More Pseudo-Keynes

Central Bankers now want governments to spend more and thereby increase their deficits and their nations’ debts in order to stimulate economies around the world.  At least they may finally be recognizing their own failure to manage the Panic of 2008 and the Panic’s ongoing aftermath.

Unfortunately, they choose not to recognize their own role, and that of governments, in worsening the Panic and prolonging the Panic’s recovery.  They ignore the difference, for instance, between the American Depression of 1920-21, which benefitted from a decided lack of government intervention, either by a Central Bank or by Government, and the American Great Depression, which was potentiated by a Central Bank’s screwed up behavior at the Depression’s outset and heavily extended by Government intervention in the middle of it.

Fed officials and counterparts in other central banks have already forced down interest rates and launched multiple rounds of asset purchases to spur an economic expansion.  Many say it’s past time for fiscal policy to step in and take advantage of low rates to funnel money into infrastructure and other projects.

Never mind that those low interest rates are artificial, and when they rise again, the added debt, together with existing debt, will become ruinously expensive even to keep current, much less actually to pay down.

Never mind that

[a]ging populations in developed countries are burdening public-pension programs and sparking fears that tomorrow’s labor force will be too small to pay off today’s debts.

That’s no idle fear.  Developed countries’ fertility rates generally are well below even replacement rates, which would simply maintain today’s worker-to-retiree ratio shortfall, not improve the ratio to economically sound levels.  The sole exceptions are the US, with a slightly below break-even ratio that’s covered by immigration (and could be better covered with immigration reform), and France, with a slightly above break-even ratio.  Government pension programs, whether for government work forces or public programs like our Social Security and Medicare programs (and the States’ Medicaid programs) are at considerable risk, not least because of that ratio.

Andrew Biggs, of the American Enterprise Institute, is on the right track:

…rising government debt will crowd out private investment, making less money available for businesses to invest.

On the other hand, folks like Doug Elmendorf, late of the CBO, and Louise Sheiner, of the Brookings Institution, are dead wrong.  They think that

ultralow interest rates should tip the scales in favor of more government borrowing and investment.

No.  These pseudo-Keynesian deficit spending policies—at any interest rate—are just excuses to keep expanding Government.  Aside from the interest on government debt—which will rise as surely as the sun—crowding out private spending (in favor of growing Government) by driving up the cost of money, including private borrowing for private economy investments; Government spending generally crowds out private spending (in favor of growing Government) by driving up the cost of goods and services and by competing for and absorbing resources that should be left to the private economy’s more efficient use.

Democrat Extortion, State Level

Louisiana Democratic Gov John Bel Edwards is suggesting the legendary Louisiana State University football team’s 2016 season might be canceled—and other doomsday consequences—unless the GOP-legislature swiftly passes a package of tax increases to help close a looming $940 million budget shortfall.

The budget deficit is projected to reach $2 billion by the start of the next fiscal year. The Republicans should call him out on his naked extortion threats. And then pass a budget with $2.5 billion in spending cuts and $500 million in tax cuts. Does Edwards want to balance the budget, or is his precious spending and taxing all he cares about?

After all, the state’s economy runs over $250 billion as of 2015. Surely, they can find $2.5 billion just by shaking the state government’s couch cushions.

Budgets

President Barack Obama (D) sent up his budget proposal Tuesday, carefully timed to be buried under the news coverage of the New Hampshire primaries. $4 trillion worth of proposals. It’s replete with the Left’s dreams of tax increases—including a one-third tax on oil (at current prices: a $10/barrel tax with oil now going for $30) and an acceleration of the Left’s tax war on successful Americans—and associated spending claptrap (gotta spend those taxes, after all) like more spending on college subsidies such as Pell Grants, incentives for States to expand Medicaid programs, increased subsidies for the Left’s goals, expanding budgets for the Department of Education, Department of Energy, Department of Labor, and on and on. This Obama Budget expands the current half-trillion dollar deficit, because gotta spend more than tax revenue, too.

Oh, yeah: that oil tax is intended, in part, to subsidize “energy sources of the future.” Read that as increased subsidies for “green” energy sources, subsidies the Left thinks are necessary because “green” energy sources can’t compete in a free market, and that’s just not fair. Along those lines, though, here’s a “subsidy” that would pay off in spades and produce potsful of green energy: drastically reduce regulatory and permitting restrictions, and so the associated costs, on building nuclear power plants. We even have a spent fuel storage facility built and ready to go in Nevada; we just have to get government out of the way of that, too. Fat chance on either one, though, under this administration.

No, what Congress needs to do, what Congress has both the sole authority to do—to pass a budget and then pass the several appropriations bills to give effect to the budget—and the power to do with Republican majorities in both houses, is ignore Obama’s budgeting nonsense. A proper step in that direction is this:

Congressional Republicans last week announced they wouldn’t invite the White House’s budget chief to testify on the administration’s proposals, breaking with longstanding protocol.

Instead, Congress simply should pass a proper budget, and it should take the one passed last fall and pass the appropriations bills that properly reduce tax rates, expand defense spending, and reduce spending everywhere else so as to produce a net surplus within those lowered tax rates. And within those bills, specify that the surplus must go first to paying down the debt.

Keep in mind, too, two things. One is the meaning of the budget passed last fall. Nothing in it prevents Congress from passing the appropriation bills outlined just above. Budget bills set outer bounds of spending; they do not set required minimum levels of spending.

The other is so-called “discretionary spending.” “Discretionary spending” is carefully defined to be spending that Congress is authorized to manage year by year; the definition is designed to exclude spending on things like welfare, Social Security, Medicare; and these exclusions amount to roughly two-thirds of Federal spending. This is a cynically perpetuated fiction. It’s all discretionary spending. It’s all fully within Congress’ spending authority to manage on a year by year basis. Every single dollar of it.

The more dollars left in Americans’ hands through lower tax rates, the less government competes with the private economy for goods and services through spending, the better off Americans will be through the resulting economic activity and rising prosperity. And the faster our nation will be able to pay down—and off—its national debt.

More Spending, More Foolishness

It’s a two-fer that only President Barack Obama could propose with a straight face.

The Obama administration is proposing to extend a financial sweetener the federal government offers states that expand their Medicaid programs, in a bid to persuade more to do so before the president leaves office.
White House officials said President Barack Obama will ask Congress to include three years of full federal funding of expansion for any state that extends eligibility for the program to most low-income residents. Officials said the proposal will be made in Mr Obama’s fiscal 2017 budget, to be released Feb 9.

More Federal spending. Billions of dollars of spending to persuade States to expand their Medicaid programs, an addictive “offer”—addiction to Federal dollars.

And that’s the foolishness. Obama is promising to do this for three more years. Three years in which to get the suckered States hooked on the Federal government’s street corner product.

This move of his hasn’t anything at all to do with low-income citizens. It has everything to do with vote pandering.

In an election year.

Debt Limits

The reason we need to raise the national debt limit is to be able to borrow to pay existing obligations. Treasury Secretary Jack Lew’s threats that he can’t won’t pay our veterans, soldiers, and retireds is nothing but politically motivated, dishonest foolishness. He can pay these; the tax revenues are plenty for that. What he won’t be able to pay are the payables to Federal contractors and a number of other bills. Those are legitimately owed, though, and they need to be paid.

There’s also plenty of money coming in to pay the interest on our national debt—so there’ll be no default, either. That’s just nonsense.

What’s unacceptable, though, is the Democrats’ refusal to go along with a debt-raise bill that includes spending cuts that will obviate the need to raise the debt ceiling next year and in the out years. President Barack Obama has even said he’ll veto a debt-raise bill that includes such preventive measures. He’s said it’s nonnegotiable.

That’s unconscionable. The Democrats’ addiction to spending—and it is an addiction—has got to be broken. If the only way to cut spending so we don’t need to increase our borrowings next year is to close the Federal government, so be it.

But the Republicans, including the right side, and their “communications” directors had better be able to sell the shutdown to the nation’s public. Democratic Whip Steny Hoyer (D, MD) said it:

[T]hey ought to all be fired[.]

Unfortunately, he wasn’t looking in a mirror when he said it.

Turn the rascals out in a year and a month.