The Mandate of the 112th Congress

This week, a new Congress has been sworn in (well, mostly), with higher expectations by conservatives than any Congress in at least 2 years.  And the first week has been full of a couple of  good things, and a lot of good symbolism.  One of the first things to happen was a reading of the Constitution on the floor of the House.  One of the first bills that the House will pass is a repeal of Obamacare.  A new House rule will require every bill to refer to the part of the Constitution where they were authorized, and other House rules will open up debate on amendments and expand floor debate in general.  I support all of these things, but I don't care that much.  While they are either small positive steps or good symbolism, they don't mean that much. 

We have a $14 Trillion national debt, and a $1.3 Trillion national deficit.  Japan and China, our two major creditors, are fighting their own fiscal issues, and have been unwilling or unable to buy very many of our bonds.  The deficit has been financed by major US banks buying Treasury bonds, with money borrowed from the Fed at 0.25% interest rate, and the Quantitative Easing by the Fed itself.  Both of these are inflationary measures with slow effects, because the money goes to the Government first.  The debt and the deficit is doing major harm to the economy.  Republicans have promised to cut $100 Billion in discretionary spending. Let's say that they do, and that the economy really starts to pick up steam, and grows by 3% in 2010 (increases tax receipts by about $65 Billion).  And lets say that Obama has a rare fit of sanity and brings all the troops home from Iraq and Afghanistan (saves $100 Billion).  Even with all of that, and the wailing and gnashing of teeth from the media about lost medical science grants and bridges falling down and dumb children who can't learn without grants from the Department of Education, we'd still have $1 Trillion deficit.

And you can't solve the problem with taxes either.  It is unlikely that the new Congress will recommend any tax increases (even those that involve lower, simpler tax rates, like Reagan signed into law), but even if so, the historical revenue limit says that would be limited to about 19% of GDP, and they're about 17% of GDP now.  So the maximum increase in tax receipts would be about $300 Billion.  If they did all of that, plus the reductions in spending mentioned above, there's still a $700 Billion deficit, and it's getting worse with every retired baby boomer.  A country with a $14 Trillion debt and a $700 Billion deficit is in better shape than one with a $1.3 Trillion deficit, but it is still headed for default.

The new Republican-led house must pass major reforms to get the country's checkbook in order.  They must get Social Security and especially Medicare on the table.  They must start talking about things like Medicare vouchers, and admitting to baby boomers that they won't be able to give them what was promised.  This won't be easy, but with everyone from Ron Paul to Paul Ryan to Paul Volcker talking about the dire situation of the national debt (in Paul Krugman bizarroland, we need a bigger deficit and I don't know what RuPaul thinks), it is possible.  It will take compromise, but any compromise must still lead to financial solvency. 

To the 112th Congress, I must say that I like the talk so far, and I like the symbolism.  But if the American people wanted great talk and symbolism, we would have elected Glenn Beck and Lee Greenwood.  Let's see some results.

Let the Bush Tax Cuts Expire

I'm not for raising income tax rates.  I'm almost never for raising any taxes.  If a government entity really doesn't have enough money, and they can't raise enough money with bake sales to build their bombs, roads, sewers, or schools, then maybe, but that instance is so rare that it's not really worth discussing. 

Besides that, letting the Bush tax cuts expire is counterproductive.  Raising taxes on just the rich from 35% to 39.6% would increase revenue little, if any.  The wealthy have the most elastic wages of all income groups.  If you raise taxes on someone living paycheck-to-paycheck, you can get more revenue, because not only will they have to pay the taxes, they will have to work more to make up the lost income.  The wealthy are much more likely to be in a position to choose whether or to absorb the hit, increase their income (through working more or whatever) to make up for it, or reduce their income due to the reduced incentive.  A 4.6% tax increase wouldn't reduce incentives for very many wealthy people, but the marginal ones might make a difference in this recession.

All that being said, the Republicans in Congress should let Bush tax cuts expire.  Basically, the agreement has been to extend the Bush tax cuts by two years, spend a lot of Federal dollars on stimulus measures that the President has wanted for some time, and add enough pork to buy off enough Democratic Congresscritters to get it passed.  This isn't a good deal.  Republican voters should demand more.  Sure, taxes will go up January 1, but if the newly-elected Republican House gets on it and passes a better tax bill immediately, workers might only see the taxes for one paycheck.  If only there were a ready-made tax plan that reduced rates for almost everyone, would have a stimulative effect on the economy, and reduced the deficit...

... Oh yeah, the plan from the President's Debt Commission.  In a rare fit of sanity, the White House appointed a debt commission that ended up recommending a flatter income tax system with tax brackets of 9%, 15%, and 24%, and a corporate income tax rate reduced from an insane 35% to a still uncompetitive, but less onerous 24%.  It'll increase revenue by including capital gains as income, and significantly reducing the number of deductions, but almost every taxpayer will end up taking home more.  Also, it would greatly simplify tax returns.  What's not to like?  It has the backing of a bipartisan group from Tom Coburn to Dick Durbin, and the President even supports it.  (My guess is only because he commissioned it, but I don't know.)  House Republicans should be able to pass it as a package with an up-or-down vote, with no pork, and while the Senate may need to buy off some votes with pork, it won't be the crapfest that the Bush tax cut extension has become.  Let's see if Republicans have learned their lesson.

How the new Republican Congress can work with President Obama

Wednesday morning, we will wake up to a House of Representatives and potentially a Senate taken over by Republicans.  Republicans have opposed all of the unpopular programs that President Obama has promoted and will be rewarded by the American people.  Democrats and the liberal talking point repeaters have reminded everyone that will listen over and over that opposition to unpopular programs is not governing, and a Republican-majority Congress will have to govern.  They're right.  But it should be noted that the American people are not sending this new Congress to add Federal programs and laws and regulations, they're sending them to cut the Federal government and repeal laws and regulations.  This election is a mandate to increase freedom.  But with divided government, to make those cuts and repeal those laws and regulations, it will take bipartisanship.  Speaker Boehner (or whoever) will have to work with President Obama, Democrats in the Senate (even if Republicans do take back the Senate, it will be narrow), and probably some House Democrats.  To get this started on the right foot, I have a simple proposal:  Make the cuts that the Democrats ask for first.  Go to the President, and Democrats in Congress, and ask for a list of government programs and bureaucracies to cut (whole or partial), and laws and regulations to repeal.  Everything should be on the table.  Make those cuts first.  This won't be enough, but it will be a start, and a start on the right foot.  If Republicans let Democrats take some credit for the low-hanging fruit cuts, they should be more willing to work with Republicans when the cuts get harder.  The current fiscal and economic mess is a hole that was dug in a bipartisan fashion.  We'll need bipartisanship to get out of it.

Predicting a $2,000,000,000,000 Budget - Update

On January 7, I made what I thought then was a bold prediction, that the budget deficit for Fiscal Year 2009 would be $2 Trillion. Today, the CBO projects a $1.9 Trillion budget deficit for Fiscal Year 2009. Odds are that many more stimulus packages are on the way. I'd like to revise my prediction up to an immoral $2.5 Trillion. The words of Senator Tom Coburn are worth repeating: “The greatest moral issue of our time isn’t abortion, it’s robbing our next generation of opportunity. You’re going to save a child from being aborted so they can be born into a debtor’s prison?” However, my response to the Good Doctor is that at the rate we are going, we may not be able to afford to finance debtor's prisons. Federal bankruptcy is looking more and more likely every day.

Pat Buchanan: Pitchfork Time

When one of the Pitchfork and Musket Junta's favorite public figures, Pat Buchanan, writes an article called Pitchfork Time, the Junta takes notice. This article is a good one. Here is an excerpt:

In his campaign and inaugural address, Barack Obama cast himself as a moderate man seeking common ground with conservatives. Yet, his budget calls for the radical restructuring of the U.S. economy, a sweeping redistribution of power and wealth to government and Democratic constituencies. It is a declaration of war on the Right. The real Obama has stood up, and lived up to his ranking as the most left-wing member of the United States Senate....
...Where the U.S. government usually consumes 21 percent of gross domestic product, this Obama budget spends 28 percent in 2009 and runs a deficit of $1.75 trillion, or 12.7 percent of GDP. That is four times the largest deficit of George W. Bush and twice as large a share of the economy as any deficit run since World War II. Add that 28 percent of GDP spent by the U.S. government to the 12 percent spent by states, counties and cities, and government will consume 40 percent of the economy in 2009.
We are not "headed down the road to socialism." We are there.

Buchanan concludes his article this way:

The president says he is gearing up for a fight on his budget.
Good. Let's give him one.

I'm with you, Pat. My pitchfork is ready.

The Most Egregious Act of Generational Theft in History

Question: What's the difference between a Donkey and a RINO?

Answer: About $100,000,000,000 of future taxpayers' money. That's the amount of money that Democrats cut out of the $800+ Billion pork/welfare/state bailout/Medicaid/public art/maybe a little bit of infrastructure bill to get Arlen Specter, Susan Collins, and Olympia Snowe to jump in with both feet. The bill that Congresscritters are calling a stimulus bill, despite the fact that Congressional Budget Office calls it harmful to the economy over the long term. (I figure that John McCain was holding out for another $15).

You've seen them in action. 61% of the Senate, and 56% of the House will shackle an enormous national mortgage to the the feet of their children to grow their own power. It is taxation without representation.



(Thread title borrowed from Tom Coburn's excellent op-ed on the same topic.)

Predicting a $2,000,000,000,000 Deficit

You heard it here first: the United States Government's Federal Deficit for fiscal year 2009 (ending 9/30) will be much closer to $2 Trillion than $1 Trillion. As bad as Bush's budgets were, Obama's first year will be worse than any three of Bush's. He has already warned us of a greater than 1 trillion dollar deficit, which will Tom Coburn predicts will be $1.6 Trillion. Add to that $290 Billion for the first 9 months of Obama's stimulus bill, $100 Billion or so for Iraq and Afghanistan, and a conservative $100 Billion to bail out various industries that will come to Washington with their hands out (I expect GM and Chrysler to be back, builders, and God knows who else). That brings my estimate to a staggering $2.1 Trillion dollars. As Senator Coburn has said, “The greatest moral issue of our time isn’t abortion, it’s robbing our next generation of opportunity. You’re going to save a child from being aborted so they can be born into a debtor’s prison?” As I wrote Monday, the "Keynesian multiplier" is now 0.2. We are saddling our children with $2 Trillion more debt to grow (or more likely, slow the collapse of) the economy by $0.4 Trillion. That is immoral.

Two related side notes:
CNN will air I.O.U.S.A. this weekend. This is the most important documentary in years, and it's well done.

Proving that he is truly insane, Harry Reid is repeating his try to pass a Coburn Omnibus bill. Senator Coburn has a really simple litmus test for bills that he'll obstruct. If a bill spends money on a duplicated program, he will hold obstruct it by any means necessary. Reid is trying to combine a bunch of bills that have been held up by Dr. Coburn to pass. Call your Senators and ask them to stand with the honorable Dr. No and against Dirty Harry.