December 11, 2018

$1.1 trillion budget deal doesn’t change fiscal cliff

Photo: Jacquelyn Martin/AP

Photo: Jacquelyn Martin/AP

TAMPA, January 15, 2014 – The Associated Press reported today that Republicans and Democrats are ready to support a $1.1 trillion spending bill that would fund the federal government through its current fiscal year, which ends September 30, 2014. Citing a perceived mandate from voters to put aside their differences, Congress largely abandoned the superficial cuts remaining from sequestration.

Those widely reported “cuts” weren’t really decreases in spending. They were merely promises to increase spending less than planned.

Out in the real world, when an employee making $18.00 per hour gets a 5% pay cut, his new hourly wage is $17.10. That’s not how it works in Washington, D.C. When a federal program funded at $3 billion in 2013 is “cut,” it’s funded for $3.1 billion in 2014 instead of $3.2 billion.

What have been called “draconian cuts” and “gutting the military” by hysterical politicians and media are, for the most part, increases in spending that beneficiaries deem inadequate. Now, even that infinitesimal restraint is gone.

Depending upon which poll one cites and the wording of the questions in it, there is some evidence that the public was unhappy with last autumn’s government shutdown and desires more “bipartisanship” in Congress. Representatives on both sides of the aisle were eager to comply in an election year.

“There’s a desire to show people we can do our job,” said Rep. Mike Simpson, R-Idaho.

However, no poll attempts to separate net taxpayers from net tax collectors. It shouldn’t surprise anyone that the latter group would be unhappy with any interruption in government spending. A poll exclusively querying the former group may have yielded far different results.

Regardless of how any part of the public feels about federal spending, it is going to be cut dramatically. The fiscal realities that prompted sequestration and the shutdown have not gone away. Playing nice in Congress hasn’t changed that.

The federal government can only service its $16 trillion debt while its interest rate remains artificially low. The Federal Reserve has attempted to keep it near zero since 2008. It has only been successful because other buyers of federal debt have continued to buy while the Fed has pumped liquidity into the economy with its own purchases.

Should China, the Fed or any other buyer of federal debt cease or even significantly decrease its purchases, interest rates will begin to rise.

When interest rates rise on home mortgages, it hurts. When interest rates rise on $16 trillion, chaos ensues.

According to the White House’s fiscal year 2014 Budget proposal, interest in fiscal year 2013 was $220 billion or 6.2% of all federal spending. That was with interest rates below one half of one percent. It doesn’t take a Nobel Laureate to imagine what happens if the rate begins creeping up to the modest 3-6% levels of the last decade, much less the double digit rates accompanying the crises of the late 1970’s and early 80’s. Annual interest due on federal debt would increase hundreds of millions of dollars.

That would amount to de facto cuts in federal spending on everything else. We’re not talking about make believe “cuts” where spending is still more than the year before. We’re talking about hundreds of billions of dollars less available to spend than the year before. We’re talking about cuts.

Increasing tax revenues isn’t the answer because taxes revenues are already maxed out. The only real debate left on tax rates is whether the top rate on the wealthiest should be 33% or 39%, which is inconsequential to the debt problem. If tax rates are raised significantly overall, revenues go down. That’s already been proven.

So, the federal government tiptoes forward on a fiscal tightrope, dependent upon a set of artificially-created conditions that could change at any time. An overpriced stock market could crash on its own. China could decide to cease or decrease its debt purchases. A natural disaster could occur. Any of these could start the dominoes falling towards higher interest rates, recession for the economy and an unserviceable federal debt.

Even if none of the above occur, the end is inevitable. If printing money to buy your own debt were sustainable, the government could legalize counterfeiting and everyone would be rich. Sooner or later, economic reality will assert itself and the United States will be forced to consume less than it produces. The only question on federal spending is whether it will decrease due to a deliberate act of Congress or the way Greece’s did.

The current budget deal may provide an answer.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Romney and Republicans live in a dream world

TAMPA, September 20, 2012 – Just when you thought that nothing interesting could come out of this presidential election, Mitt Romney shocked the world. He did the last thing that any rational person could expect.

He told the truth. Of course, his poll numbers immediately plummeted.

“47 percent of Americans pay no income tax. So, our message of low taxes doesn’t connect,” said Romney.

What isn’t true is what most Republican voters believe. They believe that electing Romney as president or more Republicans in Congress will result in spending cuts that will justify lower income taxes.

Republicans live in a dream world where the $85 billion Food Stamp program or the $9.6 billion Temporary Assistance for Needy Families (TANF) program causes $1.3 trillion deficits (that’s one thousand three hundred billion). If only those lazy people would get off welfare and get a job, we’d have that $9.6 billion back and…

While portraying Obama as a socialist for supposedly driving more people into government dependence, Republicans openly campaign for “preserving and protecting” Social Security and Medicare, as if those trillion dollar programs ($1.23 trillion combined in 2011) are somehow different from TANF (a.k.a. “welfare”).

Continue at Communities@ Washington Times…

A Modest Proposal for Interposition

So, the Tea Party Congress is seated and the “revolution” is underway. After voting to repeal Obamacare, a largely symbolic gesture that has no hope of passing in the Senate or overturning a presidential veto, the new Congress has outlined its plan to attack the federal deficit. The result: A proposal to cut $100 billion in “non-defense discretionary spending.” While that may sound like a lot of money to someone who hasn’t taken a gander at the federal budget in about 50 years, it amounts to a little under seven percent of this year’s deficit.

That’s right. Seven percent of the deficit, not the budget. In other words, the tea parties, the stormy town hall meetings, the supposed “mandate from the people” to cut the size and scope of the federal government will result in the government spending $1,380 billion more than it collects in taxes this year instead of $1,480 billion more. Worse yet, the same people who “stormed the Bastille” and threw the former bums out will defend this proposal with half-hearted panaceas like “you have to start somewhere.”

However, if history has taught us anything, it is that this isn’t “just the beginning,” with more substantial cuts to follow. This will be the high water mark as far as reduction in government spending is concerned. We should expect that by the time that this proposal goes through the process of back room deals and compromises with special interest-motivated committee members, that the $100 billion number will be reduced by at least half, perhaps more. They may even end up increasing federal spending. Would anyone honestly be surprised?

It has been obvious for at least a century that “throwing the bums out” doesn’t make a lick of difference in the behavior of our elected officials. Now we know that staging protests, waving signs, raising a ruckus at town hall meetings, and then throwing the bums out doesn’t make a difference either. Clearly, it is time to stop doing the same thing over and over again and expecting a different result.

The nullification movement has been decried by the left as right wing extremism at its most dangerous, despite the fact that it was conceived and introduced by Thomas Jefferson, the father of the Democratic Party. However, I have a proposal that I believe both conservative and liberal Americans would find very reasonable. There is a way to use the idea of state interposition to force the Congress to at least listen to its constituents. Let’s put the idea of interposition together with another of Jefferson’s ideas, drafted by him in a resolution of the Continental Congress in 1775 in response to Lord North’s Conciliatory Proposal.

“That this privilege of giving or of withholding our monies is an important barrier against the undue exertion of prerogative, which if left altogether without our control may be excercised to our great oppression; and all history shews how efficacious is its intercession for redress of greivances and reestablishment of rights, and how improvident it would be to part with so powerful a mediator.”

Let me be clear. As opposed as I am to all taxation, I am not suggesting that one dollar be cut from the existing tax schedule for 2011. What I am suggesting is that the people exercise their right to withhold their taxes until the Congress does what the people have clearly mandated them to do – balance the budget. A seven percent cut in the deficit just isn’t enough and we are running out of time. We can argue later about the role of government and the wars in the Middle East and Social Security and the rest. Right now we have to take away this Congress’ ability to borrow any more money or we’re going to be in the same boat as Greece.

I am not calling upon people to exercise civil disobedience or rebel. The stakes are high in either of those endeavors and we have other options. I am calling upon people to utilize their state legislatures to support them in withholding their taxes until a balanced budget is passed by Congress. As much as I’d personally like to see them withhold their tax money permanently, they would then release the funds to the federal government.

This would be accomplished in the same way as several other recent nullification/interposition efforts. The state legislatures would pass a law indicating that no person or business in their state could be prosecuted or fined by the federal government for failing to file an income tax return or failing to pay their quarterly payroll tax deposits, so long as said filings and payments were made within sixty days of the Congress passing a balanced federal budget. For those who still trust the people less than they do the government, a stipulation could be added that the funds go into escrow and be audited by the states, if necessary.

This would accomplish two things. First, it would reestablish exactly who works for who in this relationship. Obviously, elections have failed to do that. More importantly, it would work. The blind fear that would grip our legislators when they realize that the party is really over would at least scare them sober enough to balance what would still be an over $2 trillion budget. While it wouldn’t solve our long-term problems, that truly would be a start.

Bloated governments are imploding all over the world and ours is poised to do likewise for all of the same reasons. Now that we have seen what “extremism” really looks like in Greece, Egypt, and Tunisia, this proposal should strike any rational person as reasonable and moderate. We do not need a rebellion or violence to balance the federal budget – just a little adult supervision.

Check out Tom Mullen’s hit book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. Right Here!

Home

© Thomas Mullen 2011

>Is the Freedom Movement Really Ready for Freedom?

>Ron Paul’s campaign for the Republican presidential nomination has ignited a revolution. For the first time in a century, a real movement against the entrenched system in Washington has arisen, and it is a movement of capable people who don’t just complain – they get things done. After a complete debacle for the neo-cons in Nevada, the Republican Party has actually had to mobilize itself in several states to prevent Ron Paul supporters from taking over state conventions and voting in their own delegates. They have resorted to breaking their own rules to prevent a party takeover. This is a sign that their political days are numbered.

Almost universally, Ron Paul supporters oppose the Iraq war. Whether conservative, liberal, moderate, or independent, Ron Paul has brought together a coalition that recognizes that the United States government had no right to invade Iraq. Regardless of their positions on other issues, people of all parties in this movement deserve high marks for taking a stand against the Iraq war.

Similarly, we are almost universally in agreement in our opposition to the expansion of executive powers, especially insofar as they have allowed the government to compromise our privacy and to threaten habeas corpus. These are direct attacks on our lives, and we have been right to defend ourselves against them. It is truly the good fight, and we will win.

So, we are certainly united in what we are against, but are we united in what we are for? Are we all really for free markets, for truly limited government, and for individual liberty? Do we all really understand what that means, and what responsibility that places upon us? Are we really ready to live in a truly free country?

Certainly the first inclination is to answer “yes” to all of the above. However, I wonder if the majority of the freedom movement is really ready for life without big government.

Are we ready to live without Medicare and Medicaid, and depend on the free market to determine the distribution of medical care? Supporting the programs means taking the money for them at gunpoint from our fellow citizens, so the moral question is easily answered. Sound economic theory as well as historical evidence indicates that the poor and elderly would have more access and higher quality care without these programs. Are we ready to trust the free market and private charities with medical care for the poor and elderly?

Are we ready to live life without a “safety net?” Like medical care, the benefits of traditional welfare are also funded by the coercive extortion of money. Similar appeals to economic theory and history prove that the poor would be less numerous and would again experience an improving quality of life without these programs. However, are we ready to admit that no one has the right to even the basic necessities of life?

Are we ready to take full responsibility to support ourselves for our entire lives? Despite the government’s official fairy tale, there is no “trust fund” for social security. The money collected from taxpayers today goes directly to pay today’s beneficiaries. While the program actually runs a surplus (although it will soon become insolvent), the government spends 100% of that surplus on other budget items, as it always has. At the end of the day, social security is just another government redistribution program funded by extorted money. Any financial analysis would show that the money collected from working Americans for social security would be better invested almost anywhere else. Are we ready to admit that no one has the right to retirement benefits, and enter our golden years without social security?

Here is one that even I have trouble overriding my own programming on. Are we ready to get government completely out of education? Are we ready to admit that, like medical care or any other good or service that is produced by somebody else, that no one has a right to education? Are we ready to trust the free market for this as well?

To the average American, the questions I have asked would sound like complete lunacy. However, to someone who understands and accepts the principles of liberty and wishes to live by them, I argue that the answer to every one of those questions must be “yes.” Reason, history, and economics all tell us that these programs are immoral and destructive, not only to society as a whole, but even to the recipients of the benefits. Only our conditioned fear tells us that we cannot live without them. Are we ready to overcome that fear?

There are certainly many more intrusions by the federal government into our private lives, but I have chosen these programs because this is where the money is. Despite what we are led to believe, the Iraq and Afghanistan wars amount to only 5% of the $3 trillion budget. Ending the wars in Iraq and Afghanistan would eliminate less than half of this year’s deficit. The entire military budget makes up only 20%, and some of that would still be necessary even if we brought our troops home from all 130 countries that they are stationed in.

By contrast, Medicare, Medicaid, Social Security, Welfare, and the Department of Education combine for over 55% of our $3 trillion budget (The Department of Education is only 2%, but after that no other expenditure has a significant percentage at all). Without them, there would be no deficit. Without these programs we could eliminate the income tax and begin paying down the national debt at the same time. The financial benefits to our country would be staggering.
I am interested in the answers that CDR members would give to the questions I’ve posed. Can you answer every one of them yes? If not, I would like to hear your arguments supporting why you cannot, and specifically how you would reconcile the programs with the principles of individual liberty, property rights, and the proper limits of government. In a free society, how does government derive the right to seize the funding for these programs from its citizens? Can we ever really be free while they exist?

Home