It's the spending, stupid!

Despite what some people say, it is the spending by our federal government that is the problem. Revenue is down temporarily due to the current economy but is expected to rebound. However,spending is up greatly - and not anticipated to go down at all. This is what is making our national debt so outrageous and pushing us to bankruptcy.

The proof is in the numbers as Chris Edwards, director of tax policy studies at Cato Institute, shows in his Monday testimony before the Senate Finance Committee. His complete remarks, charts included, is available here, but below are some highlights. I hope you'll read his comments in their entirety.

* Federal spending has soared over the past decade. As a share of gross domestic product, spending grew from 18.2 percent in fiscal 2001 to 24.1 percent by fiscal 2011. The causes of this expansion include the costs of wars, growing entitlement programs, rising spending on discretionary programs, and the 2009 economic stimulus bill.

Recent projections from the Congressional Budget Office show that without reforms spending will keep on rising for decades to come.

* Some policymakers believe that our main fiscal problem is rising debt, and they are calling for a "balanced" package of spending cuts and tax increases. But CBO projections show that the long-term debt problem is not a balanced one — it is caused by historic increases in spending, not shortages of revenues. Excessive spending is the underlying cause of the government's long-run fiscal problems.

* A decade later in fiscal 2011, revenues are down by 4.7 percentage points of GDP, while spending is up by 5.9 percentage points of GDP. However, revenues are down only temporarily due to the poor economy.

* Looking ahead, the CBO projects that with current income tax cuts in place and AMT relief extended, revenues will rise to 18.4 percent of GDP by 2021, or a bit above the normal level of recent decades. For 2035, the CBO simply fixes revenues at the same 18.4 percent, but their discussion indicates that "real bracket creep" would actually keep pushing up revenues as a share of GDP beyond 2021.

* To recap, CBO projections reveal no shortage of federal revenues in coming years. Instead, they show federal spending — which is already abnormally high — rising to unprecedented peacetime levels and the government accumulating massive debt as a result.

* Historically, America's strong growth and high living standards were built on our relatively smaller government. The ongoing surge in federal spending threatens to undo this competitive advantage that we have enjoyed in the world economy. The CBO's new projections show that federal spending will rise by about 10 percentage points of GDP by 2035. If that happens, American governments will be consuming more than half of everything produced in the nation by that year. That would doom young people to unbearable levels of taxation and a stagnant economy with fewer opportunities.

* The reality is that Washington is very poor at trying to micromanagement short-term economic performance. Its failed stimulus actions of recent years have just put the nation further into debt, which has harmed our long-term prosperity. Harvard University's Robert Barro calculated that any short term benefit that the 2009 stimulus bill may have provided from small spending multipliers is greatly outweighed by the future damage caused by higher taxes and debt.

* The government uses a "leaky bucket" when it tries to help the economy. Former Chairman of the Council of Economics Advisors, Michael Boskin, explains: "The cost to the economy of each additional tax dollar is about $1.40 to $1.50. Now that tax dollar ... is put into a bucket. Some of it leaks out in overhead, waste, and so on. In a well-managed program, the government may spend 80 or 90 cents of that dollar on achieving its goals. Inefficient programs would be much lower, $.30 or $.40 on the dollar." Texas A&M Professor Edgar Browning comes to similar conclusions about the magnitude of the government's leaky bucket: "It costs taxpayers $3 to provide a benefit worth $1 to recipients."

The larger the government grows, the leakier the bucket becomes. On the revenue side, tax distortions rise rapidly as marginal tax rates rise.18 On the spending side, funding is allocated to activities with ever lower returns as the government expands.

* Federal spending is soaring, and government debt is piling up at more than a trillion dollars a year. Official projections show rivers of red ink for years to come unless policymakers enact major budget reforms. Unless spending is cut, the United States is headed for economic ruin.

* In recent years, policymakers have put great time and effort into trying to manipulate the short-run economy. These efforts have been very unsuccessful, and the government is much further in debt as a result.

Instead, policymakers should turn their full attentions to long-run spending reforms. They should begin terminating the many unneeded and damaging federal programs that draw resources out of the private sector and sap the economy's strength

* Congress should create budget restraint mechanisms to encourage policymakers to make spending tradeoffs. ... it would be better for new budget mechanisms to target spending, not deficits. A simple mechanism would be to impose a cap of three percent on the annual growth in total federal outlays. Even that modest restraint would be enough to balance the budget in a little over a decade.

* In conclusion, cutting federal spending is the right policy to strengthen U.S. economic growth over both the short-term and longer-term horizons.

It is because of these factors that any discussion about the national debt and the debt limit must be focused upon cutting spending and bringing the overall government spending under control.

The government really doesn't need any more money - it just needs to stop spending more than it can ever expect to obtain.

The case against rail transit

Ohio is planning to build a passenger rail system, with millions from the federal government. However, that project would require even more millions from Ohio taxpayers to construct and a taxpayer subsidy of at least $17 million a year - over and above any revenue - to operate.

I've written in opposition to this passenger rail project because it cannot be self-sufficient.

Now comes a new study from the CATO Institute that demonstrates just what a bad deal such projects are - for everyone!

Over the past four decades, American cities have spent close to $100 billion constructing rail transit systems, and many billions more operating those systems. The agencies that spend taxpayer dollars building these lines almost invariably call them successful even when they go an average of 40% over budget and, in many cases, carry an insignificant number of riders. In a new study, Cato scholar Randal O'Toole uses the latest government data on scores of rail transit systems to evaluate the systems' value and usefulness to the public.
- Defining Success: The Case against Rail Transit, by Randal O'Toole

TOBAL-itis infects Toledo

No - it's not related to Swine Flu - but it's as infectious and as insidious as any physical disease...

Cato Institute has a terrific article, "There's No Way to Enforce a Texting While Driving Ban," explaining the illness and it's a must-read for all Toledoans ... well, everyone else, too.

Forget flu season. Several times per year, America comes down with a national case of TOBAL-itis.

TOBAL is short for "There Oughtta Be a Law." Here's the progression of symptoms: Wrenching anecdotes about the effects of some alleged new trend make national news. A panic takes root in the media. Earnest editorialists scrawl urgent pleas for action. Politicians grandstand. Soon enough, we have our new law or regulation. It doesn't matter if the law is enforceable or may have unintended consequences. Nor does it matter if the law will have any actual effect on the problem it was passed to address. In fact, it doesn't even matter if the problem actually exists. The mere feeling that it exists is sufficient.

And so it goes with the panic over texting while driving.

As author Radley Balko explains, "...we need to get over the idea that we can solve every bad habit with a new law. We can't, and this issue illustrates why."

Because, as he documents, despite the increase in cell phone usage, traffic fatalities and accidents have dropped. Lisa Renee at Glass City Jungle even has a post about Lucas County getting traffic safety grants where the press release from the state touts this fact in Ohio:

In the past three years, Ohio roadway fatalities have decreased to near record lows. There were 1,191 fatalities on Ohio roads in 2008, down from 1,257 in 2007 and 1,239 in 2006.

So why, exactly, do we need a law?

Balko also raises a point I've made in the past about other things that are just as distracting:

There are countless other driver distractions that we'd never think of banning, from having kids in the back seat, to eating or drinking while driving, to fumbling with the radio. Certainly, it's foolish to type out text messages behind the wheel, but what about merely reading from your phone?

Are you more impaired following MapQuest directions from your Palm Pre while driving than reading them from a sheet of paper? What if you're looking at a GPS navigation device that's only slightly larger than your cellphone? What if the GPS system is on your cellphone?

He also wonders how to enforce the law:

Maryland just passed a texting ban, but state officials are flummoxed over how to enforce it. The law bans texting while driving but allows for reading texts, for precisely the reasons just mentioned. But how can a police officer positioned at the side of a highway tell if the driver of the car that just flew by was actually pushing buttons on his cellphone and not merely reading the display screen? Unless a motorist is blatantly typing away at eye level, a car would need to be moving slowly enough for an officer to see inside, focus on the phone, and observe the driver manipulating the buttons. Which is to say the car would probably need to be stopped — at which point it ceases to be a safety hazard.

But let's say you're OK with a ban on reading cellphone messages, too. How would you write that law? Would you prohibit so much as a glance in the general direction of a cellphone while driving? Should we mandate that cellphones be stored out of the driver's sight while the car isn't in park? What about other things that might distract him from the road, like navigation systems? Shiny objects? Pretty girls in the passenger seat? How would you prove a driver was looking at a cellphone and not something near it?

How, indeed? And if the person challenges the citation in court, with no way to prove the crime, the case will be dismissed ... resulting in a waste of everyone's time, money and effort.

Balko hits the nail on the head with his conclusion:

These laws aren't about safety; they're about symbolism.

Here are two things these bans will do: They'll give police officers another reason to pull people over, and they'll bring in revenue for the municipalities that aggressively enforce them. I think both are arguments against a ban. You may disagree, but the one thing these bans aren't likely to do is make the roads much safer. And if they won't accomplish that, there's no reason to enact them.

Precisely!

Which is why Toledo will probably enact the law, despite the logic and reason of not doing so. But then, that would require our city council members to actually think about and consider these points, which I doubt most of them will do. They'll be too busy claiming credit for 'making us safe,' destroying our liberty along the way.

Downsizing government

Cato Institute has launched a new website that should be used by everyone - though I doubt it will be. Downsizinggovernment.org, which focuses on the federal government, will:

"...help policymakers and the public understand where federal funds are being spent and how to reform each government department. It describes the failings of federal agencies and identifies specific programs to cut. It also discusses the systematic reasons why government programs are often obsolete, mismanaged, or otherwise dysfunctional.

Some people have lofty visions about how government spending can help society. But the essays on this website put aside such “bedtime stories” about how government programs are supposed to work, and instead focuses on how they actually work in the real world."

I'm sure bloggers and other citizens will find much to write/talk about on these pages.

Property: the foundation of all rights

The Cato Institute is a non-profit public policy research foundation whose mission is "to increase the understanding of public policies based on the principles of limited government, free markets, individual liberty, and peace."

They produce numerous publications, including a Handbook for Policymakers that focuses on issues with recommendations. I thought this portion dealing with Property Rights was very informative and am sharing it with you. I hope you'll read the entire chapter.

34. Property Rights and the Constitution

America’s Founders understood clearly that private property is the foundation not only of prosperity but of freedom itself. Thus, through the common law, state law, and the Constitution they protected property rights—the rights of people to freely acquire, use, and dispose of property. With the growth of modern government, however, those rights have been seriously compromised. Unfortunately, the Supreme Court has yet to develop a principled, much less comprehensive, theory for remedying those violations. That failure has led to the birth of the property rights movement in state after state. It is time now for Congress to step in—to correct its own violations and to set out a standard that courts might notice as they adjudicate complaints about state violations. In the Property Rights and the Constitution chapter of the Cato Handbook for Policymakers, Roger Pilon explains why Congress should:

- Enact legislation, to guide federal agencies and to provide notice by the courts, that outlines the constitutional rights of property owners under the Fifth Amendment’s Takings Clause,

- Follow the traditional common law in defining "private property," "public use," and "just compensation,"

- Treat property taken through regulation the same as property taken through physical seizure, and

- Provide a single forum in which property owners may seek injunctive relief and just compensation promptly.

Read more...

Two tidbits from Cato Institute

The first one is particularly interesting to me because a while back I got an email from the ORP about what the priorities for the upcoming state legislature should be and 'de-regulation' was one of the options.

Market Fix Rests on Bright Ideas

"Texas power rates have increased 56 percent since 2000, and the state's electricity is among the most expensive in the country despite promises prices would go down when the state opened electric power to competition," reports The Houston Chronicle. "Many in the industry say the market is working, particularly for customers willing to shop for the best rates. Two of the state's top three political leaders, House Speaker Tom Craddick and Gov. Rick Perry, share that view."

In "Short-Circuited," Jerry Taylor, Cato senior fellow, and Peter Van Doren, editor of Cato's regulation magazine, write:

"After a pretty good 30-year run, deregulation is on the political ropes. Although loosening the shackles on banking, trucking and airlines delivered lower prices, robust competition and political applause, it hasn't worked for electricity. ... So did free market reformers take deregulation too far? Yes and no. Yes, because they promised rate reductions they had no business promising. No, because deregulation of some parts of the system was offset by more ambitious regulations elsewhere. The end result is even more economically artificial than the one we started with. ... True deregulation involves allowing market actors to run their businesses in whatever manner they like, price what the market will bear, and discover for themselves how best to deliver goods and services without government influencing those decisions with carrots and sticks. The faux deregulation we have in the electricity market unfortunately falls short on most of those counts. And that -- rather than the rate increases -- is the real problem."

And then there was this one, particularly interesting considering the upcoming political discussion on SCHIP:

Democrats See Wedge Issue in Health Bill

"Representative John R. Kuhl Jr. of New York received just his second telephone call ever from his state's Democratic governor, Eliot Spitzer, last week and was not surprised at the topic: children's health insurance," reports The New York Times. "'He said, 'I am calling you to come over to the dark side,' 'said Mr. Kuhl, who was urged by the governor to drop his opposition to health care legislation and join the effort to override President Bush's veto of the bill. Mr. Kuhl, a Republican who narrowly survived the Democratic sweep of 2006, said he was unlikely to budge. As a result, voters in his district will also be getting calls -- from Democrats and advocacy groups who are planning a telephone, radio, television and even text-message barrage against Republicans over what is shaping up as a defining domestic policy issue of the 2008 campaign."

In "Sink this SCHIP," Michael F. Cannon, director of Cato's health-policy studies and co-author of Healthy Competition: What's Holding Back Health Care and How to Free It, writes:

"SCHIP is senseless. Like its much larger sibling, Medicaid ... both programs force taxpayers to subsidize people who don't need help, discourage low-income families from climbing the economic ladder - and make private insurance more expensive for everyone else. ... All told, SCHIP is a very costly way of helping targeted families obtain health coverage...Some will complain that scrapping SCHIP would leave dependent families in the lurch. As a transitional step, Congress could convert federal Medicaid and SCHIP funding into a smaller, lump-sum payment to each state. That would serve as a halfway point toward eliminating these payments and simultaneously cutting taxes. States that want to maintain their current spending levels could raise the tax revenue themselves."

Whatever your position on the current legislation, I think the whole issue of the Federal government doing this - especially when it's called STATE Children's Health Insurance Plan - just adds more to the bureaucracy, and that's money which could be spent, instead, on direct services.