Tag Archives: taxes

Some Thoughts on Spending, the Debt Ceiling, and Taxes

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I’ve written about this in my books (see the side bar); here are some of my thoughts.  Of course, to achieve this, we’ll need significant majorities of conservatives in the House and Senate, and we’ll need a conservative President.

Enact legislation requiring Federal spending averaged over a five year period to not exceed Federal revenues, except in time of national emergency.  Further, that five year period must be a sliding five years: the oldest year is dropped from the computation, and the latest year added to that computation.  This will allow spending to exceed revenues for short periods to allow for the vagaries in the timing of revenue vs. obligations that are inevitable, while requiring spending to be reined in so as to keep this short term borrowing from growing.

If the President declares a national emergency, and the Speaker of the House and the Senate Majority Leader concur, debt can be accumulated for the purpose of dealing with the emergency.  If the emergency is a declared war, then that emergency will automatically expire one year after the end of that war.  If the emergency is from another cause, then the emergency will automatically expire after one year, unless the President renews his declaration and a majority of each house of Congress concurs.  Once the emergency has expired, then each year’s spending must be held below each year’s revenues until the emergency-driven debt has been repaid entirely.

There will be a huge hue and cry over this, of course.  It’s impractical.  It ignores big ticket items.  It overly constrains spending by the government.  It’s too hard to do politically.  And so on; there will always be excuses not to make the change.  The truth is, it’s only impractical because politicians make it so.  Instead of taking action, most of our current politicians push party politics, want to trade favors, need to pay back the interest groups who made their elections fiscally possible.

Congressman Emanuel Cleaver (D, MO), chairman of the Congressional Black Caucus, tweeted after the conclusion of the summer of 2011 debt limit rise negotiations, “Democrats got nothing in this deal, and if we did, someone please show it to me.”  However, this isn’t about the Democratic or Republican Party.  It isn’t about which party gets more or less than the other.  It’s about whether the nation wins or loses, and what’s good for the United States isn’t a mindless zero-sum game.

The big-ticket items—defense and other—can, and should, be budgeted for in advance.  Absent an outright emergency, these large expenditures are not surprises.  Although military spending is constitutionally constrained to two-year periods, the President submits a budget every year, and the Congress handles budget creation and passage every year (or is required to by law; the Senate has failed that obligation for the past three years).  When budgeting is taken seriously, as every family and business takes it, the long-term, expensive items can be planned in advance, and an expenditure schema that covers those big ticket expenses can be worked out in advance to keep overall spending within the limits just described.  Notice that this can include specific long-term borrowing for specific big-ticket items.  Most families are capable of budgeting for the acquisition of a 30-year home mortgage.  Our government can budget, also, for a defense system and the repair and upgrade of the nation’s electricity grid (as one example of an expensive, infrastructure investment).

As to the constraints on government spending, that’s the point.  Congressman Mike Doyle (D, PA) is reported as saying in a meeting with Vice President Joe Biden just prior to the August 2011 House vote on the bill that codified the negotiations that Congressman Cleaver so plaintively decried, “We have negotiated with terrorists.  This small group of terrorists have made it impossible to spend any money.”  But it isn’t about the government’s “right” to spend our money.  Leaving aside the dishonest slur on a group of Americans whose only “crime” is daring to disagree with this Progressive mentality, this attitude of a government entitlement to spend is exactly why government spending needs to be tightly constrained; the only terrorism involved here consists of the exploding deficits and national debt.

Related to this, the following legislation regarding Federal borrowing is necessary.  Total US Federal debt must be limited to 20% of GDP, absent a declared national emergency.  Current Federal debt already pushes 100% of GDP; we have a long way to go.  The legislation must also include a requirement that revenue surpluses go toward paying down the debt and then toward reducing tax rates in subsequent years.  Why 20%?  That was the upper bound of the range of Federal debt in the 1920s, before Progressive policies exploded that debt from the 1930s on.  Some will decry having a debt limit, though.  It’s too constraining, they’ll complain.  Consider this: we’ve had no debt limit for the last 80 years, except in name: the debt “limit” has been routinely raised for the asking until 2011.  As a lady once asked not so long ago, “How’s that working out?”

Finally, the tax rates must be frozen at the “Bush tax cut” level, until the debt is paid down to the required level.

Watch the economy burgeon, and GDP rise to meet the falling debt.

Another Party?

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Speaker of the House John Boehner (R, OH) is now joining the growing chorus of…Republicans…who are begging for surrender on the economy: he’s offering tax rate increases, albeit on Americans with more than $1 million of annual income.  This will be an abject failure: President Barak Obama, standing tall with the Republicans now on their knees in front of him, has no need of accepting this.  In fact, he has an excellent chance of succeeding with a gambit that seemingly failed in the debt ceiling negotiations of 2011, when he made a last minute demand for even more taxes: with Republicans now begging for mercy, he can, at this late hour, add to his demands—yet more taxes beyond the $1.6 trillion he’s currently demanding (the offered reduction to $1.4 trillion was never serious).

Given this abject failure, should we walk away from the Republican Party and form a third national party, one more honest and courageous and better rooted in the principles of conservatism—the 18th Century Liberal principles on which our nation was founded and which underlie our prosperity and power?

I’m of two minds on this.  On the one hand, with the Republican Party as currently constituted now empirically in shambles and a failure, we need a national party capable of retrieving our nation from the nearby disaster of Europe-like social and political failure, and from the disaster waiting to be imposed politically and militarily later by our enemies.

The Tea Partiers have the national reach, but remain politically naïve.  They are, however, learning.  Forming a new national party would represent a strategic retreat for the principles of individual liberty and responsibility and of the small, limited government that is the only thing that can help preserve these.  However, sometimes retreat is necessary in order to be able to reengage from a position of greater strength.

On the other hand, the infrastructure of an existing national party is no mean thing.  The primary things wrong with the Republican Party are the RINOs in positions of leadership, who are too willing to sacrifice principle for political expediency however well intended the sacrifice, and their utter inability to make their case in the practical terms of interest to their constituents—and to their neighboring Progressives’ constituents.

The Tea Partiers have made great inroads in the last few years in inserting greater conservatism into the GOP, along with inserting people who will actually hew the GOP to those principles.  Their success was demonstrated in 2010, and confirmed in 2012, other than at the Presidential level.  Their success was both confirmed and expanded down-ticket in the state houses in those 2012 elections.

The Tea Partiers, though, whether in a new national party or through further recovery of the Republican Party, will need to communicate, also.  It isn’t sufficient to make tempestuous—or mild—speeches on the floor of an empty House or Senate and hope the Progressives’ news outlets will give it coverage.  Nor are digital media, important though they are, sufficient.  The new or recovered party needs to get out among the people—in their neighborhoods, their community centers, their diners, their living rooms, and in those of their Progressive constituents’—and explain in practical terms the values of conservative principles.  For this, the Professional Communicators of the GOP need not apply.  They’ve shown their level of competence already.

And the leaders, and membership, of this new or revised national party must understand that this is a struggle for our nation’s soul.  There will be conflict.  There will be demands for compromise of principles.  But they must also understand that if a man has no principles for which he’ll sacrifice, he has no principles.  That means that, sometimes, we have actually to sacrifice, not just bleat.  The present crop of Republican leadership seem to have lost sight of that last, critical part.  And it’s been fatal.

Now is Not the Time

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…to surrender.  Yet that’s what Peter Berkowitz advocates Conservatives do in a recent Wall Street Journal op-ed [emphasis added].

Conservatives should…come to grips with two entrenched realities that pose genuine challenges to liberty, and whose prudent management is critical to the nation’s well-being.

The first entrenched reality is that big government is here to stay.  This is particularly important for libertarians to absorb.  Over the last two hundred years, society and the economy in advanced industrial nations have undergone dramatic transformations. And for three-quarters of a century, the New Deal settlement has been reshaping Americans’ expectations about the nation-state’s reach and role.

…

In these circumstances, conservatives must redouble their efforts to reform sloppy and incompetent government and resist government’s inherent expansionist tendencies and progressivism’s reflexive leveling proclivities.  But to reform sloppy and incompetent government and resist government’s inherent expansionist tendencies and progressivism’s reflexive leveling proclivities reflects a distinctly unconservative refusal to ground political goals in political realities.

Conservatives can and should focus on restraining spending, reducing regulation, reforming the tax code, and generally reining in our sprawling federal government. But conservatives should retire misleading talk of small government. Instead, they should think and speak in terms of limited government.

Yet the only way to “reform sloppy and incompetent government and resist government’s inherent expansionist tendencies and progressivism’s reflexive leveling proclivities” is to shrink the government back to a manageable size—to regain the small, limited government we used to have and that is created in the documents of our social compact.  Limited government and small government are inseparable; they are two sides of the same coin.  Yes, yes, monarchies can be small governments, too.  But they’re not limited.

Accepting the status quo and declining to seek to “reform sloppy and incompetent government and resist government’s inherent expansionist tendencies and progressivism’s reflexive leveling proclivities” by shrinking—limiting—that over-large and out of control government is most assuredly an unconservative thing to do; it is to accede to the modern Liberal’s goal.

Berkowitz seems not recognize the role reversal that has occurred.  The modern Conservative is the 18th Century Liberal—the champion of limited government that protects and enhances individual liberty, individual responsibility, and the resulting national prosperity.  The modern Liberal is the 18th Century Conservative, a man who favored government control over men’s lives on the theory that both the common man was too stupid to see to his own ends and that Government—the King—Knows Better.  The only difference between the modern Liberal and that 18th Century monarchist is the accepted superficial structure of the Big Government that Knows Better.

Berkowitz’ second entrenched reality,

…this one testing social conservatives, is the sexual revolution, perhaps the greatest social revolution in human history[]

is wholly irrelevant without the individual freedom and responsibility available only with small, limited government.  With government determining what our lives should be like and how we should live them, things like the sexual revolution and our responses to them also are for governments to determine.

Even under the shadow of big government and in the wake of the sexual revolution, both libertarians and social conservatives, consistent with their most deeply held beliefs, can and should affirm the dignity of the person and the inseparability of human dignity from individual freedom and self-government. They can and should affirm the dependence of individual freedom and self-government on a thriving civil society, and the paramount importance the Constitution places on maintaining a political framework that secures liberty by limiting government.

Indeed, but a modern Conservative is not a libertarian—and he never was.  Moreover, the “social conservative” is a modern invention, defined less by social mores than by opposition to the mores of the modern Liberal.  And the affirmation of the need of civil society as one means of guaranteeing “individual freedom and self-government” and that “political framework that secures liberty by limiting government” separately and together demand an actual limiting of government—its size and the reach of its powers.

Online Sales Taxes and State Revenues

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Governor Christine Gregoire (D, WA) and Sally Jewell, President and CEO of REI, have an op-ed in a recent Wall Street Journal.  In it, they claim a desire to “level the sales-tax playing field” by imposing a national requirement for online retailers to pay local state sales taxes.

Local retailers—who create jobs for our families, friends and neighbors—have long been required to collect and remit state sales taxes.  By contrast, online vendors that operate from out of state are under no such requirement, even though the taxes are still owed by the consumer in the 45 states that collect sales taxes.  This disparity undermines the competitiveness of the retail marketplace….

They claim a “cost:”

… diverts $23 billion from state and local treasuries every year.

And

For every supposedly tax-free sale, fewer dollars are available for schools, infrastructure, public-safety providers or (in flush times) tax reductions.

Never mind that online retailers also create jobs for “families, friends and neighbors.”  Those families, friends, and neighbors aren’t constituents of any concern.  Never mind the evident lack of tax reductions.  There’s always a good cause on which Democrats—and too many Republicans—should spend OPM.

A clue bat is here, in Gregoire’s and Jewell’s own words, but the bat swung and missed [emphasis added]:

Imagine a customer who walks into a sporting-goods store and asks for help in buying the coolest new running shoes.  An attentive salesperson spends half an hour with the customer to find the most comfortable fit, the best performance and the right price.  Just as the salesperson thinks she has found the ideal pair, the customer decides to make the $100 purchase via smartphone from an online competitor who doesn’t charge sales tax.

They omit another path to “leveling the playing field:” lower their in-state sales and other taxes levied on their brick and mortar businesses.  Watch the increase in economic activity from the suddenly lowered costs to the consumer/taxpayer, which increase will produce a net increase in revenues for the state government.  Besides which, the states (and I’m not just picking on Washington here) have not established they really need all that revenue, that they really are not doing things better left to the private sector.

Public pension systems have become famous for their bloat, for the overly optimistic assumptions state governments make concerning expected rates of return and state bureaucrat investment acumen.  Were these moved from defined benefit to defined contribution, the private sector would do a fine job of managing these public employee retirement programs, for instance.  As a first step in this transition, the state governments should publish widely the return on investment assumptions on which they base their pension benefit and taxpayer contribution requirements; alongside these, state governments should publish their empirically achieved return on investments.

Schools?  Get out of the way of school choice in the hands of the parents.  Pouring more money into the coffers of failing public schools only enriches the unions running those schools; it does nothing for the students damaged by those schools.

Infrastructure?  Stop paying union rates for the construction unless those rates win a truly competitive bid process.

And so on.

It’s for the several states to fix their own gaping potholes on America’s Main Streets.

RINO Surrender?

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Fox News reported over the weekend that Senator Bob Corker (R, TN) now is saying Republicans

should cave to President Barack Obama on [tax rate increases] in order to not only resolve the current crisis but move on and start negotiating spending cuts, which could result in more significant deficit reduction.

Never mind that excessive spending—and runaway entitlements—are part of the current crisis.  Furthermore, with Obama getting his tax increases, there’ll be no spending cuts and no entitlement reform.  Corker knows full well that Democrat promises of spending cuts tomorrow in return for tax rate increases today are worthless.  And he’s begging for surrender anyway.

Corker said this to rationalize his surrender recommendation:

The focus then shifts to entitlements, and maybe that puts us in a place where we actually can do something that really saves this nation[.]

This is…naïve.  If the Republicans surrender on the tax rate increases, why should President Obama believe they won’t surrender on the debt ceiling, on spending cuts, on entitlement reform?  Why should any of the rest of us?

Corker wants to surrender.  That’s his right.  But let him do so as a private citizen.  This RINO needs to be replaced at the next election.  Republican acquiescence with Progressives’ demands over the last 80 years are how we got into this mess in the first place.  And the magnitude of the destructiveness of their demands has been especially manifest these last four years.  Our nation can’t afford any more of those policies.