Tag Archives: political economy

Two Government Stimulus Plans

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…from a redneck Conservative18th Century Liberal, yet.  The idea from this post came from an op-ed by Martin Feldstein in a week ago Monday’s Wall Street Journal.  He wrote, in part,

A successful growth and employment strategy would combine substantial reductions in the relative size of the future national debt with immediate permanent tax-rate cuts and a multiyear program of infrastructure spending.

However, I have a slightly different couple of takes on the path to recovering our economy.

I have a dim view of government spending, based on the ultimate source of the money and the inherent inefficiencies of government spending.  Many others have gone into this, also; I’ll not belabor them here.  Instead, and in keeping with the spirit of those objections, I’m proposing something of the following.

President Barack Obama’s 2009 “Stimulus” Bill was $830 billion over and above the “ordinary” budget already passed during Bush the Younger’s last year.  The 2010 budget deficit was $1.17 trillion as Obama continued profligate spending as “stimulus.”  Or would have been had there been a budget passed.  Given the deficits of the preceding years, let’s take $830 billion of that projected/planned deficit as “excess” deficit whose sole purpose was to be stimulative.  For those two years, then, the spending targeted at stimulus totaled $1,660 billion.

The Federal tax rebates of 2008 went as high as $600 for a single person whose adjusted income was under $75k, and $1,200 for a couple whose income was under $150k.  If the $1,660 billion were divided evenly among households regardless of income (just to keep the arithmetic simple in this post), then those billions could have been used to pay to each household a rebate of…$14.

The rebates didn’t work in 2008 because they were temporary.  Instead of spending the money—the rebates’ purpose being to stimulate consumption—most Americans saved the money against an uncertain future or they used it to pay down existing debt.  Both of these were very important to the long-term health of the economy, but they didn’t do anything for near-term stimulation.  Even so, the money was used far more efficiently than the government could have—that saving and debt reduction—vs the government’s inherent friction of many bureaucratic middlemen absorbing much of that money.

But instead of rebating those $1,660 billion—and the $14 likely would have been spent; it’s about a beer and a pizza, and so stimulative, at least for the pizza house and its employees—government just ran up the debt going for shovel ready jobs that weren’t shovel ready after all.

That brings me to my preferred option.  As Feldstein noted in that op-ed,

The only way to reduce future deficits without weakening incentives and growth is by cutting future government spending.

I propose, though, more government “spending,”* albeit of a less traditional form: a reduction in our tax rates (with a commensurate reduction in “normal” spending forms to pay for this alternative spending program).  In 2010, the Federal government collected right at $1,600 billion in total tax revenue from all sources.

Hmm….

Maybe the Feds should spend all that “excess” deficit in the form of a permanent tax rate cut—not the simplistic one of 100% to absorb all of that “excess;” the government needs some funds for the things it’s legitimately required to do: national defense, Federal law enforcement (we have too many Federal laws, but that’s a different story), regulation of interstate commerce (and not intrastate commerce, but again, that’s a different story), and so on.  Let’s go for a permanent reduction in our tax rates of 10% across the board.

With a permanent cut, instead of a temporary rebate, folks not only will save and pay down their debt, they’ll spend more, too.  They’ll also spend far more efficiently than government because there’s no middleman involved, and they’ll be spending on what they want and/or need, and not taking what the government thinks they should want and/or need.

Senator Mike Lee’s (R, UT) tax proposal makes an interesting start in this direction.

 

*In quotes because, of course, it’s not the government’s money; it’s ours, and so the government leaving what’s ours in our hands isn’t actually government spending.

A Thought on the Current Effort to Defund Obamacare

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Last week, the House passed a Continuing Resolution that funds the Federal government through mid-December while withholding funding for Obamacare.  Now the bill is in the Senate, where (some) Republicans are taking up the fight (we can argue tactics of the Senate fight, but that’s another story).

Here’s an aspect of the context of the fight in Congress as a whole.

There are some alternatives that fall short of full defunding, this year, but that make serious progress toward that end following the 2014 (and likely the 2016) elections—assuming the Republican Party can overcome its communications incompetence and actually talk to their and their Democratic Party colleagues’ constituents.  One is to accept a delay of Obamacare (at least the Individual Mandate) for a year.

Another is to get rid of the recently, and quietly, accepted an Office of Personnel Management ruling that Congressmen and their staffs are not subject to Obamacare strictures: these worthies get to continue their own, Cadillac of Cadillacs, health insurance plans along with the (taxpayer-funded) subsidies for these plans.  The Obamacare law explicitly requires Congressmen and staffers to buy their policies just like their merely mortal fellow Americans—on the exchanges that Obamacare mandates, from their employers (if one can be found who will continue to offer health insurance), or on the individual market.  At enormously increasing premiums, even compared to what’s currently available.  OMB ruled, fictitiously and at Congress’ direct request, that no, those Cadillac of Cadillacs plans and subsidies remain completely jake.

Very few Congressmen, though, want to push this particular alternative.  Indeed,

several Democratic senators have reacted by drafting legislation that would punish anyone who votes for [any legislation including this plan] by permanently blocking an exemption from them and their staff, even if [the plan] doesn’t pass.

There’s a hint there about the future of the overall “effort” to defund Obamacare, especially in light of Republicans’ penchant for folding in the clutch.

Wages of Government Controls

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…Cyprus example.  Deposits continue to shrink (read: disappear from the country) in the country’s banking system.  As the Wall Street Journal last week cited the European Commission as reporting [emphasis added],

the radical shake-up of the banking sector coupled with unprecedented restrictions on the movement of capital in and out of the tiny island have left it exposed to deep economic pitfalls.

And

Confidence in Cyprus’s banks has plunged after the bail-in of depositors, culminating in the gradual flight of deposits despite the government’s imposition of capital controls to stem the outflow[.]

Why?  Not despite the government’s controls, but because of them.  The Cypriot government

appropriate[ed] all uninsured deposits above €100,000 [$135,000] to pay for [Cyprus Popular Bank]’s resolution.  The biggest bank, Bank of Cyprus, underwent a long, deep restructuring, during which 47.5% of uninsured deposits were blocked and then converted into shares in the new bank.

Whether the depositors wanted a slice of a failing bank or not.  Whether that slice could be used to put food on a depositor’s table, or pay his rent, or not.

People found a way to get their money and get it out of the government’s reach.  And now it’s hard to find money to loan, even to a willing borrower.  Because there’s no money to lend to support business expansion, it’s hard to hire.  Because there’s no money to lend to roll existing debt, bankruptcies occur, and jobs are lost.  Because there’s no money to lend to cover the time gap between payouts due (e.g., existing debt or payroll) and money arriving (e.g., payments for goods sold), bankruptcies occur.  And so on.

Thus:

17% of the Cypriot workforce would be out of a job this year [reported the EC], up from an original projection of 15.5%, while unemployment will hit 19.6% in 2014, not 16.9% as previously thought.

The wages of government controls are lost jobs.

Another Non-Existent Idea for Health Care Reform

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The Republican Study Committee has offered yet another Obamacare alternative in a long line of Obamacare alternatives Republicans have offered in the past two-three years.  The gist of the latest alternative is this:

Title I – Repeal of Obamacare

Title II – Increasing Access to Portable, Affordable Health Insurance

  • levels the playing field between those who receive insurance from an employer and those purchasing it in the individual market: replacesthose with qualifying health plan receive an SDHI of $7,500 (individuals) or $20,000 (families) which will apply to income and payroll taxes, and will increase at CPI-U
    • 1) the current uncapped tax benefit for employer-sponsored health insurance
    • 2) the self-employed tax deduction with an above-the-line standard deduction for health insurance (SDHI)
  • full SDHI goes to the individual or family regardless of the cost of the policy bought—the SDHI above the cost goes right into the individual’s or family’s pocketbook
  • expand access to and allowable expenses for health savings accounts (HSAs), increase the maximum allowable contribution into HSAs, and allow employers to offer a larger benefit for successful completion of a wellness program

Title III – Improving Access to Insurance for Vulnerable Americans

  • expand federal support for state high risk pools to $25 billion over 10 years
  • guarantees that individuals with pre-existing conditions can move between the large group, small group, and individual health insurance markets, so long as they maintain continuous coverage

Title IV – Encouraging a More Competitive Health Care Market

  • allows Americans to purchase health insurance products across state lines
  • permits small businesses to pool together to negotiate better rates

Title V – Reforming Medical Liability Law

  • caps non-economic damages, and limits attorney fees

Title VI – Respecting Human Life

  • prohibits federal funds authorized or appropriated by this act from covering abortion, except in the case of rape, incest, or when the life of the mother is jeopardized
  • ensures that no state pro-life or conscience protection laws will be preempted

But this doesn’t exist; Democrats say Republicans have offered no alternatives.

Wages of Surrender

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In a recent Washington Examiner column, Byron York discussed dissension in Senate Republican ranks, centered on a series of maneuvers proposed by Senator Ted Cruz (R, TX) to Senate Minority Leader Mitch McConnell (R, KY) that, with Republican unity, would force a Senate vote on the House-passed CR that would fund the government into mid-December while withholding funds from Obamacare.  This, just incidentally, would put Democratic Senators in 2014’s vulnerable states on record as actively supporting a law that the majority of Americans—including the majority of these Senators’ bosses—do not like and do not want.

Buried in that article was this:

…one [Republican] aide opposed to the defunding maneuver. “They [Senate Republicans] will have just filibustered their own bill and shut down the government.  They will be solely responsible for shutting down the government.”

No.  The Democrats and President Barack Obama will be responsible for shutting down the government.  They’re the ones blocking a bill that funds it, or vetoing a bill that funds it.  But the aide—and the Republican Senators who agree with him—cannot see that, much less make the argument over shutdown responsibility.

That’s what happens when Republicans cede the terms of the argument.  They willingly accept the Democrat framing of the discussion: “No, we don’t want to shut down the government” instead of making the more accurate argument: “The Democrats, President Obama, want to shut down the government—they’re against the bill that would fund it.”  That’s what happens to men who are spring-loaded to surrender rather than fight an inconvenient fight.

Obama is winning: the Republican Party is destroying itself before his eyes.