Tag: Spending

Progressively Bankrupt

 

A recent story in the Wall Street Journal foretells a grim financial future for Connecticut, the wealthiest state in the union by per capita income. Its great wealth, however, does not translate into financial stability. For this coming year, the state expects a $400 million shortfall in tax collections that will only compound its looming budget deficit of some $5.1 billion, attributable to the usual suspects: service on existing debt, a lowered credit rating, surging pension obligations, runaway health care expenditures, and a declining population. In both 2011 and 2015, Connecticut Governor Dannel Malloy sought to fill the fiscal gap by engineering two tax increases on the state’s wealthiest citizens, so that today the state’s highest tax bracket is 6.99 percent. Under the state’s tax pyramid, about one-third of the state’s $7-billion budget is paid by the several thousand people earning over $1 million per year.

But reality has finally set in. Kevin Sullivan, head of Connecticut’s tax commission, has conceded that “you can’t go back to that well again.” Determined progressives may claim the path to prosperity remains blue. But sooner or later, the bubble has to burst. Even the well-heeled individuals willing to pay high taxes for superior services will cut back their business activities or flee when fleeced. Massive government wealth transfers cannot succeed if those whose wealth is to be transferred end up leaving the state altogether. Indeed, in some cases, the departure of just one billionaire can lead to a hole in the budget, as with David Tepper’s departure from New Jersey.

But if Governor Malloy has thrown in the towel on higher taxation, he has not offered any alternative program that will allow Connecticut to escape from its economic doldrums. Yet there is a path forward. His state can return to financial health if it reverses its policy course and removes many of its vaunted restrictions on labor and real estate markets. Fortunately, states have no power over interest rates and the money supply, so in order to survive, they are forced to look inward to make the necessary changes.

Jim Geraghty of National Review and Greg Corombos of Radio America get a kick out of the Democratic National Committee arguing in court that it can’t be sued for fraud because everyone knew the 2016 nomination process was rigged.  They also grumble at Republicans for giving the Democrats virtually everything they wanted on the latest spending bill.  And they express frustration with the media for running breathless headlines every time Pres. Trump says he’s considering something, but they also wonder what other things they could get Trump to publicly mull over.

Richard Epstein examines the principles that should guide efforts to reform America’s tax system.

Jim Geraghty of National Review and Greg Corombos of Radio America groan as conservative House Republicans are reportedly prepared to be less demanding on reining in spending once Trump is in office.  They also shake their heads as more revelations suggest the Germans should have had the Berlin terrorist out of the country a long time ago.  And they discuss three hate crime allegations that turned out to be hoaxes – the latest in a series of fake news.

Jim Geraghty of National Review and Greg Corombos of Radio America groan as Rush Limbaugh says Donald Trump’s trillion dollar infrastructure bill could be a big success – just like FDR.  They also get a kick out of Democrats getting really excited over the prospect of a 78-year-old Joe Biden running for president in 2020.  And Jim unloads on a “faithless elector” from Texas, who says he cannot cast a vote for Trump.

Three Cheers for Infrastructure Spending!

 

240673_road_construction_ahead_c898a8e8-fbe8-47ea-b492-4497f91421f4-prvOne of Hillary Clinton’s campaign proposals is for additional infrastructure spending to the tune of $250 billion over five years. According to the Clinton campaign, this program would be paid for by “business tax reform. It’s not clear what “business tax reform” entails, but it sounds to me like higher taxes on corporations and high income earners. Clinton claims this would create tens of thousands of jobs, stimulate the economy and fix a failing infrastructure.

Anyone who’s been paying attention during the Obama years should not be surprised by this proposal. It has been a recurring theme throughout his term in office. Infrastructure spending was a major component of the 2009 Stimulus Bill accounting for $105 billion of “shovel-ready” public works projects in the approximately $900 stimulus package. Obama and congressional Democrats have continued to call for additional infrastructure spending as a stimulus despite the fact that the 2009 stimulus failed in its stated goals of 1) keeping the unemployment rate below 8% (I believe it peaked at a tick above 10%), and 2) in providing economic stimulus (GDP growth has bounced around between 1% and 2% through the Obama years). Even Obama eventually did admit that there were no “shovel-ready” projects.

You would think this would be an easy issue for the Republican presidential candidate to oppose by noting the historical failures of public works projects in stimulating economic growth, and the need to get our fiscal house in order what with the federal government debt over $19 trillion and rising and annual deficits of hundreds of billions that will only rise without major reforms of our entitlement programs. However, you would be wrong. Republican presidential hopeful Donald J. Trump has called Clinton’s proposal “a fraction of what we need” and has at various times called for either doubling or quadrupling of Clinton’s proposal to either a $500 billion or a $1 trillion infrastructure plan. Trump would pay for this massive spending increase by borrowing via the selling of bonds, stating in his usual blustering fashion “We’ll get a fund, we’ll make a phenomenal deal with low interest rates and rebuild our infrastructure.”

Will This Be the No-Fun Presidency for the Next POTUS?

 

Why does anyone want this job if you can’t do the fun stuff that makes voters happy: cutting taxes and spending money? From the WSJ:

Donald Trump and Hillary Clinton are likely to recite their varied promises for fresh government spending at Monday’s first presidential debate. One reality they’re unlikely to note: Whoever wins in November will enjoy far less latitude to spend money or cut taxes than any president since World War II. Not since Harry Truman will a new leader enter office with a higher debt-to-GDP ratio. And for the first time in decades, the new president will face the specter of widening deficits despite a growing economy. “The next president, no doubt, is going to be very constrained,” said Rep. Charlie Dent, a Pennsylvania Republican who sits on the House appropriations committee and hasn’t endorsed anyone for president.

An Unwillingness to Fight?

 

shutterstock_279048509One common argument we’ve heard this election cycle is that people are angry at Republicans because of the GOP’s fecklessness and unwillingness to reign in the Obama Administration. But based on this data, that anger may have been misplaced:

A president’s budget proposal tends to be a curious document that acts as part wishful thinking and part a projection of hope into the future. For example, Bush’s last budget proposal showed a federal government that was on track to produce a balanced budget within a few years. Obama’s budget, on the other hand, anticipated a massive spending increase in the first year (due to stimulus spending) followed by pretty typical increases of about 6 percent per year. That “6 percent” is important because in 2009 it was the rate at which federal spending had grown year over year for almost 30 years. So that is the number the Obama team used as their standard for how quickly spending should keep growing. But after Republicans took control of Congress in 2011, despite what you may have heard, they really did put a brake on federal spending. A really good brake. In fact, since 2011, federal spending has increased at only 1.3 percent per year … the slowest rate since the aftermath of World War II.

That looks pretty good to me, and it translates into some serious money:

Member Post

 

The point of this post is to more or less deal with an annoying (it sets my blood to steam each time I see or hear it) narrative I can remember going back to at least my time in junior high of critiques of conservatism and the Republican Party. This narrative came up as perhaps […]

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Member Post

 

Cuts are off the table. I just saw a post from the loveable JP, which reads that Trump’s plan requires 11% growth. I’m not so concerned with the peculiarities of that conversation. But, let’s zoom out a bit and enlarge the frame. No proposition for reduced taxes can be paid for. Ever. Because, the strict preemptive […]

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If You Want Government to Spend Like a Nordic Nation, It Needs to Tax the Middle Class Like One

 

twenty20_bb96649b-cbf1-4e5f-afd8-e585579301f5_sweden_flag-e1454439423712The WaPo’s Max Ehrenfreund has a great Q&A with sociologist Lane Kenworthy, author of  Social Democratic America — a book I have written about a few times. The following bit gets at the idea that it wouldn’t be just the rich paying for the progressive dream of greatly expanded government, Scandinavian-style:

One difference between these two candidates’ [Hillary Clinton and Bernie Sanders] platforms and the social-democratic agenda in your book is that both are talking a lot about raising taxes on the rich, while in the Nordic countries, the middle and working classes pay more in taxes, too.

The tax strategy that these countries have tended to pursue is to spread the tax burden around, and in fact, their overall tax systems are pretty much flat. Almost everybody pays roughly the same share of their pre-tax income in taxes. You have a progressive income tax, but that’s offset by regressive payroll taxes, and especially regressive consumption taxes, which are very large in these countries.

Member Post

 

How safe are your investments? Experts say the market is due for huge correction at any moment. The warning signs are everywhere: an unprecedented 18 trillion dollars in debt, loose-as-a-goose fiscal policy. And thanks to solar subsidies, politicians are now charging us for the sun. Preview Open

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New Budget Deal Puts National Debt Back on the Rise

 

Washington in action! From the New York Times:

The House on Friday morning overwhelmingly approved a $1.15 trillion spending measure, as part of a sweeping, year-end fiscal deal that also includes a package of tax breaks worth more than $620 billion for businesses and low-income workers. The Senate was also set to approve the legislation, bundled into a single bill, in a fast-track series of votes later Friday morning. …

Giving Thanks For Congress

 

Screen Shot 2015-06-12 at 12.56.48 PMEvery Thanksgiving I sympathize with lobbyists: can you imagine sharing their obligation to feel grateful for Congress? Amidst the vast, un-American growth of the administrative state, the world’s greatest deliberative body continues to do what it does best: taxing our children and passing the savings onto us.

The distinction progressives make between public and private is a false one. Many Americans know what it’s like to struggle beneath the weight of debt: not a day that goes by when my mailbox isn’t stuffed with offers from Visa or MasterCard informing me that I have been pre-declined.

Recall the heyday of the Tea Party, which relentlessly pointed out that every penny of the stimulus would have to be paid for by our children and grandchildren. Frankly, that’s the only thing I like about it. Even the New Deal wasn’t able to extend the Great Depression beyond a decade. Today, nearly one decade after the orgy of spending instituted during the George W. Bush administration, crony capitalists can say it was worth it. With each passing year, it seems government assumes more and more responsibility for our lives. Take solar subsidies — please! As Republicans and Democrats debate how much taxpayers should fund solar energy, let’s take a step back and realize that politicians have figured out a way to charge us for the sun.

Shoring up the Debt Ceiling Agreement: Terms of Credit Act Can Help

 

shutterstock_208794031There are two significant weaknesses in the recent debt ceiling agreement: 1) It departs from the balanced budget plan adopted earlier this year; and 2) it skirts the requirements of the budget process. The Terms of Credit Act drafted by the House Republican Study Committee can be used to address these weaknesses.

Congress and the Administration have reached an agreement that suspends the debt ceiling until March 2017, while increasing appropriated spending, restraining entitlement spending and taking steps to increase revenues. This agreement, within its confines, is an acceptable outcome for three reasons. First, it sets aside the risk of a breach of the debt ceiling or default by the federal government on its debt obligations. Either of these outcomes would have very likely shaken the confidence of markets in the “full faith and credit” of the federal government in a way that would have imposed serious damage on the economy. Second, it does not raise tax rates. Third, it sets a precedent for future steps to rein in out-of-control entitlement spending, thereby addressing the real cause of the fiscal crisis the federal government faces.

Outside the confines of the agreement, however, Congress must turn its attention to returning to the path to a balanced budget set by the budget resolution it approved earlier this year and restore the integrity of the budget process. The reason is that the debt ceiling agreement departs from the budget resolution. In fact, the Senate had to vote to waive the application of the Congressional Budget Act in order to permit the adoption of the bill to codify the agreement. Accordingly, it is essential that this departure from the budget resolution approved earlier this year and the budget process is only momentary.

How Exactly Will New Taxes Fix Our Infrastructure?

 

MianusBridgeCollapse-610x404After graduating from high school in 1983, I took a weeklong vacation to Cape Cod with my friends. On the ride home, I drove over the Mianus River Bridge in Connecticut. Shortly after that, the bridge collapsed.

Now, when I say “shortly”, I mean about four or five hours later. I was driving southbound. It was the northbound span that gave way. So maybe this wasn’t such a close call. But bridges should not fall apart beneath you. I get that. I understand the importance of infrastructure spending. 

Member Post

 

McConnell is warning us today that budget busting spending increases are just head of us, and they are unable to stop this.    Apparently, the Republican -controlled legislature is powerless against the President.   This is, of course, because the Republican legislature has *given* him all their power.  They have unilaterally disarmed in the ‘political […]

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