Tag Archives: political economy

Discretionary Spending

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Much is made of the limits imposed on the Federal government’s discretionary spending by such “mandatory” spending items as Social Security, Medicare and Medicaid, and interest on the national debt.  Indeed, after mandatory items—these three major items and a few others—discretionary spending amounts to only 33% of total Federal spending as of 2015.

This dichotomy, though, isn’t only misleading, it’s entirely wrong.  The fact is, nearly all of Federal spending is discretionary: Congress sets the spending levels everywhere, and it decides the things on which to spend nearly everywhere.  There are only three categories of spending that our Constitution requires of Congress: to pay the Debts and provide for the common Defence and general Welfare of the United States.  Even in these three mandatory areas, though, the amounts to be spent are left to the discretion of Congress, even if the requirement to pay the Debts implies a requirement to spend at least enough to keep the debts current if not actually to move the size toward zero, and even if the requirement to provide for the common Defence implies a requirement to spend at least enough to keep our defense establishment superior to all threats.  Even the requirement to spend for the general Welfare is limited to the 16 items enumerated in Article I, Section 8; here, too, the amounts actually to be spent are left to Congress’ discretion.

There is, then, no requirement for Congress to spend Federal monies—citizens’ tax money—on Social Security or Medicare and Medicaid.  And no Federal money should be spent on these items, which as of 2015, comprised 49%, or $1.8 trillion of the total $3.7 trillion in Federal spending.

Think about the uses to which that money could be put were Social Security and Medicare privatized and Americans allowed to be responsible for their own health and futures, rather than being required to spend their money on others’ current retirement and health costs.  Think about the effects of block granting Medicaid payments to the individual States and then annually reducing the size of those grants to zero, so that the States would be allowed to be responsible for their own budgets and their citizens could spend that money on themselves.

Think about how $1.8 trillion could be redirected: lower tax rates and less government spending, so that Americans could keep more of their own money to spend on their own imperatives, needs, and wants, and the effect of their being able to spend in a market in which the Federal government isn’t crowding out private enterprises, private buyers and sellers with government competition for the same goods and services.

Think about other redirections of those $1.8 trillion: keeping lowered spending less than lowered tax revenues and so eliminating Federal deficits: budget surpluses and a significant fraction of those $1.8 trillion could be redirected toward paying down our nation’s exploding debt.  Another significant fraction of those $1.8 trillion could be redirected toward rebuilding and then vastly improving our national defense establishment, so that we can, not merely match, but exceed and defeat the threats against us, defeat our enemies and friends’ and allies’ enemies acting on those threats.

Congress has the discretion to do all of these things; its spending decisions—its revenue decisions generally—are not limited to those $1.2 trillion misnamed “discretionary.”

Unfortunately, the present Government doesn’t trust its employers, We the People, collectively and individually, to see to our own needs and wants; Government insists on determining these for us.  This Government, too, doesn’t believe we need a very large defense establishment at all.  It prefers, instead, to retreat from the world stage, to talk to Russia about its aggressions in eastern Europe and the Middle East, to talk to the People’s Republic of China about its aggressions in the East and South China Seas.  This Government doesn’t even recognize the Islamic terrorist threat and their war actively being prosecuted against us.

This needs to change.  Every single bit of it.

A Thought on JASTA

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JASTA is the Justice Against Sponsors of Terrorism Act, passed overwhelmingly by each house of Congress and just vetoed by President Barack Obama (D).  The bill would allow the survivors of the 9/11 victims to sue in American courts the Saudi Arabian government and members of it over their alleged role in the terrorist attacks and to seek recompense for those participations.

Without commenting on the legitimacy such suits, or on the likelihood that enough Democrats will roll over for their leader to sustain his veto, I have this on an argument against the bill.

[I]f US citizens are allowed to take the Saudis into court, then foreign countries could do the same to the United States, its diplomats, and its service members.

Whether or not foreign countries “could do the same” to us is a matter of those nations’ domestic law, current or to-be-passed.

Thus: those nations already can “do the same” to us, without waiting for a JASTA suit, and it’s already been done.  This is a nakedly specious argument by Obama against the bill.

Another Thought on Clinton’s Death Tax

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This one by Brad Anderson, ex-Best Buy CEO.

This is a devastatingly stupid idea…. I worked for a guy who was a high school graduate, created a company—it didn’t make money for 20-years. And after 20 years it finally starts to build up. He has a dream that he’s trying to build, that includes passing some of it along to his family and if you take that away, why does he pay the price?

And why does that man’s family pay an even bigger price?

Enterprises that are left to heirs with value above Clinton’s death tax threshold very often have insufficient cash from the nature of the business—a farm, for example, or a physical plant-heavy enterprise—to pay up.  As a result, the heirs must sell their inherited business to raise the money for her vig.  And so the heirs are left without their inheritance—and so too often destitute.

Never mind this insult added to that injury: this wealth has already been taxed in real time, and often several times, as it was being created, earned, and distributed.

It’s Not the Family’s Money

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It’s the Government’s.  Never mind that Government didn’t build and earn that wealth, the family did, along with their associates.

Democratic presidential candidate Hillary Clinton would impose a 65% tax on the largest estates and make it harder for wealthy households to pass appreciated assets to their heirs without paying taxes, according to an updated version of her tax plan released Thursday.

This is the Progressive view of property rights and property ownership.

Some Data on the Obama Economic Recovery

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And on Democratic Party Presidential candidate Hillary Clinton’s policy impact on that recovery from the Panic of 2008, since Clinton has promised, proudly, to continue and extend President Barack Obama’s (D) economic policies.  These data are via Robert Barro’s (Harvard University economics professor and American Enterprise Institute visiting scholar) piece in The Wall Street Journal.  He and a colleague, Tao Jin, looked at

macroeconomic disasters in 42 countries, featuring 185 contractions in GDP per capita of 10% or more. These contractions are dominated by wartime devastation such as World War I (1914-18) and World War II (1939-45) and financial crises such as the Great Depression of the 1930s.

Among other things, they found that blaming the slow- to non-recovery on the Panic’s severity or on global financial crises, in their gentle phrase, “conflicts with the evidence.”

Among the specifics of their findings:

The growth rate of total nonfarm payrolls averaged 1.7% a year from February 2010 to July 2016, despite the drop in the labor-force participation rate. The post-2009 period is not a jobless recovery; it is a job-filled non-recovery.

And

[T]he drop in the unemployment rate—from 10% in October 2009 to 4.9% in July 2016—has been impressive, though overstated because of the decrease in labor-force participation.

Never mind that half the GDP lost during the contraction is typically recovered within two years of a recovery’s start.

So, what policies led to this failed recovery?  There have been lots, ranging from attacking hydrocarbon-based energy production and the destruction of jobs with the subset of the Democratic administration’s war on coal (and growing war on oil and natural gas), the Obama EPA regulations intruding onto private property (no cattle ponds on private ranches, recall), Labor Department’s and NLRB’s restrictions on non-union labor, and so on.  The primary policy, though, has been this administration’s increase in government transfer payments.

Federal social benefits to persons (things like Medicaid, Medicare, Social Security, and food stamps) as a fraction of GDP rose from 8.7% in 2007 to 10.9% in 2015.  That’s a 25% rise in the fraction of GDP that’s money taken out of the private economy, washed through a middleman government, and the remainder then passed along to others.  In real dollar terms, that’s an increase from a skosh over $1.3 trillion in 2007 to a skosh under $2 trillion in 2015, an increase of more than 50%.

That’s money not applied to actual economy-stimulating and job-creating activities: free trade, rolling back inefficient regulations, fiscal discipline, and, yes, public infrastructure such as highways and airports.  That’s money not applied to enhancing productivity.

The growth rate of GDP per worker from 2010-15 was 0.5% per year, compared with 1.5% from 1949 to 2009.

Instead, Clinton not only wants more of the same.  She was for the Pacific and Atlantic free trade deals on offer (and one soon to be before Congress) before she lately found it politically expedient to be against them.  She favors increasing regulation—evil Wall Street and political speech are her targets du jour—not reducing it.

Her idea of fiscal discipline is increased spending, partially paid for with higher taxes.  She wants “free” education, paid for with higher taxes; reduced borrower liability for student loans, paid for with higher taxes; free day care, paid for with higher taxes; free health care—single payer, yet (never mind that contradiction)—paid for with higher taxes; free family leave from employment, paid for with higher taxes and higher prices since the employer must pay, also, if only through reduced output and so reduced sales; and on and on.

And that infrastructure work?  She is for that—so long as it’s done by Government approved union labor, and not by the most cost efficient contractors.