Tag Archives: political economy

Budget Discipline, Part II

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In the last three years, the Progressive Do-Nothing Senate has passed zero budgets.  Even President Obama completed his stand-up routines in that time frame, offering two massive budget jokes.

Here are some things that grown, adult human beings who are serious about their purposes have accomplished in the space of three years or less.

  • Broad Group erected the 30-story Ark Hotel in Dongting Lake, Hunan, PRC in just 15 days late last year.  (As an aside, the Daily Mail reports that no worker was injured on this project.)
  • Gone with the Wind was filmed in just over 9 months.
  • Building the Empire State Building, then the world’s tallest, took a year and a quarter.
  • The Pentagon, still the world’s largest building in terms of floor space, took a year and a third.
  • The time from D-Day to Germany’s surrender at the end of WWII was 11 months.
  • Indeed, the time from Operation Torch, the British-American invasion of northern Africa in WWII, to Germany’s surrender and the liberation of western Europe was 30 months.

Hmm….

Budget Discipline

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In the House, a budget is passed that contains spending levels below the $1.047 trillion cap agreed in last summer’s Budget Control Act.  The Republicans are heavily scored by Progressives for violating the BCA’s agreement to cap spending by actually spending less than that cap.

In the Senate, a bill to increase spending on the Post Office is proposed.  If passed, this spending bill will increase the Federal deficit by $34 billion because it does not offer spending reductions elsewhere—thereby exceeding the $1.047 trillion cap.

Senator Jeff Sessions (R, AL), the Ranking Republican on the Senate Budget Committee (you remember that bunch—the Progressive dominated committee that’s been so well disciplined that it has produced zero budgets in the last three years, including a half-hearted effort of just a week ago that Senate Majority Leader Harry Reid (D, UT) ordered scotched before it was born), has announced that he’ll raise a number of points of order to block this bill of ill discipline.  (As an aside, it’ll take separate 60-vote majorities, under Senate rules, to kill each of the points of order.)  Sessions made a statement on the floor of the Senate Monday explaining his action; it can be found here.  Following is an excerpt.

Under Senate rules, no committee can bring a bill to the floor that spends even one penny more than is already going to be spent under current law, or increases the deficit more than it will increase under current law.

In other words, the spending and debt under the postal bill violates the debt limit agreement reached just last summer.

…

This is particularly odd since the President and the Senate Majority Leader have accused the House members, the Republican House, of breaking the budget agreement by trying to save a little more money than the Budget Control Act said that they should save.  This argument is not sound, of course, but that bill established basic spending caps, basic limits—the maximum amount that could be spent on discretionary accounts.  Not one word in that law prevents us, or any member of Congress, from doing the duty to try to save more money.  Not one word in that law requires Congress to max out and spend up to that cap, to that limit.  So this is not a matter of interpretation; caps are the maximum, not the minimum, you can spend.

Can we really afford any more Progressive budget discipline?

Entitlement Waste

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In the pouring taxpayer money down a rathole category, we have this and this.

In one of President Obama’s Chicago Way executive edicts, he pushed through a “demonstration program” of $8 billion to pay performance “bonuses” under the Medicare Advantage insurance program.  The bonuses were claimed to be incentives to improve performance; however, in fact they were targeted at average performers: out of a 5-star scale, Medicare Advantage plans that got 3.5 stars got bonuses.  In such a canonical “esteem is more important than performance” reward system, a reasonable person might ask after the incentive to do better when simply meeting standard is remarkable.  Moreover, the enormity of this program meant that the bonuses, in their aggregate, actually undid nearly two-thirds of the cuts in overall Medicare Advantage costs that Obama’s Patient Protection and Affordable Care Act supposedly provided.

The Government Accountability Office has recommended that this waste be done away with, and the bonus program be canceled.  This isn’t a lone recommendation.  The Medicare Payment Advisory Commission, an independent Congressional agency, also has a dim view of this administration “bonus” program.  MedPAC’s view is that the bonuses are just “a mechanism to increase payments,” and Commission Chairman, Glenn Hackbarth, wrote that the bonus plan

lessens the incentive to achieve the highest level of performance

It gets better.  A report released Monday by the Social Security Trust Fund’s trustees contained this bit of good news:

The Social Security retirement fund is projected to run out of money in 2035 while the Social Security disability fund is projected to run out in 2016.

Combined, the two funds will last all the way to 2033.  If they run dry, payroll taxes would only cover about 75 percent of current benefits.

These failure dates are closer in than claimed last year.  The program’s finances are worse, say the trustees, due to a couple of factors:

Workers are expected to work fewer hours than previously projected, even after the economy recovers.

High energy prices suppressed wages, a trend the trustees see as continuing.

Thus we see another effect of Obama’s destructive energy policy, as well of his failed economic policies generally.

But just try to rescue these entitlement programs from their failure.  On the one hand, we have the Ryan Plan, which the Progressives in Congress and the Executive Office timidly snipe at from the sidelines, and on the other hand, we have the Progressives’ plan.  Umm, what was their plan, again?  Oh—the do-nothing Senate and the do-nothing President don’t actually have one.  They just want to keep throwing money down this rathole, too.

More Big Government

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Now we have a big government feedback loop between the EU and the EU wanna-bes.  The Wall Street Journal reported over the weekend that our Treasury Secretary is urging the EU and its European Central Bank to “take stronger action” to get control over Europe’s potentially deteriorating debt crisis.

The success of the next phase of the crisis response will hinge on Europe’s willingness and ability, together with the European Central Bank, to apply its tools and processes creatively, flexibly and aggressively to support countries as they implement reforms and stay ahead of markets[.]

Not, apply themselves to get out of the way of the markets and give them room to right themselves.  No, the big government policies that created the economic disasters of the PIIGS and of the EU generally need to be applied even more so to stem the tide.

Hmm….

Indeed, as the WSJ went on,

Washington has long pressed Europe to bolster its emergency bailout funds and use them to backstop government debt. It has also urged the ECB to use all the weapons in its arsenal to calm financial markets.

How’s that working out for us, exactly?

The IMF is in on this tragicomedy, also.  Its steering committee Issued a Communiqué with this sage advice for the euro zone:

[C]ontinued progress on ensuring debt sustainability, securing financial stability, and undertaking bold structural reforms will be crucial to boosting confidence and productivity, facilitating rebalancing within the monetary union, and promoting strong and balanced growth.

Most of this is pap, intended solely to give the impression of advisement.  However, with apologies to Inigo Montoya, you keep using that phrase “undertaking bold structural reforms.”  I do not think it means what you think it means.

Another Object Lesson

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…if we’re only willing to listen to it.  The Wall Street Journal‘s sub-headline says it all:

Borrowing Fueled Chongqing’s Infrastructure Projects, Highlighting National Problem of Reliance on Government Spending

“…10 major investment vehicles the city used to fuel its growth accumulated more than 346 billion yuan ($54 billion) in liabilities,” the WSJ reports.  Moreover, this is just the publicly acknowledged debts of the city.  The various national government-owned enterprises in Chongqing likely have their own debts, and these are not obligated to discuss them.  Northwestern University Associate Professor of Political Science and an expert on local government debt in the People’s Republic of China, Victor Shih, adds

I don’t think it would be a stretch to say that Chongqing local government, state-owned enterprises and state-owned developers collectively owed 1 trillion yuan [$156 billion] at the end of 2011[.]

What has Chongqing to show for this?  High risk, for one: a significant per centage of that debt is secured by land the city owns or controls.  To pick on Chongqing Yufu Assets Management Co., a city-owned investment vehicle established in 2004 as an example: the city loaded Yufu with land that then was used as collateral.  Now its 63% debt-to-asset ratio makes it one of the most heavily indebted financing vehicles sponsored by the Chongqing government.  Its 2010 profit of 1 billion yuan sounds good, however, asset sales now are likely to be necessary in order to service that debt—but Yufu’s assets are that land that’s bound up as collateral.  Moreover, that 2010 profit is down, sharply, from the prior year’s profit of 1.7 billion yuan, due to just as sharply falling revenue from its land holdings.

What happened the last time vast debt was secured by a land or housing market in a country near you and I?  At least in the US, our government can just print up all the money it needs….