Still recovering from the New Year’s Holiday Fiscal Cliff debate debacle and need a refresher on what we just went through, and what’s to come? See below:
The Economist: “The Fiscal Cliff: Nothing to be Proud of”
George Will: “Time for a balanced-budget amendment”
Ramesh Ponnuru: “Why a Debt-Ceiling Fight Is Good for the Country”
According to the nonpartisan Tax Policy Center, “77 percent of American households will face higher federal taxes in 2013 under the agreement negotiated between President Barack Obama and Senate Republicans” over the New Year holiday.
As a result, the government will bring in over $620 billion in new revenue, over ten years – or approximately $62 billion per year.
However, the deal also provided for over $300 billion in new spending over the next ten years, adding an additional $4 trillion dollars to the deficit in the same time period.
Given that the federal deficit in 2012 was $1.1 trillion, simple arithmetic shows that the fiscal cliff deal goes a long way from even making a dent in our nation’s long-term debt problem.
The mission of Ending Spending in 2013 will be advocating for large-scale solutions that put America back on a path to prosperity. In the coming months, we’re looking forward to a serious conversation about just how we get there.
Stay tuned.
Special guest post by Joe Ricketts
I’ve long felt that being a good citizen means not just watching from the sidelines but getting actively involved in the big policy debates of our time. It was in this spirit that I started a non-partisan advocacy group called Taxpayers Against Earmarks back in 2010. Taxpayers Against Earmarks focused on educating the public about the dangers of earmarking, and early in 2011 we were happy to see Congress declare a moratorium on this fiscally irresponsible practice.
With the earmarking campaign behind us, we decided to take on an even bigger challenge — the larger issue of out-of-control federal spending and the crushing burden of government debt it leaves in its wake. We renamed our group Ending Spending and for the past two years, we have been doing what we can to educate the public and help elect political leaders who understand the importance of balancing the budget and reducing the debt.
This promises to be a much longer campaign than the one against Congressional earmarks, but it’s a battle that must be waged. With this in mind, I’m pleased and proud to report that my sons Todd and Pete are coming to work with me at Ending Spending. Given the critical importance of getting our fiscal house in order, it’s more important than ever for groups like Ending Spending to continue making the case for smarter spending and smaller government. And with Todd and Pete’s help, that’s just what we’re going to do.
An economic story broke yesterday on a Las Vegas radio station that has reverberated across the country. A small business owner, who wished to remain anonymous, called a local talk show and told the host that because of President Obama’s re-election, he was going to have to lay off 22 employees. Here is a bit of what he had to say.
“I explained to them a month ago that if Obama gets in office that the regulations for Obamacare are gonna hurt our business, and I’m gonna have to make provisions to make sure I have enough money to cover the payroll taxes, the additional health care I’m gonna have to do, and I explained that to them and I said you do what you feel like in your heart you need to do, but I’m just letting you know as a warning this is things I have to think of as a business owner.
“Well unfortunately, and most of my employees are Hispanic — I’m not gonna go into what kind of company I have, but I have mostly Hispanic employees — well unfortunately we know what happened and I can’t wait around anymore, I have to be proactive. I had to lay off 22 people today to make sure that my business is gonna thrive and I’m gonna be around for years to come. I have to build up that nest egg now for the taxes and regulations that are coming my way. Elections do have consequences, but so do choices. A choice you make every day has consequences and you know what, I’ve always put my employees first, but unfortunately today I have to put me and my family first, and you watch what’s gonna happen. I’m just one guy with 114 employees — well was 114 employees — watch what happens in the next six months. The Dow alone lost 314 points today. There’s a tsunami coming and if you didn’t think this election had consequences, just wait.”
Now, I don’t know if this is on the level — we’ll have to wait and see if any companies in that area lay off 22 employees — but it matches the sort of behavior we expect. Is this happening elsewhere, though? I decided to search Twitter for the word “lays off” and see what news stories came up from the stream over the past couple days. Here are the stories I found.
The reasons for these lay offs are varied, but most of them involve government action. The companies have lost business because of decisions made by the government, are anticipating higher costs because of government regulations, or have relied on government and were left short by the vagaries of bureaucracy. Mind you, this search took me about 20 minutes, and I didn’t use a particularly sophisticated method to get my results. Keep in mind also that since these stories came from Twitter, they’re the ones people are talking about inside their own social networks. How many more stories are out there people aren’t yet sharing with each other?
Michael Boskin, Tully Friedman Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution, wrote a paper recently that’s worth a good long look this week. He examined how our national debt, especially the ratio between our debt and our Gross Domestic Product, influences the growth of our economy. You can get a copy of his work here (PDF link) and I highly recommend you do so. Here’s his initial premise.
While temporarily desirable in war and recession, large deficits potentially cause two separate but related problems—shifting the bill for financing the current generation’s consumption to future generations and crowding out of private investment. Thus, deficits are more problematic during economic expansions, if they reduce domestic investment and hence future income, when the national debt is high or rapidly rising relative to GDP, and when they finance consumption, not productive public investment.
In short, our economy has two types of money: government and private. Government money only comes from the private sector and, once removed from it, becomes far less useful because it is disbursed inefficiently (and, often, corruption is endemic). Private money, on the other hand, multiplies itself and flows where the economy most needs it at any given moment.
Our problem right now is that the national debt, especially the ratio of debt to what the entire country produces every year — the Gross Domestic Product — is climbing far past our ability to sustain it. When that ratio increases, it pulls money from the private sector into government. Now, that may seem an obvious point but the transfer of wealth from the private sector to government has a far greater effect than we can see immediately. First, let’s look at the ratio — where it is now and where it’s headed under President Obama’s watch. Right now, the big debt drivers are the large entitlement programs: Medicare, Social Security, and Medicaid. Says Boskin:
OMB provides a baseline long-run estimate based on President Obama’s policies as implemented and proposed, including his tax increases, health policy and, importantly, the absence of cost growth slowing Social Security and Medicare reform.9 After roughly doubling from the end of 2008 to 2014, then briefly leveling off, the ratio exceeds 90 percent in about 20 years, 100 percent soon thereafter, and then keeps rising.
Here, now, is where the concrete numbers are important. Boskin noted a study that found that for every 10 percent increase in the debt/GDP ratio, we lose 0.17% in economic growth per year. He took that figure and extrapolated how large an impact that would have on the economy if we continue the government’s current “everything will be fine if we just raise taxes on rich people” program.
By 2050, the higher debt ratio brings growth to a halt under the “continuation of Administration policy” scenario. The level of GDP is 30 percent lower than if the debt had not soared and the policies had not continued. That’s most of a generation of per capita income gains wiped out or, put another way, it is as large as the gap between American and lower Western European per capita incomes. Under the “reverse course, stabilize debt” policy scenario, the decline in income is “only” 12 percent. That is most of a typical decade’s worth of real per capita income growth.
In other words, if we follow the Democrats’ plan, our economy will be 30% smaller than it would be if we had a smaller, more responsibly-sized government. If we manage to freeze the debt in place, we can limit the damage to a 12 percent smaller economy than we’d ordinarily have. Of course, this strongly implies that if we put a plan into place that reduces the debt in a reasonable number of years (and there is an array of plans from which we can choose), we can cut that GDP reduction even more and perhaps even eliminate it completely.
Mind you, these numbers are not merely abstract. They represent smaller earnings per family. In other words, a high national debt means that you and your family will have less money in the future. The rampant spending of today’s politicians means you spend more today in taxes and earn less in the future because of a slower economy. The debt is a double-whammy of misery that not only affects your children because they will have to pay that money back at some point, but leaves them in a worse position from which to build their lives. I’m sure we’d all appreciate a paycheck 30 percent larger than it is right now. That’s what we could have if we cut government.
But the situation will only get worse unless we stop right now. We have already done a certain amount of damage and we can not repair it. Our debt is large — over $16 trillion dollars — and we’ll need a few years to whittle it down to a manageable size. Likewise, our economy is far from healthy. Economic growth may not reach 4 percent a year, which is really where we need it to be, for a long time. We don’t notice what our debt really costs us because we don’t see the money fling out of our bank account, but it is and it will continue to do so for such time as our debt is as high as it is.
The answer, folks, is pretty simple. Shrink government and unleash the incredible power of private money. Let job creators do what they do best without having to seek permission of government bureaucrats first. Stop trying to manage every aspect of the economy with rules that should have been tossed in history’s dumpster decades ago. Let people manage their own affairs, spend their money as they wish, find their own paths to prosperity and happiness. Turn the economy up to 11 and the government to a number a lot smaller than we have right now and reclaim our future. The alternative is, well, pretty bleak.
Failing to rapidly begin bending the long-run debt-GDP curve down risks a growth disaster, whose severity could be much worse even than the recent deep recession and tragically anemic recovery. Left unchecked, it eventually risks a lost generation of growth, a long-run growth depression.
There’s your future, if we do nothing. I don’t want that. Neither do you. So let’s change it.
Today, Ending Spending launched “Past Due,” an ad detailing the big-spending record of Washington politician Joe Donnelly.
America faces a record national debt of over $16 trillion, and we can’t afford policies that make it even worse.
That’s why we need leaders like Richard Mourdock, a proven advocate of limited government who will fight Washington’s irresponsible spending.
Watch the ad below, and let us know what you think in the comments.
This isn’t exactly an example of fiddling while your country burns, but it’s awfully close, isn’t it?
President Obama has spent far more lavishly on White House state dinners than previous chief executives, including nearly $1 million on a 2010 dinner for Mexico’s president, according to documents obtained by The Washington Examiner.
[...]
The Obama extravaganza two years ago for Mexican President Felipe Calderon, which included a performance by pop star Beyonce, cost $969,793, or more than $4,700 per attendee, the documents show.
The Calderon dinner was held on the South Lawn in a massive tent adorned with decorated walls, hanging chandeliers, carpeting and a stage for Beyonce’s performance.
Guests rode private trolley cars from the White House to the tent. Celebrity guest chef Rick Bayless from Chicago’s Topolobampo restaurant was imported to prepare Oaxacan black mole, black bean tamalon and grilled green beans.
I can understand why President Obama might want to ply the Mexican President with good eats, considering what we’ve learned of Operation Fast and Furious, but I’m pretty sure you can buy diplomatic good will on a smaller budget. There’s more.
The documents also reveal that the Obama White House retained an outside planner for the dinners. Bryan Rafanelli, a Boston-based celebrity event planner who was retained last year, managed former first daughter Chelsea Clinton’s 2010 nupitals. His firm’s website boasts that he produced “State Dinners hosted by President Barack Obama and First Lady Michelle Obama.”
Rafanelli’s business partner, Mark Walsh, is deputy chief of the State Department’s Office of Protocol, which reimburses the White House executive residence for the events.
So, irresponsible extravagance with a side-order of cronyism is on the menu? Sounds about right. Glenn Reynolds provided the appropriate picture to go with the story.
Another month, another grim milestone in the horrid, horrid Obama Economy.
The number of American workers collecting federal disability insurance benefits hit yet another record high in October, according to the Social Security Administration.
This month 8,803,335 disabled workers are collecting benefits, up from the previous record of 8,786,049 set in September.
We’ve added over 1.3 million people to the disability rolls since February, 2009, an increase of 975 per day. To put that in perspective, we’ve put enough people on this flavor of government dole to populate the city of San Diego, California.
The Lonely Conservative made an excellent observation.
Unlike unemployment benefits, Social Security disability never runs out, so the vast majority of these people will receive benefits for life.
As it happens, that’s mostly true. Social Security disability will start to run out of cash to the point we’ll see very real payout cuts in three years — 2033. That’s three years sooner than the Social Security Board of Trustees predicted last year and it’s due, in large part, to the glut of new people entering the system thanks to the Obama Economy. What do you want to bet that next year’s report from the Trustees will bring that date a couple more years closer to the present?
Americans Split On Which Presidential Candidate Would Better Manage Their Family Budget
Arlington, Va. – Public Notice today released the results of a national survey of likely voters on the issues ofdebt and spending, as well as which presidential candidate is more trusted to manage a family budget. The survey was conducted by the Tarrance Group via telephone from October 15-18, 2012, among 1,000 likely voters with a margin of error of +/- 3.1 percent.
On the question of whether the national debt has impacted personal or family financial situations, an overwhelming majority (88%) said it did, with a significant majority of seniors (61%), Independents (58%) and middle class families (58%) saying it had a “major impact.” The survey also found Americans were split between Mitt Romney (47%) and Barack Obama (46%) on who they trusted more to manage their family budget. Across key constituencies such as middle class families, Independents, seniors, married women and those likely to vote, however, Romney maintained an edge.
Gretchen Hamel, executive director of Public Notice, issued the following statement regarding the poll:
“President Obama said earlier this year that the debt wasn’t a problem in the ‘short-term,’ yet millions of Americans believe it’s having a major impact on their personal finances. Regardless of what the pundits in Washington say, voters are looking for a plan to reduce the debt now. With just over two weeks until Election Day, both candidates would be wise to focus less on partisan one-liners and empty applause lines and more on getting our fiscal house in order.”
Key Findings:
-Voters across the country report experiencing an impact from the level of the federal debt. A majority (56%) say the level of federal debt has had a major impact on their family’s personal financial situation, while another 32% also say it has a minor impact. Just 9% of voters say the debt has had no impact at all on their personal financial situation.
-A majority of seniors (61%), Hispanics (53%), Independents (58%), and middle class families (58%) say the debt has a major impact on their personal finances.
-The data also show that voters are statistically split on who they trust the most to set and manage their family’s budget. Overall, 47% trust Mitt Romney the most, while 46% trust Barack Obama the most. However, the results show key voter groups prefer Mitt Romney to manage their family budget:
-Mitt Romney’s support on this measure is also more bi-partisan than support for Barack Obama. While 28% of “soft” Democrats trust Romney the most to handle their family’s budget, only 6% of “soft” Republicans trust Obama the most.
Click here to read the full polling memo.
###
Public Notice is an independent, nonpartisan, non-profit, 501(c)(4) organization dedicated to providing the facts and insights on the effects public policy has on Americans’ financial well-being.
One of the President’s bragging points about Obamacare is the small business tax credit he claimed would help off-set the program’s costs and bring health insurance to millions. The administration predicted 4 million small businesses would claim the credit while the Government Accounting Office predicted a smaller, but still considerable number of 2.5 million. Recently, the IRS released the number of businesses that claimed the credit in 2010.
170,300.
That’s it. The administration over-shot the real number by, well, almost 4 million. It makes you wonder how many of its other rosy Obamacare claims will prove just as false.
According to testimony from an IRS official, the most common reason businesses haven’t claimed the credit is because the forms and requirements are so complex they practically require the business to hire someone just to handle the paperwork.
Small business employers have no incentive to participate in the tax credit plan. In order to comply, a small business owner has to file Form 8941 with the IRS. This 20-line form requires employers to report the number of employees they have, the average amount they are paying them, the total amount spent in premiums on them, and the average premiums for small-group coverage in their area. And that’s just if you have a simple situation.
Alternatively, employers can simply deduct their insurance premiums as a business expense and be done with it. That’s what most, if not all, small employers will continue to do. No small employer will want to compile those records when they can take the easier path.
Or, as Jim Lakely of the Heartland Institute wrote, if a business can afford to hire a new employee, they should “be sure to include that new employee on Line 34 of Page 134, Subsection D(ii) of the forms you must fill out to comply with a government that knows how to run your business better for the “common good.” Alternately, small businesses can simply stay small, cut their employees’ hours to get under the new “full-time” definitions, and putter along until we elect officials who will tear Obamacare up by the roots and full the hole with weed killer so it can never grow back.
