Friday, April 29, 2011

Obama feels our pain: "Just inflate your tires"

During the 2008 campaign, Obama himself had strange ideas about the prospect of expensive prices for fossil-fuel-generated energy: "Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket." Then-candidate Obama also elaborated on the envisioned role of his administration in ensuring such high prices: "So if somebody wants to build a coal-powered plant, they can. It's just that it will bankrupt them."

As for consumers' plight in paying skyrocketing gas prices, the president, now and in the past, has sounded ambivalent. He recently told a questioner, "If you're complaining about the price of gas and you're only getting eight miles a gallon, you know, you might want to think about a trade-in." Few large passenger vehicles today get only eight miles a gallon, and many squeezed Americans in recessionary times cannot so breezily think of "a trade-in".

In 2008, Obama addressed consumer fears about climbing gas prices: "But we could save all the oil that they're talking about getting off drilling, if everybody was just inflating their tires and getting regular tune-ups. You could actually save just as much."

Note again the fantasy. Few of today's cars have distributor points. New-generation spark plugs and computerized ignition usually ensure 75,000-100,000 miles without a so-called "tune-up." There is no evidence that Americans' tires are chronically under-inflated, or if they were, that such negligence would waste more gasoline than all that could be recovered from new offshore oil drilling.

What explains the weird rhetoric from Obama and his administration? First, not long ago they considered high energy prices as not that bad. Government-sponsored mass transit and alternative energy projects -- from wind and solar to the federally subsidized Chevy Volt -- pencil out only when gas gets expensive. And if you believe in man-made global warming, then the less coal, gas or oil that Americans use, the better for the planet.

Second, a president who believes that modern cars get eight miles per gallon or need frequent tune-ups, and that proper tire inflation can substitute for drilling oil, has never run a business that hinged on having moderately priced gas to power a truck, tractor or car fleet. In fact, most in the Obama administration came to Washington from either academia or prior state and federal government employment, where policy is theoretical, without grounding in real experience.

So much of this administration's talk about energy sounds similar to a bull session in the faculty lounge, or what we would expect from lifelong bureaucrats and public functionaries who have never experienced long commutes or struggles in the harsher, profit-driven private workplace.

Now the global economy is recovering and energy use is climbing, as the U.S. dollar sinks. The oil-rich Middle East is in chaos. And more than 2 billion people in India and China are desperate for imported oil. The result is that American gas prices are astronomical, and the public is furious and starting to demand relief from the administration.

Its answer? Simple: Since re-election looms, the administration now insists that high energy prices are no longer good, but suddenly bad. And the evil oil companies are mostly to blame!

Thursday, April 28, 2011

'Oil Men in the White House' blamed For High Gas Prices...

FLASHBACK 2008: Blamed 'Oil Men in the White House' For High Gas Prices...

White House to Propose 26 Percent Corporate Tax Rate??

I've been saying this for years. Let's hope the White House don't do what Cato suspects they might do when they lower the rate.

Cato: White House to Propose 26 Percent Corporate Tax Rate?!? Look before You Leap

According to an article in the New York Times, the Obama Administration is seriously examining a proposal to reduce America's anti-competitive 35 percent corporate tax rate.

The Obama administration is preparing to inject an unpredictable new variable into its economic policy clash with Republicans: a plan to overhaul corporate taxes. Economic advisers have nearly completed the process initiated in January by the Treasury secretary, Timothy F. Geithner, at President Obama's behest. That process, intended to make the United States more competitive internationally, has explored the willingness of business leaders to sacrifice loopholes in return for lowering the top corporate tax rate, currently 35 percent. The approach officials are now discussing would drop the top rate as low as 26 percent, largely by curbing or eliminating tax breaks for depreciation and for domestic manufacturing.

I'll hope for the best and prepare for the worst.

P.S. It's also important to understand that a "deduction" in the business tax code does not imply loophole. If you remember the correct definition of business income (total revenue minus total costs), this means a business gets to "deduct" its expenses (such as wages paid to workers) from total revenue to determine taxable income. Some deductions are loopholes, of course, which is why a  simple, fair, and honest system should be based on cash flow. Which is how business are treated under the flat tax.

Googe, Facebook: Neither one is green

Between the two of them, they use huge gobs of energy, much of it generated by coal, which puts SO2 pollution into the air, and is certainly not Green!

via Boing Boing, source Peer1

Trump is Obama's Trump Card in 2012, in Cahoots to Replay Perot Spoiler Option

Let's use a little logic to analyze this whole Trump/Birther business.

1). Trump becomes A-No.-1 birther on talk shows and everywhere.
2). Trump trumps the media. The Media can't suppress Trump.
3). Obama shows his birth certificate.

4). Trump in his press conference yesterday takes credit and is proud of himself.
5). Trump answers a question: are you a Republican: Yes, a proud Republican (but is that true?).
6). Liberals everywhere are irate at Trump (and some conservatives as well). Liberals now know him as a mean-spirited Republican.
7). Trump answers a question about a possible run for president:
he can't announce now, but when he does announce, he thinks everyone will be 'surprised'

So what's up?

1). The 'Surprise' will be that Trump announces he will be running for president as a (wait for it......)
"Independent" He'll say he's a Republican at heart, but that the Republican party has lost its way.

2). As an independent, no liberals will vote for him, remember they are irate at him.
He will draw 20% of the vote, just like Perot did from G.H.W. Bush running against Clinton, most of his voters will be independents mad at Obama that just don't want to vote for the Republican candidate, or some moderate Republicans.

3). Obama will win in this 3-way scenario.

4). Without Trump as Obama's Trump card, Obama wouldn't be able to win (look at gas prices and the economy).

5). Why else does Obama release the Birth Certificate now? Any other explanation just doesn't make sense:

So I assert: secretly behind closed doors, Obama and Trump are in cahoots to get Obama reelected.

popularity falling fast, inversely proportional to gas prices

"As a friend noted on Facebook, Obama's popularity is falling so fast that Kenyans are now claiming Obama was born in the United States." --Erick Erickson

Wednesday, April 27, 2011

Obama has a spending problem

"We need to put this in perspective: Barack Obama never had a birth certificate problem. He has a spending problem. He has a redistribution-of-wealth problem. He has a socialism problem." -Rush

Government does not tax to get the money it needs. Government will always need the money it gets.

 Reagan  : "Government does not tax to get the money it needs. Government will always need the money it gets."

US Banks Warn Obama on Soaring Debt

US Banks Warn Obama on Soaring Debt

A group of the largest US banks and fund managers stepped up the pressure on Congress and the Obama administration to reach a deal to increase the country's debt limit, saying that even a short default could be devastating for the financial markets and economy.

Barack Obama

The warning over the debt limit is the strongest yet to come from Wall Street, highlighting growing nervousness among investors about the US political system's ability to forge a consensus on fiscal policy.

The most pressing budgetary issue confronting Congress and the Obama administration is the need to raise the US debt ceiling, which stands at $14,300 billion.

That threshold will be reached by May 16 and the Treasury department has said that in the absence of congressional action, the world's largest economy could default by early July.

Although such a scenario is still likely to be avoided, the looming deadline is stoking concerns within the financial industry.

"Any delay in making an interest or principal payment by Treasury even for a very short period of time would put the US Treasury and overall financial markets in uncharted territory and could trigger another catastrophic financial crisis," said Matthew Zames, a JPMorgan executive, in a letter to Tim Geithner, the Treasury secretary, this week.

Mr Zames was writing as chairman of the Treasury Borrowing Advisory Committee, which includes some of the largest investors in US government bonds, such as Bank of America  and Soros Fund Management.

In the letter, Mr Zames outlined several consequences of a default – or even an extended delay in raising the debt limit – that are causing jitters on Wall Street.

These included the dumping of US government debt by foreign holders and the downgrade of the US triple-A credit rating, following last week's move by Standard & Poor's to change its outlook on the US from "stable" to "negative" for the first time in 70 years.

Other effects were a "run on money market funds", such as the one that followed the collapse of Lehman Brothers in 2008, and a wave of "acute deleveraging".

"Because Treasuries have historically been viewed as the world's safest asset, they are the most widely used collateral in the world and underpin large parts of the financial markets.

A default could trigger a wave of margin calls and widening of haircuts on collateral, which in turn could lead to deleveraging and a sharp drop in lending," Mr Zames said.

The letter was released 10 days before the launch of a new round of high-stakes fiscal negotiations to be led by Joe Biden, US vice-president.

Senior administration officials have said they have received assurances from Republican leaders that they understood the high stakes involved in the discussion on raising the debt ceiling and would avoid pushing the US towards default.

But Republicans remain adamant that they want to take advantage of the need to raise the debt limit in order to extract additional budget cuts – and stringent fiscal rules on government spending over the long term.

That position appears to have hardened during the Easter break.

"If the president doesn't get serious about the need to address our fiscal nightmare, there's a chance [a debt ceiling vote] could not happen," John Boehner, the Republican Speaker of the House, told Politico on Monday.

"But that's not my goal." "The world is watching, and while America must pay its bills, if we ask for more credit, we must prove worthy of it," a spokeswoman for Eric Cantor, the House majority leader, told the Financial Times.

"That's why President Obama, vice-president Biden and the leaders of their party are obligated to ensure that any debt limit increase is accompanied by serious reforms that immediately reduce federal spending and reverse the culture of debt hovering over Washington."

Some budget analysts in Washington believe that a short-term extension of the debt limit, as long as it is worth less than $1,000 billion, could ultimately be agreed in order to give lawmakers a few more months to hash out a more lasting deal.

But House Republicans – even amid mounting pressure from Wall Street – may well resist, depending on the details.

Trump: Now Let's see the College Records



(Main headline, 1st story, link)

Tuesday, April 26, 2011

WSJ: How Health Reform Punishes Work

I've been telling you this for years...
The health reform bill implies a reward to work of less than 20 cents on the dollar.
No wonder fewer people want to reenter the work force. Once they get their Obamacare, they'll stay out of the workforce forever. After all, there is little incentive to work with the onerous tax rates, and why work when the government gives you so much for free..?

How Health Reform Punishes Work

The subsidies to buyers of 'qualifying' insurance policies will induce sharp reductions in the supply of labor.


Supporters of ObamaCare acknowledge it will have some unintended consequences. Yet surprisingly little attention has been focused on the law's most problematic provision: government subsidies to help individuals and families purchase health insurance.

This new entitlement—which the chief actuary of the Centers for Medicare and Medicaid Services estimates will cost more than $100 billion per year once it is fully implemented—will damage the country's long-term fiscal outlook. It also will introduce far-reaching negative effects on rewards to work and bizarre new inequities into American life.

The health law establishes insurance exchanges—regulated marketplaces in which individuals and small businesses can shop for coverage—and minimum standards for the insurance policies that can be offered. Because the policies will be so costly, there's a subsidy for buyers that phases out as family income rises. This sounds reasonable—but the subsidies required to make a "qualifying" insurance policy affordable are so large that their phaseout creates chaos.

Starting in 2014, subsidies will be available to families with incomes between 134% and 400% of the federal poverty line. (Families earning less than 134% of poverty are eligible for Medicaid.) For example, a family of four headed by a 55-year-old earning $31,389 in 2014 dollars (134% of the federal poverty line) in a high-cost area will get a subsidy of $22,740. This will cover 96% of an insurance policy that the Kaiser Family Foundation predicts will cost $23,700. A similar family earning $93,699 (400% of poverty) gets a subsidy of $14,799. But a family earning $1 more—$93,700—gets no subsidy.

Economists call large, discontinuous changes in program benefits like this "notches." Although notches might be administratively convenient, they have terrible incentive effects. As Prof. Raj Chetty of Harvard points out in a recent National Bureau of Economic Research working paper, prior research on notches show that they induce sharp reductions in labor supply.

Consider a wife in a family with $90,000 in income. If she were to earn an additional $3,700, her family would lose the insurance subsidy and be more than $10,000 poorer. In addition, she would also pay more in income and Social Security taxes. Taken together, these policies impose a substantial punishment on work effort.

Notches also lead to unfairness. The principle that families of the same size with similar incomes should be treated similarly by tax law and transfer programs has deep philosophical roots and appeals to basic notions of equity. The notch turns this principle on its head. Next-door neighbors with virtually identical circumstances could receive very different levels of government assistance, depending on which side of the notch they happen to fall. This feature will justifiably increase public cynicism about the law and government in general.

Fixing the notch is not so easy. To phase out the subsidy smoothly for families with incomes of 134% to 400% of poverty, the law would have to take away $22,700 in subsidies as a family's income rose to $93,700 from $31,389. In other words, for every dollar earned in this income range, a family's subsidy would have to decline by 36 cents. On top of 25% federal income taxes, 5% state income taxes, and 15% Social Security taxes, this implies a reward to work of less than 20 cents on the dollar—in economists' language, an implicit marginal tax rate of over 80%. Although economists may differ on the effect of taxes on work effort, it is hard to fathom how anyone could argue that this will not reduce economic activity.

It gets worse. There are also subsidies to cover the deductibles and copayments of insurance policies purchased through an exchange—and like the premium subsidies, these subsidies also phase out with income. There is also the likelihood that federal and state income taxes on upper-middle income families will have to be raised above current levels to finance the cost of the subsidy, the Medicaid expansion, and other provisions of the new law. Both of these effects exacerbate the law's negative work incentives.

Either leaving the notch in or smoothing the notch out seems impossibly unattractive. Yet these choices are the inevitable consequences of the law's attempt to redistribute around $20,000 to someone making $30,000, but nothing to someone making $94,000. The only fix is to drastically reduce or eliminate the premium subsidies. As the 2012 elections approach, voters will have to decide: For middle-income families, should economic success be determined by work and savings, or by participation in a government program?

Mr. Kessler is professor of business and law at Stanford University and a senior fellow at the Hoover Institution.

Fwd: A Tale of Three Budgets

Historically, our economy could and cannot sustain anything greater than 20% spending as a share of GDP.

We're way over that now. I think all three budgets need to scale back to 21% by next year. All three stay at 24%, including the Ryan plan. It's just not sustainable.


Sometimes, a picture is worth a trillion words.

This chart from the 4/21 Wall Street Journal puts the budget battle in perspective. 

Budget plans compared (Obama 1 vs Obama 2 vs Ryan)

It's puzzling why President Obama even bothered to offer a second, revised budget plan (the one he announced in a campaign-style speech, with few details, at George Washington University on April 13th).

Like his first budget submission (of February 14th), his second version doesn't balance the budget, doesn't repeal the unaffordable new Obamacare entitlement, doesn't stop America's staggering debt buildup.  

What it does do is:

  1. Promise around $2 trillion in largely unspecified spending reductions (except Medicare: there, he would cut even more deeply than House Republicans over the coming decade) and
  2. Double the tax hikes from his first budget (i.e., $3 trillion in higher taxes instead of $1.5 trillion).  

In short, Mr. Obama is running for reelection on a platform of permanently higher taxes and spending, with deeper Medicare cuts than Republicans have proposed over 10 years, and trying to pass it all off as "fiscal prudence with compassion."  

True compassion (for future generations) would dictate that he offer a third budget at least as compassionate (for future generations) as the House-passed (Ryan) plan.  

For a more defailed comparison, see our handy one-page report card.

Monday, April 25, 2011

Gasoline Prices and Speculators: The Government Thinks You Are Stupid

Are you?

By Joseph Svetlic

It is with great interest that I read this past week about the President's initial response to rising gas prices.  What or who was to blame?  According to the President...speculators.  Nameless, faceless speculators.  They are to blame for the rising price of crude oil up and the accompanying price at the pump!

The problem is...speculators and people make various bets, and they say, you know what, we think that maybe there's a 20 percent chance that something might happen in the Middle East that might disrupt oil supply, so we're going to bet that oil is going to go up real high.  And that spikes up prices significantly.

Now this interested me because I worked in the petroleum industry and I studied energy law at law school, and I have taken a strong interest in macroeconomics in recent years.  (I read Market Ticker and Zero Hedge, if you are wondering.)  I'm going to disregard for this note the fact that higher gas prices are not objectionable at all to our President, despite the fact that they are connected to every product we buy.  He doesn't have a problem with high gas prices, only wishing that they become high on a gradual basis.  I'm also going to ignore the moratorium on drilling in the Gulf and general opposition to domestic exploration and production of petroleum by this Administration.

No, the main culprit here isn't the nameless, faceless "speculators" that are now the object of the President's scorn, but government policy itself, both with the Federal Reserve (monetary) and the budget deficits accrued in recent years (fiscal).  What is going on is that the government is trying to deflect blame to these nameless, faceless speculators for their own disastrous fiscal and monetary policies.

In other words, they think you are stupid.

Let me remind you that the Federal Reserve (Fed) began "quantitative easing" (using printed money to buy assets, chiefly Treasury Bonds) in September 2008 with over $2 trillion.  "QE1" continued through the end of the first quarter of 2010, the end of March 2010.   Thereafter, we got QE2, which continues to this very day but is slowly wrapping up QE2 is a third the size of QE1, but it means the same: monetizing debt.

On the fiscal side, our President has run up a lot of debt in the past two years, despite running in 2008 on a "net spending cut."  He's up to nearly 4 trillion in debt over just a little more than two years.

How are we financing this?  Well, the Fed is stepping up to  buy 70% of treasuries.  They're doing it with printed money, "quantitative easing."  What's the effect of this?  You're dollar is worth less.  Using printed money to buy the debt of the same country will inflate the currency.  Our dollar is not backed by anything.  It floats.  Therefore, the money that you have has been drastically devalued since the onset of "quantitative easing."  This is what I call "loose money."

Why is it important to you?  Because inflation is a stealth tax on every dollar you have.

Whom does this hurt the most?  The poor and those on fixed incomes.  To any progressives reading this who really do want to help the poor reach the middle class and get off government assistance: is the way to help them through a stealth 20% tax on every dollar they have in their pocket, a unilateral tax that bypasses Congress?  That stealth, regressive tax can only drive more middle class into being poor, right?  Shouldn't we want every dollar they own to have maximum purchasing power, to be worth as much as possible?  Does this have anything to do, you suppose, with the record number on food stamps, one in six Americans?

These are the ravages of a loose monetary policy, high-deficit, spendthrift government.  It is impoverishment.  It is precisely the opposite of what is necessary for a true, strong recovery.  A true recovery will feature fiscal responsibility and a strong dollar.  The President ran in part on such a platform in 2008, promising a "net spending cut."  Had he run on trillion-dollar deficits and monetizing debt, he would've never been elected.  Such a strong recovery will have to wait until the President and Fed Chairman are replaced, beginning in 2013.

This spendthrift, loose (and reckless) policy is also reflected in the price of gold and silver, which are historical safe harbors from inflation because (as precious metals) they store value and are never worthless.  Gold as of this writing was over $1,500/oz, silver over $46/oz.  Gold at the beginning of the Obama Administration was just over $850/oz, silver at under $11.50/oz.  Just this month, the price of silver skyrocketed from $40/oz to $45/oz in only 12 days.  The loss of confidence in the dollar has been striking.

So, they are hoping that you don't pay attention to their fiscal and monetary policy.  They want you to blame nameless, faceless "speculators" for the rise in the price of gas, even though everything else has risen, thanks to their loose monetary policy and spendthrift fiscal policy.  They want you to ignore the rise in commodity prices and the drastic hike in gold and silver.  They think you'll go after the nameless, faceless "speculators" because they think you are stupid.

My question is this: Are they right about you?

Thursday, April 21, 2011

Great polling news

(Briefing Room) — President Obama would face a statistical tie against former Massachusetts Gov. Mitt Romney (R) if the 2012 election were held today, a new poll found Wednesday.

A Marist Poll released this morning suggested that the race between Obama and Romney, a leading contender for the GOP's presidential nomination, is closer than previous surveys have suggested.

Obama enjoys just a single-point advantage over Romney in the Marist poll. In the hypothetical matchup, 46 percent of registered voters said they would reelect Obama, while 45 percent would elect Romney. Nine percent were undecided.

That represents a diminished gap between Obama and Romney since January, when the same poll found that Obama had a 51-38 percent advantage over the former Massachusetts governor.

Former Arkansas Gov. Mike Huckabee (R) also stands within striking distance of Obama, according to the poll. Obama would take 48 percent of the vote to Huckabee's 43 percent, with nine percent undecided.

Importantly, both Romney and Huckabee enjoy advantages in the poll over Obama among independent voters. Independents break for Romney, 45-42 percent, and for Huckabee, 44-41 percent, according to Marist.

The poll also contains other warning signs for Obama.

Forty-four percent of registered voters in the poll said they would definitely vote against Obama in 2012, compared to 37 percent who definitely intend to vote for Obama's reelection. That margin widens with independents, 47 percent of whom said they would definitely vote against Obama, and 32 percent of whom favor his reelection effort.

Fed Cash Handouts Now Exceeds Revenue

If this isn't a harbinger of bad times, I'm not sure what would qualify.

U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression.

Gee, I'm not a math major, but that sounds... how you say in English? ...unsustainable to me.

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things... But that's more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

Mission Redistribution... Accomplished!

Also, an estimated 59% of the 308.7 million Americans in this country get at least one federal benefit, according to the Census Bureau, based on 2009 data. An estimated 46.5 million get Social Security; 42.6 million get Medicare; 42.4 million get Medicaid; 36.1 million get food stamps; 12.4 million get housing subsidies; and 3.2 million get Veterans' benefits.

And the handouts from the government have been growing. Government cash handouts account for a whopping 79% of household growth since 2007, even as household tax payments--for things like the income and payroll tax, among other taxes--have fallen by $312 billion.

We have incurred massive deficits under the aegis of "Stimulus" that failed to stimulate anything other than public sector union jobs.

Wednesday, April 20, 2011

I Agree!

What makes Americans exceptional is our ornery resistance to being bossed around."

Fed Proposes Rule that Would Require Creditors determine if loans can be repayed

Duh, I've been saying this for years.
Since Clinton overturned the 20% down rule in the late '90s when he changed the CRA we've had a meltdown.
Now they are going back to common sense.

Lenders would be required to make sure prospective borrowers have the ability to repay their mortgages before giving them a loan, under a proposal released by the Federal Reserve on Tuesday


Lenders would be required to make sure prospective borrowers have the ability to repay their mortgages before giving them a loan, under a proposal released by the Federal Reserve on Tuesday.

Release Date: April 19, 2011

For immediate release

The Federal Reserve Board on Tuesday requested public comment on a proposed rule under Regulation Z that would require creditors to determine a consumer's ability to repay a mortgage before making the loan and would establish minimum mortgage underwriting standards.

The revisions to the regulation, which implements the Truth in Lending Act (TILA), are being made pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposal would apply to all consumer mortgages (except home equity lines of credit, timeshare plans, reverse mortgages, or temporary loans).

Consistent with the act, the proposal would provide four options for complying with the ability-to-repay requirement.

  • First, a creditor can meet the general ability-to-repay standard by considering and verifying specified underwriting factors, such as the consumer's income or assets.
  • Second, a creditor can make a "qualified mortgage," which provides the creditor with special protection from liability provided the loan does not have certain features, such as negative amortization; the fees are within specified limits; and the creditor underwrites the mortgage payment using the maximum interest rate in the first five years. The Board is soliciting comment on two alternative approaches for defining a "qualified mortgage."
  • Third, a creditor operating predominantly in rural or underserved areas can make a balloon-payment qualified mortgage. This option is meant to preserve access to credit for consumers located in rural or underserved areas where banks originate balloon loans to hedge against interest rate risk for loans held in portfolio.
  • Finally, a creditor can refinance a "non-standard mortgage" with risky features into a more stable "standard mortgage" with a lower monthly payment. This option is meant to preserve access to streamlined refinancings.

The proposal would also implement the Dodd-Frank Act's limits on prepayment penalties.

The Board is soliciting comment on the proposed rule until July 22, 2011. General rulemaking authority for TILA is scheduled to transfer to the Consumer Financial Protection Bureau on July 21, 2011. Accordingly, this rulemaking will not be finalized by the Board.



This is one of the oldest tricks in the how to book of government corruption. Instead of holding your partners in crime accountable, you pretend that a new rule or law is needed to protect everyone in the future, and then, you and your co-conspirators laugh your asses off and continue robbing and stealing.

These requirements have been prominently featured in all of the regulator's regulations and lending statutes for a very long time, and tend to be included again in almost every state's requirements for a valid loan. It is time that the regulators get called on this practice of simply re-issuing the rule (as if it were new) rather than enforcing it.

More highlights below...

Highlights of Proposed Ability-to-Repay Rules


Tuesday, April 19, 2011

U.S. firms shift jobs from America to countries overseas

If we reduce the corporate tax from 35 to 25% those business won't send the jobs overseas, and the boom in our economy will be enormous!

The Wall Street Journal reports:

U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home, sharpening the debate over globalization's effect on the U.S. economy.

The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million, new data from the U.S. Commerce Department show. That's a big switch from the 1990s, when they added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad.

57% disagree with president's handling of the economy

Worry over the economy and rising gas prices are driving down President Barack Obama's approval ratings. According to a Washington Post-ABC news poll, 57 percent disapprove of the president's handling of the economy.

I'd say the writing is on the wall.

Chance: You racked up the most debt ever!


Via the Looking Spoon

Re: tea anyone...losers!!!

I'm not buying your attempt to change the subject. The subject is that the economy will go completely haywire unless we STOP deficit spending now. Not 10 years from now, but now! Obama admits this. He wants to raise taxes and squeeze more money out of the private sector because he is too naive to realize that will also squeeze jobs. The real mechanism to recovery is to stop spending, and cut it back to 2008 levels (before Obama ramped it up by 30%). Just like with the Reagan recovery, the private sector will bring prosperity to everyone.

From:   Miki  
And btw….Obama, (President Obama)….KNOWS that we as a country cannot keep spending more than we take in….he is not just admitting it. The thing is that HE had the courage to spend money on infrastructure and internal spending to boost economic faith at the time young Georgy put a nail in our countries financial coffin.

On Tue, Apr 19, 2011 at 3:22 PM, indy:

Sorry, I don't click on links that hint at any kind of racism.
There is probably a virus, or phishing in there somewhere.
I'm certain there are a few racists out there, on both sides of the political spectrum.

And that fact as nothing to do with the fundamental fact:

"Now that the economy has begun to grow again, if we keep on spending more than we take in, it's going to cause serious damage to our economy," Obama said at a gymnasium filled with students and faculty at Northern Virginia Community College.

Yep, even Obama admits we can't keep on spending more than we take in.
It's time for some really serious cuts!

Besides, It's well known that the Huffington post is a way-way leftist bunch of misfits.

From:    Miki

Congress: Please pass the 'Obama Can't Keep On Spending More Than We Take In" bill

"Now that the economy has begun to grow again, if we keep on spending more than we take in, it's going to cause serious damage to our economy," Obama said at a gymnasium filled with students and faculty at Northern Virginia Community College.

I notified Boehner he should pass this bill!

Obama spokesman Carney to reporter: 'I'm not going to take your questions'...

Carney to reporter: 'I'm not going to take your questions'...

Related stories:

What else isn't he telling you?

How To Get Obama On His Lies

Even though I said in the last post that it's time to take the kid gloves off, I realized, even as I was writing that, that that wasn't true.

The public tends to steeply discount naked personal attacks.

This subject, in and of itself, will gain little purchase, as I am convinced that the persuadable non-committed public doesn't care about 1) procedure or 2) abstract spats over constitutional powers. This is both.

So the idea is to package this with a series of other Obama lies -- about transparency, about debating health care with television cameras present, and so on -- and tie them all together with the message "What else isn't he telling you?," putting his similar promises about taxing the middle class into question.

That they definitely care about. So if you do it this way, you tie something they probably don't care about with something they do care about, and you also attack Obama's character.

And here's the clever part: You're making an important argument here, in which the attack on his character is incidental rather than central.

I think the public tends to tune out direct attacks on character with a shrug. 'Oh, they all say that about each other," they think, "and besides, they're all liars."

Okay, fine. Well make it an incidental part of a larger point about middle class taxes. That way, they see it as directly relevant, and what might be an otherwise ignored personal attack is now remembered. It's now part of the basket of risks of Obama's reelection.

It'll stick with them better this way. It will seem that the personal attack isn't being made as such, but as part of a policy point. The public loves believing that they don't care about personal attacks, only policy. They're wrong about that -- they care about personal attacks more than they admit and about policy much less than they'd ever admit to themselves -- but playing it this way feeds into that self-illusion they have about themselves.

Sorry to be so cynical. But as the Dan Akroyd character in Tommy Boy said, slightly modified: What the American public doesn't know about itself is what makes it the American public.

The mushy middle will claim, every time you poll them, that by overwhelming margins of 95% to 5% they want to hear about "the issues" and not "personal" or "political" attacks.

But the fact of the matter is that that mushy middle doesn't trouble itself to discover what the issues are or evaluate methods of addressing them in any sort of rigorous, wonky kind of way. They say all they care about was substance, but if they bothered to do their homework and bone up about the substance, we wouldn't even be having these arguments anymore -- they would have decided most crucial broad-stroke issues one way or another, and the most pertinent question would be now how to implement that basic ideological agenda, not which ideological agenda we should pursue.

The mushy, careless middle which doesn't think too hard about these things loves to believe all it cares about is "substance" but in fact they can't be troubled.

The tactic I suggest would, I think, make Obama's lies politically relevant and also let this less-than-rigorous mush vote continue believing their self-illusions about caring greatly about wonkish policy points.


The biased Left Stream Media interview the left wing infiltrator (they do that all the time, they are biased after all).

And they report only that. No wonder there is general misunderstanding about the tea party.

It's hard to know if they actually believe their talking points, or if they just hammer away at them for rhetorical effect, despite knowing that they're not true.

What's this? A Tea Partier in a historical costume with a sign saying "Our cause is just and holy"?

Nope. Just another left-wing provocateur trying to discredit the Tea Party. Luckily, Sally Zelikovsky's legendary "Infiltrator Identification Squad" was all over her in an instant, pinpointing the charlatan as she tried to pose in front of the Tea Party banner.

A mainstream media reporter of course made a beeline for the fake Tea Partier and interviewed her, dutifully writing down her purposely offensive quotes.

Well, you might argue, maybe the reporter didn't know the lady in the costume was a phony. It's possible — right?

Dream on. The MSM reporter interviewed the faker while standing directly under the "Infiltrator" sign.

This is how news is created. Sigh.

Eventually, inevitably, infiltrator and identifier came together and started having a discussion. Here, the real Tea Partier looks down at the fake sign.

They started having a heated discussion, which the interloper recorded for what I can only assume was her own left-leaning media outlet or blog. I particularly like the expression of the guy with the pipe: "We certainly have gotten ourselves into a pickle here, haven't we?" he seems to be saying.

LA Times Reporter Wins Pulitzer For Exposing Corrupt Democrats

LA Times Reporter Wins Pulitzer For Exposing Corrupt Democrats

Posted by Jim Hoft on Monday, April 18, 2011, 11:03 PM

Bell City, one of the poorest cities in Los Angeles County, paid its city manager $787,000 a year.

Los Angeles Times reporter Jeff Gottleib released a list of Bell city officials and their salaries in a July report. The citizens of Bell were outraged by this revelation and held a protest after the report was published.

My Way reported:

Several hundred angry residents from a modest blue-collar Los Angeles suburb marched Sunday to call for the resignation of the mayor and some City Council members in a protest sparked by the sky-high salaries of three recently departed administrators.

The residents of the city of Bell marched to Oscar's Korner Market and Carniceria, owned by Mayor Oscar Hernandez, then to his home, demanding that he reduce his own six-figure compensation or quit.

They then did the same with some members of the City Council, with many marchers wearing T-shirts that read "My city is more corrupt than your city."

"I don't think they are taking it seriously. And we're serious," event organizer and longtime Bell resident Nestor Valencia, 45, told the Los Angeles Times. "They need to resign."

The protest was organized by Bell Association to Stop the Abuse, a group founded after the Times reported that Bell's city manager, police chief and assistant city manager were all being paid hundreds of thousands of dollars a year, with city manager Robert Rizzo collecting a check of $787,637. All three resigned on Friday.

One in six residents of the city of 40,000 southeast of Los Angeles lives in poverty.

"This is a test for our community," Valencia said. "There's been a fiasco here."

The newspaper also revealed that the mayor and three of the council's four other members make about $100,000 a year, most of it in salaries for sitting on boards and commissions. Only Councilman Lorenzo Velez makes a modest salary of about $8,000 a year.

The Mayor of Bell defended the high salaries after the report was released.

Today Jeff Gottleib won a Pulitzer Prize for his coverage of city officials in Bell, Calif., who enriched themselves with enormous pay packages.

There was one fact that Gottleib kept from his readers. The corrupt Bell politicians were democrats, every last one of them. It was probably best he didn't mention it. He may not have been awarded a Pulitzer.

Monday, April 18, 2011

Arthur Laffer: Compliance adds 30 cents on every dollar - simplify the tax code

The 30-Cent Tax Premium

Tax compliance employs more workers than Wal-Mart, UPS, McDonald's, IBM and Citigroup combined.


There is a lot more to taxes than simply paying the bill. Taxpayers must spend significantly more than $1 in order to provide $1 of income-tax revenue to the federal government.

To start with, individuals and businesses must pay the government the $1 in revenue plus the costs of their own time spent filing and complying with the tax code; plus the tax collection costs of the IRS; plus the tax compliance outlays that individuals and businesses pay to help them file their taxes.

In a study published last week by the Laffer Center, my colleagues Wayne Winegarden, John Childs and I estimate that these costs alone are a staggering $431 billion annually. This is a cost markup of 30 cents on every dollar paid in taxes. And this is not even a complete accounting of the costs of tax complexity.

Like taxes themselves, tax-compliance costs change people's behavior. Taxpayers, whether individuals or businesses, respond to taxes and tax-compliance costs by changing the composition of their income, the location of their income, the timing of their income, and the volume of their income. So long as the cost of changing one's income is lower than the taxes saved, the taxpayer will engage in these types of tax-avoidance activities.

A complete accounting of compliance costs would also include the efficiency losses created when individuals and businesses invest in tax-avoidance activities that lower their tax liability at the expense of creating more jobs and economic growth. These lost opportunities are impossible to measure but could be the largest cost of all.

David Keating of the National Taxpayers Union provides a useful perspective on how big the tax compliance industry is. According to his research, as of 2009 the income-tax industry employed "more workers than are employed at the five biggest employers among Fortune 500 companies—more than all the workers at Wal-Mart Stores, United Parcel Service, McDonald's, International Business Machines, and Citigroup combined." Without diminishing in any way the professionalism of tax attorneys, accountants and financial planners, all of these efforts produce nothing other than, well, tax compliance.

Citizens should be able to comply with the tax code without having to spend absurd amounts of money to do so. The fact that there is such a large compliance markup in our tax system indicates that the tax system has gone awry. All of these hours could have been used for something a lot more productive than just making sure our taxes are filed and paid correctly.

An obvious alternative use is work, either as an employee or an entrepreneur. We will never know how many more businesses could have been started if we did not spend billions of hours on tax compliance. But we do know approximately how much our economy would benefit if we could use our "tax-compliance time" more productively.

If we think of the tax-compliance markup as simply another tax, we can also think of a reduction in compliance costs as a tax cut.

A tax reform to a simple flat-rate tax with no deductions would significantly reduce the current complexity inherent in our progressive tax system, which is full of loopholes, exemptions and special interest carve-outs. Based on the estimates from our new study, if a static, revenue-neutral flat-tax reform were to reduce the tax complexity in half, the long-term growth in our economy would increase by around one-half of 1% per year.

Small increases in our annual economic growth rate make a big difference over time. The unemployment rate would decline and the pay for those jobs would increase faster as well.

To see what this means in practice, consider a family that made $40,000 in the year 2000. If their income grew by 3.2% per year, the average long-term GDP growth rate, their income by 2010 would be $53,110. Now imagine that the growth in the family's income was not 3.2% but 3.72% (the impact from halving the costs of our current complex tax system). Under this higher growth scenario, the family's annual income would have been $55,568 in 2010. The slight increase in the economic growth rate raises this family's purchasing power by 4.6%. Not too shabby.

Economic growth is the sine qua non for generating prosperity in the U.S. As economic growth increases, the prosperity of families and individuals in the U.S. increases in step. Higher income growth benefits government revenues too. The dynamic impacts created by the increased economic activity will lead to higher tax revenues for the federal government as well as state and local governments.

But the potential benefits of reducing tax complexity go well beyond their dollar impact. The U.S. income tax system relies on taxpayers to self-report their income—the system only works if most taxpayers view the outcomes as fair and accurately report their income. As such, excessive tax complexity undermines the very foundations of our current tax code.

Simplifying the tax code should be a top priority. Regardless of the reform approach taken, the U.S. economy will be enhanced greatly by significantly reducing the complexity of the current tax code. In a time of global economic competition, we cannot afford the luxury of a Byzantine tax system.

Mr. Laffer is the chairman of Laffer Associates and the co-author of "Return to Prosperity: How America Can Regain Its Economic Superpower Status" (Threshold, 2010).

Finally: an Honest 'Stimulus' Construction Sign


Courtesy of Woody, a truly honest construction sign for the American Recovery and Ripoff Act of 2009.

It would be great to have these printed up as full-sized stickers. Interested parties could then overlay them on the ridiculously commonplace construction signs to remind people where this money is really coming from.

Hat tip: Boy Moto.

learn how to fight like a girl

Did you see Palin's Tea Party speech in Wisconsin Saturday? The woman was on fire!

On Congress:

We didn't elect you just to rearrange the deck chairs on a sinking Titanic. We didn't elect you just to stand back and watch Obama redistribute those deck chairs. What we need is for you to stand up GOP, and fight!

On the president:

The only future that Obama is trying to win is his re-election. He's willing to mortgage your children's future to ensure his own. And that's not the audacity of hope, that's cynicism. Piling more debt onto our children and our grandchildren is not courage! No, that's cowardice.

Her battle cry made me realize what has been steadily sucking the oxygen out of the conservative movement since our big November win — a win that should have us still sallying forth in victory, but instead has left us demoralized and confused. We have no real leaders. Well, maybe we have a few real leaders, but right now we need an exceptional leader — we need Shakespeare's Henry V, someone who not only has a plan, but has the courage and charisma to rally the forces he needs to see it through. And if you aren't familiar already, go no further until you watch Kenneth Branagh's St. Crispin's Day speech.

What we heard in Wisconsin came closer by miles to Agincourt than anything yet heard from the lukewarm Establishment Republicans. Palin is a leader who can energize the conservative base.

Palin in Madison: Veni, Vidi, Vici

Apr 16, 2011 19:48 EDT

Sarah Palin rides to the sound of the guns. It was a chilly, wet and blustery afternoon in Madison, Wisconsin — one more appropriate for a late-season Packers game than a springtime political rally. The stirring NFL Films theme,  "The Classic Battle," would've been a more apt musical choice than Van Halen's "Right Now" to accompany Palin as she entered the stage outside the state capital building to address thousands of Tea Party members, along with a good number of extremely hostile, expletive-hurling government union rowdies.


In the last few months, political professionals and insiders have been writing off the former Alaska governor and 2008 vice presidential candidate, convinced she won't run for the GOP nomination in 2012 or ever. Then again, even those GOPers who are running can hardly compete with the MSM's weird, all-consuming fascination with The Donald.

But all it took was one powerful, pugnacious and presidential speech — just 15 minutes long — for Palin to again make herself completely relevant to the current political and policy battles raging across America.

She waded forcefully into the state's white-hot battle over government union power, giving her full-throated support to Gov. Scott Walker: "These are the front lines in the battle of the future for our country. A pension is a promise that must be kept. Scott Walker understands this. He understands that states must be solvent to keep their promises. He's not trying to hurt union members. Hey folks, he's trying to save your jobs."

Then, perfectly capturing the real-time mood of the conservative grassroots, Palin scorched the ever-shrinking budget deal negotiated by congressional Republicans. "We didn't elect you just to rearrange the deck chairs on a sinking Titanic. What we need from you, GOP, is to fight." She then urged Washington Republicans to take a page from the national champion University of Wisconsin women's hockey team and "learn how to fight like a girl."

Finally, it was President Barack Obama's turn. She defended, to great cheering, Wisconsin's own Paul Ryan from the president's blindside attack on his bold budget plan. Palin contrasted it with Obama's 2009 stimulus plan, describing it as a "trillion-dollar travesty." She mocked his latest economic proposals as naive bets on "really fast trains and solar shingles." The clincher: "Our president isn't leading; he's punting on this debt crisis. Win the future? The only future he wants to win is his re-election."

That line about fighting like a girl, as well as her "Game on!" declaration will surely reignite speculation about presidential plans. And understandably so. Frontrunner Mitt Romney continues to fashion and refashion a saleable explanation for his Obamacare-esque Massachusetts health plan. And while Tim Pawlenty scored a coup with the hiring of hotshot campaign manager Nick Ayers, his embryonic candidacy is still a work in progress. There's enough voter unease that another Mitch Daniels boomlet seems to be in progress.

Will she run? Even many of those close to Team Palin have no idea. Palin herself may not have made a decision and may not feel she needs to until the autumn. But as it stands, she arguably represents the purest expression out there of Tea Party passion and free-market populist rejection of Washington's bipartisan crony capitalism. If she ran, her high-wattage appearance in Madison shows just how dangerous her candidacy would be to a field of solid but stolid opponents.

Here's how John Nolte of Big Government put it:

If Sarah Palin's not running for president, what a terrible waste that would be of the single best stump speech I've heard since, well, Palin's '08 convention speech, which just happened to be the single most electrifying political moment of my adult life. … On this day, Tea Party tax-day, Sarah Palin walked into the heart of this nation's battle, stared down a gallery of Leftist union goons with poise and grace, and articulated our message as well as anyone ever could. Let's hope this is just the beginning.

So MSM, keep obsessing over the shiny new Trump toy if you must. But better keep an eye on a certain sharpshooting, grizzly mama. She's back.

Friday, April 15, 2011

Rand Paul’s speech on the budget compromise was exceptional

Rand Paul's speech on the budget compromise was so exceptional, so extraordinary, so on point, that it deserves to get much wider play... 



You know, it's amazing to me to be lectured to and hear about how awful the Tea Party is and what the Tea Party represents from folks who have never been to a Tea Party.

You know, come on down to a Tea Party. Bring your Huey Long rhetoric, a chicken in every pot, a windmill in every background — a windmill in every back yard, bring it on down to the Tea Party, let's have a discussion. Bring it out to the American public. We hear from those who want to lecture the Tea Party about cutting spending.

Who among these folks has voted against an appropriations bill? We haven't even seen an appropriations bill in this body in over a year; we didn't see a budget. We're spending $2 trillion we don't have, and they're here blaming it on the Tea Party. Who's in charge here? It's not the Tea Party. Blame it on us. Give us an appropriations bill, give us our budget.

Do something constructive to fix the fiscal problems we have up here. They say that compromise is the ideal. They tell the Tea Party, "You need to compromise." But you know what the compromise is? They want to raise your taxes. The debt commission wants to raise your taxes. The President wants to raise your taxes. That's what they're talking about.

The President yesterday said he's going to cut $4 trillion. Well, try to read what's going on here. He said he was going to spend $46 trillion a month ago, his budget, before we've even had a discussion of his budget, he's going to cut $4 trillion off the $46 trillion he's going to spend.

These are no cuts. We will spend more this year than we spent last year. Forget about all the numbers, forget about all the baselines, forget about 6, 30, or zero, which is what they scored this yesterday; forget all about it.

Ask your representative, "Are we going to spend more this year than last year?" If we're spending more this year than last year, that's not a cut. Ask your representatives, ask your senators.

Will the deficit be more this year than last year? The deficit will be bigger this year.

We threatened to shut down government over nothing because we're not cutting spending in any serious way. They want to blame it on the Tea Party because in their secret caucus meetings, they've done a poll that says, ah, the Tea Party, the villain. Say the Tea Party has taken over the Republican Party.

You know what the Tea Party believes in? Good government. We believe in balancing the budget. We believe in reducing spending. We have plans to fix Social Security. We introduced a plan yesterday. If the other side is serious about fixing the entitlements, we have a plan.

Come to us and work with us. But don't just come down here and call us names. Before you send any more money to Washington, ask your representatives — are they spending your money wisely?

$100 billion in the budget last year is unaccounted for. We don't know where it was spent or we think it was improperly spent. $100 billion. In our senatorial offices we get several million dollars. Some of us want to be frugal with that and send some back to the treasury. We plan on sending several hundred thousand dollars back. But we want to know where the money goes. We're still not certain. We've been asking for four months. Some people say that money is kept in some fund for three years and then may go back. Other people have told us the leadership spend that money. We don't have a definitive answer for even trying to save a couple hundred thousand dollars of your money that I have control over.

Now, the Pentagon spends a lot of money. Some people say we can never cut any. But are they spending their money wisely? You don't know because we can't audit them. Why can't we audit them? The Pentagon tells us they are…..  you heard about the companies saying they're too big to fail? The government tells, you know, they're too big to be audited. We got a partial audit of the Federal Reserve. We got some information from that. Guess what? We're now fighting a war against Gadhafi. You know what we were doing last month? We were giving him money. We were giving him foreign aid — not much, but we gave him some. We also helped to bail out his national bank in these third world countries; the national bank is the piggy bank. Half of it is probably spirited off to secret accounts in Switzerland. Taxpayers bailed out Gadhaffi's bank. Now we're bombing it.

The budget bill that we're talking about has now been and will cut almost nothing, maybe a couple hundred million. It will increase defense spending by $8 billion and it will cut spending by $8 billion. The net is about zero. Our deficit this year will be bigger than last year. Our overall spending will be bigger this year than last year. We are not yet serious in Washington. We have not yet here recognized the severity, the enormity and the significance of how big this deficit is.

This deficit is going to have serious repercussions. The Chinese have bought over $1 trillion of our debt. The Japanese, nearly $1 trillion. The Japanese now have suffered an enormous national disaster. The question is, "Will they continue to buy our debt?Or can they continue to buy our debt?" The other question is, "How long can a government continue to exist that spends more than it brings in?" Now on the other side, they want to blame the Tea Party or the Republicans or rich people. You know what? Both parties are responsible — Republicans, Democrats, senators, congressmen, President. Everyone up here is responsible.

It is not one party or the other. When Republicans were in charge, they ran the deficit. Now the Democrats are in charge. The main difference? They're doing it faster. But the Republicans weren't doing a good job either during our time in power. We have to understand that the people can do things. Not everything has to be done up here. The states can do things.

We have to believe once again in the American dream. Believing in the American dream is not standing here on the floor and castigating rich people. What's great about our country is that any among us, any of our kids, any among us could become rich people. Work hard, go to school, achieve. We live in a mobile society. That's what the American dream is about.

The European country was stifled by opportunity. The interesting thing is when they try to soak the rich, the Huey Long stuff, when they try this, it's actually failing the American people because many of us believe that our kids could gain great wealth or could gain great success. We still believe in the American dream.

If they want to castigate that and want to say, "Forget about it what we need is just more government," they need to explain to people why they don't believe in capitalism, why they don't believe in the American dream, why they don't believe in the greatness of America. I still believe in America.

I want to get government out of the way, but I think we cannot have an America that succeeds until we're able to do something about our debt crisis. I fear that no one here or very few up here on either side recognizes the severity and imminence of this problem, and my hope is that before a crisis occurs in our country, we will begin to seriously discuss balancing our budget, have plans to balance our budget, and seriously cut spending.

Tuesday, April 12, 2011



Ha, most cuts were going to happen anyway, so there is no real cut!

Fwd: Not the Biggest Cut in History

Sorry Mr. president, sorry Media, sorry Speaker Boehner, but $38 Billion is NOT the biggest cut in history.
That would be 1920, after WWI, a whopping 66%
and 1946 after WWII, a whopping 40% cut.

$38 Billion represents ONLY 1% cut, which is hardly anything at all.

Here are the biggest cuts in budgets:

1920  66%
1946  40%
1947  38%
1922  35%
1921  20%
1948  14%
1936  10%
1937    8%
1954    7%
1955    3%
1935    2%
2010    2%
2011 April  1%

You get the idea. Here is the link to the actual budgets at

These media morons don't understand that comparisons are ONLY possible when you use percentages.
I know they can't do math.

Not the Biggest Cut in History


Pundits and politicians are all in agreement: Those were some big budget cuts in Friday night's deal. "The largest annual spending cut in our history," President Obama said. Speaker of the House John Boehner called it the "largest real dollar spending cut in American history." Saturday's front-page, upper-right headline in the Washington Post proclaimed:


The story went on to say that Obama "said the cuts would be painful but necessary."

NPR's Andrea Seabrook reported, "The Republicans got big, big cuts." "Slashing government," agreed the Los Angeles Times. The Washington Post added the big picture:

an ascendant Republican Party has managed to impose its small-government agenda on a town still largely controlled by Democrats.

And in a separate story:

Obama and his party felt pressure to show they heard the message that many Americans believe the government spends too much and that deficits are unsustainable.

AP added:

Republican conservatives were the chief winners in the budget deal that forced Democrats to accept historic spending cuts they strongly opposed. Emboldened by last fall's election victories, fiscal conservatives have changed the debate in Washington. The question no longer is whether to cut spending, but how deeply.

Please. It's a cut of $38 billion in a budget of $3,819 billion. That's 1 percent. That's a rounding error in federal budgeting.

Have you ever seen people so self-congratulatory over such a minor accomplishment? Here's one graphic representation of the budget cuts—showing the House's original proposed cut of $61 billion—compared to annual spending and the annual deficit. Here's another, depicting the $61 billion cut in the context of the rapid growth of spending over the past decade. In fiscal year 2001, which ended in September 2001 but was mostly set in place before President Bush took office, the federal government spent $1,863 billion. After seven years of Bush and a Republican Congress, spending was more than a trillion dollars higher—$2,983 billion in FY2008. Then the financial crisis, TARP, the stimulus, and the omnibus spending bill came along, and FY2011 spending is estimated at $3,819 billion—$836 billion more than just three years earlier, and $1,956 billion more than when Bush took office a decade ago.

So this cut—not of $61 billion but of $38 billion—is a lot of money anywhere except Washington. In Washington, it's 1 percent of what the federal government will spend this year. It's less than 5 percent of the three-year spending increase. It's 10 percent of this year's spending increase, the increase from 2010 to 2011.

Is it nevertheless the "the largest annual spending cut in our history," as President Obama says? Not hardly. My Cato Institute colleague Chris Edwards notes:

This federal budget table shows total federal spending since 1901. Total spending fell in 22 years out of the last 110 years. In 19 of those 22 years, spending was cut by more than 1 percent.

And what about the downsizing of the federal government after World War II? That same budget table shows that federal spending fell from $92.7 billion in 1945 to $55.2 billion in 1946, to $34.5 billion in 1947, and to $29.8 billion in 1948 (and all without any of the job losses that we're told would result from modest reductions today). Check out also the drop in spending from 1919 to 1922, even larger in percentage terms.

The president might be technically correct in this sense: In none of those years did federal spending fall by as much as $38 billion in nominal dollars. But any real comparison would use inflation-adjusted dollars or percentage of the budget, and by those standards there are no "big, big cuts" here. (Boehner specifically called it the "largest real [that is, inflation-adjusted] dollar spending cut in American history," which is so clearly wrong that it must surely have been a misstatement.)

The fundamental point here is that federal spending rose by more than a trillion dollars during Bush's first seven years, and then by almost another trillion in barely three fiscal years. And then we had a titanic battle over whether to trim $38 billion.

The idea that the Democrats "have shown that they heard the message that government spends too much" or that the Republicans—the party that increased federal spending by a trillion dollars while nobody was looking during the Bush years—have "imposed a small-government agenda on Washington" is ludicrous. After these meager cuts, the federal government will spend more than twice as much as it did when Bill Clinton left the White House.

Our present fiscal course is unsustainable, as experts across the political spectrum have told us. Projections in the 2010 Financial Report of the U.S. Government indicate that national debt as a percentage of GDP is on course to rise from 62 percent of GDP in 2010 to 130 percent in 2040. If there's this much resistance to a budget haircut, how can we hope to agree on surgery that would actually reduce spending, balance the budget, and avert national bankruptcy?

If President Obama goes on TV tomorrow night and claims that this $38 Billion is the biggest cut in history, he will not be telling the truth, but then again, his lips will be moving, and he will be reading from a teleprompter, so we will know that anyway.

Monday, April 11, 2011

What a Joke

By Don Boudreaux on April 9, 2011

in Budget Issues,Current Affairs,Debt and Deficits,Not from the Onion,Other People's Money

Suppose that in a mere three years your family's spending – spending, mind you, not income – jumps from $80,000 to $101,600. You're now understandably worried about the debt you're piling up as a result of this 27 percent hike in spending.

So mom and dad, with much drama and angst and finger-pointing about each other's irresponsibility and insensitivity, stage marathon sessions of dinner-table talks to solve the problem. They finally agree to reduce the family's annual spending from $101,600 to $100,584.

For this 1 percent cut in their spending, mom and dad congratulate each other. And to emphasize that this spending cut shows that they are responsible stewards of the family's assets, they approvingly quote Sen. Harry Reid, who was party to similar negotiations that concluded last night on Capitol Hill – negotiations in which Congress agreed to cut 1 percent from a budget that rose 27 percent in just the past three years. Said Sen. Reid: "Both sides have had to make tough choices. But tough choices is what this job's all about."

What a joke.

The Only Two Charts That Matter For The US, And A Q&A On The Fiscal "Debate"...

Look how small the Corporate Income Tax (business tax of 35%) is in comparison to everything else.
They should cut spending by a HUGE margin, to bring receipts and expenditures in line.
Also, eliminate the Corporate Income Tax to spur econonomic growth: it won't hurt that much, and it WILL generate way more revenue in the form of personal income tax when all those people get hired!

Lately, there has been a lot of chatter by virtually everyone with some soapbox to stand on, about this and that. That's swell... if mostly irrelevant: by now everyone should be aware that only two charts actually matter, both of which are painfully self-explanatory.

Chart 1: The Federal Budget

Chart 2: The growth of the US debt in relation to the soon to be hiked debt ceiling.

And, for the purists, we'll add another chart, this time showing the continuing persistent deterioration in the budget due to mandatory spending. The question is where, absent someone discovering teleportation or some other revolutionary technological invention, will the paradigm technological step up allowing for a surge in revenues, come from.

And since even the most self-explanatory is supposed to come with some narrative, here is Goldman's most recent Q&A on the Fiscal "Debate" - although we wonder just what debate is being referred to: after all D.C. is nothing but a smokescreen for Wall Street which demands either more dollars in circulation or more public debt issued in order to keep the wheels turning. Without either of these it's game over.

Q&A on the Fiscal Debate

The formulation of federal fiscal policy is typically of interest to markets mainly when it involves large changes outside of the annual budget process, such as the countercyclical policies enacted in 2008 and 2009, or other one-off policy decisions, such as the extension of expiring tax measures at the end of 2010. By contrast, the appropriations process is normally not important to market participants apart from those focused on the effect on individual industries.  However, split control of Congress and an increasing focus on fiscal sustainability have raised the profile of seemingly routine budget matters. In what follows we attempt to clarify some of the issues currently in play that are of particular interest to markets:

Q: What is currently being debated?

A: Discretionary spending for FY2011. Defense and non-defense discretionary spending (see Exhibit 1) are projected to account for $1.373 trillion in federal outlays this year, or roughly 39% of total federal spending (Exhibit 1). But with the current fiscal year halfway over, the spending level is still uncertain. Congress has funded the government through a series of six "continuing resolutions" (CRs) while it has debated full-year spending levels. These short-term spending bills are not uncommon, and are often used to provide funding for a few departments at the previous year's level while appropriations work is being wrapped up in Congress.

However, it is unusual to be operating under a CR halfway through the year. The most recent two CRs also included a combined $10bn in cuts, and lawmakers are negotiating additional cuts of between $33bn and $40bn from current levels to be included in the funding bill for the full fiscal year. As of this writing, differences have narrowed, but the exact amount and composition of cuts is still unclear. Without an extension of spending authority, either through full-year appropriations (the goal of this week's fiscal discussions) or another short-term measure (a fallback in the absence of a full-year bill), the federal government would partially shut down until funding is restored. Funding expires at the end of April 8.

Q: Why is there such a great focus on non-defense discretionary spending?

A: Non-defense discretionary is only 12% of the budget, but cuts here are often a first step in fiscal consolidation. While discretionary spending cuts will not resolve the budget imbalance on their own, this segment of the budget is addressed once a year, creating a natural first opportunity for cuts. It also tends to have fewer vested constituencies compared with mandatory spending, which is comprised mainly of benefit payments to individuals. In previous research we have found that the level of non-defense discretionary spending is the most responsive to the debt to GDP ratio, probably for these reasons.

Q: Is the possibility of a shutdown related to the debt limit?

A: The debt limit is a legally separate issue, with potentially more important consequences if action is delayed. For historical reasons that stretch back to the First World War, Congress imposes a legally binding limit on the amount of debt the Treasury may issue. Once the Treasury reaches the limit, a prolonged failure to raise it would require the government to reduce outlays to the amount of revenue it takes in, and would not allow it to smooth monthly revenue or spending fluctuations with borrowing. So while the non-essential functions that would cease in a funding lapse account for a few hundred billion per year in federal spending, maintaining the current debt limit would require outlays to decline by an amount comparable to the budget deficit, which we expect to total $1.35 trillion this year and $1.025 trillion in FY2012.

Q: When will the debt limit be reached, and when will it be raised?

A: Probably in June. Treasury has projected that it will reach this statutory limit no later than May 16 (Exhibit 3). Once the limit is reached, the Treasury has several strategies it can use to create additional room under the limit, but after using these options the Treasury projects the limit will become a constraint no later than July 8.

Q: What about next year's budget?

A: A debate over additional spending cuts is likely. Even though the FY2011 process has not yet concluded, the process for the fiscal year starting October 1 has already begun. The congressional budget process begins with the budget resolution, which recommends spending and revenue levels for the next ten years. The House budget resolution, which passed in committee this week, assumes a reduction in non-defense discretionary outlays of $79 billion from the CBO baseline in FY2012. Along with changes in other areas of the budget, the House budget resolution proposes to reduce overall spending by $110 billion in FY2012, and aims to reduce the 10-year deficit by $4.4 trillion. To achieve this, discretionary spending reductions for FY2012 would likely need to be at least as large as those being debated for the current fiscal year. No budget resolution has been released yet in the Senate.

Agreement this spring on the budget resolution may be difficult. However, the process can continue without an agreement; in fact, the resolution by definition does not become law, and Congress has failed in several recent years to enact a budget resolution. That said, the House and Senate must agree on appropriations legislation for FY2012—or at least another short term continuing resolution—by October 1, 2011 to avoid risking a shutdown.

Apart from the normal budget cycle, lawmakers must also decide whether to extend the 2-point payroll tax cut and expanded unemployment insurance enacted in late 2010, both of which would expire at the end of 2011 in the absence of an extension.

Q: When will Congress tackle structural reforms?

A: The debate has begun, but major reform seems more likely after the election. While discretionary spending changes occur often, changes to tax policy and mandatory spending programs tend to produce the largest policy-driven changes in the budget balance (Exhibit 4 shows the 5-year fiscal effect on the budget balance of all legislation enacted in a given year, as estimated by the Congressional Budget Office).
Divided control of Congress appears to be a significant obstacle to these sorts of changes at the moment. Moreover, neither party appears interested in changes to the Social Security program that would reduce spending in the next decade. Some lawmakers have put cuts in health-related entitlements on the table, as have the various fiscal commissions, but in the wake of last year's health care law, which was partly financed with $455bn in Medicare cuts over ten years, the "easy" reductions in that program have already been made.

Q: Does policy uncertainty increase the fiscal risk facing the US?

A: While potentially unsettling in the very short term, multiple upcoming deadlines could actually increase the likelihood of meaningful fiscal reforms. With two important deadlines ahead, fiscal policy will remain in the headlines. It is possible that the potential for a shutdown will return ahead of FY2012, which starts October 1. In addition, enacting an increase in the debt limit large enough to last through the 2012 presidential election could be difficult, as it would likely require an increase in the range of $2 trillion. Since it is unclear whether lawmakers will be willing to pass such a large increase at one time, the issue could be debated more than once.

While all of these deadlines could result in additional uncertainty, they also create multiple opportunities to enact fiscal reforms. At a minimum, additional spending cuts for FY2012 look likely, on top of what is agreed to for FY2011. Moreover, discretionary spending caps and other fiscal rules are very likely to be debated as part of these measures. Although it is likely to be at least as difficult for lawmakers to  agree on multi-year fiscal restraint as it has been to agree on appropriations for this year, there are two reasons to think this could be achieved: first, prior debt limit increases have often been coupled with important budget reforms, so there is a precedent. The 1997 debt limit increase was packaged with significant entitlement reforms. The 2010 increase was combined with statutory pay-as-you-go rules.

Second, now that both parties have opened the door to discretionary spending cuts, imposing hard multi-year caps on this segment of the budget looks like a realistic possibility as these upcoming fiscal deadlines are addressed.