administration, and other agencies.

• A 2010 Bloomberg investigation . . . found that companies seeking financing aid from [the EIB] had been paying the travel expenses of government employees on visits to projects under consideration.  For instance, Exxon Mobil spent almost $100,000 on [EIB] employees responsible for helping the agency decide whether it should aid Exxon on a major gas project in Papua New Guinea. Eleven months later, the [EIB] approved $3 billion in financing for the venture.

In sum, it would make sense to shut the EIB down – as well as many other programs in the corporate welfare category.  Good for Jeb Hensarling et al. for attempting to get this done instead of just talking about it.

We are not convinced, however, that the EIB belongs at the top of the corporate welfare hit list.  Perhaps that honor should be reserved for the programs (not including the EIB) that are adding some $100 billion a year to the deficit.

Moreover, a win on the EIB would not necessarily hasten the demise of other corporate welfare programs, which are managed by a number of government agencies and have a variety of different purposes (FHA mortgage subsidies, applied healthcare research, energy supply & conservation, high-speed rail, etc.)   In each case, supporters of the programs would wage a tough fight based on the applicable facts and circumstances.

And given its growing differences with business interests, the GOP may need to exercise restraint in naming must win issues – such as immigration reform (see last week’s entry) – versus issues on which it is willing to be more accommodating.  Bottom line, the EIB’s charter will probably be extended in the end, albeit perhaps with some face saving restrictions.  Breaking the Export-Import Bank, Washington Times, 7/3/14.  http://tinyurl.com/ps6kdca

Congress has until Sept. 30 to decide whether the [EIB] will stay in business. Republicans have their sights set low if they think taking a stand on the bank will restore fiscal sanity. Agencies such as the National Endowment for the Arts are more worthy of getting taught a lesson, and the departments of Education and Commerce are far more wasteful.  If the [EIB] survives to see another day, as it likely will, what it needs most of all is new management.

There may also be a need for business leaders to rethink their approach.  At the risk of overgeneralization, many of them seem to have adopted a pattern of pushing for all the special favors they can get while doing less and less to support the free enterprise and political liberty that have enabled this country to prosper.  If so, the longer-term implications are disturbing.

Tune in next week for a discussion of the changing political landscape in this country.  Is there truly a deepening partisan divide, as many observers have said, which is making cooperation and compromise increasingly difficult?  And is SAFE part of the problem or working for a solution?

top      wwhipple3@verizon.net


7/7/14 – Revisiting the illegal immigration problem

A recent e-newsletter on “comprehensive immigration reform” began by noting that the Senate passed S. 744, Border Security, Economic Opportunity, and Immigration Modernization Act in June 2013 by an over 2/3 margin, and went on to urge that the House take up the matter.  One year later: A call to action, Senator Tom Carper, 6/27/14. http://tinyurl.com/lao3sn5

In a nutshell, according to the newsletter, S. 744 “would modernize our immigration system, strengthen our borders and ports of entry, enhance our national security in a manner that is practical, humane and fair —and grow our economy by almost one trillion dollars.”  

On June 30, the president addressed this subject in the Rose Garden.  After characterizIng S. 744 as a “commonsense immigration bill” that enjoys “support from the business, labor, [and] faith communities,” he attributed a raft of problems to a year of inaction and slammed the House Republicans for being “unwilling to stand up to the tea party in order to do what’s best for the country.”  Also, if Congress didn’t act, then he was going to see what he could do administratively. http://tinyurl.com/ppru4md

Some conservatives detest S. 744, but others urge Republicans to get on the immigration reform bandwagon for both economic (support “American economy and dynamism”) and political (don’t rely on “declining white share of the electorate”) reasons.  The immigration reform collapse,” Wall Street Journal, 7/2/14 (no link available). 

SAFE previously concluded that S. 744 would perpetuate illegal immigration rather than stopping it – raising expectations, costing tons of money, and ultimately accomplishing little of value.  While acknowledging the need for action, we suggested that the key step was not putting more “boots on the ground” along the southern border – it was eliminating the jobs magnet for illegal immigrants by making the e-Verify system mandatory and effective.   Immigration reform, June 2013. http://tinyurl.com/mp686rk

Given continued inaction, conflicting opinions of conservative observers, and some alarming recent developments, it may be helpful to revisit this subject.  Crisis – money – politics.  Here goes.

1. Crisis - The situation along the southern border has become chaotic due to a surge of some 10,000 unaccompanied youngsters (many of them teenagers, so we won’t call them children) per month, predominantly from Central American countries rather than Mexico, who are being taken into custody after crossing the border.

In some cases, federal authorities have kept the youngsters under conditions that sound rather chaotic. Border crisis was orchestrated, Erik Rush, instigator.com, 7/3/14. http://tinyurl.com/qall6bj

Those who do make it here are being crowded into makeshift dormitories by beleaguered Border Patrol personnel, and shuttled from city to city as federal authorities try to determine what to do with them. As a result of unsanitary conditions, overcrowding, and stress, these young individuals have presented with a myriad of maladies and communicable diseases.

Here is a series of photos from two federal detention facilities, not necessarily the worst ones.  Judge for yourself.  Children detained at US Customs and Border Protection facility, Washington Times, 6/18/14.  http://tinyurl.com/lh2cr3w

The Department of Defense has blocked access to another detention area at Lackland Air Force Base, where nearly 2,000 youngsters are reportedly being held at a per person cost to taxpayers of $250 a day.  Feds threaten journalist with prison over report on illegal immigration, Kit Daniels, infowars.com, 7/4/14. http://tinyurl.com/kn5col9

In other cases, federal authorities have released youngsters and thereby saddled states and communities with the responsibility for looking after them. Exclusive interview with Arizona Sheriff Joe Arapaio, Rusty Humphries, Washington Times, 6/19/14. http://tinyurl.com/mmu4xoc

[Sheriff] Arpaio takes the dumping of illegal aliens in his Maricopa County as an “affront” because Arizona has been a high-profile critic of federal immigration policy, and Arpaio has been “like the poster boy” for slamming the Justice Department and the White House.  He doubts the massive wave of illegals, many of them unaccompanied minors, is a result of mere administration ineptitude.

Residents of one California town resisted the importation of immigrants from Texas.  They won the first round, with buses carrying the youngsters going on to San Diego, but may not prevail in the long run.  Protestors gather at Murietta to await buses of immigrants, Tony Perry & Matt Hansen, LA Times, 7/4/14. http://tinyurl.com/k5lmghd

Earlier this week, federal officials said that 140 immigrants would arrive Friday at Lindbergh Field in San Diego by charter flight from Texas and then be sent for processing [a prelude to release?] to Murrieta, a community of 105,000 along Interstate 15 in southern Riverside County.  But in the wake of Tuesday's blockade, officials declined to announce the schedule. The result was that it was unknown whether buses would arrive at Murrieta or get rerouted to other facilities where there were few, if any, protesters.

Why have the youngsters been coming here in such large numbers, often risking their personal safety to make the long trip through Mexico and get across the US border? 

One factor is unfavorable conditions in their native countries.   Another is that many of the youngsters are hoping to link up with family members who are already in the United States.  These factors aren’t new, however, so there must be further reason(s) for a surge in youthful immigrants at this particular point in time,

Critics say the word has spread that if the new arrivals succeed in getting here they will probably be allowed to stay.  And based on both current law and administrative practice, this perception is warranted.  Gov. Rick Perry says US border less safe now [than at any other time in recent years], Stephen Dinan & Dave Boyer, Washington Times, 7/3/14. http://tinyurl.com/k2mgboj

Under a 2008 law, youngsters from non-contiguous countries are entitled to special legal protections and cannot be expeditiously deported.  Although the president has seen fit to adjust other legislative policies that were not to his liking, this particular statute is being observed to the letter.  Administration: Bush-era law requires us to slow-walk deportations, Byron York, Washington Examiner, 6/26/14. http://tinyurl.com/k8z8cb5

In the face of mounting criticism, the administration has now appealed to Mexico and Central American countries for help in stemming the influx of youngsters and served notice that they probably won’t be eligible to stay. WH admits its role in child-immigrant chaos, John Hayward, humanevents.com, 6/23/14. http://tinyurl.com/mucxs6g

Moreover, the president has suggested legislative action to permit expeditious deportation of some (but probably not all) of the Central American youngsters and will request some $2 billion in additional funding to cope with the situation. Obama wants to speed up process of deporting unaccompanied children, Pete Kasperowicz, theblaze.com, 6/30/14. http://tinyurl.com/lyaxwe4

[The president’s June 30 letter to the leaders of Congress] also asks Congress to take several legislative steps.  “Initially, we believe this may include: providing the DHS secretary additional authority to exercise discretion in processing the return and removal of unaccompanied minor children from non-contiguous countries like Guatemala, Honduras, and El Salvador,” the letter said.

 

It remains to be seen, however, whether expeditious deportation of the Central American youngsters will be proposed, or only procedural short cuts in certain cases such as the teenage gang members who are said to have entered the country lately. 

2. Money One of the claimed virtues of S. 744 is that it would boost the US economy, e.g., “by almost one trillion dollars” according to the e-newsletter mentioned earlier.  Similarly, see “The economic impact of S. 744,” Congressional Budget Office, 6/18/13, page 17, Figure 1. http://tinyurl.com/n8qhku4 (download PDF)

The CBO analysis  also concluded that S. 744 would result in additional government revenue, thereby reducing projected federal deficits over the next two decades.  Page 3.

Taking into account a limited set of economic effects, the cost estimate shows that changes in direct spending and revenues under the legislation would decrease federal budget deficits by $197 billion over the 2014–2023 period and by roughly $700 billion over the 2024–2033 period.

We previously dismissed the CBO estimates, which apparently assume that encouraging a continuing influx of workers from outside the US is the only way to boost total employment and output. Immigration reform, June 2013. http://tinyurl.com/mp686rk

True, the CBO estimates that S. 744 would result in overall fiscal gains of some $700 billion over the next two decades.  More people – more jobs – more taxes – Social Security retirement benefits down the road conveniently overlooked.  But one might think a proposal to encourage more unemployed Americans to find jobs by pruning overly generous welfare benefits would produce considerably larger fiscal gains.

Instead of boosting total employment or production, moreover, the new arrivals might simply displace current residents from the job market.  And according to a recently released study, this is exactly what has been happening lately.  ALL of the net jobs gain in the US since 2000 have gone to immigrants [legal and otherwise], Stephen Dinan, Washington Times, 6 /27/14.  http://tinyurl.com/mlcc5xa

One answer to the foregoing might be that the US population is aging so declining employment levels should be expected and new arrivals are needed to grow the economy.  Bear in mind, however, that the unemployment rate for youthful (16-19) would-be workers in this country remains quite high, e.g., 21% for all teenagers or 33% for black teenagers.  The employment situation, June 2014, Bureau of Labor Statistics, 7/3/14.  http://tinyurl.com/t68g

Even with the current population base, moreover, the accelerating pace of technological change may make the maintenance of satisfactory employment levels a challenge.  Humans can be replaced, and then what?  10/7/13.

Perhaps future investments will not create enough new jobs because computerized machines are increasingly capable of doing just about “everything” better than human beings. [Robocalls] – call center systems to handle “routine” requests – [automated checkout lines] - machines to replace anesthesiologists - driverless cars – medical websites for diagnostic purposes  -– [computers that beat human champions at chess and Jeopardy].

All things considered, we continue to doubt that S. 744 would lead to notable economic gains.  The only exception would be the entry of highly educated immigrants with critically needed skills, but this part of the bill could be enacted on a stand-alone basis.

That’s not to advocate closing the US border, but the quotas for unskilled workers should be enforced and it would be a mistake to set them too high.

3. Politics – Democrats view S. 744 as a means of ensuring a continuing flow of immigrants who would be predisposed to vote for their party’s candidates.  Accordingly, they have a clear incentive to support the bill.

Most employers (e.g., companies represented by the Business Roundtable or US Chamber of Commerce) support S. 744 because it would ensure them with a continuing flow of immigrant workers without saddling them with any substantial new legal responsibilities.

Some Republicans see S. 744 as a means of currying favor with the business community and hopefully attracting more Hispanic support.  Others believe that the long-term electoral effects are almost bound to be unfavorable.  Immigration reform could be bonanza for Democrats, Emily Schultheis, Politico, 4/23/13. http://tinyurl.com/c4dvjxx

To support the measure virtually guarantees millions of new Democratic voters. But for Republicans to oppose immigration reform invites hostility among Hispanic-Americans who already are punishing the GOP and imperiling its electoral prospects.

Neither side is in a hurry to resolve the battle.  One reason is that a party seeking a quick end to negotiations may be forced into painful concessions.  Another is that politicians have a natural aversion to making “tough” decisions, i.e., decisions likely to alienate supporters or energize opponents.

Many House Republicans hoped to thread the needle by publicly voting against S. 744 while working behind the scenes to get this bill (or something similar) passed. House Majority Leader Eric Cantor’s defeat in a Virginia primary changed some minds, however, and it’s now clear that the House won’t act on comprehensive immigration reform before 2015 at the earliest.  The immigration reform collapse, Wall Street Journal, 7/2/14 (no link available). 

Before [the primary loss], the House leadership’s private whip count was 144 GOP votes in favor of passing a bill this year.  Afterwards it was half that.

The president and his supporters will continue bashing Republicans for inaction and insinuating that the current crisis could have been avoided if Republicans had just passed comprehensive immigration reform in a timely manner.   See, e.g., the president’s Rose Garden address on June 30.  http://tinyurl.com/ppru4md

Our country and our economy would be stronger today if House Republicans had allowed a simple yes-or-no vote on this bill or, for that matter, any bill.  *** We now have an actual humanitarian crisis on the border that only underscores the need to drop the politics and fix our immigration system once and for all.  In recent weeks, we’ve seen a surge of unaccompanied children arrive at the border, brought here and to other countries by smugglers and traffickers. 

Actually, nothing in S. 744 would facilitate deportation of the Central American youngsters.  Obama has wrong prescription for border crisis, Byron York, Washington Examiner, 6/30/14. http://tinyurl.com/nzq3yay

. . . the problem is that American law and Obama administration policy make it extremely difficult for the U.S. to send the unaccompanied children home to Central America.  *** If the House passed the Gang of Eight bill today, and the president signed it into law, that problem would not be fixed.

Indeed, one of S. 744’s drawbacks is expansion of the procedural rights of illegal immigrants so that it would be even more difficult than at present to run the immigration system efficiently.  Immigration reform, June 2013. http://tinyurl.com/mp686rk

Another prerequisite for eliminating illegal immigration is to prevent future lawbreaking related to illegal entry, and other crimes whenever committed, from being condoned, ignored, waived, or endlessly litigated.  To this end, something needs to be done about the profusion of waivers or rights of appeal permitted by S. 744 for criminal offenses of unauthorized immigrants.  They make a mockery of the “toughest enforcement measures in US history” claims that have been made.

Good luck to Republicans in explaining all this, so they will probably attempt to best the president et al. in the blame game instead.  Here are some possible arguments suggested by one conservative firebrand.  An immigrant surge en route to a Third World USA, Wesley Pruden, Washington Times, 7/3/14.  http://tinyurl.com/k2pxemv

•The “humanitarian crisis” on the southern border is the most persuasive evidence of all that America is adrift in a sea of incompetence, blown about by every ill wind that blows. The mighty ship of state is bereft of a rudder, traveling in endless circles with the captain stumbling on the bridge, trying to make sense of navigation charts he can’t read.

[However,] he understands navigation very well. He talks of deporting the illegal children, of appointing hundreds of immigration judges and opening a vast new network of “detention facilities.” That may be his promised jobs program. But he has no intention of deporting more than a few token illegals, probably the gangbangers who came in with the rest.

*   *   *   *

Summing up, we don’t see any reason to change our minds about the best approach to immigration reform.  The design of S. 744 continues to seem deficient, and handling of the current crisis inspires little confidence that the administration is up to leading a general overhaul of the system.  However, Republicans must get their act together if they hope to offer a viable alternative.   If you agree, please pass it on.

top      wwhipple3@verizon.net


6/30/14 – Is DC supporting the economy or undermining it?

What is the number one concern of the American public? Most of the time, according to public opinion polls, it is basic pocketbook issues.

Accordingly, our political leaders typically proclaim their dedication to helping working Americans, especially the middle class.  Consider what the president had to say, for example, in his weekly address on May 3. http://tinyurl.com/letakkg

My number one priority as President is doing whatever I can to create more jobs and opportunity for hardworking families.  And yesterday, we learned that businesses added 273,000 jobs last month.  All told, our businesses have now created 9.2 million new jobs over 50 consecutive months of job growth. But we need to keep going – to create more good jobs, and give middle-class families a sense of security.  And I want to work with Congress to do it.

The results, however, often fail to live up to the rhetoric.  “A Survey of the US Economy,” SAFE, August 2013. http://tinyurl.com/l4uj7yw

The US economy has been floundering since 2009, with anemic economic growth, not enough jobs, smoldering inflation, erosion of basic government services, and stealthy tax increases.  Robust recovery seems unlikely any time soon, and things could easily get worse

At that time, SAFE made some suggestions for rebooting the economy – which were meant to be illustrative versus comprehensive and were offered without regard to partisan politics. Less is more: a 10-step plan to reboot the economy, 9/2/13.

It is not our intent to further the interests of either political party.  The goal is to get the US economy back on track, and we would encourage both parties to provide their support.  Remember that, as President Harry Truman once said, “It is amazing what you can accomplish if you do not care who gets the credit."

How many of our ideas have been implemented in the past 10 months?  None, although there has been a bit of progress in some instances.  Meanwhile, the economy has continued to sputter.  An update of our 2013 analysis follows (suggestions in red font):

GROWTH

 

 

 

Economic growth (GDP): 1929-2001 (3.5%); 2002-2013 (1.8%); 1st half of 2013 (1.8%). Realism of GDP deflator used to purge inflation has been questioned.  If inflation adjustments are too small, growth rates are overstated.

Economic growth perked up in the second half of 2013, hitting 4.1% (annualized rate) in the 3rd quarter and 2.6% in the fourth quarter, but evaporated in the 1st quarter of 2014 – at least in part due to severe winter weather. Although many economists are predicting resumed growth in the second quarter et seq., GDP growth for the full year probably won’t exceed 2%. US economy shrank at steep 2.9 percent rate in Q1, AP, Washington Examiner, 6/25/14. http://tinyurl.com/n7w7ptn

In our judgment, current tax and regulatory policies are working against robust economic growth – and if the Federal Reserve finds it necessary to slam on the monetary brakes (see subsequent comments re inflation) that could throw the economy into recession. 

For what it’s worth, a majority of Americans have a similar view of the economic outlook.  US economic confidence index drops to -16, Justin McCarthy, Gallup.com, 6/24/14. http://tinyurl.com/k3nw39o

1. Grant a permit for the Keystone Pipeline, which would transport Canadian crude oil (primarily produced from the Alberta tar sands) to refineries along the Gulf Coast.  

 

Most Republicans, a fair number of Democrats (especially senators seeking reelection in 2014), and a majority of the American people agree with this proposal.  11 Senate Democrats favor Keystone XL pipeline, Matthew Daly, AP, 4/11/14.

http://tinyurl.com/mroqgo7

 

The pipeline is anathema to diehard environmentalists, however, who see it as a symbol of “anything hydrocarbon.” What’s really behind anti-Keystone fanaticism? Paul Driessen, Washington Times, 6/12/14.  http://tinyurl.com/klwkdqe

Unless Congress forces his hand by a veto-proof majority, we doubt the president will disappoint his environmentalist base (especially billionaire Tom Steyer) by taking a position on the pipeline any time soon.  Steyer’s group’s latest Keystone XL attack, Erika Johnsen, hotair.com, 6/10/14. http://tinyurl.com/q96hkme White House officials will meet with this billionaire activist during new climate push, Brian Hughes, Washington Examiner, 6/24/14.  http://tinyurl.com/q96hkme

2. Enact legislation prohibiting the EPA or any other administrative agency from regulating or taxing carbon emissions.

 

The envisioned EPA power grab is ramping up, with the most recent move being publication of a proposed Clean Power Plan that would be implemented in 2015 with the goal of forcing a 30% reduction in carbon emissions (between 2005 and 2030).

 

We have urged Congress to amend the Clear Air Act so as to make clear that the EPA has no authority to approve such a plan (basically legislation).  Letter to members of Congress, 6/16/14.  http://tinyurl.com/mo6pao3

 

It remains to be seen, however, whether Congress will follow through as suggested – and if they don’t the CPP will drive up energy prices to the detriment of the economy.

 

JOBS

 

 

Unemployment rate of 7.4% in July 2013 compares to 10% peak in 2009, but other measures may be more meaningful.  Millions of people have stopped looking for work, and many added jobs are part time.

 

The official unemployment rate has continued to decline; it stood at 6.3% for May 2014.  The labor force participation ratio of 62.8% was also lower than in May 2013, however, suggesting that the main reason for a declining unemployment rate is working age people dropping out of the labor force. Employment Situation Summary, Bureau of Labor Statistics, 6/6/14. http://tinyurl.com/t68g

 

3. Repeal the federal minimum wage.

 

Our rationale is that worker pay is determined by supply and demand, so the practical result of a minimum wage is to reduce the number of jobs available and prevent young or marginal workers from finding employment.  Although it would suffice to freeze the current federal minimum ($7.25 per hour) and allow it to fade away due to inflation, we would favor outright repeal in the interests of transparency.

 

Few political leaders are willing to take such a position, however, because it sounds elitist and insensitive.  And the president is currently urging that the federal minimum wage be boosted to over $10 per hour as a means of “giving America a raise.” See, e.g., weekly address, 4/26/14.  http://tinyurl.com/msgh6qv

 

4.  Tighten eligibility requirements for food stamps.

 

There are many welfare programs in play, which collectively encourage people to drop out of the work force and live on the dole, but we picked on this one because of its rapid growth in recent years. Some food stamps history, and where to now, 4/29/13.

 

Spending on the Supplemental Nutrition Assistance Program (aka food stamps) has leveled off in recent months, it turns out, albeit still running at a high level. Department of Agriculture, http://tinyurl.com/o2blz24 (download Monthly data, national level file).

 

Selected months

Oct. 2010

Oct. 2013

Nov. 2013

March 2014

Participants - millions

43.2M

47.4M

47.4M

46.1M

Total cost - $ billions

$5.8B

$ 6.4B

$5.9B

$5.8B

Per person

$134

$134

$126

$125

 

The benefits cut in November 2013 reflected the expiration of a temporary increase enacted as part of the economic stimulus package in 2009.  Center on Budget & Policy Priorities, 8/2/13. http://tinyurl.com/md5msw6

 

INFLATION

 

 

Inflation estimates (CPI): 1961-2012 (4.0%); 2001-2012 (2.4%); last 12 mos. (2.0%). Without changes in methodology made since 1990, however, current estimate might be about 5%.

 

The CPI rose 2.1% over the past 12 months, with the rate of increase speeding up in April (0.3%) and May (0.4%).  Consumer Price Index Summary, Bureau of Labor Statistics, 6/17/14. http://tinyurl.com/84b4d

 

Some experts now foresee a period of 3-4% annual inflation despite continued weak growth, a condition referred to as stagflation.  If so, the Federal Reserve may be forced to choose between aborting the recovery and tolerating a rate of inflation well above their 2% target.  Retirees and lower income workers will suffer the most due to their inability to offset higher prices with higher income. Five things to know about inflation heating up, Peter Morici, Townhall.com, 6/18/14. http://tinyurl.com/otautcc

 

5. Repeal the Federal Reserve dual mandate.

 

The rationale for our suggestion is that the Fed should shoot for market stability and let elected officials worry about economic growth and jobs.  Setting and attempting to hit an inflation target, whatever the number, is equivalent to imposing a tax on wealth – which the Fed should have no authority to do.  As for quantitative easing, which injects excess liquidity into the market, such programs have much the same effect as printing money. Federal Reserve launches another monetary policy experiment [QE3], 9/17/12.

 

The Fed is currently winding down QE3 and starting to talk about setting interest rates at more normal levels.  Some of the central bankers seem to envision, however, that unorthodox monetary policy will continue for years to come. The Fed’s unofficial new goal [pricking market bubbles created by holding interest rates at very low levels], Joseph Lawler, Washington Examiner, 6/9/14. http://tinyurl.com/nnh776v

 

Last week, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota . . . said, in effect, that the underlying weakness of the US economy may mean that the Fed is not able to achieve full employment and stable prices without inflating bubbles . . . [forcing the Fed] to maintain even negative inflation-adjusted [interest] rates up to five years or more for a variety of reasons, including that credit remains tight and that workers and businesses are hesitant to borrow and spend because they fear adverse shocks and are uncertain about government policy.

 

Another wrinkle reportedly under discussion (officially by the SEC versus the Fed) is a bond exit fee, which could be levied on bond investors bolting for the exit if interest rates spiked up.  It’s a nice example of how government regulations create the necessity for more regulations, progressively undermining the freedom of financial markets.  The bond trap, Peter Schiff, Townhall.com, 6/26/14.  http://tinyurl.com/kpeezf8

 

Will the Fed et al. shield us from a nasty inflationary spiral?  Don’t bet on it.

 

6.  Repeal the ethanol blending requirements in motor fuel.

 

The mandate to blend rising quantities of ethanol (primarily produced from corn) into gasoline sold as motor fuel dates back to a bill enacted in 2007.  Compliance by the industry (either by blending in ethanol or buying “permits” not to do so) will inevitably drive up prices for motor fuel and food, to the detriment of the general public.

 

There is no move afoot to repeal this ill-advised legislation, and the EPA’s oversight over the details has made things worse. The EPA’s changing renewable-fuel mandates, Mike Brown, Washington Times, 6/6/14. http://tinyurl.com/kppjp5r

 

Every year since 2009, the Environmental Protection Agency has missed its deadline to set the required volumes of ethanol and biodiesel that must be blended into the nation’s motor-fuel supply under the schedule known as the Renewable Fuel Standard (RFS). Every year, economic chaos is the result. The volumes are required by statute to be set by Nov. 30 of the preceding year. Last year, however, the volumes were set in August — eight months into the year to which the RFS applied. This year, the EPA released a proposed RFS with significant reductions to the prescribed volumes, but has since hinted they might subsequently raise those volumes when the final standard is set . .

 

      GOV’T SERVICES

 

 

Some examples (federal, state & local): roads & bridges, parks, schools, police & fire fighters, and potentially crippling cuts to defense (per Defense Secretary Chuck Hagel).

 

Our basic thought here was that funds are being diverted from the truly essential programs of government to an ever growing host of marginal programs, for which reason politicians need to abandon the idea that all government programs are of equal value and start eliminating the ones that are not worth their keep so that essential programs can be supported. There is no shortage of spending cut targets.  See, e.g., the Budget page of our website (http://bit.ly/PM3aFN).

 

7. Restore defense budget to level requested by the Department of Defense.

The danger of crippling the US military by underfunding it should concern all Americans, whatever their views on specific international policies. 

The Middle East is a volatile mess – Syria, Iraq, Afghanistan, and soon to go nuclear Iran.  After beginning its so-called “pivot to Asia,” the administration is waking up to the fact that it lacks the will or resources to execute such a policy in the face of rising Chinese military might.  Russia’s seizure of Crimea and other aggressive moves against Ukraine has raised new doubts as to the safety and stability of Eastern Europe.

Programmed cuts to military spending were mitigated by the budget deal hammered out last fall, but the defense budget remains very tight and operational cutbacks are being planned by the administration that could not be easily reversed later.  Why it’s insane to shrink our military as much as Hagel wants to, James Carafano, Heritage Foundation, 3/9/14. http://tinyurl.com/pug97l6

Moreover, as though to add insult to injury, defense funds are being diverted to programs that seem peripheral to military readiness.  For example:

•Presidential helicopters.  Obama administration to spend $20 billion . . . to replace his private fleet of 23 choppers, Daily Mail, 5/9/14. http://tinyurl.com/n9xnm6f

•Green jet fuel.  Report: Pentagon paid $150 per gallon for green jet fuel [made from algae], Lachlan Markay, Washington Free Beacon, 5/7/14.  http://tinyurl.com/ozprxu6

•Administrative overhead.  The defense establishment has a bloated layer of high-level staff, which is apparently being left in place.  Defense budget cutbacks light on civilians, Rowan Scarborough, Washington Times, 5/6/12. http://tinyurl.com/7nzyq6l

8.  Amend federal bankruptcy law to explicitly provide that unfunded employee/retiree commitments can be adjusted in bankruptcy.

 

The most common reason for city (or potentially state) insolvency is improvident commitments to employees and retirees.  Except to the extent that such commitments have been funded, it would seem appropriate that they be subject to reduction in bankruptcy – just like unsecured obligations to other creditors.

 

As this point is reportedly controversial, we suggested amending the federal bankruptcy law to clarify matters.  No action along these lines has been taken, to our knowledge, but it continues to seem like a good idea.

 

TAXES

 

 

Taxes have been raised during an economic slump, and further increases are demanded.  All Americans would bear the burden, not just big business and the wealthy.

There have been no material tax increases since the start of 2013, but this is not due to lack of trying by some of our political leaders.  Thus, the president’s budget proposal for fiscal year 2015 et seq. projected $3 trillion more in tax revenue over 10 years than the Congressional Budget Office baseline projection.  President’s fiscal plan is a nonstarter; now what?  3/10/14.

Belying the need for further tax increases, revenues from the taxes currently in place have bounced back, hitting an all-time record (adjusted for inflation) in fiscal year 2014 through tax day (April 15) versus the same portion of prior years. Tax day tax revenues set all-time record, Ali Meyer, cnsnews.com, 4/21/14. http://tinyurl.com/pmvkehh

9.  Proceed with revenue neutral tax reform.

From an economic standpoint, this suggestion is a clear winner.  It would give the economy a big boost, and in due course produce more tax revenue as well.

There has been no significant tax reform legislation since 1986, however, and even that victory proved fleeting.  Twenty years later: The Tax Reform Act of 1986, Andrew Chamberlain, Tax Foundation, 10/23/06. http://tinyurl.com/l22ehfb

So long as the president and his party remain wedded to the idea that certain tax preferences should be eliminated without fully offsetting tax rate cuts, as a means of achieving immediate tax revenue gains, there is little chance for explicit tax reform in a gridlocked Congress.

Gridlock may frustrate bipartisan efforts to extend a host of “temporary” tax preferences, however, thereby helping to simplify the tax law. Let’s keep our fingers crossed. It’s not a slam-dunk, but some progress on tax reform may be possible, 6/2/14.

10.  Delay GovCare implementation for one year.

In our view, GovCare represents a huge tax increase on the American people, with the proceeds earmarked for spending increases versus deficit reduction.  It also fosters underemployment by undermining work incentives and motivating employers to hire part-time workers.

As repeal was a political impossibility in September 2013, we suggested a one-year delay that would at least enable Side A to achieve a smoother rollout of the program.  No dice! GovCare (with various exceptions, e.g. the employer mandate) is now up and running.

That’s not good news for the US economy!  GovCare signups were skewed towards older and sicker Americans, so Americans should expect sharp healthcare insurance premium increases and/or massive taxpayer subsidies that will inflate government spending and deficits. Here comes the death spiral: Obamacare’s prognosis grows dimmer, Nick Sorrentino, Townhall.com, 6/28/14. http://tinyurl.com/q5lt5xs

I’ve been wondering since the beginning how anyone thought Obamacare was going to work. The risk size versus the pool of insureds doesn’t make sense. If insurance companies can’t adjust for risk (which for the most part they can’t under Obamacare) what bizarro mathematics is going to save this ill-conceived juggernaut of bureaucratic bull? The answer is there is no math [that] will make it work. Either it gets tons more money from taxpayers or it dies.

What should be done now?  That’s hard to say, except that we would certainly oppose a taxpayer-funded bailout of the healthcare insurance companies.

*  *  *  *

Our views on how to boost the economy are not shared by advocates of big government (Side A), and the president has been teeing up the issues in “we versus they” form for months.  See, for example, his 6/28/14 weekly address. http://tinyurl.com/ko2lhhd

Republicans in Congress keep blocking or voting down almost every serious idea to strengthen the middle class.  This year alone, they’ve said no to raising the minimum wage, no to fair pay, no to student loan reform, no to extending unemployment insurance.  And rather than invest in education that helps working families get ahead, they actually voted [we are unaware of any such vote recently] to give another massive tax cut to the wealthiest Americans.

Sorry, we like our ideas better.  The US economy cannot be saved by making everyone in the country dependent on government handouts, but only by unleashing the power of free enterprise – which built it in the first place. 

top      wwhipple3@verizon.net


6/23/14 – The Constitution: presidential term of office

We recently suggested that a constitutional convention “would be a long shot – but the idea should not necessarily be rejected out of hand.”  The liberty amendments, 3/31/14

To be successful, a CC would need to focus on changes likely to make the political system work better as opposed to changes that would do the opposite.  This week’s entry will present an example that shows how easy it would be to get things wrong.

I. Background - The Obama administration is beset by a host of problems.  Without going into the gory details (in most cases previously discussed), here are some of them:   

•POCKETBOOK ISSUES - Anemic economic recovery since 2009 – poor prognosis for GovCare – draconian environmental regulations – reckless budget deficits – inaction on real tax reform - failure to fix problems that led to the 2008 financial crisis - massive increase in guaranteed student loans – growing risk of an inflationary spike.

•DOMESTIC SCANDALS – “Fast and furious” gun running operation - IRS targeting of conservative groups – VA healthcare scandal – reckless failure to enforce US immigration laws.

•INTERNATIONAL SCENE – Benghazi attack (and ensuing efforts to spin the news) – backtracking on Syrian “red line” – Russian actions against the Ukraine - developing collapse of the Iraqi government – lack of a credible strategy to stop Iran from developing nuclear weapons – Chinese bellicosity in the western Pacific. 

We would hasten to add that many of these problems began to develop before 2009, and further that no president should be held to a “zero errors” standard. Nevertheless, the current president has been in office for over five years and all of these problems either started or worsened on his watch.

Recent polls indicate a dramatic erosion of public confidence, which some observers see as raising concerns about how much the president can be expected to accomplish in his remaining time in office. Obama polling lower than George W. Bush, Brian Hughes, Washington Examiner, 6/18/14. http://tinyurl.com/keks4sx

The Wall Street Journal/NBC News survey found that just half of all respondents consider Obama to be competent, even lower than those polled in the wake of Bush's botched response to Hurricane Katrina. And 54 percent said Obama is no longer able “to lead the country and get the job done.” *** Though Obama's overall approval ratings remain unchanged -- 41 percent -- Americans are souring on his handling of foreign affairs amid heightened turmoil in Iraq. 

Poll results go up and down, and the aforesaid conclusions may be overstated.  Still, the perception of a rudderless government for 2-1/2 years, at a time when effective leadership is desperately needed, cannot be dismissed as an alarmist view.  What to do?

II.  Political reset - One could envision the nation’s political leaders recognizing the gravity of the situation and huddling in an effort to find common ground and solve at least some of these problems, but this does not seem likely.

First, the president’s track record marks him as a brilliant campaigner who is far less capable when it comes to working with opponents and getting things done.  The amateur: Barack Obama in the White House, Edward Klein, Regnery Publishing (2012). http://bit.ly/1nrjQOu

, , , Obama had much more talent for campaigning (raising contributions, making speeches) than for governing (not only devising policies, which he enjoyed, but also working to gain the support of political supporters and opponents). He had limited understanding of the domestic and international problems that faced the country.  His closest advisers were equally unqualified . . .  and he failed to consult or communicate with people who could have been more helpful . . .  He did not learn from his mistakes, and he was way too far left for most Americans.

Second, congressional leaders of the president’s party have enabled his leadership style by slavishly supporting him, while Republican political leaders have seemingly despaired of working with him.  When meetings do take place, they don’t generally accomplish much in terms of building consensus.  Consider, for example, a recent White House meeting [see photo] on the situation in Iraq.  Mitch McConnell: Obama says no Hill nod needed on Iraq, Burgess Everett, Politico, 6/19/14.  http://tinyurl.com/m8kqd2n

• Returning to the Capitol after huddling with Obama at the White House for about an hour, both Senate Minority Leader Mitch McConnell and Senate Majority Leader Harry Reid said the president had pledged to keep Congress in the loop. But McConnell said the president won’t ask lawmakers to weigh in on whatever course of action he chooses.

A Democratic source briefed on the meeting disputed McConnell’s account, and argued that congressional leaders simply concurred that Obama has the authority to act in Iraq due to previously existing authorizations of military force, as Reid has claimed in recent days.

In some cases, there may be an opportunity for Congress to put its foot down and block misguided initiatives. SAFE to Congress: Bin the Clean Power Plan, 6/16/14, and associated letter to the members. http://tinyurl.com/mo6pao3  It remains to be seen, however, whether Congress will be able or willing to act in such a fashion.

Perhaps things will improve after the elections in November, but this is far from certain.  The country may well remain in a pattern of muddling along until 2017. 

While it would be theoretically possible to remove the president, such an effort would probably prove counterproductive.  Impeachment off, GOP fears it [would] rally Obama Democrats, Paul Bedard, Washington Examiner, 6/6/14. http://tinyurl.com/q2fmxls

So what about amending the Constitution, which would not resolve the current situation but might prevent similar situations from arising in the future?

III. Here’s a thought – One of the panelists (not a regular) on “the Five” (Fox News) recently suggested that presidents should serve a single, six-year term of office.  His reasoning ran something like this:

•End the “perpetual campaign.”   Presidents should be able to devote all of their time and energy to governing the country rather than worrying about preparing for a reelection campaign.

•Put the “second term slump” syndrome to rest.  Historical experience has been that most presidents do better in their first term in office than thereafter, so limit them to one term.

•Give presidents enough time to have an impact.  A single, four-year term might be too short, so extend the term of office to six years.

This suggestion is not new, indeed it is said to have come up at the Constitutional Convention in 1787, and much the same arguments have been made before.  See, e.g., “Why one six-year presidential term would be good for America,” Myra Adams, Daily Beast, 12/5/13. http://tinyurl.com/oocfe8j

The absence of a looming reelection campaign could inspire future presidents to be stronger leaders and more willing to make tough, unpopular decisions that could improve our national well-being in the long term. And anyway, six uninterrupted years as president would be nearly the equivalent of two four-year terms—a reelection campaign invariably consumes two years of the president’s valuable time and distracts the nation.

Another argument is that presidential elections are an annoyance, so it would be nice to have fewer of them.  Joyce Cordey, Reimagining America.org, 7/711. http://tinyurl.com/nvqzw2e

As we listen to the point counter point of presidential politics from now to November, 2012, I bet the idea of fewer presidential elections will appeal to a growing number of voters.

On the other hand, the idea that the president should be insulated from public sentiment has been faulted as undemocratic.  Against a one-term, 6-year president, Arthur Schlesinger Jr., New York Times, 1/10/86. http://tinyurl.com/9pobe6s

[This idea] assumes presidents know better than anyone else what is best for the country and that the people are so wrongheaded and ignorant that presidents should be encouraged to disregard their wishes. It assumes that the less responsive a president is to popular desires and needs, the better president he will be. It assumes that the democratic process is the obstacle to wise decisions.

Recent attempts to expand the power of the Executive Branch would appear to reinforce the latter view.  Note that a president with a radical agenda and a guaranteed term of six years could do a great deal to change the country – in contravention of public sentiment and quite possibly for the worse – so why create such an opportunity?

IV. An alternative – Here’s another approach on the presidential term of office, which we have not seen suggested elsewhere.  In contrast to the six-year term proposal, it would make presidents more responsive to popular sentiment (the supposed goal of representative democracy).

The new rule would be that presidents would run for reelection every two years, like members of the House.  And there would continue to be an eight-year limit on their cumulative tenure.

Having presidential elections every two years would admittedly make for nonstop politicking, but don’t we already have that?

The enhanced ability to discard presidents who have worn out their welcome would tend to limit presidential overreaching – which is being pushed to dangerous extremes.  Consider this recent speech in the House of Representatives, which notes that Congress is supposed to make the nation’s laws and presidents are obligated to enforce them.  Trey Gowdy gets a standing ovation on House floor, absurdreport.com, 5/23/14 (video, 5:28). http://tinyurl.com/nkx68ru

All elections would be important; the lesser degree of interest in mid-term elections would no longer apply.  Quite possibly, this change would help to bolster the fading prestige of Congress as an institution.

What do you think about this suggestion?  Feedback would be much appreciated.

top      wwhipple3@verizon.net


6/16/14 – SAFE to Congress: Bin the Clean Power Plan 

There seems to be so much bad news these days that even major concerns don’t register for long in media reports or the public’s consciousness.  Recent examples include a Veterans Administration healthcare scandal, the high price paid for Sergeant Bowe Bergdahl, reports of the southern border being swamped by young illegal immigrants, an Islamist terrorist takeover of Mosul and other areas in Iraq, the lack of a credible strategy for stopping Iran from going nuclear, and who knows what next.

The subject of this letter may seem less urgent.  After all, the Environmental Protection Agency’s “Clean Power Plan” would not take effect until next year, and it has a stated purpose – the reduction of carbon emissions from power plants – with which many Americans are inclined to agree.  The CPP would provide an opportunity for public comment before being finalized, and it would not be fully implemented until 2030.

For reasons to be explained, however, the CPP is ill advised from a scientific, economic or political standpoint. We would urge Congress to promptly countermand this proposal instead of permitting a legal battle over it to play out in the courts.

1. A problem, maybe, but hardly an emergency  - The prime argument for the CPP is to avert catastrophic global warming (aka climate change) by curtailing the use of fossil fuels.  This is an understandable concern, but one that has been considerably exaggerated.

Global temperatures have generally been rising since the end of the Little Ice Age around 1750, albeit not at an alarming rate.  Meanwhile, increased burning of fossil fuels (a trend that began with the Industrial Revolution) has caused a steady rise in atmospheric levels of CO2.  It is natural to suppose that there might be a connection between these trends.

Some scientists theorize that rising CO2 levels (currently some .04% of the atmosphere) could result in runaway global warming – with potentially catastrophic consequences.  We’ll refer to this view as the manmade global warming (MMGW) theory.

There were warming and cooling periods over the ages, however, long before human use of fossil fuels became significant.   Also, global temperatures stopped rising around 1998 even though CO2 levels in the atmosphere have continued to rise – a development that is hard to reconcile with the notion that global warming is inexorably accelerating. 

Some scientists insist that global temperatures will start rising again, while others anticipate a period of global cooling, perhaps even another little ice age.  Who ever turns out to be right, the debate about the MMGW theory is clearly far from over.  Despite contrary evidence, global warming alarmists stick to their guns, 1/27/14.  

2. Options – Over time, it may well make sense to transition from coal-fired power plants to other energy sources, both to obtain electric power at the lowest practicable cost and to minimize environmental drawbacks.  Several alternatives are discussed below. The decisions required can be most efficiently made by suppliers and consumers in a free market; government intervention to favor some choices while penalizing others would predictably yield suboptimal results.  Coal power is out of style, 5/28/12; Coal succession planning, 6/4/12; Kill coal, lights out, 6/11/12.

# Thanks to the fracking boom, which has created an abundance of cheap natural gas, gas power plants are currently the best alternative to coal power plants. 

Natural gas produces proportionally smaller volumes of traditional pollutants, such as sulfur dioxide, than coal does – thereby reducing the need for scrubbers, etc. to meet environmental regulations.

Emissions of carbon dioxide are also reduced, as natural gas is less carbon intensive than coal. Although opinions vary as to how much this feature is worth, it can properly be viewed as a plus.

A noticeable shift from coal to gas power plants has occurred in recent years, and this trend will likely continue as existing coal power plants reach the end of their economic lives. This is one reason that the US has reduced its carbon emissions in recent years, even as other countries, notably China, increased theirs.

Despite this seemingly positive outlook, some environmentalists are dissatisfied.  Why? First, they would like to see “dirty” coal plants shut down quickly rather than being phased out.  Second, natural gas is still fossil fuel (albeit “cleaner” than coal), and therefore its continuing use is seen as objectionable.

The biggest uncertainty for natural gas power is that the government might tighten fracking regulations and thereby dry up the supply of cheap natural gas. Some states are restricting fracking already, and there are indications that federal regulators would like to get in on the action.  Thus, the EPA has been encouraging the Federal Energy Regulatory Commission not to approve new liquefied natural gas export facilities on grounds that LNG exports would provide a market for more frack gas. Does EPA’s left hand know what its far-left hand is doing to fight fracking?  Mark Tapscott, Washington Examiner, 6/6/14.  http://tinyurl.com/lmgpzrh

#Nuclear power plants eliminate (rather than simply reduce) carbon emissions, have some unique technical advantages such as a small environmental footprint, and are cheap to run.  There are also some special safety and environmental concerns, however, which dictate a tight regulatory regime and ensure that new nuclear power plants (if built) will be quite expensive.  

A new generation of US nuclear plants would require clarification of certain regulatory issues – notably permitting the reprocessing of spent nuclear fuel rather than insisting on its removal and burial.  Also, investors may demand government support, e.g., loans or loan guarantees, which violate the principle that the government should establish a level playing field and then let the market determine what energy sources are going to be used.  Coal succession planning, 6/4/12.

#Renewable energy (wind, solar, etc.) is not a satisfactory substitute for coal power, since the cost (ex government subsidies) of the electric power produced is substantially higher.  

Note that power produced from wind and solar is only available intermittently, and therefore must be backed up with continuous (or dispatchable) power sources in order to ensure a reliable power base load for the grid.  Simple, neat and wrong, SAFE newsletter, Spring 2012. http://tinyurl.com/nfqwe9r

Isn’t it possible that the cost of wind and solar power will fall as the technology is improved?  Sure, but the same is true for natural gas or coal power.  Moreover, there is no reason for renewable energy improvements to be made on the taxpayer’s dime. The false promise of green energy, Morriss et al., Cato Institute (2011). http://tinyurl.com/mpclkty

#Energy conservation is a sound cost saving strategy, permitting consumers to cut their electric bills by turning down their air conditioners, turning off lights when not in use, replacing inefficient appliances, and the like.  As a strategy to avoid expanding generation capacity to meet market demand, however, this approach seems questionable – especially if customers are paid a “bonus” for reducing their power consumption, which will artificially limit power usage and result in higher electric power rates.  When we conserve energy, utility companies raise rates, John Nichols, News Journal, 6/6/13. http://tinyurl.com/oalc348

#Completely new power sources may become available in the future.  A notable example is nuclear fusion, which could potentially produce virtually limitless power.  All one needs to do is figure out how to create a controlled hydrogen bomb. Serious effort is being invested in this challenge, although success is probably several decades away. PPPL teams with South Korea on the forerunner of a commercial fusion power station, John Greenwald, News at Princeton, 6/13/14. http://tinyurl.com/q9g4hcu

3. No free lunch – According to the EPA et al., the shift to a cleaner energy economy would produce “climate benefits” and “air pollution health co-benefits” far exceeding “compliance costs” [a mere $7.3 billion (2011 dollars) per year in 2030 and thereafter].  CPP, 6/2/14, table 2 on page 57. http://tinyurl.com/ma4uml5 (download PDF)

Others predict the economic costs would be much larger.  See, e.g., “Assessing the impact of proposed new carbon regulations in the United States,” Chamber of Commerce, May 2014. http://tinyurl.com/on5a398

Our analysis shows that Americans will pay significantly more for electricity, see slower economic growth and fewer jobs, and have less disposable income. In fact, the cumulative impact to the economy could be $859 billion by 2030 (an average of over $50 billion every year). Potential EPA regulations would result in a very slight reduction in carbon emissions, which would be overwhelmed by global increases.

The EPA presentation lacks credibility in our view.  Here are some obvious questions:

•How could coal plants be replaced with wind and solar power, which are certainly higher cost (ex subsidies), without driving up the cost of electric power? 

•How could existing coal plants be replaced before the end of their useful lives without driving up the cost of electric power?

•The rise in atmospheric CO2 levels would continue almost unabated on a global basis, so how could there be $30 billion in “climate benefits” per year?

•What weight should be given to the “air pollution health co-benefits” (range of $23B to $59B per year), if any, as they are clearly unrelated to any reduction in CO2 emissions?

One reason for the EPA’s low ball estimate of compliance costs is an assumption that the growth in electric power demand would slow based on the assumed success of energy efficiency programs, for which reason outlays for new capacity would be comparatively small and consumers would wind up with lower electric bills. CPP, page 558.

Average monthly electricity bills are anticipated to increase by roughly 3 percent in 2020, but decline by approximately 9 percent by 2030.  This is a result of the increasing penetration of demand-­side programs that more than offset increased prices to end users by their expected savings from reduced electricity use.

If Americans chose to reduce their consumption of electric power, that would be fine. We do not believe such changes should be mandated by the government or induced by paying “bonuses” (see previous discussion), however, which would create a windfall for some consumers while sticking other consumers (or the taxpayers) with the bill. 

4. Another perspective – Points 1-3 provide ample basis for rejecting the CPP, in our view, but the issues have been highly politicized and some members of Congress may not agree.  Accordingly, we would like to present a further argument, which will hopefully resonate on both sides of the aisle.

Given the abysmal approval ratings for Congress, e.g., 13% in April versus an all-time low of 9% in November 2013 (Gallup, April 2014, http://tinyurl.com/nleow55), this might be a good time to ask yourselves a question: “what are we doing here?”

Article 1, Section of the Constitution provides that “all legislative powers herein granted” are vested in Congress.  Thus, the prime responsibility of the members of Congress is to make the nation’s laws, thereby establishing the policies of the national government.

Under Article II, the president is vested with “the executive power” to see that the laws are carried out.  This does not include any responsibility for making the laws, aside from the choice to sign or veto (subject to override) legislation that Congress has approved.  

As for the Environmental Protection Agency and the 300 or so other “ABC” agencies that have been created over the years, the Constitution says not a word.  Presumably, therefore, they are not supposed to be exercising legislative powers either. 

In theory, the EPA et al. use the rule-making powers delegated to them by Congress for the purpose of filling in the details of legislatively mandated policies, but if this theory is carried too far the servant can become the master.  That’s what has happened, we believe, in the instant case.

True, the US Supreme Court held that the EPA could potentially regulate carbon emissions as a “pollutant” under the Clean Air Act.  Massachusetts, et al. v. EPA, 2007.

With all due respect, however, it is difficult to see how the EPA’s subsequent actions can be construed as mere administrative rulemaking - designed to carry out a policy established by Congress – as opposed to legislative (or policymaking) activity. 

Begin with the fact that CO2 is a natural component of the Earth’s atmosphere, essential for life as we know it.  There is no indication that Congress considered CO2 as a potential pollutant when the Clean Air Act was enacted.

As for the EPA’s finding that CO2, etc. are “pollutants” for purposes of the Clean Air Act, based on its acceptance of the controversial MMGW theory, this determination was based on a superficial review of an inappropriately limited selection of sources.  SAFE’s letter to the EPA, 6/4/09. http://tinyurl.com/qghfxcs

Subsequent EPA actions based on the “pollutant” finding are so sweeping in nature as to clearly amount to making policy.

In the CPP, for example, the EPA is proposing an overall carbon emissions reduction of about 30% between 2005 and 2030.  That would seemingly represent a national policy decision of a rather high order.

The national goal is then apportioned to the several states based on the EPA’s understanding of the prime strategies for reducing carbon emissions: (1) improve thermal efficiency, (2) substitute natural gas plants for coal plants, (3) add wind, solar and nuclear projects to the mix, and (4) promote energy efficiency. 

The proposed state goals vary widely, e.g., from 215 pounds of CO2 per net megawatt hour (in 2030 et seq.) for Washington State to 1783 pounds of CO2 for North Dakota.  Perhaps all of the targets are logically reconcilable, but the possibility that political considerations were factored in is obvious. 

States would be allowed considerable flexibility in developing the strategies to meet their assigned goals.  However, the EPA reserves the right to approve or reject plans submitted by the states, to develop plans for any state that declines to propose one, and to monitor progress towards goals and presumably sanction states for noncompliance.

In 2009-2010, when the president’s party controlled both houses of Congress, legislation to limit carbon emissions by creating a national “cap and trade” regime was considered but not passed. It would therefore be quite a stretch to view the CPP as a means of carrying out the congressional intent.

Perhaps aware of how far out of bounds it is straying, the EPA has been quick to link the CPP to policy set by the president.  EPA press release, 6/2/14. http://tinyurl.com/lhfedek

At the direction of President Obama and after an unprecedented outreach effort, the U.S. Environmental Protection Agency is today releasing the Clean Power Plan proposal, which for the first time cuts carbon pollution from existing power plants, the single largest source of carbon pollution in the United States. *** This proposal follows through on the common-sense steps laid out in President Obama’s Climate Action Plan and the June 2013 Presidential Memorandum.

If anything, however, the invocation of the president’s authority undermines the argument for the CPP rather than making it stronger. 

First, as already noted, the president has no legislative authority under the Constitution – his responsibility is to see that the laws made by Congress are carried out.

Second, a disturbing pattern of overreach by the Executive Branch has been developing, which involves (a) ignoring or changing existing laws, and (b) creating new ones. The imperial presidency returns, 6/25/12; Who needs Congress if the Executive Branch can make the laws? 7/28/12.

According to Jonathan Turley, a liberal law professor, attempted Executive Branch overreach is not something new.  The trend has accelerated recently, however, and he faults Americans for paying so little attention. Turley: interview on Sean Hannity show, realclearpolitics.com, 6/3/14. http://tinyurl.com/mta55rg

Well, I think that the biggest problem we have is that the system itself, if we have a dominant branch, simply begins to shut down in terms of the safeguards. People don't seem to understand that the separation of powers is not about the power of these branches, it's there to protect individual liberty, it's there to protect us from the concentration of power. That's what is occurring here. You know, I've said it before, Barack Obama is really the president Richard Nixon always wanted to be. You know, he's been allowed to act unilaterally in a way that we've fought for decades.

Hasn’t the time come for Congress to make clear that it takes its responsibilities seriously and is not about to be relegated to a subordinate, increasingly marginal role?  And what better way to make this point than to promptly pass legislation, by a veto-proof majority, revoking the authority that the EPA claims to have been granted to impose and enforce increasingly stringent limits on CO2 emissions? 

top      wwhipple3@verizon.net


6/9/14 – The Clean Power Plan: another proposed power grab          Read Replies

A big story last week was the publication of an EPA proposal (Clean Power Plan) to force a major reduction in CO2, etc. emissions by imposing state specific goals for reducing carbon emissions from power plants. Full implementation of the goals would be required by 2030.

The declared purpose of the CPP is to reduce “carbon pollution” and thereby slow adverse “climate change.”  Prepared “at the direction of President Obama,” the plan can purportedly be implemented without any adverse effects on the economy.  EPA press release, 6/2/14. http://tinyurl.com/lhfedek

The president heralded the EPA proposal in his weekly address on May 31, which was taped at the Children’s National Medical Center.  http://tinyurl.com/ku8pq4y  The video shows the president speaking in what appears to a scientific equipment storage area (no people), as though to suggest an affinity with scientific endeavors.

Critics maintain that (A) the manmade global warming theory has not been proven; (B) even if the theory were true, the proposed reduction of US carbon emissions would have a negligible effect on global temperatures; and (C) there would be significant economic costs from complying with the proposed limits.  Top ten reasons Washington should not impose new global warming laws and regulations, Amy Ridenour, National Center for Public Policy Research, June 2014.  http://tinyurl.com/odl8l2p

We have made much the same arguments.  See, e.g., “Despite contrary evidence, global warming alarmists stick to their guns,” 1/27/14.  So instead of repeating ourselves, this entry will focus on the legal/political implications of the CPP.  Can an administrative agency (following the president’s instructions) properly promulgate a plan that would surely be rejected by Congress? And if not, what should and can be done about it?

I. A pivotal decision – In Massachusetts, et al. v. EPA, 2007 (a 5-4 decision, majority opinion per Justice John Paul Stevens), the Supreme Court held that the EPA not only had the power to find CO2 was a “pollutant” for purposes of the Clean Air Act, but, in view of the manmade global warming theory, had a duty to consider the matter despite contrary guidance from the Bush administration. EPA regulation of C02: a bad idea from any angle, 5/11/09.

SAFE objected to the EPA’s subsequently proposed finding that CO2, etc. are “pollutants,” saying it was based on a superficial review of an inappropriately limited selection of sources.  Letter to EPA, 6/4/09.  http://tinyurl.com/qghfxcs

The EPA finalized the finding, however, and has since taken several steps to limit carbon emissions (most recently proposing the CPP).

It is claimed that the EPA has authority under the Clean Air Act to set state-by-state limits on the emission of pollutants (now including CO2) and evaluate state plans for compliance therewith.  CPP, 6/2/14, page 111 et seq. http://tinyurl.com/ma4uml5 (download PDF)

So is the battle effectively lost at the outset, simply because there is no way – in a divided Congress – to block the proposed EPA plan by amending the Clean Air Act? And the political equation would not necessarily change if the Republicans won back the Senate in November, as they still would lack a filibuster-proof majority (60+) let alone the votes (67) required to override a presidential veto. 

II.  The overreach argument – It’s one thing for an administrative agency to make decisions within a designated area based on its knowledge of the facts and presumed expertise, and quite another for the agency to act with unbridled discretion.  In the instant case, one might argue that the EPA is seeking to turn the Constitution on its head.

Article 1, Section 1 of the Constitution vests “all legislative powers herein granted” in Congress. One might think that the CPP involves so much policy making as to necessarily be viewed as legislation.  In other words, the game afoot is for the Executive Branch to circumvent the powers of Congress.

Also notable is the 10th Amendment, which provides “that powers not delegated to the United States by the Constitution, nor prohibited to by it to the States, are reserved to the States respectively, or to the people.”  Again considering the provisions of the CPP, one might conclude that the EPA’s intended role is out of synch with the idea that the states retain considerable freedom of action in our federal system.

Consider, for example, that the CPP would establish widely varying emission reduction goals for the several states, as shown by this recap (CPP, pages 643-645):

“Final” (2030 et seq.) state goals, lbs. of CO2 per net megawatt hour

WA(215)

ID(228)

OR(372)

ME(378)

NH(486)

NJ(531)

CA(537)

CT(540)

NY(549)

MA(576)

NV(647)

MS(692)

AZ(702)

FL(740)

SD(741)

SC(772)

RI(782)

TX(791)

VA(810)

GA(834)

DE(841)

MN(873)

LA(883)

OK(895)

AR(910)

NC(992)

AK(1003)

NM(1048)

PA(1052)

AL(1059)

CO(1108)

MI(1161)

TN(1163)

MD(1187)

WI(1203)

IL(1271)

IA(1301)

HI(1306)

UT(1322)

OH(1338)

NE(1479)

KS(1499)

IN(1531)

MO(1544)

WV(1620)

WY(1714)

KY(1763)

MT(1771)

ND(1783)

Alert readers may notice that only 49 states appear in the table.  The missing state is VT, which currently does not have any fossil fuel power plants of the requisite size (this may change if critics succeed in closing the Vermont Yankee nuclear plant).

According to the EPA, the proposed goals were developed based on a variety of factors including carbon emission levels in 2005 (used as a base instead of current emission levels) and available strategies (called “building blocks”) for reducing emissions: (1) improve thermal efficiency, (2) substitute natural gas plants for coal plants, (3) add wind, solar and nuclear projects to the mix, and (4) promote energy efficiency. 

Taking the circumstances of the states into account like this might seem reasonable on its face. Some states would have a tough time complying, however, and the alleged flexibility for states to decide how they will meet their assigned targets is largely illusory. Natural gas, not location, key to state emission cuts under EPA proposal, Zak Coleman, Washington Examiner, 6/3/14. http://tinyurl.com/oyjpzp2

It has been suggested, for example, that Delaware and other participants in the Regional Greenhouse Gas Initiative should be able to comply with the CPP goals with relative ease because they are already on the right track. Local reaction to anti-coal EPA regulations, News Journal, 6/3/14. 

Consider, however, that Delaware’s participation in the RGGI and compliance with a program for phasing in requirements for use of more renewable energy will inevitably result in higher electric power costs and may be jeopardizing the reliability of the electric power grid.  It would currently be possible for Delaware to pause this program for further study, either acting on its own or in concert with the other RGGI states, but once the CPP was put in place this would no longer be an option. Bad idea, because the mandate to use a growing amount of renewable energy is unnecessarily driving up electric power costs.  Failed cap and trade program to worsen, David Stevenson (CRI), News Journal, 3/4/13

In his May 31 weekly address about the CPP, the president noted that “the shift to a cleaner energy economy . . . will require tough choices along the way.”  He did not elaborate on what tough choices might be involved, however, nor does the EPA’s plan shed much light on the subject. A search for “tough choice” turns up zero matches in this 645-page document, and essentially all of the effects attributed to the CPP are positive. 

Thus, at page 15 of the plan, it is asserted that “the proposed guidelines would achieve meaningful CO2 emission reduction while maintaining the reliability and affordability of electricity in the US.”  Note that affordability is used in a qualitative sense, without ruling out the possibility of supposedly acceptable increases in energy prices.

The purported “climate benefits” and “air pollution health co-benefits” from the plan outweigh “total compliance costs” by such a wide margin as to make the decision look like a “no brainer.”  See, e.g., Table 2 at page 57.  But frankly, we have no confidence in any of these estimates because the EPA does not seem to be an objective source of information. 

Thus, the health benefits are probably based on data from decades old studies that have never been made available for independent evaluation and verification. The scourge of political dishonesty (point B, secret science), 5/5/14.  

Another point is the EPA’s assumption that electric power consumption will drop sharply in coming years as the result of energy-efficiency programs, rather than keep growing as one might expect with a dynamic economy.  What will carbon rules really cost? Cassandra Sweet & Amy Harder, Wall Street Journal, 6/4/14 (no link available). 

Enough!  Reasonable minds may differ on the projected costs versus benefits in the EPA’s analysis, and SAFE certainly can’t develop a definitive estimate of the “true” numbers.  What does seem clear, however, is that the CPP involves an exercise in making policy that looks a lot like the legislative function vested in Congress.

Consider that the EPA is proposing a national carbon emissions reduction of about 30% between 2005 and 2030), surely a policy decision, which it then apportions between the several states.  The agency reserves to itself the right to approve or reject plans submitted by the states, to develop plans for any state that declines to propose one, and to monitor progress towards goals and presumably sanction states for noncompliance.   

It would seem to follow that the CPP represents unconstitutional legislative activity, and at least one pundit has predicted that the plan will not withstand judicial challenge.  Dick Morris: Supreme Court will reverse Obama’s EPA regulations, Courtney Coren, Newsmax.com, 6/3/14. http://tinyurl.com/ooxr8xv

We don’t believe, however, that the Supreme Court could strike down the CPP without effectively overturning Massachusetts, et al. v. EPA – and we doubt the justices would be willing to do this.  As shown by its disposition of the challenge to GovCare in 2012, the Court (or at least a majority thereof) is not anxious to risk being charged with meddling in policy disputes.

Thus, the Court is not about to express an opinion on the merits of the manmade global warming theory.  And short of rejecting the MGW theory, or at least saying it remains unproven, one would be hard pressed to rule out the need for some kind of government action - such as the CPP - to head off an alleged environmental catastrophe. 

Bottom line, legal challenges will probably delay the CPP, but they cannot stop it.  An effective challenge, if there is one, will necessarily be in the political realm.

III. Congressional action won’t be easy – A pattern has developed in recent years of administrative actions that exceed the constitutional powers of the Executive Branch.  Ignore existing laws – create new laws by fiat – broadcast one-sided information – stonewall questions or complaints. The imperial presidency returns, 6/25/12.  

The problem seems to be getting steadily worse, and even a few liberals have begun to talk about it.  See, e.g. “The president’s power grab,” Jonathan Turley, LA Times, 3/9/14. http://tinyurl.com/qhan6vy

The rise of an uber presidency unchecked by the other two branches *** threatens the stability and functionality of our tripartite system of checks and balances *** the trend has existed for decades *** it has accelerated at an alarming rate under Obama. Of perhaps greater concern is the fact that the other two branches appear passive, if not inert, in the face of expanding executive power.

Congress is in a relatively strong position to resist administration proposals, or propose ideas of its own, if implementing legislation is required. For example, the president and his party would likely have great difficulty selling any more tax increases so long as Republicans control at least one house of Congress.  And the passage of GovCare was only possible during a period in which Democrats controlled both the House and the Senate (with a filibuster-proof majority). 

Where the administration arguably has authority under existing legislation, on the other hand, the bargaining position of Congress is weak. Thus, as previously noted, there is currently no chance of amending the Clean Air Act to exempt carbon emissions from regulation.  Even if the GOP recaptured the Senate in November, Democrats would still be in a position to block such legislation.

Similar considerations apply for a “let’s study the CPP to death” bill introduced by Senator Mitch McConnell (R-KY). Republicans attack Democrats on EPA proposal with legislation, Susan Lengell, Washington Examiner, 6/3/14. http://tinyurl.com/ppbrhmj

The bill faces little chance of survival, as Senate Majority Leader Harry Reid, D-Nev., isn't likely to bring it to the floor for a vote. But a Reid block of the measure would provide Republicans with ammunition to portray Democrats as being beholden to the administration's "radical" energy policy.

There is also the possibilility of defunding unduly aggressive agencies, such as the Environmental Protection Agency, which could theoretically be accomplished by the GOP-controlled House of Representatives because appropriation bills must be approved by both houses of Congress.  Obama’s war on the Constitution, Conn Carroll, Townhall.com, 6/3/14. http://tinyurl.com/p88mm5o

Establishment Republicans may not like to hear it, but [Senator Mike Lee, R-UT] is right. The only way to stop Obama’s lawlessness is to cut off funding for the agencies he is using to abuse the law. No more Education Department funding until [No Child Left Behind] is rewritten. No more DHS funding until [Deferred Action for Childhood Arrivals] is halted. No more HHS funding until the Obamacare delays are undone.

The problem with a defunding strategy, of course, is that the other side will block the  spending cuts and blame the GOP for “shutting down the government.”  Just such a scenario played out in the fall of 2013, and the Republicans got the worst of it.  On the cusp of a crisis in DC, 10/14/13.

Writing the country’s laws in a fair-minded and responsible manner is a tough job, and Congress seems to be falling into a pattern of delegating authority to administrative agencies and hoping for the best.  The members then carve out a new role: cultivating relationships with key bureaucrats and seeking to posture about their power to influence what the agencies are doing. 

Acting this way is understandable, especially for incumbent Democratic senators from “red states” who are hoping to get reelected in November, but ultimately the members of Congress should be expected to do their jobs rather than simply going through the motions.  It’s time for Congress to take back the power to make laws, Rich Tucker, dailysignal.com, 4/26/14. http://tinyurl.com/nmxmwfx

IV. We the people – A recurring point in the current political discourse is that US politics is becoming overly ideological, which supposedly causes political gridlock and dysfunctional government.  And although posing as objective observers, left-of-center commentators seem to put most of the onus on the GOP. Americans are as polarized as Washington, William Galston, Wall Street Journal, 6/4/14 (no link available).

On the role of government, Republicans have moved much further right than Democrats have to the left.  It is hard to overstate the intensity of Republican sentiment on this issue.  Between 1972 and 2012, the share of Republicans who regard themselves as very conservative on taxes and using government to promote jobs and social services soared to 38% from 9%, and the share of economic conservatives overall rose to 80% from 48%.

If one assumes that the natural path for the United States is ever bigger, more powerful government, the implications are clear.  The public should lighten up, stop worrying about the government policies being followed, and let the “experts” take care of such things.  So hooray for the CPP, which was developed by the Environmental Protection Agency and has been approved by the president and his advisors. 

For those who harbor some degree of skepticism about the wisdom of government officials or the efficacy of government versus private action, however, such a viewpoint may seem unappealing.  Who is holding politicians accountable? News Journal, 6/6/14.  http://tinyurl.com/pqhpwmv

And it’s not hard to find historical examples of disastrous results from public apathy. Escape from Freedom, Erich Fromm, 1941. http://tinyurl.com/mxwsnoh

Perhaps we ought to challenge the CPP and other power grabs/ scandals while this is still possible.  So much to do, so little time!

Let’s hope the power of the purse can serve to check the president’s momentum and agenda. The tyranny of the “urgent” (manufactured and promulgated on the left; inadequately resisted by RINOs) is sabotaging constructive dialogue, debate and Constitutional decision-making. - Neighbor

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Why should they back down on the CPP? They won!
Wish us better luck in the next incarnation. – SAFE director
top      wwhipple3@verizon.net


6/2/14 – It’s not a slam-dunk, but some progress on tax reform may be possible

SAFE favors revenue neutral tax reform (RNTR), meaning that (1) tax preferences (deductions, credits or exemptions) would be eliminated, broadening the tax base, and (2) tax rates cut so as to raise the same overall amount of tax revenue. 

What’s not to like about RNTR? It is as close to a “silver bullet” solution of the fiscal problem as the nation’s political leaders are likely to find. So why do efforts to achieve it keep getting sidetracked?

#One obstacle has been Democratic Party insistence that any major tax overhaul be sweetened with revenue increases, which is seen as easing the pressure for spending cuts and ensuring that the well to do “pay their fair share.”  Even after major tax increases at the end of 2012 (Bush tax cuts for high earners were ended, and a temporary reduction in payroll taxes was allowed to expire), Democrats were still asking for more.  A tax overhaul is way overdue, 1/14/13.

Although not pushing for more tax rate hikes right now, they will demand “reforms” (elimination of tax preferences) that would serve the same purpose.  Dems look for up to $1T in new revenues, Alexander Bolton, The Hill, 1/7/13. http://bit.ly/RBFhRa

While it’s true that RNTR should produce enhanced revenues over time by speeding up economic growth, an insistence on immediate revenue increases would slow economic growth and also reduce the chances of achieving tax reform by watering down the incentives.  It’s a shortsighted approach, which should be avoided.  Raising taxes and a crackdown on cheating won’t solve the fiscal problem, 9/20/10.

#Another problem is that all of the individual and business tax preferences on the books have supporters that members of Congress on both sides of the aisle would like to gratify.  While everyone claims to be in favor of tax reform, therefore, lining up enough votes to get the job done is tough.  Small wonder that the last general revision of the Internal Revenue Code was in 1986, and that the tax law has been growing more complicated and inefficient ever since. 

The outgoing chairman of the House Ways and Means Committee, Rep. Dave Camp (R-MI) deserves credit for putting a tax reform plan on the table earlier this year.  His plan was far from perfect, but it could potentially have served as the starting point for an overdue debate.  Didn’t happen!  There was no follow-up to speak of, and the subsequently issued House budget plan endorsed the idea of revenue neutral tax reform without going into details.  Ryan budget dismissed as a meanwich, 4/14/14.

Don’t expect a tax reform bill any time soon, certainly not in this session of Congress.   There are things tax reform proponents can do, however, which might help clear the way for eventual success. This report will offer two suggestions: block the extenders and avoid new mistakes.

A. Block the extenders – It has become common practice to enact individual and business tax preferences on a “temporary” basis, sometimes due to a perception that a given provision is only needed for a limited time (e.g., in the aftermath of a major recession) but often for other reasons.  A tactical advantage is to minimize projected revenue losses (the Congressional Budget Office will assume expiration of a preference in accordance with existing law even if the plan is to keep renewing it indefinitely). As the renewal dates come up, moreover, legislators have an opportunity to remind potential donors of the importance of their continuing support. 

A slew of tax preferences expired at the end of 2013, and there has been a concerted effort to retroactively extend many of them. Senate Finance Committee passes $85 billion tax extenders bill, Tax Foundation, 4/4/14. http://bit.ly/1tuzbju

Individual provisions, $17.0 million – Tax deductions for state and local general sales tax ($6.5M), mortgage debt relief ($5.4M), all other ($5.1M).

Business provisions, $49.5 million – Research & experimentation (R&E) tax credit ($15.4M), exceptions under Subpart F for active financing income ($10.4M), faster write-off of qualified leasehold improvements ($4.8M), work opportunity tax credit ($3.1M), increased ceiling for first year expensing of capital expenditures ($3.1M), bonus depreciation ($2.8M), look through treatment ($2.4M), special rules for qualified business stock ($1.9M), new markets tax credit ($1.8M), all other ($3.8M).

Energy provisions, $19.7 million – tax incentives for wind & solar power ($13.3M), biodiesel & renewable diesel ($2.6M), nonbusiness energy property ($1.6M), all other ($2.2M). [SAFE and many others have signed an Americans for Prosperity letter to the members of Congress opposing renewal of expired wind energy tax incentives; “this handout” is said to threaten the reliability of the energy grid, cost taxpayers over $12 billion per year, and raise electric power costs for American families.  The letter will be sent in early June.]

Revenue raiser offsets, $0.9 million.

Somewhat parallel efforts have been under way in the House Ways and Means Committee.  Representative Dave Camp’s position is that if the Committee decides to revive any of the expired tax preferences on the basis of perceived merit, it should take the fiscal hit by making them permanent.  Thus, Ways and Means has voted to make the R&E tax credit permanent (10-year price tag of $156B) versus simply extending it for one year. House looks at permanently extending some business tax breaks, Susan Ferrechio, Washington Examiner, 4/29/14. http://washex.am/1tuPpZZ

Bipartisan cooperation in the Senate broke down after the extender bill emerged from committee.  The sticking point was Senate Majority Leader Harry Reid’s refusal to allow any floor amendments, notably an amendment to repeal the GovCare tax on medical devices, which might have resulted in embarrassment for incumbent Democratic senators and/or the administration.  Approval of the “as is” extender bill fell short of the 60 votes required to break a filibuster, although some of the players are apparently still trying to work out a deal of some kind.   Senators protest power struggle in Senate by blocking tax cut bill, Susan Ferrechio, Washington Examiner, 5/15/14. http://washex.am/U19NYc

The fate of the extenders bill will probably not be determined before the November elections.  In addition to disagreement as to whether the GOP should be permitted to offer a floor amendment on the medical devices tax, the conflict between the House and Senate approaches would have to be resolved in conference.  And with the year moving right along and Congress scheduled to be out of session in August, there are just so many legislative days left.  [Senator Ron] Wyden: Tax breaks bill could return next week [it didn’t], Bernie Becker, The Hill, 5/15/14. http://bit.ly/1psy8mr

Conservative opinion is divided, with some advocates inclined to reject most or all of the extenders and others supporting some of them (e.g., the R&E credit) on grounds that they apply to a broad swath of the economy and encourage enlightened economic behavior. In the battle for tax extenders, “it’s complicated,” Nan Swift, National Taxpayer’s Union, 5/19/14. http://bit.ly/1kub1VR

Our view is that all of the extenders should be rejected, the reason being that the radical tax overhaul that is needed will not take place unless the current inventory of tax preferences is drastically reduced.  The more tax preferences that are preserved, the less latitude there will be to cut tax rates and free up the economy so that market forces can work. Also, putting the burden of proof on the proponents of eliminating tax preferences would unreasonably prolong the discussion.  SAFE’s SimpleTax proposal. http://tinyurl.com/nv9urbf

#Corporations - The clearest way to improve matters without substantially reducing tax revenue would be to cut the corporate tax rate sharply, say to a top rate of 20%, while eliminating a host of special exemptions, deductions and tax credits (other than the foreign tax credit) that are currently in effect.  Don’t make the R&E tax credit permanent, eliminate it – a tax deduction for the expense should be good enough. Say goodbye to energy tax credits, percentage depletion for oil and gas, low-income housing tax credits, and the special domestic production deduction to subsidize US-based manufacturing.

 

#Individuals - For U.S. taxpayers subject to foreign income taxes, e.g., workers on international assignments, foreign tax credit is appropriate to avoid double taxation of their income.  All other income tax exemptions, deductions (mortgage interest, charitable contributions, state and local taxes, childcare, casualty losses, etc.) and tax credits (Earned Income, Child, energy, etc.) would be eliminated. While some of these tax preferences have arguable merit, a case-by-case review would trigger endless debate. 

Gridlock is not always a bad thing, and in the case of the extenders bill it may lead to a better outcome than bipartisan cooperation would.

B. Avoid new mistakes – “If you’re in a hole that keeps getting deeper,” as the saying goes, “stop digging.”  Given the manifest problems of the current tax code, one might think the politicians would have figured out by now that new tax preferences should not keep being added to the mix.  Apparently, however, this point has not sunken in.

It’s easy to see the need to block tax-oriented proposals from big government fans (Side A), e.g., hike effective tax rates on high earners by “reducing the value of certain tax expenditures,” expand the Earned Income Tax Credit (EITC) for workers without qualifying children, perpetuate “clean energy” tax subsidies while raising the effective tax burden on oil and coal companies, create new subsidies for domestic manufacturing, and chip away at the effective US tax exemption (until repatriation) of profits earned abroad.  President’s fiscal plan is a nonstarter, now what? 3/10/14.

To be fair, however, many purported “conservatives” would like to use tax preferences to advance their agendas – in ways that should be scrutinized just as closely as the Side A proposals.  Here are two examples that come to mind.

#The EITC has traditionally attracted some conservative backing on the theory that it’s better to give low-income workers an incentive to find a job than to simply provide welfare for unemployed workers.  Indeed, the EITC was originally suggested by economist Milton Friedman and expanded under President Reagan.  This year, two prominent GOP legislators – Representative Paul Ryan & Senator Marco Rubio - have touted enhancements of the EITC as making more sense than hiking the minimum wage.  Republicans’ love-hate relationship with a tax credit, Brian Faler, Politico, 1/17/14. http://tinyurl.com/l5ke9lz

So what’s wrong with the EITC? First, it partially converts the income tax from a system of raising revenue for the government to a system of doling out money to the have-nots.  This creates a lot of intellectual dissonance and undermines respect for the tax system. 

Second, a high volume of fraudulent EITC payments have been tolerated, which further undermines respect for the system.  Report: Massive fraud still rampant in [EITC] program, Byron York, Washington Examiner, 5/13/14. http://tinyurl.com/m3xt9pq

"The Internal Revenue Service continues to make little progress in reducing improper payments of Earned Income Tax Credits," a press release from Treasury's inspector general for Tax Administration says. "The IRS estimates that 22 to 26 percent of EITC payments were issued improperly in fiscal year 2013. The dollar value of these improper payments was estimated to be between $13.3 billion and $15.6 billion."

Third, while the EITC encourages people to get a job, it also gives them an incentive not to earn too much (or in the case of a couple get married).  The credit is recaptured at higher income levels, sharply boosting the marginal tax rate. As with welfare, the long-term result is to hold people down rather than giving them an incentive to move up.

#Sooner or later, Republicans will find it necessary to offer an alternative to GovCare as opposed to simply blasting this legislation as a blunder that should be repealed.  GOP candidates show signs of retreat on full Obamacare repeal as mid-terms approach, Juliet Eilperin & Robert Costa, Washington Post, 5/30/14. http://tinyurl.com/ptrjzk8

When the GOP does coalesce behind an alternative healthcare plan, a key part of the proposal will probably be tax subsidies for healthcare outlays – at substantial cost to a government that is already living beyond its means and with the prospect of one more layer of complexity being added to the tax law. 

Senator John McCain was proposing a tax credit for those without employer-provided healthcare insurance during his 2008 presidential run.  Both candidates offer “pie in the sky” healthcare plans, 10/20/08.

Refundable tax credits would be provided (individual $2,500; family $5,000) for HCI.  The money would go directly to the designated healthcare insurance (HCI) company (preventing the taxpayer from using the credits for purposes other than healthcare).  Any excess over the cost of the HCI coverage selected could be deposited in a Health Saving Account (HSA), effectively banking the money for future medical needs.

Conservatives still seem to be leaning to tax subsidies for healthcare, perhaps HSAs funded with pretax dollars.  See, e.g., “Ben Carson pushes Obamacare alternative, calls for defeat of Obama’s supporters,” Paul Bedard, Washington Examiner, 5/29/14. http://tinyurl.com/mkr52eo

Clearly, it is inequitable for some workers to enjoy tax-free HCI from their employers while other workers have to buy HCI with after-tax dollars or go without.  Accordingly, we have proposed that everyone be put on an equal footing by taxing employer-provided HCI.  SAFE healthcare proposal, http://tinyurl.com/pkywn94.

2. End the tax exemption for employer-provided healthcare benefits with the idea that private sector and government employees should make their own arrangements for healthcare services and insurance.  In any case, those whose employers provide healthcare plans should not continue to receive this unjustifiable tax preference.

We would be willing to bend our “no tax subsidy” principles, however, for one type of healthcare coverage – so long as the government was not put in charge of the details.

3. Encourage the use of catastrophic coverage insurance combined with Health Saving Accounts to cover outlays for routine healthcare services.  As an exception to item 2, premiums for such plans should be payable out of pretax income or tax deductible, which would put all taxpayers on an even footing.  Also, to break the state-by-state stranglehold on healthcare insurance (precisely what treatments should be covered, etc.), people should be permitted to purchase coverage from insurance companies located anywhere in the country.

top      wwhipple3@verizon.net


5/26/14 – Thoughts about the VA scandal        Read a Reply

Suddenly, the big story in Washington was excessive wait times in the Veterans Administration, claimed deaths of patients awaiting treatment, and efforts to cover up the scandal.

Everyone of consequence professed to find the situation intolerable, but there was little agreement as to what had gone wrong and needed to be fixed. Indeed, there seemed to be four schools of thought (not necessarily mutually exclusive).

Theory A: This was a management problem.  Figure out what is not working and put better policies and procedures in place.

Theory B: This was a legal problem.  Investigate, find out who went over the line, and hold them accountable.   

Theory C:  This was a fiscal problem. Having assumed a mission without providing adequate resources, the government should fund the VA more generously.

Theory D: This was a design problem.  It’s time to recognize that government-run healthcare doesn’t work and find other ways to meet the healthcare needs of veterans.

Discussion follows, which suggests, among other things, that the solutions to real life policy issues are often a bit elusive.

A. Management problem – It might be well to begin by recognizing that the Veteran’s Administration is a big, complex organization that provides a variety of healthcare and other support services for millions of military veterans. 

The VA has hospitals and clinics in every state in the union, including facilities in all three counties in Delaware.  Listing of facilities by state, http://tinyurl.com/qyzf46s

The proposed VA budget for fiscal year 2015 is $164 billion (discretionary $68B/ mandatory $96B).  http://www.va.gov/budget/products.asp (download “Fast facts” PDF)

Until recently, the agency was commonly thought of as well run – and initiatives were underway to address perceived deficiencies.  Thus, according to the VA’s fiscal year 2014-2020 strategic plan, the priority goals for the agency were to (a) improve veteran access to benefits and services, (b) eliminate the disability claims backlog, and (c) eliminate veteran homelessness. http://tinyurl.com/pqmovcm

Opinions changed in a hurry when whistle blowers within the VA came forward with claims that wait times for healthcare services were far longer than had been reported and VA bureaucrats were fudging the numbers to prevent the facts from becoming known. Whistleblower: Phoenix VA hospital destroying evidence, C J Ciaramella, Washington Free Beacon, 5/2/14. http://tinyurl.com/o9jxgr3

Even normally staunch supporters of the administration were inclined to view the reported state of affairs as requiring decisive action. See, e.g., “Obama must act so heads roll at VA,” Eugene Robinson, [Wilmington, DE] News Journal, 5/21/14.

In contrast to Fast and Furious, IRS targeting of conservative groups, and the Benghazi attack & aftermath, Robinson characterized what was reportedly going on at the VA as “an authentic scandal” that could hardly be addressed without replacing a number of key managers. 

True, Secretary Eric Shinseki (formerly a four star Army general) seemed concerned about the wait times and was apparently surprised by the data fudging, but after five years as secretary, during which time he had failed to fix these problems, it was perhaps time to put someone else in charge.

Robinson concluded his column by saying the current situation should not be taken as showing that government-run healthcare doesn’t work.  To the contrary, there was ample evidence that the VA was running most of its operations rather well.  “VA hospitals see more than 200,000 veterans a day and rank among the highest in the nation in customer satisfaction, according to surveys.”

Surveys are often designed to accentuate the positive, of course, as many readers have probably gathered from service surveys they have participated in.  VA rates high on patient satisfaction in national survey, Robert Petzel (who has accelerated his previously announced retirement plans), 4/16/14. http://tinyurl.com/nwom8xf

In addition, some critics said there was plenty of evidence of VA ineffectiveness on the record aside from service wait times – as shown, among other things, by scathing reports from the Government Accountability Office (GAO).  Unearthing the depth of the VA’s malfeasance, Donald Lambro, Washington Times, 5/20/14. http://tinyurl.com/ptc7gbu

It was also suggested by some lawmakers that it was time to streamline the firing of incompetent VA managers, a process that can take months or even years due to the onerous legal requirements.  Congress mulls making it easier for Barack Obama to fire people, Susan Ferrechio, Washington Examiner, 5/21/14. http://tinyurl.com/osxu3rz

Conclusion: The situation at the VA did look like a management problem, but perhaps there was more to it.  Also, aside from insisting on honest reporting of wait times, there was no apparent consensus as to what changes in policies and procedures were needed. 

B. Legal problem – Suppose the problem was not incompetence, but rather the need to eliminate some “bad apples” in the VA bureaucracy?  Last week, after meeting with Secretary Shinseki, the president outlined plans for further investigations before making decisions as to the appropriate course of action. Statement by the president on veterans healthcare, 5/21/14. http://tinyurl.com/p9fm9hy

•The inspector general of the VA has launched investigations into possible misconduct at the Phoenix, AZ hospital and other facilities.  “We have to let investigators do their job and get to the bottom of what happened. *** And once we know the facts, I assure you -- if there is misconduct, it will be punished.” 

•Secretary Shinseki has been ordered to investigate the “full scope of the problem.”  No reporting deadline is specified.  The apparent implication is that Shinseki’s days at the VA are numbered, even though the president did not choose to fire him immediately.

•White House troubleshooter Rob Nabors has been directed to “conduct a broader review of the Veterans Health[care] Administration” and report back to the president next month. “I want to know what’s working.  I want to know what is not working.  And I want specific recommendations on how VA can up their game.” 

•Finally, all hands are expected to work with Congress, which has an important oversight role to play. 

Two comments about this plan: (A) it’s hard to imagine Nabors offering a “silver bullet” solution to the VA’s problems by next month, and (B) the president’s directive for all hands to cooperate with Congress seems out of synch with what has happened in other controversies.

Consider this recent exchange between Senator Ted Cruz and FBI Director James Comey re the investigation of alleged IRS targeting of conservative groups.  Over a year after the president’s expression of “outrage” about the targeting, no one has been indicted and the FBI has interviewed few of the alleged victims – yet Comey apparently believed that he could not properly respond to any specific question unless the answer was already a matter of public record.  Video (6:43), tpnn.com, 5/21/14. http://tinyurl.com/p8dwyvk

Generally speaking, the public was underwhelmed by the president’s statement about the VA situation.  It was seen as lacking in both passion and specifics, basically a stalling tactic.  Obama is President Passive on VA scandal, Dana Milbank, Washington Post, 5/22/14. http://tinyurl.com/lvp6qg5

Obama said Wednesday that he doesn’t want the matter to become “another political football,” and that’s understandable. But his response to the scandal has created an inherent contradiction: He can’t be “madder than hell” about something if he won’t acknowledge that the thing actually occurred. This would be a good time for Obama to knock heads and to get in front of the story. But, frustratingly, he’s playing President Passive, insisting on waiting for the VA’s inspector general to complete yet another investigation, this one looking into the Phoenix deaths.

Conclusion: While claims of alleged misconduct should be investigated, no doubt, the VA situation is far more than a legal problem and the president’s lawyerlike statement about it was not a suitable response.  It almost seemed that the president was seeking to atone for this in his weekly address (May 24). http://tinyurl.com/nje4b9z

Most of all, let’s keep working to make sure that our country upholds our sacred trust to all who’ve served.  In recent weeks, we’ve seen again how much more our nation has to do to make sure all our veterans get the care they deserve.  As Commander in Chief, I believe that taking care of our veterans and their families is a sacred obligation.  It’s been one of the causes of my presidency.  And now that we’ve ended the war in Iraq, and as our war in Afghanistan ends as well, we have to work even harder as a nation to make sure all our veterans get the benefits and opportunities they’ve earned.  They’ve done their duty, and they ask nothing more than that this country does ours – now and for decades to come. 

C. Fiscal problem – Suppose the VA was properly motivated, well organized, but had not been given the resources needed to carry out its mission?  Could the solution be as simple as increasing the VA budget? 

William Galston’s argument was a bit more sophisticated than this, but the pundit did indeed suggest that “the root of the scandal . . . is a federal budget that prevents us from meeting even the national needs on which our polarized parties can agree.” The veterans scandal is only the start, Wall Street Journal, 5/21/14 (no link available).

Consider that about 42% of the VA’s budget is subject to annual appropriations, and that “inability to agree on a sustainable approach to long-term fiscal policy has led, by default, to a relentless squeeze on discretionary spending that will hobble us at home and abroad.” 

According to current projections, discretionary spending will decline to 5.1% of GDP (currently about 7.2%) by 2024.  But don’t imagine that “with only five cents out of each dollar of national income” we can “defend the country, care for veterans, address the needs of children and the poor – and invest in the research, education and infrastructure on which America’s future depends,” because “it can’t be done.”   

Accordingly, until someone faces up to the fiscal facts of life, the decline in deficit spending will reverse and the government will go right back to running trillion dollar annual deficits by the early 2020s.

VA spending has expanded rapidly over the past decade, however, particularly under the current administration (highlighted data), so it’s hard to think of the agency as being starved for funding.

Veterans Administration Spending (mandatory + discretionary)

Fiscal Yr.

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

$B

73.1

81.8

91.0

97.7

127.2

125.5

126.8

139.1

153.8

163.9

Indeed, VA expenditures on an inflation-adjusted dollar basis are higher now than after World War II or the Vietnam War, when the number of returning veterans was far higher.  Granted that the nature of injuries may be more severe on average for currently surviving war veterans, the run-up in costs also reflects network expansion (more on that subject later).   VA budget skyrockets despite federal spending cuts, Dayton Daily News, 6/9/13. http://tinyurl.com/oep2pwz

As for the general problem of keeping government spending under control, we do not agree that discretionary spending should be exempted from continuing scrutiny.  The point is not that no waste exists in the discretionary sector, there is actually plenty of it, but that the way to eliminate the waste is targeted spending cuts versus across the board spending cuts (e.g., the sequester) that unrealistically treat all programs as of equal merit.  And so it begins: a “Super Committee” is born, 8/15/11 (see point 4 in letter).

Conclusion: Overall, VA funding is more than adequate.  Throwing money at the agency is not a solution. 

D. Design problem – Some critics were quick to see the VA problems as showing that government-run healthcare systems don’t work.  Once patients are told that medical services are a right, the reasoning goes, the only way to manage treatment costs is rationing (either explicitly or covertly). Healthcare rationing is next; Veterans’ deaths foretell Obamacare’s future, Elizabeth Price Foley, Washington Times, 5/19/14. http://tinyurl.com/nt2jgfq

When individuals receive care through the VA, it becomes the only payer and hence, the only decision-maker. The VA decides who gets care, when and how much. Moreover, as the single payer, the VA bears the risk of loss: If tax dollars aren’t enough to pay for the care demanded, there’s only one result — rationing of care.

By the same reasoning, GovCare could have similar consequences on a larger scale.  Obamacare will kill far more than the VA scandal, Alan Caruba, tpnn.com, 5/20/14.  http://tinyurl.com/o2kk8m2

These comments carry some weight, and we have ourselves repeatedly predicted that GovCare will result in healthcare rationing no matter how hard some politicians may try to pretend otherwise.  The long waiting times in Canada and the UK are well known, but they are also found in other government-run healthcare systems – with the result that patients with the means to do so will make alternative or supplementary arrangements. What Sweden can teach us about Obamacare, Per Bylund, Wall Street Journal, 4/18/14. http://tinyurl.com/pwpk82z

To be fair, however, the Veteran’s Administration is a venerable institution (dating back to the Civil War or earlier) that has provided useful and praiseworthy services for veterans over the years.  Do the recent problems truly demonstrate the necessity of selling off the VA facilities and closing down the operation, or would some less radical approach make sense?

Perhaps the fundamental error was not trying to provide VA services, as such, but expanding the VA’s mission without properly weighing the consequences. Proceed with caution: the unintended consequences of expanding VA access, Nina Owcharenko, Heritage Foundation, 3/17/06. http://tinyurl.com/qczy3br

The core mission of the VA is "to serve current combat veterans and veterans with service disabilities, lower-incomes, and special needs.”  *** The VA is known for its specialized treatments and for dealing with difficult and complex health conditions. Expanding its services to meet the basic health care needs of the broader veteran population could cause general health services to crowd out more specialized treatment within the system.

Eric Shinseki was one of the president’s first cabinet picks after the 2008 election.  At the time, the president defined the goals as not just “better [serving] veterans of today’s wars,” but also “[building] a 21st century VA that will better serve all who have answered our nation’s call.” Obama: No one “more qualified” than Shinseki to head VA, CNN, 12/7/08. http://cnn.it/1kdK2O0

In his introduction to the VA’s fiscal year 2014-2020 strategic plan, Secretary Shinseki recapped the perceived progress. http://tinyurl.com/8yk764j (download PDF).

. . . VA opened its first new medical center in 17 years in 2012 [Las Vegas, NV] and, since January 2009, increased the number of community-based outpatient clinics by 55 to improve access for Veterans. We have ensured that nearly 90 percent of Veterans have a burial option within 75 miles of home. We have addressed both disabling healthcare issues [notably Agent Orange claims] from past conflicts and the needs of more recent Veterans. These decisions to better care for Veterans increased the disability claims backlog. Despite this growth, we have now reduced that backlog by 36 percent since March 2013. *** We reduced Veteran homelessness by over 24 percent between January 2010 and January 2013. VA has delivered or improved numerous other benefits and services to include expanding educational assistance through the Post 9-11 GI Bill; supporting family caregivers; hiring additional mental health professionals in accordance with Executive Order 13625; implementing the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011 in conjunction with our interagency partners; assisting Veterans to avoid foreclosure; and improving our internal planning, human capital management, information technology management, and preparedness capabilities.

Recent revelations have tarnished this record, however, as have reminders of similar problems in the past (e.g., ABC “hidden camera” expose circa 2000).  The real lessons from the VA scandal, Laura Hollis, Townhall.com, 5/23/14. http://tinyurl.com/kkgjdse

Conclusion: Perhaps the government could set up and run a satisfactory Veterans Administration to ensure the availability of healthcare and other basic needs of the veteran population, goodness knows these folks deserve support, but thoughtful implementation might have served them (and the country) better than grandiose overhaul plans that were launched too quickly with inadequate supervision.

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Rep. Carney and Sen. Coons were at the Veterans Memorial community based outpatient clinic in Dover on May 26. Both spoke about the importance of honoring and respecting our veterans and dealing with homeless vets. While their speeches were nice, neither of them mentioned the VA scandal or improving support for vets in need of long-term care. – Sam Friedman, CRI

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5/19/14 – Opportunity is the best answer to economic inequality        Read a Reply

Last week, we considered and rejected the thesis that taxes on high earners and the wealthy should be hiked as a way to counteract growing economic inequality.  A clever  but deeply flawed rationale for Robin Hood economics, 5/12/14.

The previous discussion was somewhat abstract, so let’s now get down to brass tacks.  How is the US economy doing overall, are certain segments of the population receiving less than they deserve, what could be done to improve matters, and how should the proposed approach be explained?

A. Overall economy - The economy may have perked up since the last election, but only by a bit.  Consider, for example, this update of national employment numbers, which shows population growing faster than the number of job seekers (resulting in a declining labor force participation rate).

In millions

Jan. 2010

Jan. 2011

Sept. 2012

April 2014

Population*

236.8

238.7

243.8

247.4

Labor force**

153.4

153.2

155.1

155.4

Employed

138.5

139.3

143.0

145.7

Unemployed %

9.7%

9.0%

7.8%

6.3%

Labor force participation

64.8%

64.4%

63.6%

62.8%

*16 and over, excluding people serving in the military or incarcerated.

**Members of the population seeking employment.

As for overall output, the first quarter of 2014 brought a surprise – essentially zero growth.  Free fall: GDP plummets to 0.1 percent, Katie Pavlich, Townhall.com, 4/30/14. http://tinyurl.com/lluk8ux

Many analysts dismissed this result as an aberration due to a bitter winter, etc. and are forecasting over 3% real growth for the balance of the year. Conference Board, 5/14/14. http://tinyurl.com/7n64ok2

Among the reasons cited for optimism: global decline seems to be reversing, a hoped-for increase in US housing starts, and continued easy monetary policy. Old normal returns as Pimco foresees “new destination” for US, MoneyNews, 4/28/14. http://tinyurl.com/md8wccv

Not necessarily! A global rebound is beginning to seem like wishful thinking, for one thing, given “soft growth in Europe, a stop-and-start US recovery and waning momentum in China.”  The only major player meeting expectations is Germany, which grew at a 3.3% pace in the first quarter.  And the only response policy makers can seem to think of is providing more monetary and/or fiscal stimulus.  Global growth worries climb, Wall Street Journal, 5/16/14, no link available. 

Re a housing recovery, the government is considering relaxation of the mortgage lending standards that were tightened after the housing loan bust in 2007-08. It seems that homebuyers have been finding it so difficult to get loans that the home ownership rate has fallen 3.5 percentage points from its pre-crisis peak.  Hmm, could this be the start of another bubble?  Obama to loosen lending standards to boost home ownership, James Pethokoukis, American Enterprise Institute, 5/14.14. http://tinyurl.com/lkrz3va

If US economic growth did accelerate, this could ignite inflation and force the Federal Reserve to slam on the monetary brakes.  Peter Schiff to Newsmax TV: rising inflation will drive up gold price, Dan Weil, MoneyNews, 4/7/14. http://tinyurl.com/ldtgcep

How are the people faring who have stopped seeking employment? As a result of receiving benefits from federal and state welfare programs, many of them are receiving as much or more than low-wage workers.  This result might be seen as a commendable (albeit costly) demonstration of American compassion, but if welfare recipients are lulled into long-term dependency the results for them will not be pretty. Why get off welfare? Michael Tanner, towhall.com, 8/26/13.  http://tinyurl.com/oocpv86

It’s not just workers who are dropping out of the economy either; the market share of new businesses has fallen to the lowest level in decades. Unless and until this trend is reversed, it’s hard to visualize a solid economic recovery. US businesses are being closed faster than they’re being created, Christopher Ingraham, Washington Post, 5/5/14. http://tinyurl.com/mn23wzu

B.  Inequality - According to data compiled by the US Census Bureau, median household income peaked in 1999 on an inflation-adjusted basis and dropped sharply after 2007.  Data for selected years are tabulated below. DavidManuel.com, 5/15/14.  http://tinyurl.com/2gxv22c

Inflation-adjusted dollars in thousands

1967

1979

1989

1999

2007

2008

2009

2010

2011

2012

$42.9

$48.5

$51.7

$56.1

$55.6

$53.6

$52.3

$51.9

$51.1

$51.0

Moreover, data from this series indicate that high earners have done considerably better than the median result – from which one might infer that low earners have fared considerably worse. 15% of Americans living in poverty, Steve Hargreaves CNN Money, 9/17/13. http://tinyurl.com/mcpx25m

Since 1967, Americans right in the middle of the income curve have seen their earnings rise 19%, while those in the top 5% have seen a 67% gain.

Such comparisons are unreliable, however, as the data don’t include untaxed government benefits in income and also fail to recognize that high earners pay proportionately higher income taxes.  US income inequality not increasing if you count all “disposable income,” Michael Barone, Washington Examiner, 5/6/14. http://tinyurl.com/nkjfw2j

If you only count wages, salaries and taxable income, income inequality has been increasing over the past decade. If you count disposable income, it hasn't. Disposable income . . . includes not only taxable market income but also “all government transfers (such as Social Security, unemployment insurance and welfare) and subtracts tax liabilities.  This is a measure of resources actually available to household members for spending.”

On balance, we think the economic inequality issue has been greatly exaggerated for political purposes.  Evidence that the overall economy is stagnating, on the other hand, seems clear and compelling. Accordingly, why not focus on growing the economic pie instead of fretting about how the pie is divided? 

A former president recently made much the same point, observing that "we can't just tax our way out of [inequality]” and identifying job creation as the top priority. Bill Clinton: You can’t stop the rise of 1 percenters without “jailing people,” Joseph Lawler, Washington Examiner, 5/14/14. http://tinyurl.com/o52ocp6

Meanwhile, Clinton’s wife – currently the leading Democratic contender for president in 2016 – made a strikingly similar pitch in another venue.  Hillary Clinton slams Obama economy, Byron York, Washington Examiner, 5/16/14. http://tinyurl.com/ps544ma

C. Policies – SAFE’s vision for strengthening the economy is to promote smaller, more focused, less costly government and let the private sector do the rest. After reviewing the economic plans of the two major presidential candidates in 2012, we offered a plan of our own.  SAFE’s jobs manifesto, 10/15/12.

MORE JOBS will be available when the federal government changes its behavior.  Without delay, the government must stop piling more and more requirements on business.

To lighten the burden, simplify the tax system and eliminate unnecessary regulations & red tape.  The result will be faster economic growth, MORE JOBS, and more revenue to the federal government without raising taxes.

In addition, significant changes are needed to cut spending, eliminate deficits, and start paying off debt.  That will reduce the present risk of financial disaster and provide fairness to coming generations.

Here is a recent editorial, which seems to confirm our thinking.  The vanishing entrepreneur, Washington Times, 5/9/14.  http://tinyurl.com/n965nez

Strangled by endless spools of red tape and beaten down by taxes and government fees, businessmen are losing their zeal to convert an idea into a startup business or expansion of one already operating. It’s too much work and risk, to get approvals and comply with laws written by bureaucrats with no spirit or vision. Such rewards as there may be are consumed by taxes. That’s why there are fewer jobs to feed growth.

D. Marketing - The SAFE jobs manifesto is not about us, it’s for America, and we would be pleased to see either party embrace it.  But let’s be realistic.  In a country where businesses and people have grown accustomed to a diet of mandates, subsidies and welfare benefits, this plan would be a tough sell.  What would the winning arguments be?  And how could the reform coalition be held together long enough to overcome the special interests that are so determined to preserve or expand their own influence?

It would clearly be crucial that Americans understand the reasoning behind the plan, and not simply what they were being asked to support.  With that thought in mind, here are some suggested talking points.

#Free enterprise works The objective of an economy is not simply to put people to work, but to give them jobs that will contribute to the efficient satisfaction of human needs within the limits of available resources. 

People are different, so the economy should provide a range of choices as to the goods and services that are available. That goes for motor vehicles, plastic bags, and the kind of electric bulbs used in one’s home.  It should also apply for healthcare insurance, financial services, and where parents send their children to school.

Competition is essential so that producers who anticipate and efficiently meet market needs can thrive, while underperforming producers are allowed to fail.  The government has a proper role to play in establishing ground rules, but it should refrain from attempting to play a managerial role.  

If a government starts picking economic winners and losers, making technology choices, or establishing unduly restrictive barriers to entry, the key to business success changes from what you can do (capitalism) to whom you know (cronyism).

State-directed economies typically underperform economies that are relatively free, and there is no need to cite extreme cases like the collapse of the Soviet Union to prove it.  Consider two countries living side by side, one of which produces far more wealth per capita (the highest percentage of millionaire households in the world!) than the other despite having no obvious advantages in economic resources or geographic location. 

Switzerland does have several things going for it, however, notably (1) it is the 4th ranked country on the Economic Freedom of the World Index (US has fallen to 12th), and (2) government spending is proportionately lower than in France (57% of GDP) and other European countries.  Tellingly, an audience in Paris was unwilling to say they get better government services than the citizens of other countries where the government’s GDP take is lower, namely Germany (45%), Canada (41%), or Switzerland (34%). What’s the better role model, France or Switzerland? Daniel Mitchell, Townhall.com, 6/19/13. http://tinyurl.com/qhav5fo

The fundamental question, then, is why French politicians impose such a heavy burden of government spending – with a very high cost to the economy – when citizens don’t get better services?  Or maybe the real question is why French voters elect politicians that pursue such senseless policies? But to be fair, we should ask why American voters elected Bush and Obama, both of whom have made America more like France[.]

As we noted last week, Thomas Piketty’s new book on economic inequality has been selling better in the US than in France.  Perhaps the French are not all that thrilled with the performance of their big, centralized government, and secretly envy the Swiss per capita income (1/3 higher) and unemployment rate (2/3 lower). Economic freedom versus big government, Richard Rahn, Washington Times, 5/12/14. http://tinyurl.com/ltpzek3

To be fair, however, the Alpine country has its own debates about economic policy.  A $25 an hour minimum wage?  It may happen in Switzerland, Meritxeil Mir, Christian Science Monitor, 5/16/14. http://tinyurl.com/qgk8z82

In 2011, consumer goods were 62 percent higher in [Switzerland] than the European Union average, according to Eurostat. And Zurich is significantly more expensive than New York City when comparing consumer prices, according to Numbeo, a site that compares cost of living between cities.

#A rising tide lifts all boats – The label of “trickle down” economics, where all economic gains go to the wealthy and high earners and they may eventually share a portion with the plebes, would be deadly.  It is also unrealistic.  In a buoyant, dynamic economy, opportunities are created for everyone who has talent and wants to pitch in.   

That’s not to say high earners and the wealthy won’t reap the rewards of success, surely they will, and according to the president (whether he meant it or not) that’s fine. “We can’t wait” to strengthen the economy and create jobs, weekly address, 10/29/11. http://tinyurl.com/6bkfj2m

Now, in this country, we don’t begrudge anyone wealth or success – we encourage it.  We celebrate it.  But America is better off when everyone has had the chance to get ahead – not just those at the top of the income scale.  The more Americans who prosper, the more America prospers.

The rank and file should also benefit from economic prosperity, however, as it has in the past.  Labor rates are determined by supply and demand, and when business is good they will rise.  The challenge is growth, not inequality, Larry Kudlow, Townhall.com, 12/6/13. http://tinyurl.com/mwkqxmq

[The president] never speaks the language of growth, such as a rising tide would lift all boats. That’s the basic economic truth of the remarkable prosperity of the ’80s and ’90s, a period during which tax, regulatory, trade, and monetary barriers were reduced, and the door opened to innovation, entrepreneurship, capital formation, and job creation.

#There is no such thing as a free lunch – People are hard to satisfy.  They want what the want, and they would like to get it quickly.  So for those more interested in economic redistribution than in growing the overall economy, it’s only natural to look for ways to directly take from targeted classes and/or give to favored classes.

Such measures typically reduce overall economic growth, and they may even work to the detriment of intended beneficiaries.  Thus, as already discussed, welfare programs can backfire for participants by trapping them in long-term dependency.  Some other “no free lunch” examples follow.

Tax investors more heavily and they may find somewhere else to invest their money.  If the supply of investment capital dries up, worthwhile investments may not be made and economic growth will suffer. 

Tax businesses more heavily, e.g., by eliminating supposedly unjustified tax breaks for oil companies, and they will raise their prices, minimize investment, or even go out of business. Like it or not, the burden is shifted to the general public.

What do “feel good” environmental regulations have to do with economic equality? Not much, but that does not stop advocates from proposing such measures in the name of economic or social justice.  As with taxes, the burden will wind up on the general public.

The income of lower level workers can be enhanced by direct government action, e.g., by hiking the minimum wage as the president has so often proposed in recent months. It’s arguably a better idea than doling out more welfare benefits, and there are no government expenditures to justify. These men and women work very hard – they deserve to earn a “living wage” – “let’s give America a raise.”   

In practice, however, employers may lay off some workers or limit their work hours so the healthcare insurance benefits required for full time workers can be avoided.  Some low paid workers will wind up earning less instead of getting a raise. 

Businesses will also attempt to raise their selling prices, thereby recovering the net increase to employment costs from customers.  Price increases in April more than offset growth, marginally reducing average wages.  Feds applaud inflation despite drop in average income, Mike Shedlock, Townhall.com, 5/16/14. http://tinyurl.com/lyd5csz

Real average hourly earnings for all employees decreased 0.3 percent from March to April, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This decrease stems from unchanged average hourly earnings combined with a 0.3 percent increase in the Consumer Price Index for All Urban Consumers.

#Enough is enough – The president et al. have had control of the national government for nearly six years now, during which time the US economy has experienced a weak recovery and essentially all the gains have supposedly gone to the top 1 percent. So isn’t it at least possible that economic inequality became a problem as a result of his party’s policies?  Friendly reminder about “income equality”: Democrats run America’s poverty zones, Katie Pavlich, Townhall.com, 12/6/13. http://tinyurl.com/kyd3ad6

Research by University of California economist Emmanuel Saez shows that since the Obama recovery started in June 2009, the average income of the top 1% grew 11.2% in real terms through 2011. The bottom 99%, in contrast, saw their incomes shrink by 0.4%.
As a result, 121% of the gains in real income during Obama's recovery have gone to the top 1%. By comparison, the top 1% captured 65% of income gains during the Bush expansion of 2002-07, and 45% of the gains under Clinton's expansion in the 1990s.

In addition to growing angst over economic inequality, recent polls indicate a loss of faith in economic opportunity.  Poll: two of three Americans dissatisfied with income, wealth distribution, Caroline May, Daily Caller, 1/20/14. http://tinyurl.com/py9v6z8

Overall 54 percent of Americans are satisfied, compared to 45 percent who are dissatisfied with the opportunity to get ahead through hard work. “This measure has remained roughly constant over the past three years, but Americans are much less optimistic about economic opportunity now than before the recession and financial crisis of 2008 unfolded,” Gallup’s Rebecca Riffkin writes. “Prior to that, at least two in three Americans were satisfied, including a high of 77% in 2002.”

This is not how America’s story should end.  It’s time to turn around!

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The Pimco outlook cited for the rest of 2014 et seq. seems very high.  There has been a lot of “stimulus” spending since 2009, with little accomplished beyond running up the debt. Further “growth” will be dependent on more deficits and debt, which cannot safely be continued.  Expect stagflation ahead! – SAFE director

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5/12/14 – A clever but deeply flawed rationale for Robin Hood economics

Everyone seems to be talking about economic inequality these days, from the president (more on his perspective in a minute) to the pope (http://tinyurl.com/m9osonw). 

And a new book about inequality by French economist Thomas Piketty is sitting near the top of the Amazon bestseller list.  We even spotted an ad for “Capital” on the Drudge site, paired with “Flash Boys” (a tale about the stock market being rigged) by Michael Lewis.

 SAFE’s previous coverage of the inequality issue may have been a bit cursory, so we decided to reprise the president’s view and then segue into a discussion of Piketty’s book – an important work that will no doubt be cited frequently in coming months.

A. The bully pulpit - Speaking in Osawatomie, Kansas several years ago, the president expounded on one of his pet themes – the need for government action to counteract economic inequality.   

Why Osawatomie?  Theodore Roosevelt (at the time a former president itching to get back in the game) had given a “New Nationalism Address” there over 100 years earlier. Kansas Historical Society, Robert La Forte, Summer 1966. http://bit.ly/RuAxOV

The president reprised the 1910 speech, which (being ahead of public opinion at the time) had resulted in TR being “called a radical . . a socialist . . even a communist.”  Subsequently, in his 1912 campaign, TR “fought for . . . an eight-hour workday . . . a minimum wage for women . . . insurance for the unemployed and for the unemployed and for the elderly. and those with disabilities . . . a progressive income tax.” Remarks on the economy, Osawatomie High School, 12/6/11. http://1.usa.gov/RoXWlg

By running for president again, TR split the Republican Party and gave Woodrow Wilson the election. His thinking was on the right track, however, according to the president, and “today we are a richer nation and a stronger democracy” as a result.

After the US “triumphed over the Great Depression and over fascism, it had the largest middle class and the strongest economy that the world has ever known. *** Every American shared in that pride and in that success -- from those in the executive suites to those in middle management to those on the factory floor. So you could have some confidence that if you gave it your all, you’d take enough home to raise your family and send your kids to school and have your healthcare covered, put a little away for retirement.”

In time, however, “the basic bargain that made this country great” eroded *** hard work stopped paying off for too many people *** those at the very top grew wealthier from their incomes and their investments *** everybody else struggled with costs that were growing and paychecks that weren’t -- and too many families found themselves racking up more and more debt just to keep up *** in 2008, the house of cards collapsed *** [the depression] plunged our economy and the world into a crisis from which we’re still fighting to recover. It claimed the jobs and the homes and the basic security of millions of people -- innocent, hardworking Americans who had met their responsibilities but were still left holding the bag.”

The fundamental problem was income inequality, said the president, and he reeled off some supporting statistics. “In the last few decades, the average income of the top 1 percent has gone up by more than 250 percent to $1.2 million per year *** the typical CEO who used to earn about 30 times more than his or her worker now earns 110 times more *** over the last decade the incomes of most Americans have actually fallen by about 6 percent.”

What were the consequences of the growing gap between top and lower level salaries? “When middle-class families can no longer afford to buy the goods and services that businesses are selling [and] people are slipping out of the middle class,” said the president, “it drags down the entire economy from top to bottom.”  He also cited “a recent study [showing] that countries with less inequality tend to have stronger and steadier economic growth over the long run.”

B. Dueling viewpoints - We don’t know what “recent study” the president was referencing, but a nearly 700-page book has since been published that elegantly supports his thesis.  Capital in the Twenty-First Century, Thomas Piketty (translated by Arthur Goldhammer), Belknap Press (2014).

Piketty’s book is based more heavily on data (since 1800 or so in numerous countries) than on theory.  The French economist (who spent some years in the US) concludes that income/wealth inequality grew during much of the 19th century, fell in the first half of the 20th century as the result of two world wars and the 1930’s depression, and in the postwar era has started to grow again.

The book does not suggest inequality will inevitably increase.  Certain factors tend to increase inequality over time (e.g., the return on previously accumulated capital or “r”), while others (e.g., the tendency for information to be disseminated over time, and economic/wages growth or “g”) have the opposite effect.  Moreover, income and wealth distribution are not simply determined by the laws of economics; political factors are crucial in determining the applicable government ground rules.

Some economists have concluded that economic growth will typically equal or exceed the return on capital [r < g], creating a situation in which “a rising tide lifts all boats.” Piketty’s data indicate, however that the real economic growth rate – excluding catch-up situations like the high growth rate for China in recent decades and taking into account losses from wars, etc. – averages a relatively modest 1.6-2.0% per year.  This suggests that the return on capital should generally exceed growth [r > g], so “the rich get richer and the poor get poorer.”

To turn things around, Piketty suggests hiking the top income tax rate to 80% and imposing a global wealth tax (e.g., 0.1% below E 200,000, 0.5% for E200,000 – 1,000,000, 1.0% for E1,000,000-5,000,000, 2.0% for over E5,000,000).  The governments concerned could presumably find productive ways to spend the extra revenue.  Problem solved? 

Full disclosure: The foregoing recap is based on Piketty’s lengthy introduction (which is well written and can be accessed for free) plus published comments on the book. See, e.g., “Can’t be bothered to read Piketty?  Here’s a cheat’s guide,” Jeremy Warner, UK Telegraph, 5/7/14. http://bit.ly/1nlLVKS

To date (May 10), 358 reviews of Piketty’s book have been posted on Amazon – 187 “five star” ratings, 113 “one star” ratings, and 58 intermediate ratings.  It would be a safe bet that the political leanings of the reviewers contributed to this bipolar distribution.  The five star reviews express wonder and delight; the one star reviews are mostly pithy putdowns.  http://amzn.to/1obf1MV

Capital is selling briskly in the US and UK (more slowly in France), and it will probably figure in US political discourse for years.  France’s Thomas Piketty could be the Left’s version of anti-debt Carmen Reinhart-Ken Rogoff, Joseph Lawler, Washington Examiner, 4/16/14. http://washex.am/1mHueS7

Conservatives are terrified, says one liberal commentator, because so far they haven’t been able to counter Piketty’s exposure of the lie that those in the 1% (or even more elite 0.1%) have earned their place in the economic pecking order.  The Piketty panic, Paul Krugman, New York Times, 4/24/14. http://nyti.ms/1k20UnU

The really striking thing about the debate so far is that the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling — in particular, claims that Mr. Piketty is a Marxist, and so is anyone who considers inequality of income and wealth an important issue.

Other pundits have offered criticisms of Capital, however, that strike us as substantive in nature.  For example:

# The book ignores plenty of historical evidence about the negative effects of higher marginal tax rates (and conversely the positive effects of lower rates). Piketty’s high-tax prescription is warmed-over liberal economics, Stephen Moore, Washington Times, 5/5/14.  http://tinyurl.com/pzq6y2k

That the left has come full circle to celebrating the anti-growth tax rates of the bad old days of the 1970s is a depressing reminder that liberals really haven’t learned much of anything over the past several decades. In the Carter years, the combination of high tax rates and high inflation pushed Americans into ever-higher tax brackets, which contributed to the worst losses in middle-class incomes since the Great Depression.

# Piketty exaggerates returns on capital before 1800 and relies heavily on projected versus historical data for his r > g prediction.  Will 80% income taxes and a new 10% [2%?] wealth tax fix our economy?  Hunter Lewis, townhall.com, 5/4/14. http://tinyurl.com/qylup9z

#The possibility that the ultra-rich may use their wealth in constructive ways, e.g., to fund productive investments, is glossed over.  It seems to be assumed that the government has a duty to take their money, which flies in the face of traditional ideas about the proper role of the government. Fighting inequality: Rule of law vs. legal plunder, James Dorn, Investor’s Business Daily, 4/29/14. http://tinyurl.com/pcbt2kv

True morality and justice require the protection, not the taking, of property. Following the policy prescriptions of Piketty and Shiller would not lead to social harmony and prosperity, but rather to injustice and the loss of liberty.

#It is not apparent that the government would make constructive use of money taken from the wealthy, and evidence re the historical results of wealth taxes should have been considered.  Capital punishment: Why a global tax on wealth won’t end inequality, Tyler Cowen, Foreign Affairs, May/June 2014.  http://tinyurl.com/kwaat8l

-Maybe it is [his lack or practical experience] that allows Piketty to write the following words with a straight face: “Before we can learn to efficiently organize public financing equivalent to two-thirds to three-quarters of national income” -- which would be the practical effect of his tax plan -- “it would be good to improve the organization and operation of the existing public sector.” It would indeed. But Piketty makes such a massive reform project sound like a mere engineering problem, comparable to setting up a public register of vaccinated children or expanding the dog catcher’s office.

-Historically, [wealth] taxes have been implemented slowly, with a high level of political opposition, and with only modestly successful results in terms of generating revenue, since potentially taxable resources are often stashed in offshore havens or disguised in shell companies and trusts. And when governments have imposed significant wealth taxes quickly -- as opposed to, say, the slow evolution of local, consent-based property taxes -- those policies have been accompanied by crumbling economies and political instability.

C. Motivation – Analysts often find reasons for action they would like to see taken, i.e., they start with the conclusion and work backwards.  Could this be how Piketty’s book was written?

Similarly, people are typically receptive to study results that match their preconceptions.  It’s called the confirmation bias.  Could that help to explain why Capital is getting such a warm welcome in some quarters?

Fans of big government (Side A) are disposed to favor tax increases, which can then be used to fund more government spending. Their intellectual opponents feel otherwise, and each side has a narrative (see below) to justify its point of view.  Never the twain shall meet, 2/4/13

SIDE A -Traditional societies were plagued by deep-rooted inequality, exploitation, and irrational traditions. The noble human aspiration for autonomy, equality, and prosperity struggled mightily against the forces of misery and oppression, and eventually succeeded in establishing modern, liberal, democratic, capitalist, welfare societies. Much work remains, however, to dismantle the powerful vestiges of inequality, exploitation, and repression.

SIDE B - America was once a shining beacon. Then liberals came along and erected an enormous federal bureaucracy that handcuffed the invisible hand of the free market . . . took money from hardworking Americans for the idle and undeserving . . . abandoned traditional American values of family and personal responsibility . . . neglected the American military. Now it is time to take our country back from those who have sought to undermine it.

Here are a few examples of the lust for new sources of tax revenue, some proposed and others already being implemented.  A tax on healthcare insurance (HCI) policies, medical devices, not signing up for approved HCI coverage, etc. – current proposals to hike gas taxes, mandates for ethanol in motor fuel, regional greenhouse gas emission regimes that drive up the cost of electric power – taxes on the internet (or at least internet sales) - a financial transactions tax – a value added tax (which Europe already has, but the US has so far avoided).

Piketty’s book may have reinforced the case for a wealth tax, but that idea was already under discussion – both in this country and elsewhere. The growing threat of a wealth tax, Daniel Mitchell, Cato Institute, 5/6/14.  http://tinyurl.com/pvf2wpw

Moreover, by setting a 2% target rate for inflation and attempting to ensure that it is not undershot, the Federal Reserve is already effectively seeking to impose – on everyone – a wealth tax of the magnitude that Piketty proposes for wealth of over E5,000,000. By its own yardstick, the Fed is falling short, Binyamin Appelbaum, New York Times, 4/30/14. http://nyti.ms/1nhusD6

It might be well for all concerned to recall an old rule of thumb:  If you want less of something, put a higher tax on it.  Is that really how we feel about the income and wealth a robust economy can generate?

We don’t mean to suggest that economic inequality doesn’t matter.  Side B cannot hope to win the debate without convincing Americans that its economic ideas will do more to help people in lower layers of the economic pyramid than Side A’s ideas.  Republicans need to get to know their enemies on income inequality, Cathy Reisenwitz, townhall.com, 4/28/14. http://tinyurl.com/n8rkkbl

Framing some winning arguments may sound like an impossible challenge, but tune in next week and we’ll give it our best shot.

top      wwhipple3@verizon.net


5/5/14 – The scourge of political dishonesty

Do politicians have a constitutional right to lie while practicing their art?  And if so, do their surrogates and supporters enjoy the same protection?

Oddly enough, just such a case was recently argued before the Supreme Court. It involved the validity of an Ohio law (a dozen or so other states have similar statutes) criminalizing falsehoods about candidates during a political campaign. Ministry of truth: SCOTUS skeptical of law to police campaign “lies,” Jacqueline Klimas, Washington Times, 4/22/14.  http://bit.ly/1u1HQNn

At issue were billboards prepared in 2010 by the Susan B. Anthony List, a pro-life group, accusing Steven Driehaus of supporting taxpayer-funded abortions because the Democrat voted in Congress for the Affordable Care Act.  Mr. Driehaus . . . filed a complaint with the Ohio Elections Commission. The Commission found “probable cause” that the pro-life group violated a state law against making false statements in the 60-day window before the election.

Given the tendency to stretch the truth in politics, plus the subjectivity of political opinions, such a law seems wildly impractical.  Ohio’s ill-conceived political campaign truth squad on trial, Washington Times, 4/21/14. http://bit.ly/1pM1ld9

Politicians lie. Political groups do, too. Exaggeration, obfuscation and misinterpretation is the way politics has always been played. Political questions are not often black or white, but usually a shade of gray.

Why not let voters (hopefully aided rather than confused by the media) evaluate the truthfulness of political statements for themselves  – subject to preserving the traditional legal remedies for libel and slander?  The Court will probably decide to do just that if the case isn’t dismissed on procedural grounds (Driehaus dropped his complaint after losing the election so there is no present controversy), and we would be inclined to agree.

Political dishonesty is a serious problem, however, and Americans will not automatically recognize it.  Fans of smaller, more focused, less costly government (Side B) must stay on their toes if they hope to carry the day. Tips for fiscal visionaries: Be persistent or get run over (defenses against recommendation to drill more aggressively for oil), 4/25/11; Policies and politics are closely connected (deceptive slogans, credibility attacks, stacked proceedings & disruptive behavior), 5/23/11. 

In a similar vein, this week’s entry will review some recent examples of political dishonesty – $5 trillion misstatement, secret science, Benghazi cover story – focusing on the potential harm and offering some thoughts about the path forward.

A.  $5 trillion misstatement – Lest it seem that we are picking on a single speech by the vice president (VP), perhaps incorporating one of his famous gaffes, this example will start with a bit of history.

One of the Democratic talking points during the last presidential campaign was that the challenger would cut income taxes by $5 trillion over 10 years to the detriment of the middle class.  When the president and the challenger crossed swords, this claim was repeatedly made and denied.  The first presidential debate was instructive, 10/8/12.  

The president said (transcript 3, 4, 6) the challenger was proposing a $5 trillion tax cut, which, by inference, would be paid for by the “middle class. The challenger fired back that the $5 trillion tax cut claim was not factual.  For example (transcript 7):

. . . let me repeat what I said.  I’m not in favor of a $5 trillion tax cut.  That’s not my plan.  My plan is not to put in place any tax cut that will add to the deficit.  That’s point one.  So you may keep referring to it as a $5 trillion tax cut, but that’s not my plan.

We agreed with the challenger “as his proposed reduction in tax rates is not offered in isolation.  He also proposes to eliminate enough tax preferences and stimulate enough economic growth that the overall result would be revenue neutral.”

Yet a few days later, the vice president (VP) insisted – in a debate with his GOP opponent (Rep. Paul Ryan) – that such an outcome was impossible.  Lawyers do not necessarily make great leaders, 10/22/12

The vice president interjected that the planned result of the Romney tax plan was “not mathematically possible” and Ryan said it was not only mathematically possible but had been done before several times.  Style points aside, the ensuing back and forth established nothing.

With all due respect, the VP was wrong.  For a concrete example of how tax rate cuts could be fully offset by eliminating tax preferences (with the resulting economic gains as gravy), see SAFE’s SimpleTax proposal, November 2010. http://bit.ly/1gJc4xf

Now fast-forward to the present, with Democrats (still in control) on the defensive about an anemic economic recovery.  In a speech at George Washington University, the VP attempted to change the subject by blaming Republicans for economic inequality, etc. and making dire predictions about what they might do if given the chance.  Joe Biden: Republicans will “further damage” the middle class, Susan Crabtree, Washington Examiner, 4/28/14. http://washex.am/1nK2NL1

The key claim to support this case was, you guessed it, that Republican would cut taxes for the benefit of the upper echelon.  And by way of proof, the VP cited the “Ryan budget” (budget plan passed by the GOP-controlled House).

The Ryan budget calls for cutting key domestic programs by about 15 percent and an additional $5.7 trillion in tax cuts — the vast majority of which Biden said “goes into the bank accounts of the very wealthy.”

A quick scan of the House budget (http://budget.house.gov/fy2015/) will demonstrate that it does not call for a huge tax cut. The stated goal in the tax area is revenue neutral reform, and the projected change in tax revenues versus “current policy” (CBO baseline) over the next 10 years is zero.  See chart at page 90.

Also, the VP neglected to point out that the president’s supposedly balanced budget proposal calls for a $3.2 trillion increase in revenue – without any net reduction in spending.  President’s fiscal plan is a nonstarter, now what? 3/10/14.

While the House budget plan does show $5.1 trillion in spending cuts, which presumably works out to about 15% of currently projected domestic spending, the VP probably should have explained why the president’s budget proposal fails to call for at least a modicum of spending discipline.  Ryan budget dismissed [by the president in another college speech] as a “meanwich,” 4/14/14.

2015-2024, $T

Ryan plan

President’s plan

Outlays + adj.

(42.4)

(48.7)

Revenues

40.6

43.8

Deficit

(1.8)

(4.9)

We doubt that many George Washington students were inclined to question, let alone attempt to evaluate, the VP’s claim about a GOP-supported tax cut for the upper echelon.  Sadly, conservatives are an endangered species at many universities – more likely to be laughed at than listened to.  What it’s like to be conservative on a liberal college campus, Ryan Struyck, go.com, 4/25/14. http://abcn.ws/1hWI9nn

But Susan Crabtree, the reporter for the story, might have done some checking before portraying this claim as factually plausible.  And we on Side B need to hammer such misstatements at every opportunity, because otherwise they will slide by and discredit genuinely constructive efforts like the House budget proposal.  

B. Secret science – The issue involved in this example may not be of the EPA’s making, but the agency hasn’t shown much interest in resolving it – and all concerned should have seen what was coming.  The question Obama’s EPA pick Gina McCarthy can’t answer, Mark Drajem, Business Week, 5/23/13. http://buswk.co/1eZAYYw

. . . there’s one query the EPA’s head of air regulation [a reference to McCarthy’s former position] has no way to respond to, and it could derail her nomination [as EPA director]. GOP Senator David Vitter of Louisiana—who alone has made 400 inquiries—is insisting she turn over data linking air pollution to early death. The EPA has used that research, much to the consternation of energy companies, to justify regulations that curb pollution from diesel engines, coal-fired power plants, and industrial boilers. *** [But there’s] one problem: The agency doesn’t possess the data. They were compiled by Harvard University two decades ago—long before McCarthy became an EPA official—and confidentiality agreements with thousands of participants prevent researchers from making the information public. Nor can the EPA access the Harvard analysis.

During the protracted fight over her appointment, McCarthy reportedly made some sort of commitment to make the data available. But this didn’t happen, and she has now changed her tune.  EPA chief promises to go after Republicans who question agency science, Michael Bastasch, Daily Caller, 4/28/14.  http://bit.ly/1lwjPKm

In a speech to the National Academy of Sciences, which also brought up the debate about manmade global warming, McCarthy slammed the “small but vocal group of critics” who try to "vilify the work of reputable scientists and [the] EPA." EPA administrator: Newsflash! “People like us,” Susan Jones, cnsnews.com, 4/28/14. http://bit.ly/1fTz4rB

People are entitled to their own opinions, but not their own facts. "You can't just claim the science isn't real when it doesn't align well with your political or financial interests. Science is real and verifiable. With the health of our families and our futures at stake, the American people expect us to act on the facts, not spend precious time and taxpayer money refuting manufactured uncertainties.

Fine, we respect science and facts too, but independent verification of experimental results is a key part of the scientific method – not a step that can be skipped when not convenient.  And although the EPA presumably provided all the data to which it had access, private researchers are still withholding data that would be needed to confirm the test results.  Ergo, critics are being asked to accept on faith that fine airborne particles measuring 2.5 micrograms (one millionth of a gram) or less “are killing thousands of Americans every year.” Should it really be considered anti-scientific to oppose economic regulations that are based on unsubstantiated studies conducted two decades ago?

Despite the withholding of the data, research continues and more recent studies have reached different conclusions – which the government is ignoring. EPA concedes: We can’t produce all the data justifying clean air rules, Barbara Hollingsworth, cnsnews.com, 4/11/14. http://bit.ly/1rbqv03

Stanley Young and Jessie Xia of the National Institute of Statistical Sciences in a paper last year: “There is no significant association of PM2.5 with longevity in the west of the United States,”Young and Xia  noted, adding that “our findings call into question the claim made by the original researchers.” (See young080113.pdf)

 

Another recent study by Johns Hopkins-trained biostatistician Steve Milloy found “no correlation between changes in ambient PM2.5 mortality” and any cause of death in California between 2007 and 2010.

Finally, as though to demonstrate her agency’s lack of objectivity, McCarthy has encouraged scientists to report results that would serve the administration’s political ends.  EPA administrator: We “look at climate change as something where we . . . can grow jobs,” Penny Starr, cnsnews.com, 1/30/14. http://bit.ly/1fClDRL

I need you *** to tell people that science and technology improvements will allow us to take action moving forward that meets the needs of this president as he has charged EPA, which is to look at climate change as something where we can innovate and we can move forward to grow the economy, to grow jobs, to understand how we’re producing sustainable, livable communities.

Our ideas on redirecting this agency are looking better and better.  Dear EPA: shape up or ship out, 11/29/10.

And more generally, Side B needs to oppose attacks on the scientific method that would silence dissenters or support political agendas. No scientific question should ever be considered “settled” if some scientists are dissatisfied, because now and then the majority view turns out to be stunningly wrong!

C. Benghazi cover story – When we previously wrote about this subject, there were signs of information being suppressed. Thus, a review board had faulted security arrangements for the Benghazi consulate, etc., yet no one had been effectively held accountable.  It remained to be seen whether congressional investigators would accomplish more. Five whoppers: a sampling of misleading statements (see item three), 1/21/13.

Four months after the Benghazi attack, many questions remain unanswered, including the appearance of a cover-up, and critics are continuing to press for answers.  (Go critics, we say.)

The subsequent testimony of outgoing Secretary of State Hillary Clinton was not very informative.  Her basic position seemed to be that it was pointless to keep harping on what had happened in Benghazi as opposed to ensuring that State Department facilities and personnel around the world were better protected in the future.  See especially her exchange with Senator Ron Johnson of Wisconsin (second video clip). The 8 memorable moments from Hillary Clinton’s Benghazi testimony, Sean Sullivan, Washington Post, 1/25/13/ http://wapo.st/1nO3Byz

Here is the question Senator Johnson apparently wanted to ask (the witness parried his efforts with a dazzling display of histrionics): Why did high-ranking officials, including the president and secretary of state, repeatedly link this deadly attack to alleged public outrage about an obscure anti-Muslim video?

In the months since Secretary Clinton’s testimony, it has been established through the testimony of other witnesses (military officers, State Department personnel, and field intelligence agents) that, as they recognized and reported almost immediately, the Benghazi incident was a preplanned and coordinated terrorist attack – probably executed by elements of Al Qaeda. 

Nevertheless, an anti-Muslim video, which few people if any in Libya had actually seen, was immediately identified as a possible cause of the Benghazi attack and repeatedly brought up in public statements about the matter.

9/11/2 - Press release by Secretary Clinton while Benghazi attack was still in progress, http://1.usa.gov/1o9QO74: Some have sought to justify this vicious behavior as a response to inflammatory material posted on the Internet. The United States deplores any intentional effort to denigrate the religious beliefs of others. Our commitment to religious tolerance goes back to the very beginning of our nation. But let me be clear: There is never any justification for violent acts of this kind.

9/12/12 - Remarks by the president in the Rose Garden, http://1.usa.gov/1kr2wGL: Since our founding, the United States has been a nation that respects all faiths.  We reject all efforts to denigrate the religious beliefs of others.  But there is absolutely no justification to this type of senseless violence.  None.  The world must stand together to unequivocally reject these brutal acts.

9/14/12 - Remarks by Secretary Clinton at Andrews Air Force Base (transfer of remains ceremony), http://bit.ly/1lHgOa7: This has been a difficult week for the State Department and for our country.  We’ve seen the heavy assault on our post in Benghazi that took the lives of those brave men.  We’ve seen rage and violence directed at American embassies over an awful internet video that we had nothing to do with.  It is hard for the American people to make sense of that because it is senseless, and it is totally unacceptable.

9/16/12 - Remarks by UN Ambassador Susan Rice (now national security adviser) on five Sunday talk shows (extract from Face the Nation), http://on.wsj.com/1fADCIH: . . . we’ll want to see the results of that [FBI] investigation to draw any definitive conclusions. But based on the best information we have to date, what our assessment is as of the present is in fact what began spontaneously in Benghazi as a reaction to what had transpired some hours earlier in Cairo where, of course, as you know, there was a violent protest outside of our embassy– –sparked by this hateful video. But soon after that spontaneous protest began outside of our consulate in Benghazi, we believe that it looks like extremist elements, individuals, joined in that– in that effort with heavy weapons of the sort that are, unfortunately, readily now available in Libya post-revolution. And that it spun from there into something much, much more violent.

9/25/12 - Remarks by the president to UN General Assembly, http://1.usa.gov/1rMfwuw:  . . . a crude and disgusting video sparked outrage throughout the Muslim world.  Now, I have made it clear that the United States government had nothing to do with this video, and I believe its message must be rejected by all who respect our common humanity.  It is an insult not only to Muslims, but to America as well -- for as the city outside these walls makes clear, we are a country that has welcomed people of every race and every faith. 

In our view, this storyline represented an effort to spin the Benghazi attack in a politically favorable way instead of honestly reporting what had happened.  Others disagreed, however, saying the situation in Benghazi and elsewhere was complex, Ambassador Rice was speaking based on CIA talking points that reflected the best information available at the time, and the purported importance of the video was downgraded later when better information became available.  See, e.g., “CIA talking points for Susan Rice called Benghazi attack ‘spontaneously inspired’ by protests,” CBS News, 11/15/12. http://bit.ly/1lHgOa7

As time went on, it began to appear the inquiry would blow over.  But then a new batch of e-mails surfaced, providing a direct link to the White House and rekindling public interest in the issue.  E-mails on  Benghazi show aides’ effort to make Obama look “statesmanlike,” Guy Taylor, Washington Times, 4/29/14. http://bit.ly/1lycA4w

In one of the emails — written just hours after a top CIA official [Michael Morell] warned the White House that the Benghazi attack might not have been inspired by the Internet video that had triggered protests in Egypt, Yemen and other nations in the region — the administration’s strategic communications adviser [Ben Rhodes] told UN Ambassador Susan E. Rice in a memo to push the favorable story line anyway on national television.

This information was not supplied in compliance with subpoenas from congressional committees, which had supposedly been fully complied with (the Ben Rhodes e-mail had reportedly been provided in such heavily redacted form as to be useless), but rather in connection with a lawsuit filed by Judicial Watch (a private watchdog group) against the State Department.  JW press release, 4/29/14. http://bit.ly/1u0vh4X

“Now we know the Obama White House’s chief concern about the Benghazi attack was making sure that President Obama looked good,” said Judicial Watch President Tom Fitton. “And these documents undermine the Obama administration’s narrative that it thought the Benghazi attack had something to do with protests or an Internet video.  Given the explosive material in these documents, it is no surprise that we had to go to federal court to pry them loose from the Obama State Department.”

Dropping his previous resistance to the idea, House Speaker John Boehner announced that a special House committee would be appointed to consolidate and continue the investigation. And Secretary of State John Kerry was summoned to explain the State Department’s apparent stonewalling of document requests.  Boehner announces special committee on Benghazi, Kerry subpoenaed, Fox News, 5/2/14. http://fxn.ws/1i0RJpr

"Americans learned this week that the Obama Administration is so intent on obstructing the truth about Benghazi that it is even willing to defy subpoenas issued by the standing committees of the People's House. These revelations compel the House to take every possible action to ensure the American people have the truth about the terrorist attack on our consulate that killed four of our countrymen," [Boehner] said in a statement. 

Democrats will predictably condemn the special committee on Benghazi as political grandstanding and a waste of time and money.  GOP escalates Benghazi probe, Politico, 5/2/14. http://politi.co/SkLjIP

“These actions are not a responsible approach to congressional oversight, they continue a trend of generating unnecessary conflict for the sake of publicity, and they are shockingly disrespectful to the Secretary of State,” said Rep. Elijah Cummings, the top Democrat on the Oversight panel.

But in our opinion, the appointment of a special committee – as opposed to having several standing House committees (Armed Services, Foreign Affairs, and Oversight) involved and inevitably tripping over each other – is a step that should have been taken some time ago.

There are serious unanswered questions about the Benghazi attack, including an apparent cover-up, and the American people deserve the truth.  Although congressional investigations are often ineffective, this effort will hopefully prove an exception.

Representative Trey Gowdy (R-SC), a former prosecutor, is apparently the leading candidate to head the special committee.  He appeared on Fox News (interviewed by Greta Van Susteren) on May 2, and made clear that he was ready, willing and able.

Stay tuned!

top      wwhipple3@verizon.net


4/28/14 – Doubling down on campaign finance “reform”

Every citizen of voting age is entitled to one vote in elections, with the exception of some convicted criminals, so in theory the rich have no more say than anyone else. 

People in the upper echelon wield more influence in practice, however, due to their greater ability to dispense the “mother’s milk of politics” – political contributions.  Although politicians claim to be concerned about the views of all their constituents, they return phone calls of major donors while their staff members service the hoi polloi in a perfunctory manner or ignore them entirely.

Some observers may see nothing wrong here.  Perhaps the successful and wealthy are a little smarter than the rest of us, why shouldn’t they have more influence?  And in any case, they don’t all think alike, so their opinions will tend to balance out. 

Others view the current state of affairs as anti-democratic and corrupt. See, e.g., Republic Lost, Lawrence Lessig (Harvard Law professor), 2011. http://bit.ly/Mp4uNG

Our Congress has been corrupted; its independence, weakened.  *** From the side of Congress, the corruption weakens the focus on the people, as it strengthens the focus on the funders [special interests]. *** From the side of the people, the corruption confirms the irrelevancy of democracy.  We are taught our place.  We find other things to do. 

The result is to block the agendas of both the left and the right, says Lessig, ensuring a lethal build-up of unsolved problems.  He proposes that politicians be encouraged to forswear normal campaign fundraising and accept capped donations from individual donors with a $50 per person government subsidy as a sweetener.   

We doubt that such an approach could eliminate political influence of the wealthy; the probable result would be to drive said influence further underground.  And for reasons to be discussed, the cure would likely prove worse than the disease. 

A.  Current state  – Want to get a headache?  Try to make sense of the federal campaign contribution limits for individual donors, party committees, political action committees, etc. that have resulted from repeated “reform” efforts. How much can I contribute? Federal Election Committee (FEC), http://1.usa.gov/1ig7Fpc (April 2014).

An individual may contribute $2,600 per election for any given candidate, with calendar year limits of $32.4K to a national party committee (“Obama hits California fundraisers to raise money for Democrat,” NYDailyNews, 4/4/13, http://nydn.us/1igC8h0), $10K to state/local party committees, and $5K to political action committees (PACs).  The goal of these limits is to avoid the appearance of impropriety, not to prevent outright bribery, so the absence of a quid pro quo does not justify a waiver.

The foregoing limits may seem high to many people, but they could cramp the style of well-heeled individuals – not to mention corporations and labor unions, which are barred from making any political contributions to candidates. Prohibited contributions, FEC, http://1.usa.gov/1nJ1vgK (April 2014). 

These restrictions must be squared with the First Amendment, which provides that “Congress shall make no law . . . abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.”  Wouldn’t it be logical to consider political contributions as a form of political expression just as deserving of protection as burning the American flag or picketing military funeral processions?

Not to worry; the political contribution limits can be circumvented in a variety of ways and are therefore not nearly as restrictive as they might seem at first blush.

One technique available to companies and unions alike is to channel contributions through political action committees.  And for all the fuss about how the Citizens United decision has opened the floodgates for corporate money, as will be discussed shortly, other donors contributed considerably more money to PACs last year than corporations did. How unions trumped corporations in big contributions, Sean Sullivan, Washington Post, 2/7/14. http://wapo.st/1lKc160

We should hasten to add that PAC contributions represent the tip of the political spending iceberg. Political spending by unions far exceeds direct donations, FoxNews (based on a Wall Street Journal report), 7/10/12. http://fxn.ws/1idsSyZ

• Unions reportedly spent over $4.4 billion for political activities between 2005 and 2011, or some $700 million per year.  Only about ¼ of this total was reported to the FEC or the IRS; the remainder was reported to the Labor Department.

• Corporate political spending is harder to quantify.  Some of it (such as contributions to the US Chamber of Commerce political wing) doesn’t need to be disclosed, and many contributions are made by corporate employees versus the companies they work for. Also, a major portion of corporate spending goes for lobbying versus supporting political  candidates or parties, i.e., is basically a business expense versus a true contribution.

• Most union spending benefits Democrats, while companies and company employees are more likely to hedge their bets. Thus, according to the Center for Responsive Politics, Democrats received 55% of the $2 billion contributed by corporate PACs and company employees in 2008.

Another technique for averting limitations on political spending is to pay for political ads that do not directly endorse any candidates and are not coordinated with any campaign organization – but which will likely benefit one side or the other.  Consider the significance of someone with substantial resources weighing in on comprehensive immigration reform or GovCare, for example, during the run-up to this year’s elections. 

Note that political ads clearly fall under the “free speech” heading. Who is the FEC to dictate what individuals or groups can or cannot say about the issues of the day, or to rule that it is too close to the election for them to be speaking out?

The McCain-Feingold Act did attempt to impose various restrictions on spending for political ads by companies, unions, and nonprofits, but these directions were blown away in early 2010 by the Supreme Court’s decision in Citizens United.  Just like natural persons, it was held, corporations, unions, and nonprofits may spend as much as they want on independent political ads.  High court unleashes political ad spending, Stephen Dinan, Washington Times, 1/22/10.  http://bit.ly/RPjCaC

This decision was bitterly attacked by Side A leaders – including the president during his State of the Union address, with six members of the Supreme Court sitting before him in their judicial robes as invited guests.   Washington is not working so let’s take another helping, 2/1/10.

With all due deference to separation of powers, last week, the Supreme Court reversed a century of law that I believe will open the floodgates for special interests, including foreign corporations, to spend without limit in our elections.

One Side A talking point against Citizens United is that corporations, not being natural persons, are not entitled to free speech. As Justice Clarence Thomas has pointed out, however, the First Amendment rights of people engaged in group efforts should not be dependent on the form of organization they choose for legal purposes.  And by the way, the New York Times et al. happen to be corporations.  Justice defends ruling on finance, Adam Liptak, New York Times, 2/3/10. http://nyti.ms/1k3seSw

“If 10 of you got together and decided to speak, just as a group, you’d say you have First Amendment rights to speak and the First Amendment right of association,” he said. “If you all then formed a partnership to speak, you’d say we still have that First Amendment right to speak and of association.” *** “But what if you put yourself in a corporate form?” Justice Thomas asked, suggesting that the answer must be the same.

Most recently, the Supreme Court chipped away at the political contribution limits for individual donors in McCutcheon v. FEC.  Although the limits on contributions to specific candidates and political committees were not affected, this 5-4 decision voided a cap of $123,200 on an individual’s aggregate campaign contributions during a 2-year election cycle. Supreme Court lifts ban on aggregate campaign contributions, Richard Wolf & Fredreka Schouten, USA Today, 4/2/14. http://usat.ly/1i25rED

Under the court's ruling, donors will have to stick to that $2,600 limit but can give to as many campaigns as they want without worrying about the previous $123,200 ceiling. The decision also could jeopardize separate contribution caps in at least a dozen states, from Arizona to Wyoming.

Critics claim that the current Supreme Court majority is intent on gutting all limits on political contributions – step by step – unless outright bribery is involved.  Understanding the Supreme Court’s campaign finance ruling, Paul Barrett, Business Week, 4/3/14. http://buswk.co/1tM6mlq

The only limiting principle Roberts & Co. seem to perceive to the First Amendment’s reach in this regard is quid pro quo corruption: when money buys a specific favor from a particular politician.

In any case, the limits on campaign contributions do not seem very robust. One might conclude that it’s time for either (a) another round of campaign finance reform, perhaps along the lines proposed by Professor Lessig, or (b) recognition that there is no practical way to keep money out of politics so we should stop trying.

B. Tighten campaign finance limits - As an indictment of the current system, Professor Lessig’s book is generally on the mark.  The apparent problems have to do with his proposed solutions.

The dollar volume of campaign spending has soared, in part due to an increasingly sharp partisan divide in this country.  Much of the money comes from big donors, because they are the ones who can afford to provide it.  Politicians spend an inordinate amount of their time and energy in fund raising activities, and they are well aware of the wishes of wealthy individuals, companies and unions that are supporting them – or who might choose to bankroll someone else if displeased by what they are doing.

This is not to say politics is totally corrupt, politicians have no regard for the general good, etc. – but good intentions often weaken over time while the support of dubious policies is rationalized.  And no wonder, as the tradition of citizen-politicians serving a term or two (“Mr. Smith goes to Washington”) is fading, while more and more politicians view politics (perhaps culminating in a lucrative position on K Street) as a career.

In principle, there would be much to be said for migrating towards a system in which political spending came in smaller increments from many more people than at present.  And although Professor Lessig advocates government subsidies ($50 per registered voter, which would currently add up to about $10 billion) for such a change, he would empower people to direct the subsidies to the candidates of their choice along with up to $100 from their own pockets. 

In other words, Lessig is not simply proposing that the government pay for political campaign spending, which might motivate a great many people to throw their hats in the ring. That’s the good news.

But one suspects that most of the money flowing to candidates under his system would be coming from the government rather than from private citizens, which is problematic because government subsidies typically have undesirable side effects.  Thus, to cite an example from another context, student loan subsidies have helped to fuel a rapid run-up in the cost of higher education.  Out-of-control college tuition, Washington Times, 10/26/11. http://bit.ly/1k67hXk

Nor would Lessig’s proposal eliminate the political influence of the wealthy and well-connected, for there would be no change in the ground rules for political ads.

This is not a solution that says speak less.  It is a solution that would, if adopted, allow people to speak more.  Yet in that may lie its Achilles heel.  For, as I’ve already remarked, the effect of the Supreme Court’s decision in Citizens United has been to encourage a massive growth in “independent” political expenditures . . .

In the eyes of the public, the perception of impropriety might be reduced.  Lavishly priced fundraisers (wonder what goes on at those affairs?) would presumably disappear, for example, if individual contributions to a candidate or party were capped at $100. And if the lion’s share of campaign expense was being borne by the government, how could anyone suspect things weren’t on the up and up? 

Direct campaign contributions involve some degree of accountability, however, as a candidate is responsible for how the money is used.  If his or her campaign unleashes outrageous attacks on an opponent, for example, the candidate may find it necessary to back down.  In the case of independent political ads, the candidate could simply disclaim responsibility while the attack was allowed to stand.

Similarly, independent donors can espouse irresponsible or unpopular policy positions – for which the candidate would be hammered – and get away with it because they are not running for office.  

Consider billionaire Tom Steyer’s opposition to the Keystone Pipeline project (upper portion; lower portion has been built and placed in operation).  By virtue of his wealth plus a few diehard environmentalist supporters, this man is apparently holding up a project that has been studied to death, would be of great benefit to the US economy, and is supported by a clear majority of Americans – yet the media has been rather lax in holding him accountable.  CNBC vs. NBC: Did Democrat donor influence latest Keystone delay, Jeffry Miron, newsbusters.org, 4/21/14. http://bit.ly/RFpi71

On Friday, April 18, the Obama Administration announced yet another delay on whether or not to proceed with the Keystone XL pipeline. The Obama Administration’s decision came in the wake of a new ABC News-Washington Post poll which found 65 percent of Americans support the construction of the pipeline with only 22 percent opposed. *** [Yet] CNBC’s Squawk Box was the only NBC program to mention that Democratic billionaire and environmentalist Tom Steyer had pledged $100 million for Democratic candidates on the condition that Keystone not be approved.

Going further than Lessig, retired Justice John Paul Stevens envisions a constitutional amendment to undo Citizens United, McCutcheon et al.  Justice Stevens suggests solution for “giant step in the wrong direction,” Adam Liptak, New York Times, 4/21/14. http://nyti.ms/1hBoVPT

The new amendment would override the First Amendment and allow Congress and the states to impose “reasonable limits on the amount of money that candidates for public office, or their supporters, may spend in election campaigns.”

All things considered, we would be inclined to look for ways to improve on the current campaign finance ground rules that don’t involve placing ever more power in the hands of unelected government bureaucrats.

C. Streamline campaign finance limits – What would happen if the limits on campaign finance were liberalized, thereby moving in essentially the opposite direction from Professor Lessig’s proposals?

Limits on donations to individual candidates or party committees would be eliminated on the basis that channeling contributions through candidates and their campaigns enhances rather than detracting from accountability.  Prompt public disclosure would be required of all significant contributions.

As they would no longer serve any clear purpose, political action committees (and all the arcane rules associated with them) would be eliminated.

The rules for political ads would continue, but with disclosure of the sponsor(s) – as is currently required for candidate ads.  “I’m [Tom Steyer, George Soros, Charles Koch, or whoever], and I approve this message.”

Disclosure of political spending can lead to retaliation by people with different views, as was illustrated recently by the firing of Mozilla’s CEO.  Brendan Eich was targeted because six years ago he had given $1,000 to support a referendum banning gay marriage. Whatever one thinks about that issue, it had no apparent connection to his suitability for the post that he occupied.  The zealots win again, Charles Krauthammer, Washington Post, 4/17/14. http://wapo.st/1jQk5m2

Based on this and many similar incidents, Krauthammer concludes that disclosure of political contributions cannot be required. 

The ultimate victim here is full disclosure itself. If revealing your views opens you to the politics of personal destruction, then transparency, however valuable, must give way to the ultimate core political good, free expression.

Perhaps he is right, it’s a tough issue, but we’re more attracted to the idea of providing swift and severe legal penalties for people who engage in this type of retaliation. 

top      wwhipple3@verizon.net


4/21/14 – Bundy ranch showdown shows erosion of rule of law        Read Replies

The footage is reminiscent of the classic style of western movies, in which the good guys generally outnumbered the bad guys and invariably occupied the moral high ground.  They move forward toward the objective, with no intent to do needless damage but prepared for action.  Their opponents pull back and a glorious victory is won without firing a shot.  But wait, there’s something wrong with this picture.  The opponents are not nefarious outlaws; they are uniformed federal officers.

We’re speaking of an April 12 confrontation between riders on horseback and people on foot, who had mobilized to support rancher Cliven Bundy, and the heavily armed forces of the Bureau of Land Management (BLM).  One shot and a lot of bloodshed could have resulted, but it didn’t happen – this time. The up-close account of the tense standoff with federal agents, Greg Campbell, tpnn.com, 4/14/14.  http://bit.ly/P462hh (video, 4:39).  

For fans of smaller government like us, it would be hard not to empathize with the Bundy faction in this situation.  And the Fed’s behavior was abysmal. 

Cliven Bundy et al. did break the law, however, and we can’t condone that either. So what is the right way to view what happened, and what should be the path forward? Our thoughts follow.  Bundy v. BMP – Harry Reid connection – the rule of law.

A. Bundy v. BMP - The first report we noticed about the Bundy family standoff in Clark County, Nevada was that the Feds had arrested a family member and threatened others for seemingly lawful activity.  Federal snipers train guns on family for filming cattle; Man arrested for expressing free speech outside of designated “First Amendment area,” Paul Watson, Infowars.com, 4/7/14.  http://bit.ly/PVU6ir

SAFE had recently reported two analogous (albeit less dramatic) cases in which the authorities lost when taken to court.  Land of the free, SAFE newsletter, Spring 2014. http://bit.ly/1hLBJsr

Maybe the Bureau of Land Management (BLM) had a point if family members were trespassing on restricted federal land, but no, the vehicle from which the video was being shot was on a state highway.   “Even if they want to call [the area that we were filming] federal land, which it’s not,” said Bundy, “we weren’t even on it.”

There was, of course, a lot more involved.  The Bundy family has grazed cattle on open land since the 1870s, long before the BLM was created.  When the BLM issued a ruling in 1993 that would have severely curtailed their grazing rights in the name of protecting desert tortoises, the Bundys ignored it. 

The Mojave desert tortoise (inhabits area north and west of the Colorado River) is listed as threatened (not endangered) under the Endangered Species Act, and the BLM says they have “closed livestock grazing allotments to reduce competition for forage.” Desert tortoise management, http://on.doi.gov/1mayv3K (accessed April 2014).

But do the tortoises really need such protection, e.g., is there a shortage of vegetation in this vast area?  The list of threats to desert tortoises posted by the Arizona Game and Fish Department does not so much as mention grazing cattle. Desert tortoises, http://bit.ly/1hVUKTg (accessed April 2014). 

Primary threats to survival of the desert tortoise are related to loss and degradation of the species’ habitat, through drought, wildfire, habitat destruction and fragmentation, and invasion of exotic plant and wildlife species. Other impacts to the species include removal of individuals from the wild, vandalism, mortality from vehicles, irresponsible off-highway vehicle (OHV) use, release of captive tortoises into the wild, and disease. *** URTD [Upper Respiratory  Tract Disease] has caused catastrophic die-offs in the Mojave tortoise population, resulting in part [in] their federal listing as threatened under the Endangered Species Act.*** there is some evidence that URTD was introduced into the Mojave desert tortoise through the release of sick captive tortoises into the wild. 

In addition to ignoring the BLM restrictions on grazing, the Bundys have not been paying grazing fees – which were formerly payable to Clark County, but are now supposedly due to the federal government.  They owe a million dollars or so according to the BLM, but only about 1/3 of that by their own reckoning  The Feds were getting ready to bring the hammer down on the Bundys in a way likely to cost a good deal more than the hoped-for recovery. Armed Feds prepare for showdown with Nevada cattle rancher, Paul Watson, Infowars.com, 4/7/14. http://bit.ly/1r0bWwf

Hundreds of federal officials, aided by helicopters, low flying aircraft and hired cowboys, began rounding up Bundy’s cattle on Saturday as Bundy accused them of “trespassing.”

Cliven Bundy’s claim that the federal government does not own the grazing area has been presented and rejected.   According to a 1998 federal district court decision, affirmed on appeal, this land was part of territory ceded to the United States by Mexico in 1848 and no action has been taken to transfer ownership to anyone else.

Indeed, the federal government still owns over 80% of the land in Nevada – a higher percentage than in any other state.  Showdown in Nevada; Who owns the West?  Gary North, teapartyeconomist.com, 4/16 /14. http://bit.ly/1eKpyMe

The federal courts have ordered Bundy several times to remove the trespassing cattle, most recently in 2013.  This time the BLM was authorized to seize the cattle unless Bundy complied within 45 days (which didn’t happen). History of land dispute between Cliven Bundy and the BLM, mynews3.com, 4/11/14. http://bit.ly/RpnO0I

Never say die!  Bundy “has attempted to pay his [grazing] fees to Clark County,” and maintains that the Nevada authorities should tell the Feds to stand down.  Cliven Bundy: Fight goes on until federal bureaucracies disarmed, Greg Richter, Newsmax.com, 4/14/14. http://nws.mx/1mdGafc

Videos of action near the Bundy ranch went viral, and back-up forces began streaming in.  Coalition of Western state legislators, sheriffs, and veterans stand vigil in support of embattled Nevada rancher, Cliven Bundy, oathkeepers.org, 4/10/14. http://bit.ly/Qa7H5J

The courage and resolve displayed by Ammon Bundy and his relatives is inspiring, and may well go down in history as a watershed moment – a turning of the tide.  But the above video also amply demonstrates the heavy-handed behavior of the BLM that risks escalating an already volatile situation into open bloodshed, that, once begun, may spiral out of anyone’s control.

 

It is necessary that current serving public servants step in-between the protesters and the BLM, to protect the rights of the people and to prevent violence against them by the militarized federal law enforcement that are massing near the ranch to continue the forced confiscation (theft) of Bundy’s cattle, while they also restrict all access to huge tracts of public land, and attempt to restrict the free speech of protesters with their absurd “First Amendment Area” (which the protesters are ignoring, to their honor).

Then came the previously described showdown on April 12, which ended with the BLM announcing they would release all of the cattle (nearly 400 head) they had seized and withdraw.  Rancher prevails in “new Ruby Ridge” battle, Dave MacKenzie, Newsmax.com, 4/12/14. http://nws.mx/QhZTPI

"Based on information about conditions on the ground, and in consultation with law enforcement, we have made a decision to conclude the cattle gather because of our serious concern about the safety of employees and members of the public," BLM Director Neil Kornze said.

There were complaints afterwards that the Feds had abused cattle (notably, hired cowboys shot two prized bulls) and destroyed Bundy-made property improvements (water tanks, water lines, corrals, etc.) in the grazing area.  Federal agents reportedly claimed that they “were forced by law and court order to remove the structures and ‘restore’ the land to its [natural] state,” but a Bundy supporter begged to differ. Insult to injury: Retreating Feds accused of trashing Cliven Bundy’s Nevada ranch, Cheryl Chumley, Washington Times, 4/17/14. http://bit.ly/1hU9yaT

“Nowhere in the court order that I saw does it say that they can destroy infrastructure, destroy corrals, tanks … desert environment, shoot cattle,” said Mr. Houston in Fox News.

Here’s another report, posted by a Bundy supporter, which expands on the alleged cruelty to animals.  Evidence of BLM’s deadly abuse of animals taken from Bundy ranch, tap.blogspot.com, 4/16/14.  http://bit.ly/1ljSsRJ

During a live radio broadcast of The Pete Santilli Show on GNM, [Nevada legislator Michele] Fiore reveals new details of “the BLM’s method of herding where they have slaughtered horses and cows. This time we have video of it, and pictures of it.”

“I did post the first picture of one cow who was shot in the back of the head from a helicopter (photo above).”

I personally helped save a calf who still had an umbilical cord attached to her as she was separated from her mom. It is such a disgusting event (…)… they (BLM) don’t herd cattle – they slaughter cattle.”

The federal government expressed no contrition about how matters had been handled.  Instead, no lesser authority than Senate Majority Leader Harry Reid said, “this is not over,” and subsequently condemned the Bundy faction in no uncertain terms.   “Patriot Party” gathers at Bundy’s Nevada ranch, Reid deems them “domestic terrorists,” Valerie Richardson, Washington Times, 4/18/14. http://bit.ly/1i1XO0j

“Those people who hold themselves out to be patriots are not. They’re nothing more than domestic terrorists,” [said] Mr. Reid in remarks at a luncheon, according to the Las Vegas Review- Journal, which sponsored the event. “… I repeat: What went on up there was domestic terrorism.”

Whatever the Feds have in mind, another resort to brute force is probably not on the menu. The fight over the Bundy cows will end as Civics 101, Philip Bump, 4/16/14. http://yhoo.it/1eR10kL

"The BLM will continue to work to resolve the matter administratively and judicially," BLM Director Neil Kornze said in a statement reported by The Hill. DC attorney Jonathan Emord outlined the likely strategy: "They'll press charges against him in federal court, and they’ll try to basically bleed his ability to defend himself, and beat him up on technical grounds... They'll put him in a situation where he'll end up with a determination of liability that would be so great that he would have to sell his ranch to them to extinguish his debt."

Is this how liberty dies, not with a bang but with a whimper, and for the benefit of desert tortoises at that?  Ironically, the government itself is taking steps to reduce the tortoise population, although BLM officials have stated that “healthy tortoises will be relocated and not euthanized.”  Patriot Party” gathers at Bundy’s Nevada ranch, op. cit. http://bit.ly/1i1XO0j 

Dig deeper, said some observers, because there’s more involved here than meets the eye.

B. Harry Reid connection – Does Senator Reid have a special interest in the Bundy family’s feud with the federal government, as critics have claimed?  We don’t know, although there is some evidence pointing in that direction. 

Reid is the senior senator from Nevada, with a natural interest in what goes on there, and Neil Kornze, the just-appointed head of the BLM, was a former member of his staff.  One could readily imagine  Kornze looking to his former boss for advice about how to handle this explosive situation.

Special interests reportedly wanted a favor, namely clearances to build a Chinese solar power facility in the desert tortoise zone.  Turns out, however, that this deal came to light several years ago and, since it fell through, would not appear to have a direct connection to the Bundy situation.  Harry Reid’s crony capitalism behind showdown with Nevada rancher?  Rachel Alexander, Townhall.com, 4/14/14. http://bit.ly/1kJBXQu

In 2012, investigative reporter Marcus Stern blew open a deal Reid and his son had arranged with a Chinese company to build a $5 billion solar farm and panel manufacturing plant in the southern Nevada desert. The BLM helpfully expressed its opinion that trespassing cattle would need to be removed in order to make way for the deal. Although the project ultimately failed, it represents part of a pattern by Reid to seize land to give to special interests in order to benefit himself, his family and campaign contributors.

Here is a 2012 report that confirms Rory Reid’s role in promoting the solar power facility. Note the denials that Reid and his son ever discussed this project.  Harry Reid’s son represents Chinese solar power plant in $5 billion Nevada deal, Wynton Hall, breitbart.com, 9/4/12.  http://bit.ly/1hzbFAI

Whether Reid urged the BLM to crack down on the Bundys or not, he probably was involved in the decision to withdraw.  Nevada ranch standoff could leave dirt on Harry Reid’s reputation, Valerie Richardson, Washington Times, 4/13/14. http://bit.ly/1m2QxVv

“It was likely pressure from upstairs, rather than weapons from the field, that changed his mind on the matter,” the liberal group Americans Against the Tea Party said in an online post. “Fact is, Harry Reid probably didn’t want his name attached to the biggest civilian massacre in US history right before election season.”

Senator Reid’s intemperate rhetoric, which has already been noted, does not prove that he acted dishonestly. Our take is that Reid dislikes the Bundy family, the culture they represent, and the people with guns who supported them – and is simply letting it show. 

Rory Reid has spoken out in a similar vein.  Rancher Cliven Bundy “should be prosecuted,” realclearpolitics.com, 4/15/14.  http://bit.ly/1gHG62C

•He is not a victim and he’s not a hero. He’s been using [land] that he doesn’t own for over 20 years and he didn’t pay. He broke the law. There are hundreds of ranchers throughout Nevada that conduct their profession honorably. There’s thousands of them throughout the country and when they have a dispute with the BLM they try to work it out. (source: KSVN-TV)

We believe in a country in which we are subject to laws and you can’t just ignore the laws we don’t like. I think clearly if state and local prosecutors look at this more closely, they’re going to find that he broke the law and he should be prosecuted.

C. The rule of lawAs we acknowledged at the outset, the Bundys have broken the law.  One can’t very well ignore federal court orders without doing so.  And the basic purpose of government is to establish a rule of law, ultimately backed by government-controlled force, as an alternative to a “might makes right” society in which the strongest members can terrorize everyone else.

But that’s not necessarily the end of the matter, as there is an underlying premise that the government will act reasonably rather than overstepping its proper bounds and becoming just as oppressive as the robber barons that it replaces. 

What was the Bundy family supposed to do when the BLM issued an edict in 1993 that would have effectively put their ranch out of business?  Others knuckled under, in fact the Bundys are reportedly operating the only cattle ranch left in Clark County, but they refused to do so.  Last man standing: Nevada ranch family in Fedgov face-off, William Jasper, thenewamerican.com, 4/11/14.  http://bit.ly/1r6Wsqp

[Cliven Bundy] notes that more than 50 other ranchers have been bankrupted, intimidated, and forced to give up their land and legal property rights. He is, he points out, “the last man standing”; and now that generations of ranching families have been driven out, federal officials have dropped the pretense that it is all about saving the “endangered” tortoise and have actually been killing the reptiles by the hundreds.

When Congress passes questionable (well meaning, but impractical) legislation like the Endangered Species Act, and authorizes the creation of administrative agencies like the BLM with sweeping powers to interpret and enforce it, is that acting reasonably? 

When an administrative agency attempts to assert its authority without regard to economic common sense or longstanding tradition and practice, is that acting reasonably?

When an administrative agency resorts to the use of armed force versus normal collection procedures, basically to show that it is “the boss,” is that acting reasonably? 

There are no clear answers to such questions, of course, but the Bundy ranch situation is indicative of fundamental problems.  Judge Napolitano: Ranch rebellion was America’s “line in the sand,” Paul Watson, infowears.com, 4/14/14.  http://bit.ly/1hOYCFJ

“The government’s option is to take the amount of money he owes them and docket it, that is file the lien on his property….the federal government could have done that, instead they wanted this show of force,” said Napolitano, adding, “They swooped in….with assault rifles aimed and ready and stole this guy’s property, they stole his cattle, they didn’t have the right to do that, that’s theft and they should have been arrested by state officials”.

Well, maybe, but shouldn’t aggrieved citizens go to court instead of meeting violence with violence? Certainly, in theory, but in practice they may not get a good reception.

When it comes to the government’s conduct, any remotely plausible argument based on an applicable statute or regulation is likely to prevail.  After all, the government can’t be expected to please everyone, so its actions should be entitled to great deference.

If ordinary citizens challenge the legality of a statute, regulation, or administrative action, on the other hand, their claim will be viewed with a jaundiced eye.  Indeed, it may very well be rejected based on lack of standing.  See, e.g., “Bloom competitor to continue its case; US District Court magistrate makes ruling on Tuesday,” News Journal, 4/18/14.

One rationalization for the foregoing is that generalized citizen grievances should be resolved through the democratic process.  But while the right of voters to “throw the rascals out” is better than nothing, experience has shown that it’s far from a panacea.  Elections only take place every so often – politicians may dissemble as to their true intentions – voters aren’t necessarily paying attention – public opinion is split on most of the issues that matter. 

Besides, political and social attitudes vary by region. If  Nevada residents don’t like what the federal government is doing but a majority of voters in California, New York, Illinois, Florida, etc. do, tough luck!

So what happened at the Bundy ranch is less surprising than it might seem, and similar controversies are likely elsewhere.  Obama administration’s “culture of intimidation” can be seen in Nevada ranch standoff; Critics say fight is not first instance of Feds’ “overkill,” Valerie Richardson, Washington Times, 4/15/14. http://bit.ly/1m7r2T7

The simmering truce between the Bundys and the [BLM] comes after high-profile raids last year by armed federal agents on small-time gold miners in tiny Chicken, Alaska, and guitar makers at the Gibson Guitar facilities in Tennessee.  That doesn’t include more subtle threats, such as recent efforts by the Obama administration to raise grazing fees or pressure permit holders to transfer their water rights as a condition of renewal, said Ryan Yates, director of congressional relations for the American Farm Bureau.

We do not favor “militia” activism, which involves great risks and no ultimate solutions, but some people are “ready for action.”  After Nevada ranch standoff, emboldened militias ask: where next?  Jonathan Allen, reuters.com, 4/17/14. http://reut.rs/1eEOgxe

In the days since the showdown, right-wing websites have begun searching for other Bundys. Several conservative and survivalist blogs have seized on the case of Tommy Henderson, a rancher on the Texas-Oklahoma border who they say is fighting BLM attempts to seize some of his land.

The only exit ramp we can see is for the government to stop trying to run everyone’s lives and get back to trying to discharge its core responsibilities in an exemplary manner.  Let’s hear it for smaller, more focused, less costly government!

Legislators from nine western states have identified a concrete step in this direction, which would be to surrender huge swaths of the land under federal control to the states.  Western lawmakers gather in Utah to talk federal land takeover.  Kristen Moulton, The Salt Lake Tribune, 4/18/14. http://bit.ly/1izz8Rr

No doubt there would be some necessary exceptions, such as defense installations and national parks, but in general this sounds like a great idea. Hats off to Senator Mike Lee (R-Utah) for supporting it.  And maybe the federal government could raise a few billion dollars in the bargain by selling some of its vast holdings to private interests.

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Speaking of government overreaching, some states (e.g., Virginia) have enacted laws requiring motorists to change lanes, yielding added space for a standing emergency vehicle.  The law sounds reasonable on its face, but look how the police are using it: (a) First cop stops someone for speeding; takes his time about writing a ticket while they sit on the side of the road; (b) Additional cops from “wolf pack” observe, then pursue anyone who does not change lanes; (c) While the first non-lane-changer is being ticketed, the game continues.......  Drive defensively! – Retired IBM executive

We have an arrogant government that will grab what people let them grab, but resistance must be handled in an intelligent way. Thus, Senator Jim Inhofe  has criticized the tough talking Oklahoma militia (which claims to have nearly 50K members), saying he blames both sides and that BLM critics should not take the law into their own hands. http://bit.ly/1gO1GT7 - SAFE director

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4/14/14 – Ryan budget dismissed as a “meanwich”        Read Replies

We suggested a month ago that House Republicans could find more productive things to work on than an alternative budget plan for fiscal year 2015. President’s fiscal plan is a nonstarter; now what? 3/10/14.

#Acknowledge that “there is no point trying to develop a congressional budget this year since spending levels for Fiscal Year 2015 have already been set and there is no realistic prospect for action on entitlements before the elections.”

#Introduce a new topic, namely an overhaul of the budget process. Time to get serious about budgeting, 1/20/14, offered some fairly sweeping suggestions.

#Pivot to revenue neutral tax reform, perhaps working away from the plan proposed by House Ways and Means Chairman Dave Camp.

Surprise, surprise, no one heeded (or probably noticed) our advice. The Path to Prosperity: Fiscal Year 2015 Budget Resolution was published on April 1 (Newsmax, 4/1/14.  http://nws.mx/1n4sMdc) and approved by the House on April 10 (Washington Examiner, 4/10/14, http://washex.am/1gdWo6D).

Oh well, what’s done is done.  This entry will (A) recap the Ryan plan, (B) report on reactions thereto, and (C) offer some suggestions for the path forward.

A. Fix things or else – Our country stands at a crossroads.  It can get its fiscal house in order and restore the economy to a healthy state or continue down the current road with predictably disastrous results.  Here’s a graph, taken from the report, starkly showing the choice.

 

The current budget projection only goes through 2024, whereas the most dramatic differences in the chart show up later, but surely it would be easier to change course now than attempt to do so later.  As the saying goes, “a stitch in time saves nine.”

To get off the current path, it is proposed to cut projected spending over the next ten years by roundly $5 trillion (primarily for healthcare & other entitlement programs, other than Social Security, and interest expense), while not raising taxes. 

GovCare would be repealed and replaced (details not spelled out), other social programs would be reformed, defense spending would be beefed up, and revenue neutral tax reform (details not spelled out) would be enacted, thereby putting this country back on the path to prosperity.

Executing this plan would not be easy. The details that aren’t spelled out could prove troublesome, not to mention the difficulty of overcoming entrenched resistance to spending discipline on both sides of the aisle.  And if the economy heated up, the resulting inflation would likely force the Federal Reserve to tighten monetary policy and wipe out the projected interest savings ($783B over ten years).  

There is also a plus factor, namely the deficit may be headed down faster than forecasters have recognized due to spending cuts and tax increases already made. Budget deficit is shrinking – a lot, David Wessel, Wall Street Journal, 4/11/13. http://on.wsj.com/1juTHhi 

If the urge to spend the gains was resisted, and divided government might help in that regard, the budget could be balanced in far less time than the 10 years assumed by the Ryan plan.  Given the trend shown by the 2013/2014 data, the projected deficits for 2015 et seq. may be on the high side.

Fiscal year, $B

2013

2014 est.

2015

2016

Outlays

(3,455)

(3,650)

(3,664)*

(3,676)*

Revenues

2,775

3,001

3,305

3,481

Adj.

N/A

187#

??

??

Deficit

(680)

(462)

(380)

(227)

Source

OMB

OMB/CBO

Ryan plan

 *Including “Macroeconomic fiscal impact.”

#Deficit for first half of 2014 was $413B - $187B less than for the first half of 2013 (which produced 88% of the 2013 deficit). CBO, http://1.usa.gov/1gMfZqf.  It seems reasonable to assume this differential will carry over for the full year 2014 deficit.

In sum, the Ryan plan seems to address the fiscal problem in a businesslike manner, and the projected results compare favorably to those in the president’s budget proposal. President’s fiscal plan is a nonstarter; now what? 3/10/14. 

2015-2024, $T

Ryan plan

President’s plan

Outlays + adj.

(42.4)

(48.7)

Revenues

40.6

43.8

Deficit

(1.8)

(4.9)

B1. No way, Jose – Despite having ducked the fiscal problem in his own budget proposal, one might have expected the president to concede that this problem represents a real concern.  His actual response, however, was purely partisan.  President’s remarks at the University of Michigan, 4/2/14. http://1.usa.gov/PlKkpy

Supposedly, the idea of the House budget was to recreate the economic plan on which Republicans ran in 2012. Giving “a massive tax cut to households making more than $1 million a year,” higher taxes on middle-class families with children, termination of business tax credits, drastic cuts in a variety of social programs, repeal GovCare, etc.

 

“It’s like that movie Groundhog Day, except it’s not funny.  If they tried to sell this sandwich at Zingerman’s [a local eatery where the president had eaten lunch], they’d have to call it the Stinkburger or the Meanwich.”

 

But hey, Republicans are “not necessarily cold-hearted, they just sincerely believe that if we give more tax breaks to a fortunate few . . . invest less in the middle class . . . cut food stamps [and] Medicaid . . . let banks and polluters and credit card companies and insurers do only what’s best for their bottom line . . . then somehow the economy will boom, and jobs and prosperity will trickle down to everybody.”

 

Another Side A leader in attack mode was Rep. Steve Israel (D-NY).  Paul Ryan’s budget will be “defining issue” in midterms, Rebecca Berg, Washington Examiner, 4/2/14.  http://washex.am/1kRi7RE

 

"When you have a budget that proactively hurts and weakens the middle class, people get angry," Israel said. "When they get angry, they vote."

 

A former Harvard Law School professor, now senator, accused the House GOP of ignoring the lessons of the “Great Recession.” Elizabeth Warren picks a fight with Paul Ryan, Luke Johnson, Huffington Post, 4/7/14. http://huff.to/1lW7L70

 

In 2008, this economy crashed, wiping out millions of jobs.  [Yet,] Paul Ryan says *** keep the monies flowing to the powerful corporations, keep their huge tax breaks, keep the special deals for the too-big-to-fail banks and put the blame on hardworking, play-by-the-rules Americans who lost their jobs.

And the ranking minority member of the House Budget Committee slammed the proposed (since approved) House budget as vastly inferior to his party’s approach.  [Rep. Chris] Van Hollen announces House Democratic budget alternative, 4/7/14. http://1.usa.gov/Raw0lm

Where Republicans in Congress gut funding that would boost the economy and help our nation succeed in the 21st century economy, we invest in our kids’ education, infrastructure, and life-saving research.  Where they provide perverse incentives for companies to ship American jobs overseas and hit middle class families with children with an average tax increase of $2,000, we call for tax reform that promotes the growth of American businesses and tax fairness for all families. Where they end the current Medicare guarantee and raise the average premiums for traditional Medicare to 50 percent higher than current law, we strengthen Medicare and ensure seniors have retirement security. 

Without attempting to discuss all of the Side A claims, we would point out that the House budget plan does not propose to give a huge tax cut to high earners while raising taxes on the middle class.  What it actually proposes (House budget, pages 82-84) is revenue neutral tax reform, i.e., lowering tax rates while eliminating tax preferences (exemptions, deductions and credits) so that the same amount of revenue would be collected with less preparation/ enforcement effort and interference with economic decisions. 

The House budget does not endorse any specific tax reform plan; “there are many good ideas on that front,” it says.  We hope SAFE’s SimpleTax plan would be among the approaches considered. http://bit.ly/1gJc4xf

B2. Too little, too slow – Although the harshest responses to the House budget plan came from Side A, there was plenty of conservative criticism.  The plan is well meaning but somewhat naïve, spending cuts have been watered down and might not get made in practice, etc.

According to economist Daniel Mitchell, each successive budget from Ryan’s House Budget Committee has projected more spending growth than the last – although it continues to be assumed that the private sector will grow faster than government spending (Mitchell’s golden rule). Assessing the new Ryan budget, Cato Institute, 4/2/14. http://bit.ly/1iCB5bQ

Three years ago, he put forth a budget that limited spending so that it grew 2.8 percent per year. Two years ago, [spending] grew 3.1 percent per year. Last year, [spending grew] 3.4 percent per year. [And in his latest budget] the burden of government spending will rise by an average of 3.5 percent annually over the next 10 years [while] inflation is projected to be about 2 percent per year.

A tea party favorite blasted the reliance on spending cuts down the road.  Sarah Palin: Paul Ryan budget “a joke,” Tony Lee, breitbart.com, 4/1/14. http://bit.ly/1lRMMQb

If we can’t balance the budget today, what on earth makes us think it will happen at some future date?  The solution is staring us in the face. We need to rein in spending today, and don’t tell me there is nothing to cut when we know every omnibus bill is loaded with pork and kickbacks.

Governor Palin subsequently toned down her remarks, but continued to insist that commitments to future spending cuts cannot be taken seriously.  Palin on budget, Fox News Insider, 4/3/14. http://bit.ly/1qKoVST

Bless his heart. [Paul Ryan] probably has more faith in politicians than I do *** Future congressmen and women don't have to obey what today's congressmen and women wish for in terms of budget cuts that may happen in 10 years.”

A Young Voices Associate took another tack, claiming the House budget had overlooked the prime targets for long-term improvement in the fiscal situation. Paul Ryan budget gets into the gimmick game, Cathy Reisenwitz, Townhall.com, 4/7/14. http://bit.ly/1lXsWWg

Any plan which can credibly reduce the deficit is a good one. However, this one may not be it. Ryan’s budget plan fails to address the two biggest contributors to the federal deficit: entitlements and military spending.

Really?  The House budget addresses entitlements by proposing to repeal GovCare, make major changes to Medicare and Medicaid, and study what should be done about Social Security.  As for defense, the writer’s statement that US military spending “defies all logic and common sense” seems out of touch with recent and potential developments on the international stage.  But whether Reisenwitz’s comments are right or wrong, they demonstrate how difficult it is to please everyone.

In that regard, a former GOP House majority leader offered a telling comment about the House budget – it comports with political reality. A budget that reflects our true values, Tom DeLay, Washington Times, 4/10/14.  http://bit.ly/1kSLlQ7

. . . we all can point to things we might have done differently than Mr. Ryan. But conservatives should be really proud of the fact that Paul Ryan has brought forth and passed a budget that truly does reflect constitutional values. It’s not perfect, but it’s the best budget that could be written and still get the 219 votes it got to pass the House.

C. And now what – We’ll go out on a limb by predicting that the House budget will never by approved by the Senate, and that hardly anyone will vote for the president’s budget proposal.  Accordingly, the government will go through another year running on budgetary autopilot.

The question is whether Americans will notice.  Unless they do, it’s unclear that the GOP will get much mileage in November from its efforts to propose a responsible budget.

Rather than dwelling on the details of the House budget plan, which relatively few Americans will ever read, Republicans should explain the expected benefits in plain English.  Some thoughts about selling the SAFE agenda that we outlined after the 2012 elections might potentially be applicable. If all else fails, appeal to self interest, 11/12/12.

#Smaller government - Experience (in both the public and private sectors) shows that large organizations have inherent weaknesses.  Here is a partial list: more organizational layers, specialized groups (aka “stovepipes”) that do not communicate effectively with each other, managers who are often out of touch with the real situation, and resistance to change.

# More focused government - Would you rather have (1) a government that tries to solve every conceivable problem with generally mediocre results, or (2) a government that tackles a limited number of issues and performs with distinction?  The answer seems obvious, and there is ample evidence that the government is currently producing mediocre results in many areas.

#Less costly government - If the government runs expensive programs, the money must come from somewhere. Tax hikes for high earners and business firms would discourage savings and investment, thereby fostering a stagnant economy that hurts everyone. And the wealthy don’t have enough money to cover the government’s projected deficits anyway, so ordinary folks would wind up paying as well – either directly (higher taxes) or indirectly (inflation). 

In short, don’t let Side A get away with the claim that their economic ideas represent “common sense.”  Nothing could be further from the truth!

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Let’s be realistic. Over the last 70 years, almost every major policy change in DC was liberal leaning or nonpartisan. Very few “Conservative” policy ideas have been made into law. http://delonline.us/1qE72qD - Sam Friedman, CRI

Unless and until they lose control of the Senate, the Democrats will have no reason to deal on the budget, taxes, or real immigration “reform” (versus their path to citizenship version). The Republicans have earned this trip into the ditch for going along to get along.  Look for cover! – SAFE director

Dennis Prager tells it like it is in this 9-minute video.  The root problem is that Americans have forgotten what this country was supposed to be about. http://www.youtube.com/embed/XNUc8nuo7HI - SAFE member (DE)

So the premise of the blog entry that arguments could be made that people would actually listen to is false, and the country will inevitably continue down the path to ruin?  Let’s hope not!  - Publius

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4/6/14 – Why can’t Side A think like we do?        Read Replies

Here’s a shocker: Human beings believe what they want to believe, and it’s tough to change their minds. 

 

Thus, people pay attention to information and arguments that support their cherished beliefs (aka confirmation bias), while discounting or ignoring information and arguments on the other side.  And this holds true whether their beliefs are in the mainstream, i.e., shared by many others, or represent a distinctly minority view.

 

For a demonstration of the foregoing, based on interviews with a series of contrarians, including men who deny Darwinian evolution, the Holocaust (Nazi program for exterminating Jews during World War II), and the manmade global warming theory (Lord Monckton is the prime subject), see “Profiles in denial: The unpersuadables,” Will Storr, 2014. http://amzn.to/1luteBg

 

There is always a question, of course, about where the truth lies.  Time was when Galileo was branded as a heretic for believing the Earth orbits the Sun, but today most people would say he was right.  And Storr’s book notwithstanding, we believe Lord Monckton et al. are on sound ground in challenging the MMGWT.

 

It wouldn’t hurt, however, to recognize that our beliefs are not infallible.  Could we be the ones whose thinking is off, at least in some cases, rather than our intellectual opponents?  The Heretics [UK title] by Will Storr, Michael Deakin, UK Telegraph, 1/30/13.  http://bit.ly/1efp8Yw

 

This is what The Heretics does: it makes you distrust your own mind. And, to go by the evidence the book assembles, you’re right to do so. Our minds lie to us. And we don’t even know they’re doing it. That’s right: our own minds are cleverer than we are.

 

Having sounded that note of caution, let’s proceed to the prime thrust of this entry.  We believe Side A’s drive for ever more controlling government is based on beliefs that reflect bias and wishful thinking versus a reasoned view of the facts. For example . . . 

 

A. GovCare enrollments – After a last minute sign-up rush, triggered by a March 31 deadline, the number of Americans who had enrolled for healthcare insurance (HCI) coverage on the federal exchange rose to over 7 million.  Side A hailed this result as demonstrating the success of the GovCare rollout – and vindication of a program that has been widely criticized.  See, e.g., the president’s remarks at an April 1 event in the Rose Garden. http://1.usa.gov/1fM6mIO

 

But were the numbers truly encouraging?  Critics suggested that far more information was needed to answer that question,.  How many of the sign-ups had started paying for their insurance, meaning they were actually insured? How many people were obtaining HCI for the first time versus switching over from previous HCI arrangements?  What was the age-bracket distribution of the sign-up, which would determine the viability of the insurance premiums that had been quoted?

 

Some of the president’s rhetoric stretched the limits of credulity to the breaking point, moreover, by exaggerating the benefits being achieved and deflecting blame for any shortcomings.  Compare the juxtaposed comments of a skeptical columnist.  A catastrophe like no other; the president tries to put a good face on Obamacare, Peggy Noonan, Wall Street Journal, 4/5/14. http://on.wsj.com/QJL6hv

 

(A) “This law is bringing greater security to Americans who already have coverage,” by making “our healthcare system a lot better.” Support it or not, you cannot look at Obamacare and call it anything but a huge, historic mess.

 

(B) “We’ll work to get more Americans covered with each passing year,” to the end “that no American should go without the healthcare they need.” And “the idea that everybody in this country can get decent healthcare – that goal is achievable.” What the bill declared it would do—insure tens of millions of uninsured Americans—it has not done. There are still tens of millions uninsured Americans. On the other hand, it has terrorized millions who did have insurance and lost it, or who still have insurance and may lose it. 

 

(C) “ . . . millions of Americans remain uncovered in part because governors in some states for political reasons have deliberately refused to expand coverage under this law.” And when  “[this law is] helping people from coast to coast, [it’s hard to understand] the lengths to which critics have gone to scare people or undermine the law, or try to repeal the law without offering any plausible alternative.” There are very, very few Democrats who would do ObamaCare over again. Some would do something different, but they wouldn't do this. The cost of the blunder has been too high in terms of policy and politics.  They, and the president, are trying to put a good face on it.


At bottom, the deceptions and miscalculations that have led to the present mess sprang from the beliefs that (a) “basic healthcare” is a “right,” and (b) equality of access trumps all other considerations.  Consider this passage in the president’s remarks.

 

As messy as [GovCare has] been sometimes, as contentious as it’s been sometimes, it is progress.  It is making sure that we are not the only advanced country on Earth that doesn’t make sure everybody has basic healthcare. 

 

Sorry, but while agreeing that basic healthcare should be made available, ideally at the state & local versus national level, we don’t agree that it is a “right” let alone that it trumps the interests of everyone else. 

 

B. Giving up the Internet – Here is an issue that came up several weeks ago when the Department of Commerce announced plans to surrender US government stewardship over the Internet – currently administered by a nonprofit contractor named the Internet Corporation for Assigned Names and Numbers (ICANN) – without a shot being fired.

 

As described, the proposal sounded innocuous.  Privatization – broad group of stakeholders – support and cooperation.  Promoting Internet growth and innovation through multi-stakeholder Internet governance, Lawrence Strickland, Department of Commerce, 3/19/14. http://1.usa.gov/1mhvwWZ

 

ICANN has been asked to convene global stakeholders to develop a proposal to transition the U.S. government’s stewardship of the Internet’s Domain Name System (DNS). This marks a major milestone toward the final phase of the privatization of the DNS, which was first outlined by the U.S. Government in 1997.  We believe the timing is right for this transition, and a broad group of stakeholders – both domestically and internationally – have expressed their support and cooperation in this process.

Yet critics branded the move as a power grab.  Turning over the Internet to UN bureaucrats, who are subject to the influence of China, Russia and other unfriendly nations, they said, could aid and abet censorship, lay the way for international taxation of Internet sites, and who knows what else.  Obama’s move to surrender control of the Internet endangers freedom here and abroad, Bob Barr, Townhall.com, 3/26/14. http://bit.ly/1k8UIz1

This is not necessarily a “conservative” issue; a former president who took some credit for the flourishing of the Internet in the 1990s has expressed similar sentiments.  Bill Clinton and Wikipedia co-founder Jim Wales question international takeover of Internet, Robert Romano, NetRightDaily, 3/20/14. http://bit.ly/1lGfQMM

Whatever you think our country’s done wrong, the United States has been by far the country most committed to keeping the Internet free and open and uninterrupted, and a lot of these people who say they want multistakeholder control over domain names and Internet access, what they really do, is want the ability to shut down inconvenient exchanges within their own countries.

The Department of Commerce reportedly claims to have legal authority to proceed without congressional approval, yet has declined to reveal the legal basis for this position.  American Limited Government has filed a freedom of information request in an effort to learn more. Can Obama give away the Internet without Congress?  Robert Romano, NetRightDaily, 4/1/14. http://bit.ly/1kxLqZd

The administration’s proposal is probably related, as implied in President Clinton’s aforesaid remarks, to the controversy sparked by recent revelations about National Security Administration surveillance of global telecommunications traffic. That is, relinquishing of US control over the Internet might be seen as a sop to international critics.

But ideology is also involved.  The Internet divestiture proposal reflects a belief that the United States should defer to international organizations with regard to activities extending beyond its own borders. A cry to Congress: Save the Internet, Steve Forbes, Forbes.com, 3/26/14. http://onforb.es/1dUXKPg

The current White House deeply believes that this country should have virtually no footprint beyond its shores, that everything that happens anywhere else should be left to the UN, the IMF and other dysfunctional multinational bodies. The decision to turn the Internet over to the tender mercies of the Putins of the world is part and parcel of this America-is-bad mentality.

What’s the basis for such modesty?  The track record of the UN and other multinational organizations is hardly so distinguished as to suggest they are ready to take on additional responsibilities – like overseeing the Internet that was created under American auspices and has been operating quite satisfactorily to date.  At a minimum, there should a candid in-house discussion of the pros and cons before other countries are consulted.

C. Minimum wage – Five years after the “Great Recession,” what is Side A’s leading proposal for dealing with a still anemic economic recovery?  The answer seems to be boosting the minimum wage, or at least that’s the proposal that has been coming up most frequently.

This idea was touted in the president’s state of the union address, not to mention numerous other speeches.  Some reflections on SOTU address, 2/3/14.

It was the subject of the president’s weekly addresses on Feb. 15, Feb. 22, Mar. 8, Mar. 22, & Mar. 29. http://1.usa.gov/1f8Bw1N

The [Wilmington, DE] News Journal, and presumably many other newspapers, published a column by the president on why the minimum wage should be raised.  It’s time to give Delaware and America a raise, President Barack Obama, 3/30/14.

And there has been ample talk about the issue by others.  See, e.g., “NJ supports raising federal minimum wage to $10.10 per hour,” Delaware Chatter, 3/23/14.

From a purely political standpoint, the objectives of this campaign seem obvious.  Change the subject from GovCare – paint GOP as obstructionist and the party of the rich – encourage lower income Americans to turn out and vote in the mid-term elections.

But Side A’s beliefs also enter into the equation, which we take to be: (a) workers should be paid “enough” to live decently, (b) it’s the government’s responsibility to determine what constitutes “enough,” and (c) any effects on the overall economy will necessarily be positive (or at least benign).

Our response would be that the government should focus on creating a favorable business environment and let economic decisions like the pay of unskilled workers be determined by supply and demand.  The end result will be a stronger economy, with benefits for all concerned.  SAFE newsletter, Spring 2014. http://bit.ly/1i8XmiF

Does our view make sense?  Hopefully so, but you can take it to the bank that Side A won’t be listening.  Forget job losses for low pay workers or price increases that will result from hiking the minimum wage; these effects simply can’t cancel out the righteousness of paying everyone enough.

And by the way, don’t forget to do right by the members of Congress!  Dem Rep complains that members of Congress are “underpaid,” Mollie Reilly, Huffington Post, 4/3/14. http://huff.to/1hMHdlj

Rank-and-file members of Congress are paid $174,000 annually. However, Moran [Rep. Jim Moran of VA, who will be stepping down at the end of this session] says, it's just not enough, as members often have to maintain two residences: one in their home district and one in Washington, D.C.  "A lot of members can’t even afford to live decently in Washington," he said, noting that some of his colleagues sleep in their offices or rent "tiny" apartments to save money.

D. Immigration enforcement – “Undocumented workers” might be more politically correct, but “illegal immigrants” seems to be an apt label for people who have entered and stayed in the United States without complying with the country’s immigration laws.

This problem has developed over the course of several decades as a result of economic and political incentives to look the other way.  Both parties are to blame, and there is general agreement that some type of “reform” is needed.  So far, however, there has been no agreement about the details.

Side A’s ideas were embodied in a “bipartisan” bill that the Senate passed last year.  The basic thrust was to (1) encourage a continuing influx of immigrants (including both entry level and highly skilled workers), and (2) provide illegal immigrants with a host of new legal rights plus “a path to citizenship.”

There is no reason to believe that the Senate bill would end illegal immigration, which we believe should be the primary objective of reform efforts.  Provisions for beefing up border security in the Senate bill sound like overkill, and they might well be ignored or defunded in practice.  Our proposal would be to complement a reasonable level of border security (including more emphasis on promptly deporting detainees) with measures to deter employers from covertly employing illegal immigrants. Immigration reform, June 2013. http://bit.ly/1fJDYuq

The Senate bill has been sidelined in the House, while alternative approaches are being considered, but many conservatives believe the GOP House leadership is plotting to embrace “reform” legislation somewhat along the lines of the Senate bill and then allow the differences to be resolved in conference. 

For now, Speaker John Boehner et al. have declared this won’t happen, but their stated rationale has been a lack of trust rather than differences in substance.  Goodlatte to Obama: Let’s make an immigration deal, but not yet, Neil Munro, Daily Caller, 4/3/14.  http://tinyurl.com/kxxt8s7

This brings us to questions about reports of stepped-up enforcement of the US immigration laws. Deportation hits another record under Obama administration, Elise Foley, Huffington Post, 12/2/12. http://bit.ly/1hNc8Oc

As a result of questions from the Hispanic community, the president has directed a DHS review of current practices. Obama, citing a concern for families, orders a review of deportations, Michael Shear, New York Times, 3/13/14. http://nyti.ms/OqehUV

Critics claim, however, that the record deportations were achieved by “cooking the books.”  Thus, according to Jessica Vaughan, Center for Immigration Studies, the true number of deportations in 2013 was 135,000, the lowest since 1973.  Also, 68,000 convicted criminals were among the illegal immigrants released from custody last year.  Obama’s deportation rate hits record low, not record high, Ernest Istook, Washington Times, 4/1/14. http://bit.ly/1ilYCir

She described a cover-up that substitutes numbers from the Border Patrol — which apprehends those who have newly crossed our borders — and using them to pump up ICE (Immigration and Customs Enforcement), which is supposed to apprehend and deport violators from the interior. Those apprehended by the Border Patrol are transferred to ICE custody just before being returned to their country of origin, enabling ICE to claim a statistic but without having to enforce the laws in the heartland.

Assuming the deportation data are being manipulated as described, which would be consistent with bitter complaints of ICE employees that the higher-ups are undercutting their enforcement efforts, what would account for such a pattern of deception?

Another puzzler is the claim that it would be economically beneficial to encourage a continuing influx of low skilled immigrants.   Will immigration reform provide the workers America needs?  Thomas Donohue, US Chamber of Commerce, 6/15/13. http://uscham.com/PEo9Le

As more native-born students pursue higher education and advanced training, many lesser skilled positions sit vacant. Job growth between now and 2020 is expected to be highest in low and moderate skill jobs that cannot be mechanized or outsourced.

 

In addition to seasonal or agricultural work, immigrants are becoming increasingly vital to industries like home healthcare, nursing and hospitality services. If we don't welcome workers here to fill those jobs, we will watch companies take jobs elsewhere or find that some services are no longer broadly available in our country. And that hurts everyone.

Hmm, this pitch doesn’t seem to square with concerns about: (a) low wage rates for unskilled workers (Side A’s rationale for boosting the minimum wage), (b) displacement of human workers by lower cost machines (which is accelerating rapidly), and (c) the burgeoning costs of social and welfare programs for people living on the dole. 

Wouldn’t it be sensible to make fuller use of the working age population that already lives here?  This could readily be accomplished by pruning welfare programs, abolishing the minimum wage, and letting labor rates be determined by supply and demand. Then if there was still a labor shortage, legal immigrants could come in to take up the slack. 

If Side A’s views on immigration policy are not based on valid economic considerations, what are the real reasons?

One point is self-interest, in that unskilled immigrants are expected to predominantly support the Democratic Party.  Meanwhile, as the party for older white Americans, the GOP could face a dismal future.

But human beings don’t operate strictly on the basis of self-interest, being wired to seek justification for their actions.  Whether consciously or not, Side A is motivated by moral beliefs as well.  For example, national boundaries are an expression of selfishness –immigrants should be allowed to come here if they wish – Americans are rich enough to help them.

Our response would be that (a) immigration policy should be based on the national interest, and (b) regulating who comes to this country, and under what conditions, is a perfectly legitimate thing to do.  Here’s a column that eloquently makes these points.  Gingrich and immigration, Thomas Sowell, 11/20/11. http://bit.ly/1jORpuj

Let's go back to square one. The purpose of American immigration laws and policies is not to be either humane or inhumane to illegal immigrants. The purpose of immigration laws and policies is to serve the national interest of this country.

 

There is no inherent right to come live in the United States, in disregard of whether the American people want you here. Nor does the passage of time confer any such right retroactively.

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So it’s hopeless, there’s no way to overcome Side A, supported as it is by the government, academia and the media, and we definitely can’t change their minds?

Remember, however, that the bulk of the population is still up for grabs.  Side B can and must offer a better plan, 2/24/14.

Most “ordinary Americans” don’t follow political or government policy issues with any regularity.  We’ll collectively refer to these “low information voters” and nonaligned business people as Side X.  In terms of numbers and financial resources, one might think Side X would reign supreme.  Realistically, however, the ideas that sway political results come from Sides A and B with Side X support being the prize needed to prevail.

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On Friday, all employees in my office received a notice from our insurer, Aetna, that it could no longer offer our existing coverage because that coverage did not comply with ACA.  I spoke to several friends this weekend that received similar notices.  These are the life changing events that will cause millennials to wake up.  I just hope it’s not too late. – SAFE director

Since politics is not based on truth - rather on persuasion - I demand that Side A PROVE any statement or I will ignore it or add it to my list of ideological edicts from them. – SAFE director

The inability of progressives to see that their ideas haven’t been working leads me to agree with research suggesting a genetic component.  See, e.g., this current piece from Mother Jones. http://bit.ly/1jaU6FD Forget about compromise, one side or the other is going to prevail. – SAFE member (DE)

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3/31/14 – The liberty amendments            Read Replies

While all other sciences have advanced, that of government is at a standstill - little better understood, little better practiced now than three or four thousand years ago. - John Adams

 

Government is a function, not a process for the rational and verifiable discovery of truth (science).  But by calling it a science, Adams implied that governments could be improved by designing them properly.

 

History shows that autocratic leaders can make timely and coherent decisions while minimizing internal dissension – thereby serving their countries well.  Such leaders often lose their edge however, due to successes that render them overconfident, advancing age, or new challenges they aren’t equipped to handle. In any case, their successors may be less capable.

 

The key problem with democracy is not incompetent leadership, but rather lack of leadership, which yields indecision and internal infighting.  As Adams put it: “Democracy... while it lasts is more bloody than either aristocracy or monarchy. Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There is never a democracy that did not commit suicide.”

The Constitution was designed to steer a middle course between autocracy and democracy by establishing an American republic. 

Leaders of the national government were to be chosen in various ways.  Thus, representatives and the president would be elected by the voters (in the president’s case through the electoral college), senators chosen by state legislatures, and judges appointed.  Judges could serve for life; the other leaders served for defined terms of office.

The powers of the national government were divided between three branches with the intent of ensuring that no leader could accomplish much without securing the cooperation of leaders in the other two branches.

Finally, the powers of the national government were enumerated, which implied that plenary powers had not been granted.  And as state governments and the people retained rights and powers (see the 9th and 10th amendments), the national government’s powers were not necessarily supreme.

Aside from an attempted withdrawal by the southern states, which was stopped by force of arms, the Constitution worked smoothly for over a century.  Fans of big government (progressives) eventually succeeded, however, in expanding the national government’s role.  Some changes were made by constitutional amendments, such as the direct election of senators; others were accomplished more subtly, e.g., by interpreting the federal power to regulate interstate commerce as extending to even incidentally related activity. 

The American republic is now well on its way to becoming a European-style welfare state, which is hardly what the founders intended.  Worse, the cost of entitlement programs will skyrocket as more and more people retire or otherwise qualify as beneficiaries – outstripping the willingness of Americans to pay and perpetuating a pattern of deficit spending and borrowing.

Sooner or later, a fiscal meltdown seems inevitable.  Thomas Jefferson, for one, would have been scandalized. “It is incumbent on every generation,” said the sage of Monticello, “to pay its own debts as it goes.  A principle which if acted on would save one-half of the wars of the world.”

Another problem is the current president’s efforts (which are not entirely unprecedented, but rival the excesses of the Nixon era) to overpower rather than work with the other two branches.  The imperial presidency returns, 6/25/12.  Even a few liberals acknowledge that a dangerous dynamic is at work. The president’s power grab, Jonathan Turley, LA Times, 3/9/14. http://lat.ms/1fj95Na

Is the American government doomed to morph into an autocracy such as the founders attempted to avoid?  The answer is uncertain, but we are clear on one point. It’s not enough to complain about the “dysfunctional government;” those who aspire to preserve the republic should be prepared to propose specific changes.

Thus, Mark Levin (“the great one”), whose talk show rant in 2009 is said to have inspired the tea party movement, has proposed a constitutional convention (CC) to overhaul the US political system and put some proposed amendments on the table. The Liberty Amendments: Restoring the American Republic, 2013. http://bit.ly/1ecNWUf

Whether the idea of convening a CC is a winner or not, it seems worthy of discussion – and that is the intent of this week’s entry.  Here goes – process, substance, strategy, and conclusions.

A. Process – All the amendments to the Constitution so far have been proposed by Congress and ratified by the states, but the members of Congress would predictably resist curbs to their own powers and prerogatives.  To pursue amendments that would have this effect, therefore, it might be necessary to convene a constitutional convention.  Here are the steps prescribed by Article V:

2/3 of the states [34] ask Congress to “call a convention to propose amendments”

Congress (by 2/3 vote of both houses) calls a convention

The convention proposes amendments

The amendments are ratified by 3/4 of the states [38]

Many conservatives are skeptical, worrying that fans of big government might seize control of a CC and rewrite the Constitution to suit themselves.  See, e.g., “RX part two, a constitutional convention,” 12/7/09 (click “read replies”). 

Other conservatives, perhaps in desperation, are warming to the idea. Convention of states: A project of citizens for self-governance, http://bit.ly/1ak1Iz9

The Federal Government is broken. Washington D.C. will never voluntarily relinquish its power. Left unchecked, the government will continue to bankrupt this nation and destroy the liberty of the people. It is time for citizens and the States to act and we have the solution.

The case for action may boil down to this: “If you always do what you’ve always done, you’ll always get what you always got – and that’s just not good enough.”  As their current strategies aren’t working, in other words, it might behoove conservatives to try something else.

B. Substance – To avoid a “runaway convention,” proponents suggest the CC should be convened to consider a slate of amendments focused on conservative concerns. Here is a recap of Levin’s rather lengthy list with our comments.

#Budget: Outlays could not exceed either receipts or 17.5% of GDP, subject to congressional override by a 3/5 vote of each house (super majority vote) in a given year. Raising the debt limit would also require a super majority vote.

Conservatives may find this proposal more appealing than a balanced budget amendment, which could serve as an excuse for major tax increases.  Progressives would slam it, however, as an attempt to rule out a “balanced solution” to the fiscal problem. 

Also, the limitation of spending to 17.5% of GDP – versus say 20% - seems essentially arbitrary.  Proponents of such a provision should be prepared to explain how current spending levels (21%+ of GDP) would be cut to the target level. 

Congressional overrides might become an annual event, which would defeat the purpose of the amendment and do little to restore faith in the government.

#Taxes: The federal income tax rate on individuals would be capped at 15%. A VAT or national sales tax would be prohibited. The estate tax would be eliminated, and also (according to the explanatory text) taxes on investment income and on corporations.

We generally agree with the thrust of this amendment, but a 15% top rate for the individual income tax seems too low.  SAFE’s SimpleTax proposal uses a 30% top rate.  http://bit.ly/1gJc4xf

Also, if it were really intended to do away with taxes on dividends & capital gains, plus the corporate income tax to boot, business income would escape taxation.  Although we’re all in favor of eliminating double taxation, complete tax exemption for business income does not seem justifiable.

#Congress: (A) Members would be limited to 12 years of service as a representative and/or senator combined, with a phase-in provision for current members. (B) Congress could overrule specific Supreme Court decisions by a super majority vote.

Term limits would be healthy – the effects of legislators staying too long in Washington have been pernicious.  The 12-year standard is a judgment call, but it seems about right.

If Congress started overruling Supreme Court decisions, that could cause a lot of confusion.  We would not go there. 

#Judicial: (A) Supreme Court justices could serve a maximum of 12 years, with a phase-in provision for current members. (B) “Interstate commerce” would be defined as transactions across state lines, thereby reversing a long line of decisions extending the regulation of interstate commerce to essentially all business activity.

The idea of judicial term limits is unappealing, but there have been cases in which superannuated justices overstayed their welcome.  Perhaps minimum age requirements and a mandatory retirement age would be a better way of ensuring that Supreme Court justices don’t “stick around forever.”

It’s too late to revert to the original interpretation of Congress’s power to regulate interstate commerce.

#Executive branch: (A) Administrative departments and agencies would have a maximum life of 3 years, subject to express renewal by Congress. (B) Major regulations (economic burden of over $100 million) would require approval by a joint committee of Congress before going into effect. (C) In addition to compensating property owners for the value of property taken by eminent domain, the government would be required to provide compensation for the constructive taking of property by regulations designed to serve public purposes if the resulting loss of value to an individual owner was $10K+.

Sun-setting administrative departments and agencies has a nice ring to it, but no one would take the 3-year life seriously and the resulting reprieves would degenerate into a pointless exercise. 

The other proposals may have some merit, but they should be dealt with legislatively rather than addressed in the Constitution.

#States: (A) Revert to the election of US senators by state legislatures vs. by state voters. (B) Empower 3/5 of state legislatures to overrule federal statutes or major regulations within a limited period after adoption. (C) Empower 2/3 (why not 3/4?) of state legislatures to amend the Constitution without going through Congress.

It’s inconceivable that the states would revert to the election of US senators by state legislatures, as the Constitution originally provided.  Inclusion of this idea in the “liberty amendments” would simply detract from their credibility.

As for empowering the states to strike federal statutes or amend the Constitution without contacting Congress, we think the results might be more confusing than constructive. 

#Voting: Require photo ID for voting and impose limitations on early voting, e.g., not allowed more than 30 days (45 days for deployed military personnel) before elections.

This is one of the best chapters in Levin’s book, and the proposed amendments should be welcomed as a reform of an increasingly corrupted voting system.  But progressives would predictably claim “there is no credible evidence of voting fraud” and slam the amendment as a ploy to suppress voting by people of lower socio-economic status.

C. Strategy – Levin’s book makes a stirring case that the American republic is endangered, and then presents and explains the constitutional amendments that he envisions would get things back on track, but many questions are left unanswered.

How could a CC movement be organized and win the country’s support?  How would the delegates be selected, and who would give them their marching orders? What if the delegates deadlocked, as the nation’s leaders have deadlocked in recent years on every occasion when real reforms were on the table?

Another book, this one a work of fiction, suggests some answers to these questions.  For Love & Liberty, Stephen M. Grimble, 2011. http://bit.ly/1dDozgm

Any successful CC movement would probably be launched by political outsiders, in Grimble’s book the Madison Committee led by a retired business executive named “Reb” McCoy, which begins with a series of theoretical conversations about the state of the American republic and progresses to a slate of proposed amendments (which overlap with, but are less partisan in nature than Levin’s).

To get anywhere, outsiders need to reach out to potential allies in the political power structure.  Thus, it’s not long before Reb runs for governor of Texas, his first-ever foray into the political thicket, and, after winning that office, begins lobbying fellow members of the national governor’s association.  As part of the campaign to build popular support, the Madison Committee amendments (or “Second Bill of Rights”) are printed up with explanatory text and sent to all state legislators as well as many others.

Ultimately, the fate of the CC movement would be determined by political control.  Readers will feel a sense of inevitability when Reb reluctantly agrees to run for president and very nearly prevails.  Also, over 2/3 of the states wind up voting for a CC, thereby putting the matter in Congress’s in-box after the presidential election. 

The GOP-controlled Senate passes a resolution that spells out some of the mechanics for a CC.  Notably, each state was to appoint a slate of 3-5 delegates, not more than one of whom could be currently holding political office.  Also, each state was to have one vote at the convention rather than apportioning voting power based on the respective population of the several states.

The Democratic-controlled House of Representatives passes a somewhat inconsistent resolution and then stalls about resolving the differences in conference.

Rightly or wrongly, Grimble’s book suggests little reason to worry about a runaway CC.  Far from attempting to highjack the CC proposal for a CC, progressive politicians view it as threatening their power and use every means available to block it.  And without getting into plot spoiler details, the CC effort ultimately falls short – presumably heralding the end of the American republic.

D. Conclusions – Convening a CC to reform the political system would be a long shot – but the idea should not necessarily be rejected out of hand.

Whether they found a way to hijack the process or simply worked to block it, the opposition of progressives would be ferocious.  Indeed, nothing energizes entrenched politicians more than a threat to their own power 

Conservatives would not readily coalesce around any specific slate of amendments – witness our reservations about some of Levin’s “liberty amendments.”

Still, it is hard to see how electing more conservative leaders and attempting to reform some of the laws and programs that have been put in place could represent a winning strategy.  Conservative leaders are not all created equal; some are standouts and others are duds.  The details of reforming social programs, e.g., healthcare, are mind numbingly complicated, and the public has a limited attention span.

To steer the political conversation in a constructive direction, there needs to be a focus on a clear and relatively simple vision that could resonate with the American people.

So what about taking a cue from American history?  Acknowledge that the country is off track, suggest where the problems lie (as Levin  has done, and many others – including SAFE), and support the call for a CC in principle. 

Given enough buzz about the CC idea, Congress might suddenly develop an interest in addressing some of the problems that have been allowed to fester.  That’s what happened about 100 years ago when the idea of convening a CC to consider the direct election of senators began to pick up steam.

What have we got to lose?

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Liked the entry, but why did you rule out the idea of having state legislatures choose senators.  They should represent their respective states versus having their own little fiefdoms. – SAFE member (DE) 

Our thought was that arguing against having the voters select senators directly would sound too much like trying to turn back the clock (which can never be done). 

I read Levin’s book, and my reaction was, how could we expect Congress to abide by these amendments when they don't abide by the current Constitution or its amendments? So a CC might be a useless effort, even if successful. – SAFE member (Texas)

If a CC worked out as Levin envisions, the Constitution would be back in vogue and all the politicians would be scrambling to get in step.  Their lack of respect for the Constitution has been based on a perception that no one was paying attention. 

Key problem with democracy is not lack of leadership, because leadership is not what decides the outcome of elections.  Those who are lower in the socio-economic hierarchy will always vote for alms. – SAFE director

Looking back over the past four score years the march toward omnipotent, unlimited "progressive" government has continued steadily with no more than an occasional brief pause (the Reagan years?) until the next leap "forward." It almost seems inexorable now. People are more wedded to their political ideologies than the Constitution or even their religion (assuming they have one). Republicans at best try to slow the pace of growth, but the seduction of government passing out ever more handouts, or being entrusted to solve every perceived problem is an irresistible siren song for too many politicians and voters. (And even when someone merely proposes to slow the rate of increase in spending, this is irrationally attacked as a heartless, draconian "cut.") 

Liberals instinctively want to impose their will on the populace in every way imaginable. No matter how incompetent government is in imposing and administering its misguided and too often unconstitutional policies, most people apparently give more weight to its "good intentions." 21st century liberalism in America is fast morphing into fascism. The Constitution is disregarded if it gets in the way of achieving "utopia" and "social justice." Everything will be tolerated except those who oppose the liberal, Saul Alinsky agenda.

The final nail in the coffin is the slavish devotion of most all TV and print journalists to the liberal cause, along with their vitriolic, knee-jerk antipathy to anyone who disagrees. Without a blunt, crusty, cynical, dogged, inquisitive, and intelligent press that prides itself on challenging whoever holds power regardless of their ideology, the first amendment freedom of the press has no meaning, at least not in the context that the Founders understood it. – Steve Grimble, author of “For Love & Liberty”

We aren’t ready to give up hope yet, but admittedly things have been headed in the wrong direction and time is getting short.  Wake up, America! - Publius

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3/24/14 – Healthcare “reform” is a work in progress        Read a Reply

Remember the point in our holiday blog entry of 2013 that conservatives need to master the art of telling stories.  Not by bread alone, 12/23/13. This week, we’ll attempt to put theory into practice.

It seems that someone retrieved a document entitled “Healthcare reform” from a DC dumpster.  It read as follows.

Once upon a time, a rich and powerful nation decided the government should ensure that its citizens had access to healthcare services rather than leaving this matter to the vagaries of the free market.  Richtopia’s constitution said nothing about taking on such a responsibility, but this document was thought to be behind the times.

Programs were created to provide subsidized healthcare insurance (HCI) for various segments of the population.  There was ElderCare for seniors, IndigentCare for the poor and disabled, and YoungCare for children from lower and middle class families.  None of these programs were true insurance arrangements to protect against unusual losses; they were more akin to prepaid service plans.

Healthcare spending in Richtopia grew rapidly, with the government paying an increasing portion of the total bill.  Don’t worry, it was said; this showed the government programs were working better than expected. 

From 5% of Gross Domestic Product a half-century earlier, overall healthcare spending climbed to 17%+ of GDP – the highest healthcare/GDP ratio in the world.  That’s fine, said some, as we are getting the world’s best healthcare, but others were not so sure.

Granted, Richtopia’s medical procedures were world class, but people in other countries had comparable or in some cases longer life expectancies.  Could it be that some of the bountiful healthcare spending was driven by the bottom lines of healthcare providers, not medical effectiveness, and resources were being diverted from more productive uses?

Another concern was that outlays for HCI subsidies represented a growing share of the government’s total budget.  Meanwhile, other programs – such as military defense, national parks, and roads & bridges – were not being adequately supported.  Additional funding for these functions could be provided by hiking taxes, of course, but some Richtopia citizens had the quaint notion that they were “taxed enough already.”

For all the government’s programs, roughly 1/6 of the population still didn’t have HCI so the progressive vision of universal healthcare equity remained unfulfilled. A new Richtopia ruler proposed to fix this, while also addressing the other problems.

GapCare would be for working age adults, ensuring HCI for the one segment of the population still not covered (except to the extent they had private HCI). High earners would pay top dollar; the lower echelon would purchase HCI on a subsidized basis or enroll in an expanded IndigentCare program.   Fines for not signing up would be imposed to ensure everyone’s cooperation.  That should eliminate the HCI coverage gap, or at least greatly reduce it.

To avoid aggravating the fiscal problem, GapCare would be funded by a combination of new taxes and funding cuts for existing healthcare programs.  Not quite the same as balancing the budget, but at least the bill would be balanced and the budget office could score it as a deficit reducer.

As for wasteful healthcare spending, the government would tighten its reimbursement procedures, thereby encouraging healthcare service providers to avoid ordering unnecessary tests, prescribing expensive medical procedures, or admitting patients to hospitals too freely. The healthcare cost curve would no doubt be bent down over time, and the government (as a major contributor to overall healthcare spending) could expect to share in the savings.

In selling GapCare to the public and getting it enacted into law, supporters glossed over potential negatives.  “If you like your private healthcare insurance plan, you can keep it. If you like your doctor, you can keep your doctor.”

Observers who understood how insurance markets work were dubious about such promises. If all HCI policies would be required to add new features, such as allowing children to stay on their parents’ plans until they were 26, wouldn’t the insurance companies have to raise their premiums to cover the costs?  If people could not be denied coverage for preexisting conditions, why would they sign up for coverage before they got sick? If healthcare service providers would be expected to do more and take less, wouldn’t many of them find other things to do? 

To a retired financial planner and insurance adviser, the indicated design changes seemed fairly clear. Take the arrangements for covering uninsured individuals (no HCI from employer, making too much to participate in IndigentCare).

Start with an assigned risk pool, similar to high-risk pools in the auto insurance market. Require all healthcare insurers to participate in the pool, accepting applicants on a random assignment basis.

Policies would be individually owned and the premiums paid would be means tested. Insurers would pay a tax based on premium revenue, which would help to cover the cost subsidy, but some subsidy money would still need to come from general revenue.

Individuals paying HCI premiums would be entitled to a tax deduction therefor.  Switching policies would be allowed each year during an open enrollment period. Those opting not to get HCI would be handled by cost shifting, as at present, but the burden would be less.  Over time, people would figure out what was in their best interests.

Employers would be able to offer HCI coverage for their employees by paying a percentage of their individually owned policies.  Premiums paid by an employer would be tax deductible to the employer and tax free to the employee. 

The foregoing changes would also apply for ElderCare and IndigentCare participants.  Individual policies for everyone, government subsidies means tested. Healthcare Savings accounts for deductibles and co-pays should be part of all plans to provide an incentive for controlling costs.  A brief sketch, to be sure, but it is at least something everyone can shoot at.

Over time, many people began to suspect that things might not go as well as had been promised.  Opinion polls showed declining support for GapCare, particularly the requirement that individuals participate or pay a fine. 

Conservatives attempted to block GapCare in the courts (the first of several challenges failed in the highest court of the land), have the legislation repealed, or delay its implementation.  A “government shutdown” resulted when the ruling party (Party A) flatly rejected demands for a delay, insisting everything was under control.

The website for enrolling working age citizens in qualifying HCI plans malfunctioned, which was embarrassing for the government, but the technical problems (with the possible exception of glaring security flaws) could be and were fixed in due course.

Based on rates being quoted to prospective customers around the country, it appeared that the new HCI plans would generally be more costly – or come with higher deductibles and a shorter list of doctors and hospitals – than the “noncompliant” HCI plans being phased out.  This didn’t greatly concern lower echelon workers, some of whom would pay only a small fraction of the applicable premiums, but well paid workers didn’t like the idea of paying more for new HCI plans than they had been paying for the old HCI plans that had met their needs just as well or better.

Consider these comments from a 54-year-old consulting engineer making a nice (but not top bracket) salary.  His girl friend makes a modest salary as a part-time mail clerk.

For me, under GapCare, the cheapest, lowest grade policy I can buy, which also happens to impose a $5,000 deductible, costs $482 per month.  For my girlfriend, the same exact policy, same deductible, costs $1 per month.

If I want to upgrade my policy to a low-deductible premium policy, such as what I had with my last employer, my cost is $886 per month. But my girlfriend can upgrade her policy to the very same level, for just $4 per month. That's right, $4 per month. $48 per year for a zero-deductible, premium healthcare policy.

Why must I pay $482 per month for a policy that someone else gets for a dollar? And why should the other person get to buy an $886 policy for $4 a month? Think about this: I have to pay $10,632 a year for the same thing that the other person can get for $48. $10,000 of net income is 60 days of full time work as an engineer. $48 is something I could pay for collecting aluminum cans and plastic bottles, one day a month.

While rejecting delays proposed by the opposition party (Party B), the leader delayed one GapCare provision after another that threatened to cause administrative or political problems.  Questions were raised as to his authority to order such delays without action by the legislature, but he paid no attention.

Several legal challenges to GapCare were still pending.  Given that the high court had upheld GapCare against an initial challenge, however, some observers doubted that it would strike down the legislation based on some other legal theory. 

•Suit one – As the high court had construed the noncompliance fine as a “tax,” the GapCare legislation should have originated in the lower chamber of the legislature.  Also, the tax was designed to change behavior rather than raise revenue, so it violated the prohibition against taking property without just compensation. Conservativebyte.com, 3/17/14. http://bit.ly/OK9eif

•Suit two – Some Richtopia state governments had declined to establish HCI exchanges under GapCare, so the federal government had established exchanges to act in their place. The statute provided taxes to encourage participation and subsidies for compliant HCI policies in states that established exchanges, but these provisions arguably did not apply in areas served by federal exchanges.  Accordingly, it was claimed, the tax office’s determination that the taxes and subsidies would apply anyway was unlawful.  Worse, the government had recently filed a legal notice that implied it might decline to follow a court order to cease and desist if such an order was issued.  Forbes.com, 3/14/14. http://onforb.es/1jf2reD

Party B was hoping to exploit the public’s dissatisfaction with GapCare in the mid-term elections. There were varying opinions, however, as to whether the good old party’s best bet would be to simply oppose the legislation (and thereby risk being perceived as obstructionists) or suggest legislative changes (which could be attacked).

The upshot was that Party B began floating ideas for GapCare fixes, although its members couldn’t seem to coalesce behind any particular approach.

•Three Party B members of the upper chamber (controlled by Party A) proposed a watered-down version of GapCare that would ditch the mandates, retain subsidies for approved HCI policies, and make ends meet by partially taxing employer-provided HCI. Just a big tax increase sniffed conservative critics. Forbes.com, 1/14/14. http://onforb.es/1extKZj

•Several Party B members of the lower chamber (controlled by their party) suggested packaging the customary “Doc fix” (deferral of previously mandated cuts to reimbursement rates for Eldercare) with a deferral of the individual mandate provision for GapCare.  Hopefully, the fiscal cost for the Doc fix would be “paid for” by a reduction in GapCare outlays (as citizens deferred signing up).  This suggestion hit a nerve, prompting an immediate veto threat from the leader.  The Hill, 3/12/14. http://bit.ly/1dAkV16

•There were reports that Party B would present an official alternative to GapCare, to be passed by the lower chamber before the elections. It was said the plan might include an expansion of high-risk insurance pools (hmm, that sounds familiar), promotion of healthcare savings accounts, inducements for small businesses to purchase pooled coverage, enhanced ability to buy HCI across state lines, and tort reforms. It seemed probable that Party B’s proposal would wind up as a statement of principles, however, rather than a fully developed proposal in “legislative language.” Townhall.com, 3/17/14. http://bit.ly/1gJezws

Party A members were also in a quandary.  Should they say GapCare needed to be fixed, and here’s how, or would it be smarter to hail this law as a big success and defer any ideas for changes until later?  Here’s the view of a pundit who favored the latter approach.  Delaware Chatter, 3/19/14.

Candidates of Party A should tell voters that GapCare is the biggest expansion of access to healthcare in decades, fulfilling a long-held progressive dream.  They should accuse their opponents of playing voters for fools by cynically pretending that repeal is just around the corner. They should talk about the millions of formerly uninsured Americans who now have coverage.  They should talk about the young people who are able to be covered under their parent’s policies.  They should talk about the diabetics and cancer survivors who now cannot be denied coverage because of their conditions.

Oops, it was predicted that some 30 million people would still lack HCI after GapCare was fully implemented.  Among the reasons: illegal immigrants were not eligible (at least under the law as it stood, no telling what might happen in the future) and many citizens would pay the fine rather than sign up for approved HCI coverage at applicable prices.  Budget office, 3/10/14. http://1.usa.gov/1gxsFp2

Would the charge stick that Richtopia’s healthcare system had been turned upside down, inconveniencing and upsetting almost everyone, without a great deal to show for it?

Also, signup for HCI under GapCare had been skewed in favor of older and sicker people, so insurance companies would be seeking compensatory payments (bailout money) from the government and/or big premium rate increases in 2015 et seq. 

The capability for a partial bailout – via “risk corridors” – had been written into the GapCare legislation for years 2014-16.  And some said the leader could extend the risk corridors for several more years if necessary, although others saw such an action as beyond his authority. The Hill, 3/19/14.  http://bit.ly/1dAB070

As for premium hikes in future years: “Health industry officials say GapCare-related premiums will double in some parts of the country, countering claims recently made by the administration. The expected rate hikes will be announced in the coming months amid an intense election year, when control of the upper chamber is up for grabs. The sticker shock would likely bolster Party B’s prospects in November and hamper GapCare insurance enrollment efforts in 2015.” The Hill, 3/19/14.  http://bit.ly/1igNVPO

Some observers feared the leader et al. would turn on the “greedy insurance companies” in 2015, citing their demands as an excuse for melding GapCare and other government programs into a “single payer” system, which was what progressives had wanted all along. Washington Times, 3/19/14. http://bit.ly/1gcegPs

The conclusion of this document was not found, dear readers, so you will have to use your imagination as to how the story ends. All we can say for sure is that “it will be interesting to see what happens.”

*        *        *        This Blogs Reply        *        *        *

The entry on healthcare and "telling a story" was well thought out, timely & entertaining. Just yesterday, I talked with a big supporter of GovCare. She is a Harvard MD practicing with a large hospital (University of Pittsburgh Medical Center) and also with the VA Hospital there. It was an amazing and frustrating conversation. Supposedly a life-long Republican, she has jumped ship because "the Republicans did not have any suggestions or proposals to resolve healthcare issues and were at war against women's rights, especially the ‘right’ to get government-paid contraception and abortion.” She cited no credible data, and dismissed my factual arguments as “right-wing spin.” I could not sway this single-issue voter, who has bought all of the liberal story lines and myths. – Retired financial executive

top      wwhipple3@verizon.net


3/17/14 – A word to the wise: look before you leap

In his well-known book, “Seven Habits of Highly Successful People,” the late Stephen Covey offered a series of seemingly obvious – yet often overlooked - principles for the achievement of personal and business success.  http://yhoo.it/1evWQsq

Covey’s second principle, “begin with the end in mind,” seems equally applicable for groups.  After all, how can an organization, government, or country make meaningful plans without deciding what it wants to accomplish?

Given a goal, one should be able to make logical plans for achieving it.  Omit this step, and the planning process may produce unwanted results.  Discussion follows of an example that is dear to our hearts.

A. The goal – Securing America’s future economy is a rather fuzzy concept; we don’t know what the economy should look like 20, 50, 100 years in the future.  But it would be nice to see the production of desired goods and services grow robustly, thereby facilitating the satisfaction of human needs. 

Centrally planned economies muddle along.  Government bureaucrats cannot hope to keep track of (1) what goods and services a host of producers can make, at what cost, and (2) what countless consumers want and are willing to pay for, as well as these parties can do themselves.  What’s more, bureaucratic decisions are often distorted by self-interest. 

Witness the collapse of the former USSR, centuries of economic stagnation in China before the relaxation of government economic controls sparked a boom (someone in that country must follow SAFE; we have received quite a few e-mails written in Chinese characters), and many autocratically ruled countries with anemic economies. 

On the other hand, relatively free markets seem to foster economic prosperity.  See, e.g., “How the West Grew Rich: The economic transformation of the industrial world,” Nathan Rosenberg & L.E. Birdzell, Jr., Basic Books, 1986. http://amzn.to/1fwKIXU

Initially, the West’s achievement of autonomy stemmed from a relaxation or a weakening of political and religious controls, giving other departments of social life the opportunity to experiment with change.  Growth is, of course, a form of change, and growth is impossible when change is not permitted.  And successful change requires a large measure of freedom to experiment.  A grant of that kind of freedom costs a society’s rulers their feeling of control, as if they were conceding to others the power to determine the society’s future.  The great majority of societies, past and present, have not allowed it.  Nor have they escaped from poverty.

Some leaders and observers may give lip service to economic growth and prosperity, yet set more store in other goals – such as achieving income equality, rewarding cronies, or restoring the world to a natural (before humans came along) state. 

Thus, the word “opportunity” appears over 100 times in the administration’s current budget proposal, but it is often qualified as “opportunity for all.” On other occasions, moreover, the president has referred to the reduction of income inequality as “the defining issue of our time.”  SOTU finesses fiscal responsibility, 1/30/12.

No challenge is more urgent.  No debate is more important.  We can either settle for a country where a shrinking number of people do really well while a growing number of Americans barely get by, or we can restore an economy where everyone gets a fair shot, and everyone does their fair share, and everyone plays by the same set of rules.

OK, but the president and other fans of big government (Side A) don’t dispute the importance of securing America’s future economy, so let’s assume that’s the main goal and move on to the next step.

B. SAFE’s plan – Policy ideas of folks on the right tend to be relatively straightforward and easy to explain.  The basic premise is that government (say a composite of federal, state and local governments) has gotten too big for its britches, is diverting too many resources from the productive private sector, and needs to be taken down a notch or two. 

To some conservatives, that means stopping the march towards ever bigger government and, if possible, putting some things back to where they used to be.  Follow the Constitution – do away with the IRS – empower the states - bring back the gold standard.

Others (including SAFE) are more inclined to envision the future we want and propose course adjustments to get there.  Change happens, it’s impossible to turn back the clock, let’s focus on what’s coming down the pike.

None of this is meant to suggest government does not have an important role to play.  For starters, it creates a rule of law and provides protection against external threats – without which no economy can hope to flourish for long.  And other roles taken on by government may be appropriate too, such as providing a social safety net (without going overboard and spending the country into bankruptcy), regulating the emission of pollutants (so long as the cost-benefit ratio is genuinely favorable), and supporting basic scientific research (not picking economic winners or losers).  Always remember, however, that it’s better for government to do a limited number of things and do them well than to take on an ever-expanding list of jobs and handle many of them poorly.

As for how to rein in the government, SAFE has developed a policy agenda that, we believe, is generally shared by other conservatives.

•Eliminate wasteful government spending, while ensuring that needed government operations (such as the US military) are adequately supported, and balance the budget. http://bit.ly/Og0Ua2

•Simplify the tax law by eliminating preferences and slashing rates. http://bit.ly/1nnvSJK

•Restructure “entitlements,” e.g., Social Security (http://bit.ly/NgKywO) and healthcare programs (http://bit.ly/1fwNImO), so they will be affordable over the long haul.

•Get the federal government out of areas more properly handled at a state or local level, e.g., education, thereby avoiding duplication of efforts and loss of accountability. http://bit.ly/1fyXlSe

•Rationalize regulations, eliminating or refraining from imposing government rules that entail more costs than benefits. http://bit.ly/1fIKFwP

If we’re right that relatively free markets contribute to economic prosperity, while centrally planned economies sludge up, the foregoing policies would seem well suited to revitalize the economy or, to borrow a line from President John Kennedy, “get this country moving again.”

C. Side A’s plan – Can the typically more sophisticated proposals of our intellectual opponents be supported without somehow explaining away the evidence that free markets work?  In a word, “no.”

FIRST, notice how Side A suggests that (a) the government’s traditional role has been underestimated (“you didn’t build that”), (b) the issue at hand is too critical to be left to the private sector (“we don’t have time for a debate”), and/or (c) the proposed approach will overcome issues that doomed prior government efforts (“this time is different”).

Apparently, conservatives are expected to make the case for following free market principles, as though it were a novel argument, rather than the burden of proof being put on Side A to justify deviations.

SECOND, it’s difficult to reconcile the points in Side A’s policy agenda with a vision of boosting the economy.  Consider the following examples, in each case asking yourself  a question: how is this going to encourage innovation, investment, and full employment?

•Social welfare programs such as food stamps, unemployment insurance, and Social Security disability awards have been allowed to spiral out of control.  See, e.g., “Some food stamps history and where to now,” 4/29/13.

The latest benefit is healthcare insurance subsidies under GovCare. There has also been a relentless push to hike the federal minimum wage.  The Congressional Budget Office forecasts a reduction employment in each case, e.g., by the equivalent of 2 million full time jobs for GovCare and 0.5 million jobs for the minimum wage increase. Tax work, subsidize idleness, and batten down the hatches, 2/17/14 (item 5).

Despite a major international crisis brewing in the Ukraine, the president has continued devoting his weekly addresses (4 out of the last 5) to pitching mandated pay raises for American workers.  See, e.g., “Rewarding hard work by strengthening overtime pay practices,” 3/15/14. http://1.usa.gov/1gto1Iz

•Comprehensive immigration “reform” is touted as a plus for the economy on grounds that the new arrivals would fill jobs that Americans don’t want and pay more in taxes than they would receive in government benefits.  Immigration reform, June 2013. http://bit.ly/1fJDYuq 

It strikes us, however, that better economic results could be achieved by encouraging current US citizens to work instead of staying on welfare.  That’s not to advocate cutting off legal immigration, our objection is primarily to allowing illegal immigration to continue ad infinitum, but what ever happened to the concern that computers and robots are taking on more and more of the work so that it won’t be possible to keep lower or even middle tier workers employed? Humans can be replaced, and then what? 10/7/13.    

•Side A’s only real idea for reducing the deficit seems to be collecting more taxes – without regard to the economic drag effects.  President’s fiscal plan is a nonstarter, now what? 3/10/14

•Government regulations are continually tightened, with no apparent regard for the law of diminishing returns.  And in order to justify their proposals, some public officials have shamelessly exaggerated the alleged health or environmental benefits.  Regulate or subjugate, 12/9/13.

In this regard, the manmade global warming (aka climate change) theory deserves special mention.  The government’s own data show no global warming, on average, since 1998, and climate scientists whose prior predictions have gone awry seem at a loss to explain what they got wrong. How can it be said with a straight face that the MMGWT theory is a “fact” and no further discussion of the matter is permissible? Despite contrary evidence, global warming alarmists stick to their guns, 1/27/14.

•Monetary policies are being followed with the express intention of boosting the rate of inflation to 2% per year, never mind the adverse effects for those who have conducted their financial affairs prudently.  A survey of the US economy, August 2013. http://bit.ly/1fjoDSR

The foregoing covers a lot of ground, and our logic may not be air tight in every case.  But overall, it’s hard to avoid the conclusion that Side A (basically the Democratic Party) has been supporting these policies for reasons other than boosting the economy. Republican roulette, Daniel Henninger, Wall Street Journal, 3/13/14 (no link available).

While Republicans stage the Irish family reunion that never ends, Democrats stay united around policies dating back to 1964.  Tax, spend and pander.  You keep looking for anything resembling an interesting revision of their entitlement state steam engine, but it never comes.

Perhaps it would make sense to ask Side A’s leaders what they are really hoping to accomplish by pushing the country into economic and social decline.

top      wwhipple3@verizon.net


3/10/14 – President’s fiscal plan is a nonstarter, now what?

The president’s budget proposal for fiscal year 2015 (http://1.usa.gov/1jmJlPu) resembles last year’s version.  We could basically repeat our previous objections, e.g., purposeless deficit spending, rosy economic assumptions, no meaningful effort to curb deficits, drag on the economy. President’s budget plan, 4/15/13.

Or we could challenge specific claims in this document, which reads more like a campaign brochure than a financial report.  See several examples below.

Page 1 – “After 5 years of grit and determined effort, the United States is better positioned for the 21st Century than any other nation on Earth. *** And for the first time in over a decade, business leaders around the world have declared that China is no longer the world’s number one place to invest; America is.”  This may be what some business leaders think, but the global business arena is and will remain intensely competitive.

Page 2 – “Climate change is a fact, and we have to act with more urgency to address it because a changing climate is already harming western communities struggling with drought and coastal cities dealing with floods.” Calling a theory a “fact” does not prove it. Despite contrary evidence, global warming alarmists stick to their guns, 1/27/14.

Page 8 – “Under the President’s leadership, the deficit has been cut in half as a share of the economy, representing the largest four-year deficit reduction since the demobilization from World War II.” The “Annual deficits as a % of GDP” chart, lower on the page, indicates steady progress in cutting this ratio from 9.8% in 2009 to 1.6 % in 2024.  Notice how this impression would be changed if the chart showed “historical” data for several years before the president took office.

But instead of simply assessing the president’s budget proposal, let’s put it in context.  The state of play has changed from a year ago (see the table that follows), and Side B’s response should be adjusted accordingly. 

Prior budget proposal (April 2013)

Current budget proposal

House & Senate budgets issued in March.

CBO baseline issued in  Feb.

Effort to reconcile House & Senate budgets was expected, although in the end it went nowhere.

House budget planned; Senate will not participate.

Budget stalemate led to a government shutdown, after which there was a narrow budget deal setting discretionary spending limits for FY 2014 & 2015.

No fiscal deadlines coming up before the elections, so no chance for a deal.

A. Assessment – The Congressional Budget Office regularly prepares “baseline projections of what federal spending, revenues, and deficits would look like over the next 10 years if current laws governing federal taxes and spending generally remained unchanged.”  The budget and economic outlook: 2014 to 2024, 2/4/14. http://1.usa.gov/1doLODQ (download PDF).

We recently commented on the CBO’s latest projection, which shows the deficit bottoming out at $478 billion in 2015 and then heading back up in both nominal dollars and as a percentage of GDP.  Tax work, subsidize idleness, and batten down the hatches, 2/17/14 (point 6).

Given this dismal projection, which in our view is a best-case scenario, the United States could be in for some very tough times.  Demand better!

At first blush, the president’s budget proposal looks more promising than the CBO projection, with the deficit continuing to fall in real economic terms until 2024 (at which point it would be 1.6% of GDP vs. 4.0% in the CBO projection).  And over a 10-year period, the cumulative deficit would supposedly be cut by $3 trillion ($7.9T - $4.9T).  

$ in trillions

President’s budget proposal 3/5/14

CBO baseline Feb. 2014

Fiscal years

2015-19

2020-24

Total

2015-19

2020-24

Total

Outlays

21.4

27.3

48.7

21.1

27.4

48.5

Revenues

19.0

24.8

43.8

18.1

22.5

40.6

Deficit - $

2.4

2.5

4.9

3.0

4.9

7.9

Deficit - %GDP

2.5%

2.0%

2.2%

3.0%

4.0%

3.5%

Note, however, that none of the indicated deficit reduction is attributable to spending reductions (budgeted cuts are more than offset by new spending) – it’s all due to an increase in projected revenues.  That suggests a need to drill down on the revenue side to see what is behind the $3.2 trillion increase in taxes and fees.

First, the president’s budget proposal has an “adjusted baseline” (Table S-4) with projected revenues that exceed the CBO projection by over $1.3 trillion.  Most of this difference ($1.2T) comes in the second half of the projection, and the revenue increase may be partly due to rosier economic assumptions in the president’s proposal (e.g., compounded real GDP growth of 30.3% over 10 years vs. 28.4% per the CBO.) 

By type of revenue, the biggest baseline increase is for corporate income taxes, which are shown as jumping from $4.5T to $5.1T (+ 13%).  This may reflect an assumption that tax collections from corporations can be increased by more vigorous enforcement efforts, but that’s just a guess.

Second, the president’s budget proposal calls for a variety of revenue increases adding up to roundly $1.4 trillion over 10 years. More details will be provided in a minute.

Third, receipts of $0.5T are projected on an “allowance for immigration reform” revenue line, which presumably represents taxes and fees to be paid by immigrants placed on a path to citizenship.  There is also a mandatory outlays line of $0.3T with the same caption, indicating a net budget pickup from immigration reform of $0.2T. 

Note: Others have suggested that the fiscal effects of the Senate immigration bill would actually be negative.  5 immigration falsehoods from the White House, Jessica Zimmerman & Ken McIntyre, Heritage.com, 9/6/13. http://herit.ag/1kB13T3 (claim 1)

Here is a recap of projected taxes and fees by type:

$ in trillions,

2015-24 totals

Individual Income

Social Insurance

Corporate

Income

 

Excise

All

Other

 

Total

CBO baseline

20.1

13.0

4.5

1.1

1.9

40.6

Baseline +

0.3

0.4

0.6

0.1

(0.1)

1.3

Tax increases

0.8

0.1

0.2

0.1

0.2

1.4

Immigration reform

0.0

0.0

0.0

0.0

0.5

0.5

Budget proposal

21.2

13.5

5.3

1.3

2.5

43.8

Some observers profess indifference as to whether the deficit is addressed by raising taxes or cutting spending.  If the budget process were merely a matter of reaching agreement on a level of government spending and then deciding how to pay for it, the president’s preference for tax increases would arguably be reasonable.

Bear in mind, however, that tax increases divert resources from the private sector, which might otherwise be used more productively than the government programs that will be funded.  The higher tax rates are set, the greater the potential for economic damage – and the greater the potential benefits from cutting taxes instead of raising them.  Accordingly, some observers (ourselves included) see the president’s push for ever-higher tax revenue as fundamentally misguided.  Recall the days when Democrats cut taxes, Larry Kudlow, Townhall.com, 3/6/14. http://bit.ly/1fbznfH

The tax legislation of 1964 was one of three major across-the-board income-tax cuts in the 20th century. The others took place in the 1920s, during the Warren Harding and Calvin Coolidge administrations, and in 1981 and 1986 during the Ronald Reagan administration. After the Tax Reform Act of 1986, the top marginal rate was all of 28%. Today it is 39.6%.

Even if taxes could be raised further without tanking the economy, moreover, that wouldn’t explain or justify the failure to consider meaningful spending cuts.  Really, with a nearly $4 trillion budget, our leaders in Washington don’t understand or won’t admit that hundred of billions per year are being spent for government programs that cost more than they are worth?  Skyrocketing entitlements – corporate welfare – subsidies for “clean” energy and electric cars – an ever-expanding empire of regulatory agencies – top-heavy defense establishment with shrinking military capabilities. Let’s fix this!

Then there is the failure to embrace real tax reform.  Some of the suggested tax changes (see Table S-9) might be viewed as reforms, but the prime thrust is to (1) complicate the tax system instead of simplifying it, (2) enhance and expand tax preferences instead of eliminating them, and thereby (3) ignore the principle that the prime goal should be to collect tax revenue (say up to 20% of GDP) versus promoting social and economic goals. 

SAFE’s approach to tax reform is laid out in our SimpleTax proposal, November 2010. http://bit.ly/1nnvSJK In general, we think it would be more feasible to fix the present tax system than to abolish it and start over – as is contemplated by the flat tax and FairTax proposals – but the changes must be sweeping rather than timid. 

In case after case, the tax changes being proposed by the president would go in the opposite direction from our SimpleTax proposals.  Here are a few examples:

•Hike effective tax rates on high earners by “reducing the value of certain tax expenditures.”  Retain or enhance tax preferences that primarily benefit lower-income Americans, e.g., expand the Earned Income Tax Credit for workers without qualifying children.  We would redo the income tax tables, slashing rates at all levels but retaining a graduated structure, and repeal essentially all tax preferences for individuals except for the foreign tax credit and business tax deductions. 

•Enhance and make permanent the Research & Experimentation Tax Credit, perpetuate “clean energy” tax subsidies while raising the effective tax burden on oil and coal companies, create new subsidies for domestic manufacturing, and “reform” the international tax system by chipping away at the effective US tax exemption (until repatriation) of profits earned abroad. We would (a) eliminate the R&E credit and other tax preferences that have been enacted in an effort to influence business decisions, (b) preserve the foreign tax credit, (c) slash the corporate tax rate to 20%, and (d) do away with the double taxation of corporate income.

•Increase tobacco taxes and index them for inflation. We would eliminate federal excise taxes on alcohol and tobacco, leaving it up to the states to decide how heavily these products should be taxed.   

The resulting reduction in tax compliance costs (also cheating) and increase in freedom for investors and business managers should provide a powerful boost to the economy, which in due course would lead to higher government revenue.  Why pass up this opportunity?

B. Response – As previously noted, Senate Democrats don’t intend to have a budget this year.  Their rationale is that discretionary spending levels for fiscal year 2015 were fixed by the December 2014 budget deal, leaving nothing to talk about.  Senate Dems to skip 2015 budget, Erik Wasson, The Hill, 2/28/14. http://bit.ly/1hZQJUy

Senate Budget Chairman Patty Murray: “Fiscal Year 2015 is settled, the Appropriations Committees are already working with their bipartisan spending levels, and now we should work together to build on our two-year bipartisan budget, not create more uncertainty for families and businesses by immediately relitigating it.”

From a Democratic Party standpoint, this leaves the president’s proposal as the only official budget document on the table – even though no one expects it to be taken seriously. 

Republicans blasted the president’s proposal as a non-starter on the day it was released.  Boehner: Obama introduces “the most irresponsible budget yet,” Susan Jones, cnsnews.com, 3/4/14. http://bit.ly/1gYRR5D

"American families looking for jobs and opportunity will find only more government in this plan," Boehner said. "Spending too much, borrowing too much, and taxing too much, it would hurt our economy and cost jobs. And it offers no solutions to save the safety net and retirement security programs that are critical to millions of Americans but are also driving our fiscal imbalance."

House Budget Chairman Paul Ryan chimed in with a similar statement.  The president’s budget is another disappointment, 3/4/14. http://1.usa.gov/1hUKJJY

The President’s budget . . . would demand that families pay more so Washington can spend more. It would hollow out our defense capabilities. And it would do nothing to preserve or strengthen our entitlements. The President has just three years left in his administration, and yet he seems determined to do nothing about our fiscal challenges.

 

But now what?  In normal course, the House Budget Committee would put together a budget proposal for House action in April – and reportedly that’s what is planned.

 

So as to project budget balance within 10 years without proposing tax increases or further cuts in discretionary spending, the House budget would have to propose pruning entitlement programs (as was also done last year).  This might not prove popular, and some Democrats are salivating at the prospect of putting their political opponents on the defensive. Boehner expects House to pass budget, Erik Wesson, 2/27/14. http://bit.ly/1n3tiMi

Democrats reacted to Boehner’s comment with some excitement on Thursday since they see Ryan’s past budgets as a political liability for Republicans.   Ryan has proposed partially privatizing Medicare in the past by allowing seniors to opt to receive a premium subsidy to buy private insurance. Democrats say the shift will spike out of pocket costs for seniors.  

If House Republicans push through a budget, it’s hard to see it serving as an effective campaign tool – voters don’t typically get excited over a bunch of dry facts and dull numbers.  As for Democrats being persuaded to seriously consider entitlement changes proposed in the budget, forget it, so what’s the potential upside?

We are rather hoping the GOP will follow a more creative strategy, which could at least get some new issues on the national radar screen.  How about the following approach?

#Acknowledge the undeniable - Issue a statement agreeing with Senator Patty Murray that there is no point trying to develop a congressional budget this year since spending levels for Fiscal Year 2015 have already been set and there is no realistic prospect for action on entitlements before the elections.

#Introduce a new topic – Explain that the budget system is not working properly, which should be an easy case to make, and then offer a series of reforms.  Our ideas were discussed in a previous entry; they are recapped below, in revised order (easiest first), for convenient reference.  Time to get serious about budgeting, 1/20/14.

a. Switch to two-year budgets versus annual budgets, starting with the budget covering fiscal years 2016 and 2017, which would hopefully be approved and ready to go into effect by October 1, 2015.  Projections beyond the 2-year budget period could be provided, but they would be labeled “for informational purposes only.”

b. Institute dynamic scoring for tax cuts and/or increases so as to realistically reflect the anticipated economic effects.

c. Include entitlement program outlays in the budget on the understanding that if actual outlays (based on program parameters) outran budget, program payments would be proportionately reduced so as to cover the shortfall.

d. Merge the OMB and the CBO, placing the combined Budget Office staff under congressional control.  After this change was made, the Executive Branch would submit budget requests to the Budget Office in lieu of preparing budget proposals.

e. Revamp the House committee structure, combining the Budget, Appropriations and Ways & Means Committee.  As this would leave a lot of House members without much to do, consider cutting the number of representatives from 435 to about 200.

#Pivot to tax reform - Although the revenue neutral tax reform plan proposed by House Ways and Means Chairman Dave Camp has drawn mixed reviews, it represents the first serious effort to streamline the tax law in nearly 20 years.  Election year or not, the Camp Plan deserves respectful consideration and members of Congress on both sides of the aisle should proceed accordingly. Congressman Camp’s serious tax bill just wasn’t made for these times, Joshua Green, Business Week, 2/27/14. http://buswk.co/1ebddKM

Some may consider the foregoing ideas to be extreme or impractical, but we think it’s time for this country’s political leaders to start looking for the right answers instead of simply trying to avoid political risks. 

With congressional approval ratings in the low double digits and a majority of Americans telling pollsters that they feel this country is on the wrong path, it’s pretty clear that the public is not satisfied with the status quo. 

And by way, hat’s off to Representative Dave Camp for his determination to press ahead with tax reform in the face of widespread opposition on both sides of the aisle. Dave Camp won’t take “no” for an answer, David Drucker, Washington Examiner, 3/7/14. http://washex.am/1g8VwQo

“I don’t care about how comfortable it may make people — or uncomfortable,” Camp said during a breakfast with reporters. “I don’t think we can afford to wait. I’m willing to take on this issue because I think it’s something the American people are going to demand. And I would say to those who think the timing isn’t right: What is their plan for moving the economy forward?”

C. In closing - If you agree with our ideas for addressing the fiscal problem before it results in a full-fledged crisis, please pass them on.  If you have different ideas that might work better, please share your thinking with us.

top      wwhipple3@verizon.net


3/3/14 – Step right up, it’s a government plan

Today is the 132nd anniversary of Charles Ponzi’s birth, and SAFE member Harry Thompson of Tucson, AZ has suggested that we should “offer a tribute to how Ponzi provided the blueprint that helped FDR create” the largest program of the US government.   OK, Harry, you asked for it.

In his day, Ponzi promised stellar yields to investors and used funds received from later investors to cover them.  Word got around that early investors had been paid, more and more people invested, but eventually income faltered and the jig was up. Convicted on fraud charges, Ponzi served two prison sentences and was then deported. Bio, http://bit.ly/Mrp6Vl

Other notable “Ponzi schemes” have occurred.  Thus, Bernie Madoff’s investment advisory empire collapsed in 2008, resulting in losses to thousands of investors that were estimated at $50+ billion.

Currently, one of the biggest bitcoin exchanges has declared bankruptcy, and the entire virtual currency system may be in jeopardy (despite denials of other interested parties).  MtGox and bitcoin: where has £251M gone? Matthew Sparkes, UK Telegraph, 2/26/14.  http://bit.ly/1cmYhZt

Why don’t people remember the old saw – “if it sounds too good to be true, it probably isn’t” – and proceed accordingly?  But clever schemes keep being offered, and something in the human psyche wants to believe they are for real.

In the government sphere, it’s fine to blame the politicians concerned for problematic programs, but all of us should bear some responsibility.  “Fool me once, shame on you.  Fool me twice, shame on me.” 

Let’s start with the Social Security saga, which might have taken a different course if Americans had been paying more attention, hit several other cases in which similar mistakes were made, and conclude with some questions to ask about future proposals.

Social Security is not a voluntary investment program, but rather an insurance program in which working Americans are required to participate.  It does have Ponzi-like features, however, in that benefit payments are covered on a pay as you go basis and periodic government cash infusions have been needed to keep the program afloat. 

The ratio of workers to beneficiaries keeps dropping, and at some point younger Americans will predictably get left holding the bag.  But who would have foreseen such an outcome when the program was launched with the idealism and pride conveyed by this 1936 poster from the Social Security Administration archives?

The terms of the program sounded straightforward.  Employees paid maximum tax of $30 a year – 1% on each dollar of earned income up to $3,000 a year – that was withheld and matched by employers.  At age 62, employees would be eligible for checks of $22.54 per month.  The tax was collected starting in 1937; payouts began three years later.

There were clues from the start, however, that Social Security was about more than simply creating a safety net for retired people.

•Unlike a normal insurance plan, the program was not designed to operate for the benefit of all participants.  Some participants would receive a windfall return on their tax payments (Ida Fuller famously paid $24.75 into Social Security before retiring and during her retirement years got back $22,888.92), while many others would – as a result of dying relatively young – receive little or nothing. (This flaw was mitigated by adding survivor benefits in 1939.)

•The initial phase (collect taxes now, start benefits later) was arguably a drag on an economy still mired in depression, but FDR defended the approach on political grounds.  “With those taxes in there,” he reportedly boasted, “no damn politician can ever scrap my social security program.”

•Senator Bennett Champ Clark (D-MO) offered an amendment to the Social Security bill passed by the House.  It would have allowed employers to offer employees a choice between Social Security and a comparable plan managed by a private insurance company.  To the consternation of advocates of a public monopoly, who feared that many people would sign up for private plans, the Senate passed the amendment. FDR threatened to veto the bill in this form, and the Clark amendment was eliminated in conference through some slick legislative maneuvering.

Many changes were made after Social Security was launched.  Thus, the practice of setting aside the program revenue was discontinued in the early 1940s, resulting in the pay as you go funding approach that is now used.  And Congress “steadily increased the benefits doled out and also the percentages of income to be paid by employee[s] and employer[s].” New Deal or Raw Deal? Burton Folsom Jr., Threshold Editions, 2008. http://bit.ly/1fWKHNi

As a result of demographic trends and the propensity of Congress to sweeten Social Security benefits, e.g., by adding disability benefits and indexing benefits for inflation, Social Security was “broke” by the early 1980s. 

The Greenspan Commission recommended higher payroll taxes, income tax on a portion of Social Security benefits (a veiled benefit cut) for higher income retirees, and a two-year increase in the normal retirement age by 2027.  The changes were enacted into law and hailed as ensuring the solvency of Social Security for the next 75 years.

Once the tax increases went into effect, the program became a cash cow.  Some $2 trillion in “excess” revenues were received over a period of years.  Instead of using this money to shore up Social Security in some fashion or paying down the national debt, Congress spent the surplus for other purposes. 

Ongoing Social Security outlays are theoretically backed by two trust funds (Old age & survivors insurance, Disability insurance) with a combined balance of some $2.7 trillion.  The only trust fund assets are government obligations (aka IOUs), however, which were created due to the diversion of Social Security tax revenues.

Excluding imputed interest income, which like the IOUs has no economic substance, here is a recap of recent Social Security cash flows. http://1.usa.gov/1gvu1Qi (Table 13.1)

 

$ in billions

2012

2013 est.

OASI

DI

Total SS

OASI

DI

Total SS

Noninterest income

624

102

726

640

105

745

Outlays

(635)

(139)

(774)

(674)

(144)

(818)

Deficit

(11)

(37)

(48)

(34)

(39)

(73)

As the Baby Boomers continue to retire, the Social Security deficit will grow.  Corrective action will become unavoidable long before 2033, when statistical projections show the trust funds will be used up. Social Security outlook remains unchanged, Phillip Moeller, usnews.com, 5/31/13. http://bit.ly/1lr4P1C

Opinions differ as to what should be done, however, and no one seems anxious to tackle the issue.  Social Security is burnt out, now what?” 3/7/11

At this point, there are two basic options for Social Security – neither of which will appeal to fans of the system.  (A) Keep it afloat with periodic tax increases and benefit cuts, a doable but politically thankless task.  (B) Offer personal accounts for younger workers, gradually converting the crown jewel of the New Deal into a funded retirement plan. http://www.s-a-f-e.org/social_security.htm

Medicare & Medicaid – The cost of these programs has grown rapidly since they were launched, fueled by rising enrollment, added coverage provisions, and rising costs for healthcare services.  The history of federal healthcare spending, Senator Tom Coburn Jr., MD, February 2014.  http://bit.ly/Mz9qzA (download report)

Here are some data from the Coburn report (which in turn are based on government sources).  To avoid overstatement, the early cost data were multiplied by a factor of 7.1 so as to put them on a 2012-dollar basis.  We also replaced percentage increase numbers with easier to grasp growth ratios.

Medicare

1967

2012

Growth ratio

Total cost

$20B

$472B

23.6

Enrollment (A/B avg.)

18.2M

45.4M

2.5

Medicaid

1966

2012

Growth ratio

Federal portion of cost

$6B

$250B

41.7

Enrollment in millions

4.0M

55.6M

13.9

One searches the historical record in vain for evidence that this explosion of spending was anticipated at the beginning, let alone communicated to the American public.

In President Johnson’s State of the Union address in 1966, for example, there was only one general comment about the cost of these programs (both enacted in 1965 as amendments to the Social Security Act).  http://bit.ly/1hZbZK4

I recommend that you provide the resources to carry forward, with full vigor, the great health and education programs that you enacted into law last year.

LBJ also said the forthcoming budget would be close to balanced even “if you approve every program that I recommend tonight,” and that “on a cash basis . . . your government will collect one-half billion dollars more than it will spend in the year 1967.”

Whether by accident or design, such initial cost projections as were made would be far exceeded by actual costs.  See, e.g., “The facts about the government’s Medicare cost projections,” Veronique de Rugy, Reason.com, 6/3/11. http://bit.ly/1fOtcT5

In 1967 long-run forecasts estimated that Medicare would cost about $12 billion by 1990. In reality, it cost more than $98 billion that year.

Similarly, Medicaid spending would be far higher than predicted.  Medicaid spending: A brief review, John Klemm, CMS, 2000. http://go.cms.gov/1hZhoAD

By 1971, annual spending had reached $6.5 billion, and enrollment had topped 16 million. Initial projections of Medicaid forecast less than one-half of this spending level, primarily because analysts greatly underestimated the extent to which States would offer coverage of optional eligibility groups—especially the medically needy—and optional services. Enrollment growth also greatly exceeded original expectations.

The real cost kicker in the case of Medicaid, however, was expansions of the program starting in 1984. 

The expansions affected nearly the entire spectrum of Medicaid enrollees from infants, children, and pregnant women to low-income Medicare beneficiaries, and other aged and disabled enrollees. Initially, States were offered options to expand coverage of these groups, but ultimately most of the options were converted by subsequent legislation into mandates, most notably in the Medicare Catastrophic Coverage Act of 1988.

In summary, as observed in the Coburn report, (a) “the federal government has a poor track record of constraining healthcare spending over time,” and (b) “the original estimates of program outlays are relatively poor indicators of actual spending over a longer period of time.” 

Given this record, one might have expected a serious reassessment of Medicare and Medicaid, but what fun would that be?  The focus has remained on expanding these programs or starting new ones.  Thus, under the last three presidents, the State Children’s Healthcare Insurance Plan (SCHIP) was enacted on a trial basis in 1997, a Medicare prescription drug benefit was enacted in 2003, SCHIP (now CHIP) was confirmed and expanded in 2009, and the Affordable Care Act (aka GovCare) was enacted in 2010.

GovCare - A fundamental problem with this landmark legislation, in our opinion, is that it was designed to reduce the number of Americans without healthcare insurance (HCI) coverage by fiat rather than tackling a problem that affects everyone, excessively high healthcare costs. A “ready, aim, fire” approach to healthcare reform, 3/30/09.

In sum, mandating HCI for everyone would not necessarily produce better healthcare for the poor and disadvantaged, let alone better healthcare at lower cost for everyone.  We therefore feel quite comfortable in concluding that the key problem with the healthcare system is rapidly rising spending (aka cost).

GovCare supporters claim this legislation will reduce healthcare costs in the long run, which could be true if healthcare services were effectively rationed – as has been done in other countries with government-run healthcare systems, e.g., the UK and Canada.  If that’s the plan, however, the president and his supporters have not owned up to it.

In general, GovCare was sold as a “win-win” or “all gain, no pain” proposition, which anyone who was paying attention should have been able to see through.  Once again, “if it sounds too good to be true, it probably isn’t.”  The website is fixable, but GovCare has deeper problems, 11/4/13.

Americans already covered by healthcare insurance (HCI) could keep what they had and pay less, it was said, while uninsured Americans would be taken care of as well.  This picture was painted during the presidential campaign in 2008 and repeatedly thereafter until GovCare was enacted in 2010.

Some people will benefit from GovCare, but others will be worse off and the overall system will become more bureaucratic/ less efficient.  Far better results could be obtained, we believe, by empowering patients and doctors instead of system administrators. See SAFE’s 7-point plan for healthcare reform, which we developed and fruitlessly advocated in 2009.  Healthcare page of this website. http://bit.ly/1fwNImO

Synthesis – If a proposal sounds improbable, whether it’s brought to you by a slick sales representative or an equally slick politician, do your homework and ask questions like the following.

How is your proposal different from the ABC plan, which turned out rather badly?

What’s the evidence for the benefits and costs that are cited? Why can’t the underlying information be made available? 

Aren’t there some disadvantages or risks that haven’t been mentioned? What’s the worst that could happen?

What’s the best available alternative, and how does it compare to your proposal?

I understand that Group Y has a different take on this.  How would you answer them?

What people or groups stand to benefit from this plan? Who is paying for those TV ads?

Why, if applicable, is it so important that the government run the program? Why not allow private options?  Why not permit people to opt out without penalty?

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2/24/14 – Side B can and must offer a better plan            Read Replies

Last week’s entry argued that current government policies (fiscal, monetary and regulatory) are penalizing the productive sector of the economy while subsidizing idleness.  Some claim said policies are clearing the way for a robust economic recovery, but we see little evidence of this.

Despite the use of qualifiers like little, modest, and sustainable, big government fans (Side A) will push their vision as far as they can.  Witness the willingness of the Executive Branch to take sweeping actions without clear-cut legal authority.   

And now, how should those who favor a free market economy (Side B) respond?

The players – The president’s base (an approximation of Side A) has been described as a top-and-bottom coalition of academics/gentry liberals, blacks and Hispanics, with Side B consisting primarily of middle class strivers.  The failure of Obama’s aristocracy of merit, Michael Barone, Washington Examiner, 2/14/14. http://washex.am/1jQYbBf

SAFE is clearly on Side B.  So are libertarians, conservatives, analysts who believe the free market works better than government planning, managers who want more freedom to run their businesses, and Americans who are tired of paying more and more taxes, fines, and regulation-fueled price increases and not getting much in return.

Many business people (especially from big companies) stay out of politics except when it comes to seeking special favors (e.g., mandates, subsidies & regulatory forbearance). Say hello to “crony capitalism,” where political support goes to the highest bidder.

Most “ordinary Americans” don’t follow political or government policy issues with any regularity.  We’ll collectively refer to these “low information voters” and nonaligned business people as Side X.

In terms of numbers and financial resources, one might think Side X would reign supreme.  Realistically, however, the ideas that sway political results come from Sides A and B with Side X support being the prize needed to prevail.

Side B may have more members than its intellectual opponents, but Side A has more cohesive goals and strategies and is supported by a preponderance of the media and academia.  No wonder Side A has won so many of the battles in recent years, and this country is on the road to becoming a European-style welfare state. It’s time for the right to recognize reality, Derek Hunter, Townhall.com, 2/20/14. http://bit.ly/Ok9o0h

Most Americans are uninformed, distracted and disinterested. That makes them prime picking for progressives who never let the facts stand in the way of their agenda, and who co-opt the language of liberty to fool them. Why not use it? No one else is.

Flashback – The issues SAFE is concerned with used to seem manageable, as was shown by two entries we posted six years ago.

•One entry focused on opportunities to make a  difference. 2008 was an election year, the Fiscal Wake-Up Tour (David Walker et al.) was gearing up, and it seemed politicians should be in a listening mood.  Several SAFE letters were cited as examples of how we might be able to help. Opportunities abound for fiscal visionaries! 1/1/08.

Employ down to earth analogies. http://bit.ly/1cqWtSC (Boughton); http://bit.ly/1fe6rcA (Dorsch);

Tell it like it is. http://bit.ly/1m6nQ7r (Fasig); http://bit.ly/1jd0hbX (Martin);

Compliment the addressee if merited. http://bit.ly/1nOoHIQ (Whipple);

Express respect for the opposition. http://bit.ly/1gia1yJ (McClain);

Keep the opposition honest. http://bit.ly/1jR9yZZ (Morris)

A second entry responded to a comment that SAFE was tilting at windmills as “no Congress will ever accept our agenda.”  It concluded otherwise, saying the facts and logic were on our side.   Better days ahead; fiscal visionaries should persevere, 2/25/08.

In summary, the case for smaller government seems more compelling than the arguments for making the government bigger.  For what conceivable reason, we would ask, should this country trade its birthright of freedom for a proverbial “mess of pottage?”

No matter, the problems noted in 2008, e.g., the national debt, have gotten steadily worse.  Obama has more than doubled marketable US debt, Terrence Jeffrey, CNSNews.com, 2/18/14. http://bit.ly/1c1mi8g

Current situation – Carried to its logical conclusion, Side A’s obsession with wealth inequality could only end by crashing the economy and reducing most of the population to poverty.  Tax work, subsidize idleness, and batten down the hatches, 2/17/14.

Nor do we see signs that Side A will voluntarily moderate its policies, only statements and actions showing willfulness and ideological rigidity.  Here are some recent examples:

•Secretary of State John Kerry’s 2/16/14 speech on climate change in Jakarta, Indonesia, was bizarre.  One would think there are more pressing issues for the government to worry about, and in any case it’s a mystery why the top US diplomat would deliver the message in such a blatantly overstated fashion.  The only explanation that comes to mind is that Side A is more interested in cowing opponents than in promoting human welfare. http://1.usa.gov/1kLTGrZ

It’s a real stretch to rank global warming as a threat on a par with terrorism and the proliferation of nuclear weapons.  How can global warming be happening “faster than ever predicted” when there has been no global warming since 1998?  What’s the excuse for labeling all manmade global warming skeptics as shoddy scientists, extreme ideologues, and/or mercenaries in the pay of the oil and coal companies?  As for the science being “absolutely certain,” Secretary Kerry’s explanation about “a very thin layer of gases [presumably CO2, methane, etc.] . . . up there at the edge of the atmosphere . . . trapping the Sun’s heat and warming the surface of the Earth,” has no basis that we know of in physical reality. 

•Being a politician (former governor of Kansas), not an administrator, HHS Secretary Kathleen Sebelius was an odd choice to lead implementation of a huge new program.  Her primary role has been to act as a cheerleader for GovCare and then as a lightning rod for the president (no wonder he has not seen fit to fire her) when things went awry.

Sebelius has repeatedly issued airy assurances that GovCare implementation was on track, only to be proven wrong, but she does not appear to have grown more cautious.  Thus, she challenged a Congressional Budget Office finding that GovCare will reduce overall employment levels, illogically associating this prediction with job opportunities for medical professionals. Kathleen Sebelius: No job loss under Obamacare, Lindsay Kalter, Politico, 2/18/14. http://politi.co/1mqR0S8

“There is absolutely no evidence, and every economist will tell you this, that there is any job-loss related to the Affordable Care Act,” Sebelius told reporters in Orlando, Fla., on Monday. “Part-time physicians are actually down since 2010, not up. The number of full-time workers continues to increase. I know that’s a popular myth that continues to be repeated but it just is not accurate.”

It is claimed that HHS has been soliciting donations to a private group engaged in promoting GovCare enrollment, a tactic critics have characterized – with some logic, it seems to us - as “an unethical shakedown.”  Kathleen Sebelius won’t say whether still fundraising to promote Obamacare, Susan Crabtree, Washington Examiner, 2/19/14. http://washex.am/1fCRtHS

•Liberal academics have tirelessly provided intellectual cover for deficit spending, e.g., by attributing the anemic economic recovery since 2009 to supposedly ill-advised austerity measures.  Krugman: Fiscal stimulus was economic success, “political disaster,” Dan Weil, moneynews.com, 2/21/14. http://nws.mx/1h9NhTF

The important point is that U.S. fiscal policy went completely in the wrong direction after 2010. With the stimulus perceived as a failure, job creation almost disappeared from inside-the-Beltway discourse, replaced with obsessive concern over budget deficits.

•Side A seems prepared to use whatever arguably legal means may be available to silence – not debate - those who disagree with them.  Witness Senator Chuck Schumer’s advocacy of an IRS clampdown on conservative groups and “John Doe” investigations in Wisconsin to distract and demoralize conservative groups at the state level.  Similar steps could be taken against liberal groups, but that is clearly not the intent. Free speech for me, but not for thee, David Keene, Washington Times, 2/17/14. http://bit.ly/1glU8aE

To suggest that Mr. Schumer or anyone on the left wants an evenhanded approach to those engaged in political advocacy is pure, unadulterated bunkum. Mr. Schumer doesn’t want to punish, silence or “shut down” the Sierra Club or former New York Mayor Michael R. Bloomberg’s gun-control groups. He wants to “shut down” those with whom he disagrees, just as his state’s progressive governor wishes they’d all leave New York.

Path forward – To bring about a change in the nation’s direction, Side B would need to get candidates nominated and win elections.  The best bet would seem to be working through the Republican Party, which although not fully in synch with Side B is much more supportive than the Democratic Party, rather than launching a third party. 

For this arrangement to work, the Republican Party would need to change – a lot.  Consider that 38% of Americans identify themselves as “conservatives” in national polls, yet only 25% say they are Republicans. Can we save the soul of the GOP? Steve Deace, Townhall.com, 2/22/14. http://bit.ly/1egKOCi

Without getting into personalities, this may not be the time for “tried and true” or “next in line” leaders.  That particularly goes for the presidential candidate in 2016 and the party’s “brain trust;” it should not be taken as suggesting a purge of all GOP leaders.

Side B needs to offer, and be prepared to fight for, a true alternative to the Side A agenda rather than a watered-down version thereof.  Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution, Michael D. Tanner, Cato Institute (2007). http://bit.ly/1hfqO71

Some may feel it’s too late for the type of rally we envision.  That ship has sailed, there are too many people on the government dole to ever beat Side A at the polls, politicians are all scumbags, etc., so the only hope is to let the country crash and then pick up the pieces. Boomergeddon, James A. Bacon, Oaklee Press (2010). http://bit.ly/Nm0CO9

Such a view carries some weight, but we aren’t inclined to accept it.  First, there might not be much left to salvage after the crash.  Second, some countries on the dependency track have moved back in a free market direction, e.g., Canada and Sweden, even though their experiences may be atypical.  Is America doomed to become a failed European-style welfare state? Daniel Mitchell, Townhall.com, 2/20/14.  http://bit.ly/1cbvmaQ

. . . the tipping point is not a number, but a state of mind. It’s the health of the nation’s “social capital.”  So for what it’s worth, the country will be in deep trouble if and when the spirit of self-reliance becomes a minority viewpoint.

 

An engaging political theme is needed, and we don’t mean “let’s hear it for smaller, more focused, less costly government.”  People are not energized by abstractions like that, even if they agree with them in principle.

 

It is commonly supposed that election results are determined by self-interest, from which one might conclude that Side B could not hope to win by offering fiscally sound government instead of matching the other side’s “something for nothing” promises.

 

Not necessarily!  Both individually and collectively, people often make decisions that cannot readily be explained in terms of self-interest.  Thus, why did this country wind up fighting a war over slavery?  While the South had a clear economic interest at stake, the abolitionist movement in the North seems to have been based on moral conviction.  Top five causes of the Civil War, Martin Kelly, about.com. http://abt.cm/1c8ezZr

On February 27, 1860, Abraham Lincoln gave a speech in New York City that would serve as the basis for his presidential campaign.  His rhetorical technique was simple: fully and fairly explain the opposing arguments and then systematically demolish them. Cooper Union Address, http://bit.ly/1iEJ4ay

Lincoln was not attempting to upset or disregard precedents, for most of the founding fathers had seen slavery as an institution that the federal government would have power to deal with and that might hopefully be limited over time.  Names and relevant votes by these individuals over the years were cited to support his claim.

 

Although his party abhorred slavery, they would never demand its abolition. “Let all the guarantees those fathers gave [slavery], be, not grudgingly, but fully and fairly, maintained. For this Republicans contend, and with this, so far as I know or believe, they will be content.”

 

Southern arguments that Republicans were representing sectional interests or seeking to upset the established order of things were simply not true. “We admit that [the slavery issue] is more prominent, but we deny that we made it so. It was not we, but you, who discarded the old policy of the fathers.”

The Supreme Court’s 1857 decision in the Dred Scott case, which had turned on classing slaves as mere property, was rendered by a divided court “mainly based upon a mistaken statement of fact” - the statement in the opinion that "the right of property in a slave is distinctly and expressly affirmed in the Constitution” – when no such language appears in that document. (Sounds a bit like our view of the 2012 decision upholding GovCare.)

Ultimately, the South would never be satisfied unless Republicans retracted their opinion that slavery was wrong – and this they could not do.

 

“Neither let us be slandered from our duty by false accusations against us, nor frightened from it by menaces of destruction to the Government nor of dungeons to ourselves. LET US HAVE FAITH THAT RIGHT MAKES MIGHT, AND IN THAT FAITH, LET US, TO THE END, DARE TO DO OUR DUTY AS WE UNDERSTAND IT.”

 

Wow! The gauntlet had been thrown down and there would be grievous consequences, including over half a million men dying in battle, but this speech showed that no other reasonable course was available.  Perhaps Side B can learn the power of plain speaking from Lincoln’s example.

Why do people find it so difficult to advocate for the free market system?  It’s the original economic system for this country, and the results have been spectacularly successful. Yet the fans of big government have a different vision, and, despite one compromise after another, it is evident that Side A will never be satisfied with anything short of total victory.

Disaster lies at the end of the path this country is now on; the only question is exactly when the roof will cave in.  Isn’t it time to say “enough” and get back on course?

*        *        *        This Blogs Replies        *        *        *

Side A has the edge at the ballot box. No matter how the economy does, the top layer will receive grants and slick jobs while the bottom layer rakes in welfare, food stamps and HC subsidies. Nothing will change until there is some fiscal calamity that can be pinned directly on progressives. A currency plunge might do that or a few strokes of hyperinflation. – SAFE director

Response: We’re inclined to be more optimistic for the reasons cited in the entry, basically because ideas do matter and Side B would have lots of ammunition if it offered a real alternative instead of an “us too, but not quite so much” message.

The chart of "Marketable U.S. debt" shows said debt increasing from $2,000,000 (two million dollars) in 1990 to slightly less than $12,000,000 (twelve million dollars) in 2014. I think the actual figures are a million times higher than that. – SAFE member

Response: The chart shows the growth trend properly, but there should have been an “in millions of dollars” legend.  

I try to remain optimistic about the Republic's future, but most all the trends and critical indicators suggest to me that things are going to hell in a hand basket. G.K. Chesterton once remarked: "A society is in decay when common sense becomes uncommon." Evidence that common sense in America is an endangered "species," certainly in Washington DC and the media, is daily on parade. – Retired financial executive

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2/17/14 – Tax work, subsidize idleness, and batten down the hatches

Here is an argument that big government fans (Side A) often invoke to justify expanding the government and/or restricting the private sector – just a little more won’t hurt. And let’s face it, they are probably right in some cases.

After all, we ourselves have written about hormesis, which means that a little of something (e.g., radioactivity) may be harmless (or actually beneficial) even though a lot of it would be deadly.  Nuclear power a safer energy source than most, Bill Morris, News Journal, 4/26/13. http://bit.ly/1cwmvjI

It has been proved many times that lower level radiation is not harmful, but beneficial. This phenomenon, called “hormesis,” occurs widely. Just one example: one aspirin can cure a headache, but a thousand might kill you.

But beware, for Side A’s favored policies will surely backfire if carried too far. The story about killing the goose that laid golden eggs comes to mind. Aesop’s Fables, http://bit.ly/NCELTf.

So, the couple killed the goose and cut her open, only to find that she was just like every other goose. She had no golden eggs inside of her at all, and they had no more golden eggs.

A review follows of how the “just a little more” argument is being used re government spending, taxes, deficits, inflation, and regulations. The effects have generally been negative, and they could get a lot worse.  Don’t say we didn’t warn you, America! 

1. A little more spending won’t hurt – One of Side A’s arguments for robust government spending is that stimulus is needed during periods of economic weakness to bolster flagging demand (aka Keynesian economics).  This was the rationale for the big stimulus package enacted in 2009, for example, and the argument is still in vogue even though the “Great Recession” has been officially over for several years.

Because it diverts resources from the productive private sector, stimulus spending has “a long track record of failure.” It is, however, politically convenient.  Keynesian economics, government shutdowns, and economic growth, Daniel Mitchell, Cato Institute, 10/30/13. http://bit.ly/LV469d

 . . . politicians love Keynesian theory because it tells them that their vice is a virtue. They’re not buying votes with other people’s money, they’re “stimulating” the economy!

If pressed into conceding that some reduction in overall spending might be potentially desirable, Side A’s fallback position is to decry the effects of across-the-board spending cuts. A scalpel, not ax needed to cut US budget, former Senator Ted Kaufman, News Journal, 11/25/12.

If the cuts mandated by the sequestration legislation of 2011 go into effect [as they subsequently did] *** that would threaten hundreds of budgeted programs, including all the regulatory agencies, the National Institutes of Health, the EPA, financial aid for students, Head Start, national parks, and the list would go on for pages.

Most politicians studiously ignore the one way to cut spending that might actually work, despite SAFE’s earnest efforts to educate them.  Let’s make a deal: some thoughts for the budget conference committee, 10/28/13.

Targeted spending cuts are probably unpopular in the “go along to get along” culture of Washington.  There is an abundance of targets to pick from, however, and the information is readily available.  As a starting point, we would suggest that BCC members review the Prime Cuts list [this year’s version contains 557 recommendations that would save taxpayers an estimated $1.8 trillion over five years] maintained by Citizens Against Government Waste. http://bit.ly/123Fi2X

2. They should gladly pay a little more – Politicians love to raise taxes, thereby getting more money to spend, but a bit of finesse is needed to avoid ticking off the voters.  As the saying goes, “don’t tax you, don’t tax me, tax that fellow behind the tree.” 

Big tax increases have been enacted in recent years, including (1) a sharp hike in the federal tax on cigarettes (smokers are not a politically potent class), (2) numerous tax levies embedded in the GovCare legislation, and (3) expiration for high earners of the Bush income tax cuts (enacted in 2001 & 2003). 

Ending the Bush tax cuts for high earners was portrayed as restoring the status quo after an unfortunate experiment.  President’s remarks on extending tax cuts for middle-class families, 7/9/12. http://1.usa.gov/NfiqGZ

. . . I’m not proposing anything radical here.  I just believe that anybody making over $250,000 a year should go back to the income tax rates we were paying under Bill Clinton -- back when our economy created nearly 23 million new jobs, the biggest budget surplus in history, and plenty of millionaires to boot. 

Side A got its way on the Bush tax cuts after the 2012 elections, but has continued to push for more tax increases. President’s budget proposal for fiscal year 2014, http://1.usa.gov/1jmJlPu.

p. 19 – Proposed corporate income tax changes are described as revenue neutral in that they would supposedly be offset by corporate tax rate cuts. It is also stated, however, that these changes “would prevent hundreds of billions of dollars from being added to the deficit if the Congress continues to extend temporary business tax incentives without paying for them.”

p. 36 – “While the [American Taxpayer Relief Act] raised revenue from higher tax rates, the next stage of deficit reduction will require additional revenue from reforming the tax code. *** [To this end], the President proposes that the Congress immediately enact two measures that would raise $583 billion in revenue by broadening the tax base and reducing tax benefits for those who need them the least.”

Some members of Congress favor truly revenue neutral tax reform, i.e., the elimination of tax preferences would be fully offset by lower tax rates. Senate Majority Leader Harry Reid maintains, however, that simply reforming the tax system would be “a waste of time.” Tax reform in the Senate?  Not so fast, says Reid, Bernie Becker, The Hill, 7/25/13.  http://bit.ly/1cxe1sG

“It has to be under the total understanding that this can't be revenue-neutral,” Reid said at a news conference. “It can't be even close to neutral. It has to be a significant tax target, and we've talked about that. I believe in that. I think it's important.”

Real tax reform would entail the elimination of numerous tax preferences, all of which have defenders, with offsetting rate cuts serving an essential role as the sweetener.  Side A’s insistence on significant overall tax increases would doom the effort to failure.  SAFE offers DC a “to do” list for 2012, 1/16/12 (point 4).

3. Deficits are OK, just trim them a little – There was a time when deficit spending was frowned on except in times of war, and when the government did resort to borrowing there was at least a thought that the debt should be paid back. Thus, (1) the national debt as of 1789 was essentially repaid by 1835; (2) some 44% of Civil War debt was repaid between 1866 and 1893; and (3) some 38% of World War I debt was repaid between 1919 and 1931.

During the Great Depression, following the then novel precepts of Keynesian economics, the Roosevelt administration embarked on an unprecedented peacetime spending spree.  The debt doubled between 1933 and 1940; then it soared during World War II. Historical debt outstanding, treasurydirect.gov. http://1.usa.gov/1aZQhCx

No serious effort was made to repay the mountain of debt that was owed as of 1946 although it did dwindle in real economic terms due to inflation.  The new paradigm was to balance the budget, a goal that was achieved in a dozen years (47, 48, 49, 51, 56, 57, 60, 69, 98, 99, 00 and 01). OMB historical tables. http://1.usa.gov/1gvu1i

In recent years, deficit spending and/or temporary tax cuts have been used aggressively to counter perceived economic weakness. However, a chastened President Bush did propose a goal of balancing the budget after the GOP lost control of both houses of Congress in the 2006 mid-term elections.   State of the Union address, 1/23/07. http://bit.ly/1jOuqRa

In the coming weeks, I will submit a budget that eliminates the federal deficit within the next five years. I ask you to make the same commitment. Together we can restrain the spending appetite of the federal government, and we can balance the federal budget.

Fine words, but little has been said about balancing the budget since the “Great Recession” hit.  Thus, when appointing a Fiscal Commission in 2010, President Obama tasked it with balancing the budget before interest expense, which “result is projected to stabilize the debt-to-GDP ratio at an acceptable level once the economy recovers.” Executive Order 13531 – National Commission on Fiscal Responsibility and Reform, 2/18/10.

Many economists are sanguine about deficit spending so long as the debt to GDP ratio is not rising, i.e., debt increases are offset by inflation.  See, e.g., “Dwindling deficit disorder,” Paul Krugman, New York Times, 3/10/13. http://nyti.ms/1gAvHXf

Using similar logic, the European Union has set a goal for member countries of reducing their budget deficits to 3% of gross domestic output – which some of the countries are having trouble meeting.  EU sets deficit targets as Brussels softens austerity regime, advn.com, 5/29/13.  http://bit.ly/1eXWgau

Side A welcomes the conclusion that there is no need to fret about a little deficit spending, as it gives them considerable flexibility to keep the spending party going without enacting (rather than simply proposing) the tax increases to pay for it.

As a case in point, the big difference between the House and Senate budget proposals last year was the assumed dictates of fiscal responsibility.  The House contemplated balancing the budget in 10 years; the Senate assumed deficits would continue indefinitely.  On this basis, the Senate proposed an additional $5 trillion in spending, of which about 80% would be borrowed. When budgets collide,3/25/13.

Even the House budget took too long to turn the ship around in our opinion. The prudent course would be to stop rationalizing a deteriorating situation and find ways (e.g., targeted spending cuts and entitlement reforms) to balance the budget within 2 or 3 years and keep it that way.  No more excuses, it’s time to fix the fiscal problem, 9/9/13.

Budget projections are notoriously unreliable, and the projected deficits may prove understated. *** One thing that could result in higher than projected deficits is slower economic growth (which would tend to boost welfare spending and cut revenues). ***

Another possibility is that interest expense will exceed expectations.  Not only is the government currently benefitting from ultralow borrowing rates due to Federal Reserve policies, but it is effectively being relieved of interest on roundly $2 trillion in Treasury bonds held by the Fed.  *** If inflation spiked and the Fed was forced to slam on the monetary brakes, interest expense would soar.

4. A little more inflation would be great – In addition to maintaining the stability of the monetary system, the Federal Reserve seeks to promote full employment and economic growth. Re the latter objectives, the Federal Reserve and many economists warn about the perils of deflation (falling prices), which could supposedly lead to long-term economic stagnation.  OK, rapid inflation would be bad, they agree, but mild inflation would be safer than overall price stability.

How much inflation?  The official goal is 2% per year, and Federal Reserve officials fret that actual inflation is not hitting the mark.  Inflation, strangely low, holds key to 2014 Fed policy, moneynews.com, 1/12/14. http://nws.mx/1ouLm00

Both Boston Fed President Eric Rosengren and Chicago Fed President Charles Evans have referred to stubbornly low inflation as a "puzzle," and have warned that the longer it persists, the more likely it is that there is something rotten in the state of the economy.

We consider this concern misplaced for several reasons, including (a) the strong possibility that the real rise in price levels is being understated by current reporting procedures, and (b) the risk of an inflationary spike if the Fed miscalculates.  A survey of the US economy (inflation module), August 2013. http://bit.ly/1fjoDSR

Even if the Fed were right, however, the fact remains that a 2% inflation rate would have negative implications for many people.  Inflation is a tax, in effect, which penalizes thrift and erodes incomes of the productively employed (with the exception of those with the bargaining power to obtain offsetting wage increases).

5. This regulation will cause little difficulty  – Countless personal and business activities are subject to government (federal, state and/or local) regulation, and estimates of the overall compliance costs range up to about $2 trillion per year.  Regulatory common sense requires eternal vigilance, 11/22/10.

Yet whenever new regulations are proposed, regulators and/or advocates invariably find ways to exaggerate the purported benefits and/or minimize the costs.  Consider, for example, the oft repeated claim that “clean energy” programs will not only have environmental benefits but boost the economy as well.   New EPA chief: “Stop talking about environmental regulations killing jobs,” Joel Gehrke, Washington Examiner, 7/31/13. http://washex.am/1iWe9qH

“Can we stop talking about environmental regulations killing jobs, please?” McCarthy said at Harvard Law School Tuesday while defending her agency’s air regulations, according to the Washington Post. “We need to embrace cutting-edge technology as a way to spark business innovation.”

Another example would be minimum wage laws, which purport to ensure that all workers receive adequate compensation.  Such laws also reduce the number of jobs available, however, with the likely result that some intended beneficiaries will lose their jobs. 

If asked about a very large increase in the minimum wage, say to $50 an hour, most economists would concede a sharp reduction in employment opportunities.  There is increasing support for the view, however, that “modest increases [e.g., up to about 20%] in the minimum wage do not have negative effects on employment.”  Use wage hikes, EITC to help Delawareans, Saul Hoffman (UD economist), 1/14/14.   

Side A politicians go further, making increases to the minimum wage sound like a winner for everyone and not even mentioning the possible effect on prices.  See, e.g., “Calling on Congress to raise the minimum wage [by 39%, from $7.25 to $10.10 per hour],” president’s weekly address, 2/15/14.  http://1.usa.gov/1oyd9wy

And raising the minimum wage wouldn’t just raise their wages [referring to people currently earning the minimum wage] – its effect would lift wages for about 28 million Americans.  It would lift millions of Americans out of poverty, and help millions more work their way out of poverty – without requiring a single dollar in new taxes or spending.  It will give more businesses more customers with more money to spend – and that means growing the economy for everyone. 

Then there are welfare benefits, which are funded by taxes on productive workers and disbursed to unemployed and underemployed Americans.  This brings two economic principles into play: (a) Tax something (in this case productive effort) and you will get less of it; (b) Subsidize something (here idleness) and you will get more of it.

Most people are not inherently lazy, but if they expect to earn more from welfare than from working they will opt for welfare.  Accordingly, the “war on poverty” announced by LBJ in 1964 hooked a lot of people on welfare rather than helping them to better themselves. The American welfare state, Michael Tanner, Townhall.com, 8/15/13. http://bit.ly/1dtzFlX

GovCare will be one more nail in the coffin, as people receiving free (Medicaid) or heavily subsidized healthcare will be reluctant to lose it by seeking more remunerative employment.  In this vein, the Congressional Budget Office estimates that GovCare will reduce the work force by the equivalent of 2.0 million full-time workers in 2017, rising to about 2.5 million in 2024. The budget and economic outlook: 2014 to 2024, CBO report, 2/14/14 (Appendix C). http://1.usa.gov/1doLODQ

CBO’s estimate that [GovCare] will reduce employment reflects some of the inherent trade-offs involved in designing such legislation. Subsidies that help lower-income people purchase an expensive product like health[care] insurance must be relatively large to encourage a significant proportion of eligible people to enroll. If those subsidies are phased out with rising income in order to limit their total costs, the phaseout effectively raises people’s marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work.

Ironically, now that it is too late, a solid plurality of Americans are telling pollsters that Americans didn’t understand the GovCare proposal.  Too bad, maybe they should have been reading the SAFE blog!  Poll: 64% say Obamacare would have never passed had truth been known, Wynton Hall, breitbart.com, 2/14/14.  http://bit.ly/1gm0R6B

6. It all adds up – Even if none of the individual decisions (wasteful spending, taxes, deficits, inflation, or regulatory burdens) break the bank, the cumulative burden could certainly do so.  And while no one can prove that unsound government policies are to blame, there is ample evidence that things are not going very well.  Anemic economic growth – crony capitalism – shrinking workforce participation – swelling welfare rolls - widespread loss of confidence in the country’s future.

Here’s how pundit Charles Krauthammer sums up the situation.  Obamacare’s war on jobs, Washington Post, 2/13/14. http://wapo.st/1buAvjB

With the weakest recovery since World War II, historically high chronic unemployment and a shockingly low workforce participation rate, the administration correctly fears the economic consequences of its own law — and of the political fallout for Democrats as millions more Americans lose their jobs or are involuntarily reduced to part-time status.

Economist Larry Kudlow goes even broader, tying in the effects on businesses and investors as well.  Janet Yellen’s problem, National Review, 2/14/14. http://bit.ly/NQ7hkt

Holding back growth and jobs are a series of tax and regulatory barriers that must be fixed if we are to move from secular stagnation back to traditional American prosperity. Obamacare is at the top of the list *** but there’s more holding back the economy than Obamacare. A recent report by Tax Foundation president Scott Hodge shows that the U.S. has the worst corporate and capital-gains tax structures among the OECD developed countries. The EPA is going to destroy the coal industry. The Obama administration refuses to open up federal lands for oil-and-gas fracking and drilling, even though the energy revolution is a high-paying job creator. And the National Labor Relations Board is pushing for snap “ambush elections” to promote unionization. *** I don’t understand why the Fed’s planners want to raise inflation to around 2.5 percent. Higher inflation is a tax on consumers, families, investors, jobs, and growth.

Finally, a big fiscal problem remains.  After declining to a supposedly sustainable level in fiscal year 2014, according to the CBO projection, the deficit will soon start growing again in both nominal and real economic terms.  Testimony before the Senate Budget Committee, CBO Director Douglas Elmendorf, 2/11/14.  http://1.usa.gov/Mk4T4k

FY

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

$T

0.5

0.5

0.5

0.6

0.7

0.8

0.8

0.9

1.0

1.0

1.1

% of GDP

3.0%

2.6%

2.8%

2.9%

3.1%

3.4%

3.7%

3.8%

4.2%

4.1%

4.0%

 

 

Given this dismal projection, which in our view is a best-case scenario, the United States could be in for some very tough times.  Demand better!

top      wwhipple3@verizon.net


2/10/14 – There must be a better way to hold presidents accountable        Read a Reply

Presidential leadership might be thought of as the engine that makes our national government go, while Congress serves as the brakes.  But with more and more power vested in the presidency, is the braking mechanism still adequate?

In theory, Congress has the upper hand.  It makes the laws that the president is charged with implementing – holds the power of the purse – reviews presidential appointments – exercises oversight over government operations – and if all else fails can remove the president via impeachment.

As the 535 members of Congress are seldom of one mind, however, it’s difficult to present a united front in disagreements with the president, especially if his or her party controls at least one house of Congress (as has been true since 2001, except in 2007-2008).  A visual guide: The balance of power between Congress and the presidency, about.com. http://abt.cm/1cVsG4R

Short of mounting a full-scale challenge, which might not succeed (consider the results of the attempt to defund GovCare implementation last fall), there is little Congress can do to force conversations a president wants to avoid. 

Presidential addresses to Congress are a one-way street (no questions allowed); informal discussions are at the president’s discretion; and executive privilege can be invoked to block inquiries of presidential aides as to their conversations with the president. Government Run Amok Disease, Nov.-Dec. 2009.  http://bit.ly/1fYXVdZ

Scrutiny by the media may help, but is far from a panacea.  Thus, the president has been able to hum by issue after issue since the 2012 elections without much in the way of questions.  Speeches to friendly audiences, scripted press conferences, and talk show interviews were a snap.  His biggest challenge was an interview with Bill O’Reilly of Fox News on Super Bowl Sunday that lasted – all told – for about 20 minutes.

This entry will recap the O’Reilly interview, with our comments, and offer some concluding observations.

Segment A (http://fxn.ws/1gFjIMt)  – This portion of the interview shows O’Reilly in a generally confrontational mode.  Fox News aired it live during the Super Bowl pre-game show on February 2, and video clips have been widely disseminated. 

1. “Why didn't you fire Sebelius, the secretary in charge of [the GovCare rollout,] because I mean she had to know, after all those years and all that money, that it wasn't going to work?

(O’Reilly had previously established that there had been major computer problems, with the president disavowing any advance knowledge thereof.)

The president said his main priority had been fixing the problems, not firing people. Although behind schedule, the healthcare policy signup was now coming along. “What we're constantly figuring out is how do we continue to improve it, how do we make sure that the folks who don't have health insurance can get health insurance and those who are underinsured are able to get better health insurance.”

As a taxpayer, said O’Reilly, “I’m paying Kathleen Sebelius' salary and she screwed up. And you're not holding her accountable.”

“We hold everybody up and down the line accountable,” said the president.  However, “our main focus is how do we make this thing work so that people are able to sign up.”

In response to further questions, the president reiterated his previously expressed regret for the statement that “if you like your insurance you can keep your insurance.” He declined to agree, however, that this had been the biggest mistake of his presidency.

Comment: The problems with GovCare have been evident for years, and given the president’s role in selling the program it’s hard to believe that he was unaware of them. The website is fixable, but GovCare has deeper problems, 11/4/13.

We are not aware that anyone has been fired for this developing disaster.  The same goes for other problems brought up in the interview, infra.  So it’s hard to give much credence to the president’s assertion that “we hold everybody up and down the line accountable.”

2.  Did Secretary Panetta tell you it was a terrorist attack?