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Posts Tagged ‘Big Government’

If you are an average American, today is a great day. According to the Tax Foundation, you have finally worked long enough and earned enough money to satisfy the annual tax demands of federal, state, and local governments.

This means you now get to keep any additional income you earn.

That’s the good news. The bad news is that Tax Freedom Day only measures the direct and immediate impact of taxation. It doesn’t measure the overall burden of government. This chart from the Tax Foundation shows that the fiscal burden of government has jumped enormously since the end of the Clinton years.

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Michael Gerson is upset that the GOP budget would trim some money from the foreign aid budget. In his Washington Post column, he regurgitates Obama Administration talking points, claiming that less foreign aid will kill tens of thousands of poor children in Africa.

USAID estimates that reductions proposed in the 2011 House Republican budget would prevent 3 million malaria treatments. …this means about 1.5 million people in need of treatment would not receive it. About 3 percent of untreated malaria infections progress to severe malaria — affecting 45,000 children. Of those children, 60 to 73 percent will not survive, yielding 27,000 to 30,000 deaths. …global health programs are not analogous to many other categories of federal spending, such as job training programs or support for public television. A child either receives malaria treatment or does not. The resulting risk of death is quantifiable. The outcome of returning to 2008 spending levels, as Republicans propose, is predictable. …One can be a budget cutter and still take exception to cuts at the expense of the most vulnerable people on earth. …Cuts for global health programs should be of special concern to those of us who consider ourselves pro-life. No pro-life member of Congress could support welfare savings by paying for abortions.

Gerson’s moral preening is a bit tedious. He’s a guy who presumably is part of top 2 percent of income earners in America. And I bet his family’s overall level of consumption must be in the top 1 percent worldwide. Yet he wants to take money from the rest of us, with our lower living standards, so he can feel morally superior.

Having met Gerson a couple of times, I don’t doubt his sincerity, and I’m guessing he probably gives a lot of money to charity. Moreover, I doubt he personally benefits from more spending in these areas (i.e., he’s not an overpaid bureaucrat, a consultant with a fat contract from USAID, or anything like that).

But I still have a hard time taking him seriously because he thinks the coercive power of government should be used to spend money in ways that he finds desirable – even if that means that people with much lower levels of income and wealth are picking up the tab for something that Gerson wants.

My Cato colleague, Roger Pilon, had a column in yesterday’s Wall Street Journal examining the broader issue of whether federal spending is an appropriate way of fulfilling charitable impulses. As Roger notes, it’s not charity when you make other people pay for things that you think are important.

‘What Would Jesus Cut?” So read the headline of a full-page ad published in Politico last month by Sojourners, the progressive evangelical Christian group. Urging readers to sign a petition asking Congress “to oppose any budget proposal that increases military spending while cutting domestic and international programs that benefit the poor, especially children,” it was the opening salvo of a campaign to recast the budget battle as a morality play.

Not to be outdone, Catholics for Choice took to Politico on Tuesday to run “An Open Letter from Catholic State Legislators to Our Colleagues in the US Congress.” The letter condemned “policies that unfairly target the least among us,” echoing a blogger at the National Catholic Reporter who averred last month that the federal budget is, after all, “a moral document.”

…The budget battle is thus replete with moral implications far more basic than Sojourners and Catholics for Choice seem to imagine. They ask, implicitly, how “we” should spend “our” money, as though we were one big family quarreling over our collective assets. We’re not. We’re a constitutional republic, populated by discrete individuals, each with our own interests. Their question socializes us and our wherewithal. The Framers’ Constitution freed us to make our own individual choices.

The irony is that Jesus, properly understood, saw this clearly—both when he asked us to render unto Caesar what is Caesar’s and unto God what is God’s, and when he spoke of the Good Samaritan. The ads’ signers imagine that the Good Samaritan parable instructs us to attend to the afflicted through the coercive government programs of the modern welfare state. It does not. The Good Samaritan is virtuous not because he helps the fallen through the force of law but because he does so voluntarily, which he can do only if he has the right to freely choose the good, or not.

Americans are a generous people. They will help the less fortunate if left free to do so. What they resent is being forced to do good—and in ways that are not only inefficient but impose massive debts upon their children. That’s not the way free people help the young and less fortunate.

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Just days after the introduction of a very good plan by the Chairman of the House Budget Committee, leaders from the Republican Study Committee in the House of Representatives have introduced an even better plan.

In a previous post, I compared spending levels from the Obama budget and the Ryan budget and showed that the burden of federal spending would rise much faster if the White House plan was adopted.

If the goal is to restrain government, the RSC blueprint is the best of all worlds. As the chart illustrates, government only grows by an average of 1.7 percent annually with that plan, compared to an average of 2.8 percent growth under Ryan’s good budget and 4.7 percent average growth with Obama’s head-in-the-sand proposal.

According to the numbers released by the Republican Study Committee, the burden of federal spending would fall to about 18 percent of GDP after 10 years if the RSC plan is implemented.

While that’s a great improvement compared to today, the federal government would still consume as much of the economy as it did when Bill Clinton left office.

Last but not least, for those who are focused on fiscal balance rather than the size of government, this is the only plan that produces a balanced budget. Indeed, red ink disappears in just eight years.

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Forget all this talk about giant “spending cuts” of $6.2 trillion in Congressman Ryan’s budget plan. That’s music to my ears, but it’s also based on Washington’s bizarre budget math – i.e., the screwy system where politicians can increase spending but say they’re cutting spending because the budget could have grown even faster.

What really matters is how much money government is spending this year compared to how much money will be spent in subsequent years. Using this common-sense benchmark, let’s look at two competing proposals.

According to the new numbers released today, Congressman Ryan’s budget plan will result in government growing, on average, by almost 2.8 percent annually over the next 10 years.

President Obama’s budget plan, by contrast, would increase the burden of government spending by an average of nearly 4.7 percent each year.

This chart compares the two budget plans. Because Chairman Ryan does not let spending grow as rapidly, cumulative spending over that period will be $6.2 billion less than it would be based on the President’s plan. That’s an impressive amount of money that taxpayers will save if Ryan is successful, but it’s not a spending cut.

Not surprisingly, the big spenders in Washington are claiming that the “spending cuts” in Representative Ryan’s budget are “harsh” and “extreme.” But Ryan’s proposal would allow the budget to grow faster than inflation, which is projected to average less than 2.1 percent annually over the 10-year period.

Good fiscal policy is very simple. Restrain the size and scope of government so that outlays grow slower than the private sector. If that happens, the burden of federal spending will shrink as a share of economic output

That’s exactly what happens with Ryan’s plan. By 2018, the federal budget will drop to less than 20 percent of GDP. That still doesn’t bring us back to where we were at the end of the fiscally responsible Clinton years, when federal spending consumed only 18.2 percent of GDP. But after a 10-year spending binge under Bush and Obama, Congressman Ryan’s plan would move America back toward fiscal responsibility.

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The left already is wailing about the Medicare and Medicaid reforms in Congressman Paul Ryan’s budget. They don’t have any solutions of their own for these bankrupt programs, but they hope to scare voters in the short run and don’t seem to care about the nation in the long run.

But, as Margaret Thatcher famously warned, the problem with socialism is that sooner or later you run out of other people’s money. With that in mind, it’s quite appropriate to cite a story about another needless death resulting from the inefficient U.K. government-run health care system.

But what makes this story so remarkable is that the person who died was part of the upper-level bureaucracy. When folks relatively high in the pecking order start suffering from needless death and wind up having their surgeries delayed four times, you know it’s just a matter of time before the system collapses.

A former NHS director died after waiting for nine months for an operation – at her own hospital. Margaret Hutchon, a former mayor, had been waiting since last June for a follow-up stomach operation at Broomfield Hospital in Chelmsford, Essex. But her appointments to go under the knife were cancelled four times and she barely regained consciousness after finally having surgery. Her devastated husband, Jim, is now demanding answers from Mid Essex Hospital Services NHS Trust – the organisation where his wife had served as a non-executive member of the board of directors.

Keep in mind that this is America’s future if we don’t reform entitlements. That’s what the leftist critics of Ryan’s plan aren’t telling you.

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The Chairman of the House Budget Committee, Congressman Paul Ryan of Wisconsin, will be unveiling his FY2012 budget tomorrow. Not all the details are public information, but what we do know is very encouraging.

Ryan’s plan is a broad reform package, including limits on so-called discretionary spending, limits on excessive pay for federal bureaucrats, and steep reductions in corporate welfare.

But the two most exciting parts are entitlement reform and tax reform. Ryan’s proposals would simultaneously address the long-run threat of bloated government and put in place tax policies that will boost growth and improve competitiveness.

1. The long-run fiscal threat to America is entitlement spending. Ryan’s plan will address this crisis by block-granting Medicaid to the states (repeating the success of the welfare reform legislation of the 1990s) and transforming Medicare for future retirees into a “premium-support” plan (similar to what was proposed as part of the bipartisan Domenici-Rivlin Debt Reduction Task Force).

2. America’s tax system is a complicated disgrace that manages to both undermine growth and promote corruption. The answer is a simple and fair flat tax, and Ryan’s plan will take an important step in that direction with lower tax rates, less double taxation of saving and investment, and fewer distorting loopholes.

One potential criticism is that the plan reportedly will not balance the budget within 10 years, at least based on the antiquated and inaccurate scoring systems used by the Congressional Budget Office and Joint Committee on Taxation. While I would prefer more spending reductions, I’m not overly fixated on getting to balance with 10 years.

What matters most is “bending the cost curve” of government. Obama’s budget leaves government on auto-pilot and leaves America on a path to becoming a decrepit European-style welfare state. Ryan’s budget, by contrast, would shrink the burden of federal spending relative to the productive sector of the economy.

Along with other Cato colleagues, I’ll have more analysis of the plan when it is officially released.

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This Thursday, April 7, Senator Corker of Tennessee will be the opening speaker at the Cato Institute’s conference on “The Economic Impact of Government Spending” (an event that is free and open to the public, so register here if you want to attend).

The Senator will be discussing his proposal to cap and then gradually reduce the burden of government spending, measured as a share of gross domestic product. With federal outlays currently consuming about 25 percent of economic output, excessive federal spending is America’s main fiscal problem.

Corker’s proposal would put federal spending on a 10-year glide path so that it eventually shrinks to 20.6 percent of GDP. This chart, from the Senator’s upcoming presentation, shows that government will grow at a much slower pace as a result of this restraint. Indeed, total savings over the 10-year period, measured against a baseline that assumes the federal government is left on auto-pilot, would exceed $5 trillion.There are two things to admire about Senator Corker’s CAP plan.

First, he correctly understands that the problem is the size of government. As explained in this video, spending is the problem and deficits are a symptom of that problem.

Unfortunately, many policy makers focus on the budget deficit, which often makes them susceptible to misguided policies such as higher taxes. At best, such an approach merely substitutes one bad way of financing federal spending with another bad way of financing federal spending. And it’s much more likely that higher taxes will simply lead to more spending, thus exacerbating the real problem.

Second, Corker’s legislation has a real enforcement mechanism. If Congress fails to produce a budget that meets the annual spending cap, there is a “sequester” provision that automatically takes a slice out of almost every federal program.

Modeled after a similar provision in the successful Gramm-Rudman-Hollings law of the 1980s, this sequester puts real teeth in the CAP Act and ensures that the burden of government spending actually would be reduced.

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