Cut federal spending?

What are the odds that Democrats would actually adopt Republican Senator Tom Coburn's amendment? I won't be holding my breath:

The Senate is debating a $1.9 trillion increase in the nation's debt limit that would lift Treasury's legal borrowing ceiling to $14.3 trillion. After a $290 billion debt-limit raise last month, this giant new increase is intended to get Democrats past November's election without another reminder to voters of how much debt their spending is piling up.

Mr. Coburn has a better idea: Cut spending to a level that would allow the government to stay beneath the current debt ceiling for a few more months. President Obama promised in his campaign to eliminate "unnecessary redundancy" in government, so Mr. Coburn is calling for at least $20 billion in spending cuts on programs that are duplicated across federal agencies. That's about 4% of nondefense discretionary spending, and Mr. Coburn's amendment identifies at least 640 programs that could be consolidated.

A few examples: A 2009 Government Accountability Office report found 69 early education programs, administered by nine different agencies. A 2003 GAO report found 44 job training programs, also administered by nine agencies. The Department of Education runs 14 separate programs for foreign study exchanges. Taxpayers spend more than $300 million annually on at least nine Agriculture Department programs to develop biofuels. Too bad we can't pay for all this with wood chips.

Obamanomics and the Dread of Inflation

Greg Mankiw posted the growth forecasts from the Obama administration (in Red) and a competing forecast from a group of private economists (in Blue). It should be no surprise that the Obama administration forecasts are far more optimistic that the "Blue Chip" private forecasters; administrations are notorious for forecasting rosy scenarios when their economic plans are concerned; politics is a strong influence and the Obama regime is no different than other administrations before it.

2009: -1.2% -1.9%
2010: +3.2% +2.1%
2011: +4.0% +2.9%
2012: +4.6% +2.9%
2013: +4.2% +2.8%

Needless to say, I agree with the sober forecast of the private economists. If and when the economy does have some growth, it will be slight and hardly robust due to the massive spending in the public sector. In my opinion, the biggest threat to the economy will be high inflation once there is a return of confidence and some GDP growth. The M2 money supply has been growing at a pace that has never been seen before--the printing presses are working hard printing money in order to pay for all of the bailouts and for Obama's kooky stimulus scheme. This will not end well.

And the rumba line just gets a little longer

Now commercial real estate developers are asking the government for financial assistance. The line for a taxpayer handout just keeps getting longer, folks. As predicted, a bad precedent was set when the Feds decided to bailout Wall Street.

We need a "Car Czar" like we need bullets to our heads

Despite polls showing that most Americans have an unfavorable view of bailing out GM, Ford, and Chrysler, Democratic congressional leaders and White House officials "agreed in principle Tuesday on a $15 billion bailout of U.S. automakers that would give the government extraordinary power to restructure the failing industry." Perfect. While our political class is busy spending our tax dollars on bad businesses, maybe we can also have ourselves an "energy czar" to boot

Kling on Freddie and Fannie and the Recent History of the U.S. Housing Market

Quite possibly one of the most educational podcasts that I have listened to regarding the debacle of Fannie Mae and Freddie Mac is this one on Econ Talk with Russell Roberts and Arnold Kling. The discussion covers all the intricacies and mechanisms between government and these large congress-created behemoths. If you don’t believe that government had a hand in the collapse of these two GSE’s (government sponsored enterprises), take some time and listen in.

U.S. spending obligations surge

Don’t let anybody tell you that the 110^th Congress hasn’t done anything lately. Oh, they have and big time. They have managed to create the sort of spending from the creation of Federal programs that would make a spendthrift blush. I hope Americans know what they are getting themselves into when they jaunt into those voting booths in November. Because if we get more massive spending programs from the next administration, there’s going to be a lot of financial pain to spread around and it won’t be just for the “rich.”

From CSM: WASHINGTON--The Democratic-controlled Congress and the Bush administration have presided over a surge in new federal spending obligations that may be the most enduring legacy of the 110th Congress.

From new entitlements such as a GI bill for military veterans to recent federal commitments to shore up a troubled housing market, Washington is taking on obligations with long-term consequences for taxpayers. At the same time, critics say, lawmakers aren't exercising the oversight needed to keep these commitments manageable.

"In the last three or four months, the momentum has really built up for more spending," says Michael Franc, vice president of government relations for the Heritage Foundation, a conservative think tank in Washington. "Congress has moved a whole range of bills that take the problem up another notch."

Here are some of the items.

•A new housing law, signed last week, commits the government to backing some $300 billion in troubled mortgages.

•A higher education bill adds $169 billion over the next five years.

•The GI bill that extends education benefits to veterans or their family members will cost $62 billion over 10 years.

•Congress boosted the statutory debt ceiling by $800 billion to $10.6 trillion. That's $4.8 trillion more than it was at the end of 2001. (Read More Here)

How I spent my stimulus package!

Well, I haven’t received mine yet. But it looks like someone started up a website for people who have received their check and have already done some spending. My favorite one is the guy who went out and bought a sack of marijuana. Ah, our tax dollars at work.

HT: Andrew Roth

Federal budget deficit spurs back 1 year T-Bill

Since our federal government can’t seem to balance the budget, the feds have decided to bring back the one year Treasury bill. I wish I could say that this is a good thing.

The Farm Bill

“Democrats are committed to ending years of irresponsible budget policies that have produced historic deficits. Instead of compiling trillions of dollars of debt onto our children and grandchildren, we will restore pay-as-you-go budget discipline."

--Speaker Nancy Pelosi, December 12, 2006

When the Democrats gained the majority in congress after the fall ’06 elections, there was a notable, if not highly vociferous, cheer by their liberal supporters. To them and their then newly-minted political champions, the country had smartly started to repudiate the destructive political acrimony of George W. Bush and his neo-con cabal - a demoralizing, wasteful, and degenerate band of wily thieves absconding with everything America stood for. The new house Democrats with the left’s stamp of approval would come to the country’s rescue: They would resuscitate the flailing moral body that is America at odds with itself and also bring back some semblance of fiscal responsibility, fairness, and equanimity to politics.

Months ago when Senate Democrats and House Democrats gave up on their false promise of ”pay-as-you-go” it wasn’t as if it was much of a surprise that they would abandon a plan that was far from feasible but that they actually had the audacity to claim that they could deliver on that promise in the first place. Puzzling still was that there were people that actually believed that they would come through with their promise!

And so here we are at April 2008 with a looming juggernaut of a farm bill that is larger than the one proposed by President Bush back in 2002 (that totaled to 260 billion dollars). It seems that the farm lobby will get the lavish subsidies it wants while a limp Democratic majority led by Nancy Pelosi will do very little to curb it’s appetite for taxpayer dollars. Attempts by a few intrepid congressmen to trim the fat off the farm bill have fallen flat on its face due to the amount of leverage the farm lobby has been able to exert:

“The agribusiness industry plowed more than $80 million into lobbying last year, according to the nonprofit Center for Responsible Politics, which tracks spending on lobbying. Much of that was focused on the farm bill.” (WSJ, 5/27/08, Farm lobby beats back assault)

Despite the fact that farm incomes have hit record highs over the last several years, farmers are about to get paid and it’s going to be sweet for them. “Farmers” like oil-baron billionaire David Rockefeller who will happily receive a fat subsidy from taxpayers.

Recently, in an act of political grandstanding, congress paraded oil executives in a circus of pretend chastising. But where are the executives of the large agri-business that have made record profits over the last several years due to high commodity prices? And why isn’t someone calling to end corporate welfare for farmers as they do for Big Oil?

This is surely one of those cases where the interests of the American taxpayer have been quietly subverted aside just as economist Bryan Caplan correctly characterized in his recent book, The Myth of the Rational Voter: “While the voters sleep, special interests fine-tune their lobbying strategy. Just as voters know little because it doesn’t pay, interest groups know a lot because-for them-it does.” While Democrats should not be altogether faulted for their inability to stop the largesse that powerful lobby’s curry - Republicans are equally as complicit – they’re lame attempt to paint themselves as fiscally responsible is a powerful reminder of how politicians will try their hardest to appear as if they have their constituent’s interests at the forefront of their public work. But as we have seen with the farm bill and the mighty farm lobby, all we really get from politicos is a lot of hot air and false promises.

One More Problem With National Healthcare.

From The Christian Science Monitor

“Healthcare expenditures in the US rose 6.7 percent in 2006 to $2.1 trillion, or 16.1 percent of the nation's total output of goods and services, government economists reported last month. (Last week, the government predicted the nation's healthcare expenditures will reach $4 trillion by 2017.) Most other rich industrial nations, with universal care, spend only 11 to 12 percent of their gross domestic product on healthcare. Canada spends even less, a bit more than 9 percent of GDP, on a single-payer government insurance system for all its people.”

“US health costs have doubled in the past decade. Yet nearly 48 million Americans have no health insurance.”

Comment: Those individuals that wax poetically about the myriad benefits of universal health care seem to be missing a key fiscal issue that looms large in our national future: As baby boomers start to retire en masse, the ratio of workers to beneficiaries will go from four to one to roughly two to one. The shock to future tax revenue should be cause for some alarm if not rapid action.

Currently, Medicare and Medicaid federal spending is larger that what we spend on national defense. And it is a sure bet that medical costs will continue to rise faster than the rate of inflation. The portion of the federal budget allocated as an entitlement for seniors and the poor as medical care will become a larger percentage of our GDP: According to the Congressional Budget Office, Medicare spending will essentially double from 2007 levels in 10 years and Medicaid spending will nearly do the same. Both programs will consume 12 percent of GDP by 2030. (See CBO study here.)

Now, knowing that we have a looming fiscal storm looming on the horizon, does it make sense to call for a national health care plan right about now? If we provided health care for everybody in this country, we would expand the federal expenditure to health care far beyond our current and future revenues from tax receipts. We would have to raise taxes so high to cover future expenses that it would surely be a detriment to our economy. Any purported savings that is usually mentioned by universal healthcare advocates from having national health care would hardly matter in an economy that was hamstrung by extremely high taxes.

The true cost of a national health care plan has not really been brought to light this election year. We keep hearing populist rhetoric as presidential candidates try to garner votes from a public that wants easy and quick answers. Most people just want the surface details but none of the dirty underlying economic facts. Too complicated, too many graphs and besides government built the highways and sent a man to the moon. And as usual, we may end up with the government bureaucracy and all of the nasty cost we deserve.