Tag Archives: spending

Federal Control(s)

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This is how the central government gets its subordinate states ensnared in the Federal power trap.  Much has been written already on the entrapment of the states in the Medicaid, education, and so on honeypots, with the Feds having gotten the states dependent on Federal monies for those programs, and then using that addiction to control the states’ behavior vis-à-vis those programs—and other useful state considerations—lest those funds have something happen to them (albeit descriptions have not been this blunt).

Here’s an explicit example, this time aimed at New Orleans and through this city the state of Louisiana.

Engineers consider it a Rolls Royce of flood protection—comparable to systems in seaside European cities such as St. Petersburg, Venice, Rotterdam and Amsterdam.  Whether the infrastructure can hold is less in question than whether New Orleans can be trusted with the keys.

The Army Corps estimates it will take $38 million a year to pay for upkeep, maintenance and operational costs after it’s turned over to local officials.

Local flood-control chief Robert Turner said he has questions about where that money will come from.  At current funding levels, the region will run out of money to properly operate the high-powered system within a decade unless a new revenue source is found.

“That’s been the eternal problem with flood-protection systems,” said Thomas Wolff, an engineer at Michigan State University.  “You build something very good and then give it to local interests who are not as well-funded.”

However, the Feds will blame the locals for the failure:

Congressional investigations found the old Orleans Levee Board more interested in managing a casino license and two marinas than looking after levees.  Though the Army Corps of Engineers had responsibility for annual levee inspections, the local levee boards were responsible for maintenance.  Still, the boards spent millions of dollars on a fountain and overpasses rather than on levee protection.

Never mind that the locals have a local economy that needs looking after, else there’s nothing for a (Cadillac) Federal program to…protect.

As Richard Fernandez notes in his post,

The problem with free stuff is that someone has to pay for it.

And when the Federal government sighs and says, “OK, we’ll pay,” it then also exerts control over the program being centrally funded and over the entity “benefiting” from that program.  And so the entity and its citizens also “pay for it,” with their freedom of action.

So much for federalism.

Tax “Negotiation”

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Here’s another example of the Progressive view of negotiations.

In public statements, [Treasury Secretary Timothy, who has joined the negotiations] Geithner has suggested he will hold the line on the core White House demand to raise tax rates on wealthier Americans.  If “people look at this and look at it carefully, they’ll come to the judgment we reached,” he said at a Wall Street Journal conference earlier this month, adding that this meant “higher rates” and limits on tax deductions.

Because, of course, they’re right; anyone with any sense will agree with them, so that question is closed.

This is consistent with the new Obama position of being willing to discuss only tax raises, with spending cuts and entitlement reform completely off the table.  Progressives will talk about them later.  They promise.

Unfunded Liabilities

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We’ve already seen counties and cities brought low and into bankruptcy by their blithe accumulation of future liabilities that they have no hope of honoring.  Jefferson County, AL, comes to mind, from a bond sale they had every reason to believe, a priori, that they could not honor in the future.

So does Stockton, CA’s bankruptcy, flowing from a public union pension and insurance program that they, also, must have known in advance that they could not support in future.

These are well understood, and the data that would have predicted these failures easily available to any who cared enough to look—and to face the impending problem squarely.

What of our nation’s debts, though?  Chris Cox and Bill Archer describe in a recent Wall Street Journal the hidden—and unfunded—liabilities at the Federal level that make our public national debt of $16 trillion look minor.

These hidden, but too real liabilities—debts—include

the unfunded liability of Medicare, $42.8 trillion

the unfunded liability of Social Security, $20.5 trillion

the unfunded liability of federal employees’ future retirement benefits, $23.5 trillion

But these data are carefully hidden from public scrutiny.  Federal Treasury “balance sheets” don’t include things like the debt represented by those Medicare, Social Security, and retirement unfunded liabilities.  No, the data are carefully squirreled away in the individual social welfare accounts.  You have to know where to look and what to look for—knowledge that heavily trained and experienced folks like Cox and Archer have, but which our politicians know the average American constituent lacks.

This is a time bomb that demands out entitlement programs be brought to heel, our entitlement mentality as a nation to be curbed.  Else we’ll go the way of Stockton.  And for a nation, that won’t be pretty.  Think of Greece today.  Think of Weimar Germany of the last century.

Progressives and Taxes

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Not only do they still not get it, they’re already operating in bad faith.  Here’s more, via Damien Paletta of The Wall Street Journal.

Treasury Secretary Timothy Geithner on Tuesday said higher tax rates on upper-income Americans were a central part of the White House’s deficit-reduction proposal because there was no way to raise enough revenue by only limiting tax breaks.

No doubt.  But that just means it’s a bad proposal.  Notice that this plan proceeds from a couple of false premises.  One is that the Federal government needs more money.  Another is that the only way to cut the deficit is to raise taxes.  (Putting on my best cheesy-ad voice) but wait—there’s more!

Mr. Geithner said there was a lot of “magical thinking” about the amount of revenue that could be raised by capping or eliminating tax deductions and exemptions.  He said this approach wouldn’t come near the roughly $1.5 trillion in revenue the Obama administration believes is necessary as part of a broad deficit-reduction package.

There he goes again, and with his own “magical thinking.”  Geithner’s magic is to repeat the fantasy that the Feds need $1.5 trillion in revenue in order to reduce the deficit.  In the first place, taking that much money out of the private sector will reduce economic output, which will continue, if not increase, the current unemployment rate.  In the second place, taking that much money out of the private sector will lower the amount of tax revenue flowing to the Feds, both directly and through that continued/increased high unemployment rate.  If the government wants to increase revenue, it must support a vibrant, growing economy—which it cannot do when it starves that economy of its fuel, which is money.

Then Geithner says, without a trace of irony,

When you take a cold hard look at the amount of resources you can raise from that top 2% of Americans from limiting deductions you will find yourself disappointed to the relative magnitude of the revenues we need[.]

I won’t repeat myself on his underlying false premise; I’ll just point out the equal truth of his statement from substituting “raising tax rates” for “limiting deductions.”

In the end, the only way to eliminate the deficit (and so to begin paying down the national debt) is to spend less than is collected in revenue, as any third-grader on an allowance understands.  The only way to do this is to spend less.  Only that third-grader would insist on an increase in his allowance.

Taxes and the Fiscal Cliff

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As Senate Minority Leader Mitch McConnell (R, KY) pointed out the other day,

[T]here is no consensus on raising tax rates.

Additionally, McConnell reminded us

[W]e still have yet to hear an actual plan from the president for addressing the great economic challenges we face.  What’s needed now is a realistic and specific proposal from the president that can actually pass the Congress.

Indeed, we haven’t heard anything President Obama in the way of a specific plan, beyond two budget “proposals” from the last session that can only be taken as having been improv satire.

McConnell laid down his marker, and it’s a correct one:

One issue I’ve never been conflicted about is taxes.  I wasn’t sent to Washington to raise anybody’s taxes to pay for more wasteful spending and this election doesn’t change my principles.

Is Obama serious or not about recovering our economy?  We’ll find out in the coming days.