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Delusional Thinking in Domestic Affairs

America in 2016 is, in many ways, a nation that has failed to address key issues due to the delusional thinking on the part of government. Yesterday, the New York Analysis of Policy and Government reviewed international affairs. Today’s column examines domestic matters.

The core domestic issues affecting the United States include:

  •  a crippling national debt made worse each year by annual deficits,
  • The dramatic growth of the Executive branch and federal bureaucracy at the expense of Congressional authority,
  • the lack of adequate numbers of middle income jobs, and
  • a failed educational system.

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A quick glance at those selections may raise eyebrows, because nowhere in them can be found the headline-grabbing topics that so frequently top the evening news.  The reality is, however, that without resolving these fundamental challenges, the financial and intellectual resources to resolve the myriad problems that do gain more frequent attention will be unavailable.

The stunning national debt of the United States, estimated at the time this article was prepared is closing in at $19,400,000,000,000. This prevents many subsidiary problems from being easily or rapidly resolved.  America’s infrastructure certainly needs repair, but state and local resources are already stretched thin (in many ways, thanks to mandates from the federal bureaucracy) and Washington is already mired in a financial hole of its own making.

The story of the national debt is a telling sign of the delusional thinking of the past eight years. There are frequently good reasons, for families or governments, to accumulate debt. Buying a house and securing a college degree are two good examples.  But the near doubling of the national debt over the past eight years was the result of spending that was the equivalent of blowing the mortgage money at the race track.

Vast sums were spent, (including an over $800 billion “stimulus” program, and hikes in assistance programs) with almost no results.  Consider: As the national debt doubled, America’s infrastructure needs remain unaddressed, the military has been cut to dangerously low levels, taxes remain high, poverty has not been reduced, and Social Security is still heading towards bankruptcy. Other examples could certainly be added.

Despite gimmicks such as the Sequester,  the problem is not getting better.  The Sequester, which reduced some federal spending, itself was an example of delusional thinking.  It didn’t adequately discriminate between spending on frills and spending on vital necessities.

Indeed, the prospects for the future are grim.  Delusional thinking has played a key role.  Spending on welfare-type programs such as the 41% increase in the Supplemental Nutritional Assistance Program, rather than emphasizing job creation, created a fiscal dead end.  The Affordable Care Act (Obamacare) emplaced significant disincentives to hire full time workers, while accumulating significant new amounts of expense. Middle class jobs, already under stress from a number of factors, received yet another body blow.

Speaking of traditional middle class jobs, the challenges of controversial environmental regulations (promulgated in some cases unconstitutionally by President Obama’s executive action rather than by legislation) which devastate many well-paying jobs, trade deals (particularly that signed by President Clinton in 2000) that allowed manufacturing jobs to migrate overseas, and America’s extremely high corporate tax rate have all worked together to devastate opportunities in the workplace.

Much of the harm, through excess spending and disincentives to create businesses and hire workers, comes from a disregard for the legislative process, which would have illuminated the potential harm from bureaucratic actions.

The delusion behind all these factors is that the rules of the marketplace can be ignored, and that Washington can simply print money to cover the losses. Poverty can only be resolved by providing opportunity, not handouts. The War on Poverty, commenced in the 1960s, has stretched for half a century, consumed $22 trillion, and failed to make any dent in the poverty rate. The Heritage Foundation  notes that “Adjusted for inflation, that’s three times the cost of all military wars since the American Revolution.”

These delusional actions on the part of the federal government have not provoked the level of outrage that would be expected. And that is why the failure of America’s educational process is so important.

For far too long, when discussing government and economics, the previously standard, fact based curricula of our schools, from elementary to graduate levels, has been replaced by an ideologically-driven agenda which ignores common-sense reviews of economics and how the U.S. Constitution works. Absent this knowledge, the delusional policies that currently dominate do not raise the vitally needed objections that could motivate a return to realism.

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A Financial Explanation for President Obama’s Foreign Policy

Is there a financial explanation for President Obama’s national security and foreign policy choices?

It is difficult to put a positive spin or find a logical explanation for the current Administrations’ actions and attitudes towards the growing threats facing the United States, and the diminished influence Washington has in global matters.  The list of failures and missteps, which have emboldened America’s enemies and alientated its allies,  is considerable:

The Obama/Clinton “Reset” with Russia produced completely unfavorable results.  Moscow is now considerably more aggressive than when the President first took office.  The Kremlin’s military spending has skyrocketed, and it has not been shy about using its new muscle.  Ukraine has been invaded, Russian forces have become active in the Middle East, Eastern Europe is increasingly threatened, the Arctic has been militarized, and the nation’s nuclear bombers and submarines have resumed cold war patrols near American coastlines, a task made easier by deals made with Cuba and Nicargua. Moscow now holds, for the first time, a lead in strategic nuclear weapons, as well as a ten to one lead in tactical atomic devices.

The failure to confront China either diplomatically or with a show of force when it invaded the Philippine Exclusive Economic Zone encouraged further aggressive actions by a Beijing regime convinced it would pay no penalty for unlawful expansionist moves. China has become a military superpower, the technological and numerical equivalent of U.S. forces. It already has more submarines than the Amrican navy, and will outnumer the U.S. fleet in four years.

Since Mr. Obama withdrew all U.S. troops from Iraq, Radical Islam has exponentially increased, with particular power being gained by ISIS.  At almost every step, the current Administration chose to not confront the problem, and, indeed, it did much to make it worse. The White House supported “Arab Spring” movements which empowered extremist elements throughout the region, and did not respond even when Americans were directly attacked in  Benghazi. It has abandoned a long-held policy of not negotiating with terrorists and opened talks with the Taliban in Afghanistan. The White House concluded an agreement that restored vast wealth to Iran in return for a shaky pledge to halt Tehran’s nuclear program, in a deal that a key Administration official now admits to misleading the U.S. public about. The President has deflected public anger and concern over terrorist attacks on U.S. soil by focusing his blame on gun rights, imagined bias towards Islam, and, incredibly, workplace violence.

If one assumes that Mr. Obama is not content with the dismal results of his policies, then a reason must be found why, despite substantial and repeated failures, he continues to pursue the same course of reducing American strength and influence, with a particular hesitancy to actively support American allies such as the Philippines, Israel, moderate Arab regimes, and, at least before Moscow’s Ukraine invasion, Europe.

The answer might have much to do with the President expensive and expansive domestic agenda.

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A Washington Times study found that the latest government reports estimate more than 23 percent of Americans lived in a family that received some form of welfare help under Obama, up 17.1 from the last year of the Bush presidency. The number of those on Social Security disability ballooned from 7.4 million at the start of the Obama presidency to 10.9 million in 2015.

Obamacare proved to be devastatingly expensive.“About 87 percent of people who selected health insurance plans through HealthCare.gov for coverage beginning Jan. 1, 2015, were determined eligible for financial assistance to lower their monthly premiums,”  notes the Department of Health and Human Services.

This demands massive infusions of cash. Major Increases in taxes are unpopular and politically difficult, and the debt has already jumped beyond reasonable limits (A CNSNews study  found that “the portion of the federal government’s debt that is held by the public…has more than doubled during President Barack Obama’s time in office” up by 113.8 percent.) All of this debt occurred despite the reality that Washington has taken in record amounts of revenue.U.S. Government Revenue  estimates that federal “direct revenue” collected last year amounted to $3.3 trillion.

All of this means that the dollars for the ambitious domestic agenda must come from someplace else.  That someplace else may be the defense budget.

According to a 2015 politifact analysis,”military spending decreased every year for [the past]four straight years by a cumulative 15%…In 2010, national security spending made up 20.1% of the federal budget, but in 2015 it was roughly 15.9%. Over that same period, spending declined from 4.6% of gross domestic product to 3.3%.”

Obama’s reduction in spending on a military that is now sharply diminished (the army is the smallest it has been since before World War 2, the Navy has less ships than at any time since before World War 1, and the Air Force is the smallest in history, with some aircraft so old they were flown by the grandparents of today’s pilots) means that conflicts must be avoided—even when vital interests are at stake, and supremacy in weaponry must be conceded to potential foes, no matter the potential danger.

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A candid discussion on American socialism

Do progressive policies actually accomplish solid results?

As several presidential candidates ask Americans to seriously consider an openly progressive agenda, it is appropriate to examine how that concept has fared in actual practice. The goals of the hard left are in line with President Obama’s desire to “fundamentally transform” America.

Throughout most of its history, the United States has experienced unprecedented economic growth and mobility though an essentially capitalist philosophy. Market conditions which encouraged growth and entrepreneurship allowed vast numbers of Americans to advance economically into the middle class and beyond.

As a possible reaction to the poor results of the Obama presidency, free-market advocates or conservatives have, according to the Gallup polling organization, outnumbered both moderates and liberals since 2009.

However, as presidential candidate Senator Bernie Sanders has openly identified himself as a socialist, and his Democrat opponents Hillary Clinton and Martin O’Malley have for the most part agreed with his policies in an attempt to solidify their support with the left wing of their party, the question of “fundamentally transforming” America from a free market to a progressive/socialist economy has risen to the forefront.

The progressive concept, which is essentially been the mantra of the currently ascendant left wing of the Democrat party.

Progressive policies can be distinguished from other programs such as Social Security and Medicare, which are essentially funds taken from individual paychecks then returned to the taxpayers at a later date when eligibility sets in. Progressive policies center on the concept of “redistributing” wealth from those who have earned or produced it to those who have not.

The late British Prime Minister Margaret Thatcher once remarked that ““The problem with socialism is that you eventually run out of other people’s money.”

As Geroge Will “America’s national character will have to be changed if progressives are going to implement their agenda…consider the data Nicholas Eberstadt deploys in National Affairs quarterly: America’s welfare state transfers more than 14 percent of GDP to recipients, with more than a third of Americans taking ‘need-based’ payments. In our wealthy society, the government officially treats an unprecedented portion of the population as ‘needy.’ Transfers of benefits to individuals through social-welfare programs have increased from less than one federal dollar in four (24 percent) in 1963 to almost three out of five (59 percent) in 2013. In that half-century, entitlement payments were, Eberstadt says, America’s ‘fastest growing source of personal income,’ growing twice as fast as all other real per-capita personal income. It is probable that this year, a majority of Americans will seek and receive payments. This is not primarily because of Social Security and Medicare transfers to an aging population. Rather, the growth is overwhelmingly in means-tested entitlements. More than twice as many households receive ‘anti-poverty’ benefits than receive Social Security or Medicare.”

It is appropriate to note that as those entitlement programs have soared, including a 41% in the supplemental nutrition assistance program (food stamps) social security benefits for seniors have suffered, enduring the lowest amount of cost of living increases on record. Indeed, the social security program itself is facing bankruptcy, since funds that should have gone to insure its solvency have been diverted to progressive programs.

A study of American cities and states where progressive concepts have been used provides an important glimpse into what results the growing trend towards socialist government can be expected to yield.

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Newt Gingrich, quoted in Front Page , has noted that “Every major city which is a center of poverty is run by Democrats. Every major city. Their policies have failed, they’re not willing to admit and the fact is it’s the poor who suffer from bad government.” Since 2013, of the large American cities with significant poverty rates, only Miami has had any experience with non-Democrats hands.

A study by United Way, “Struggling to Get By,” takes a hard look at how progressive policies have fared in California.  Among the key findings:

“One in three California families lacks income adequate to meet their basic needs.  One in three California households (31%) do not have sufficient income to meet their basic costs of living. This is nearly three times the number officially considered poor according to the Federal Poverty Level. Families falling below the Real Cost Measure reflect California’s diversity. One in five (20%) struggling households are white, so while poverty is often portrayed in our media and culture as primarily a problem for minorities, the reality is that families of all ethnicities struggle.”

By contrast, notes the American Legislative Exchange Council, (ALEC) “States that have adopted pro-growth policies have generally witnessed their economies grow, offering greater wage growth and more opportunities for citizens. Yet, despite years of empirical evidence supporting free market policies, some states choose a different path. …

“The empirical evidence and analysis … makes clear which policies lead to greater levels of opportunity and which policies are obstacles to growth. … This … concludes that pro-growth tax policy, that avoids picking winners and losers, provides a fair and competitive environment for all hardworking taxpayers. There are many policy obstacles that lawmakers face when trying to create a competitive economic environment… tools include lowering or eliminating the corporate and personal income taxes, reducing overall tax burdens, reducing or eliminating state death taxes, simplifying tax codes and supporting worker freedom. State policymakers [must] fix their budgets and address long-term pension liabilities.

“Generally, [ALEC’s latest] rankings show that [free market-oriented states]Utah, Wyoming, North Carolina, Florida and Texas are economic hotspots for growth. Furthermore, many of the no income tax states such as Nevada and South Dakota are also economically promising. On the other hand, most states in the Northeast and some states in the Rust Belt are facing economic decline. In the Rust Belt, Michigan, Indiana and Wisconsin deserve major credit for positive pro-growth reforms they have recently enacted after decades of poor policy choices. Additionally, Minnesota and Illinois both face significant fiscal challenges. the Northeast are even worse.”

Internationally, socialism has harmed the prosperity of the nations and peoples who have adopted it. The Foundation for Economic Freedom (FEE) notes: “Socialism is the Big Lie of the twentieth century. While it promised prosperity, equality, and security, it delivered poverty, misery, and tyranny. Equality was achieved only in the sense that everyone was equal in his or her misery.”

The latest example is Greece. Jake Novak, writing for CNBC  eports “while Greece’s epic debt problems have dominated the news, I haven’t heard very much about who is to blame for what’s happened in that country. When any bank or other capitalist entity fails, the news media and the general public seem to name their favorite specific villains almost instantly. The word “profit” becomes dirty somehow and public figures start pining away for a more giving society that never was. But where is the condemnation of socialism and the failed politicians who peddled a proven failure of a system not only to the Greeks but to the half billion people who live in the E.U.? Where is the recognition that when the Greeks recently elected an even more leftist and socialist government, it sped up the path to collapse?”

The problems are not limited to the Old World.  In contrast to the largely capitalist USA, Latin America economies have been far more government-centered. Despite the inherent wealth of resources, many nations in Latin America fail to prosper. Daniel Wagner and CJ Post, writing in Huffington point out that “Even when times have been good, Latin America’s socialist countries have still failed to deliver meaningful political and economic reforms or effective public spending programs.”

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The alluring fraud of free stuff

The 2016 election cycle is underway, and the contrast between the candidates is stark.  Some have concentrated on the growing dangers from issues such as America’s unmanageable national debt, excessive taxes, the rise of international terrorism, Russia’s increased aggressiveness, China’s actions in the Pacific, or the challenges arising from illegal immigration.

Others have promised free stuff.

The allure of free stuff is seductive for a voting population suffering from continued long-term unemployment, stagnant wages, increasing prices in many key essentials, and heavy student debt from unjustifiably high college tuition. Politicians promising giveaways, particularly in an era when many in the media are inclined to agree with the practice of more entitlements and disinclined to examine how to pay for them, have a distinct edge.  It calls to mind Benjamin Franklin’s warning that “When the people find that they can vote themselves money that will herald the end of the republic.”

A list of the give-away ideas floated by several of the presidential hopefuls includes budget-breakers such as, to take two prominent examples, free college tuition and more subsidized or free health care. They also continue to favor more leniency on illegal immigration, which increases the population dependent on government largess.  It’s not just illegal immigration that presents an increased dependency problem.  U.S. consulates abroad feature helpful pamphlets on how to apply for benefits upon arrival in America. The United States cannot afford to function as the welfare agency for planet Earth.

Interestingly enough, those advocating for free stuff have not expressed equal concern for the fact that non-entitlement benefits already paid for by workers such as Social Security face bankruptcy, or that America’s military personnel and veterans continue to be underpaid or receive inadequate post-service care.

Prudent voters should ask how candidates promising free stuff intend to pay for their generous plans. The concept of taxing the rich is unconvincing.  It would not reduce “inequality,” another idea floated by candidates who favor increased entitlements. A Money.com review noted that “researchers …looked at what would happen if all the extra money raised from the tax hike on the rich were given to America’s poorest. Lower-income families would receive about $2,650 a year, they found. The country would still remain far more unequal than it was in the 1970s.”

John Stossel, writing in Forbes, notes “it’s a fantasy to imagine that raising taxes on the rich will solve our deficit problem. If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. That’s only a third of this year’s deficit. Our national debt would continue to explode.” Add to that fact the reality that increased taxes serves as a disincentive to hire and invest.  A shrinking economy does not help pay for increased entitlements.  Margaret Thatcher, the late British Prime Minister, perhaps stated the problem most succinctly: “The problem with socialism is that you eventually run out of other people’s money.”
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Details such as how to pay for giveaway plans fail to get airtime during televised debates, in the breathless press releases of campaigns promising more and greater entitlements, or in reviews by a generally left-leaning media. That lack of specificity tends to assist candidates proposing free stuff, and works to the detriment of candidates who focus on looming threats or fiscal reality.

It’s not just candidates that endure harsh criticism when entitlements are involved. In Maine, reports the Daily Signal, Governor LePage has enforced stricter requirements for food stamps, and has taken considerable press criticism for the effort.

“Since LePage assumed the governorship, Maine has reduced enrollment in the state’s food stamp program by over 58,000; currently… there are 197,000 people on food stamps, down from a high of 255,663 in February 2012…the decline is due to eliminating the waiver of the work requirement previously attached to food stamps, as also witnessed in Kansas. Under the new legislation, recipients would need to work 20 hours per week, volunteer for about an hour a day, or attend a class to receive food stamps past three months.”

Mary Mayhew is the commissioner of Maine’s Department of Health and Human Services, responsible for administering Maine’s food stamp program. She has taken considerable criticism, she notes in a Daily Signal interview. “I can’t stress enough what an attack campaign it has been from the media for four and a half years…Mayhew claims that detractors—who mostly take issue with welfare reforms enacted by Gov. Paul LePage, a Republican, since his election in 2011—have gone so far as to call her ‘Commissioner Evil,’ and her and LePage’s policies a ‘War on the Poor.”

The 24 hour news cycle may be broad, but far too often it is also shallow. Voters enduring America’s weak economy are targeted by candidates who promise free stuff and are confident there will be little follow-up on how to pay for their proposals. On the other hand, candidates with more realistic platforms are seen as miserly and uncaring.

When Winston Churchill became Prime Minister of the United Kingdom in 1940, he famously said “I have nothing to offer but blood, toil, tears and sweat.” His blunt honesty in the darkest days of World War 2 helped rally his nation to victory. One wonders how an American version of Churchill would fare in a campaign against a candidate who simply offered more free stuff.

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US in Deficit Despite Record Revenue

The United States Treasury’s Bureau of the Fiscal Service   has reported that despite an all-time high revenue intake of $2,663 billion dollars in the first 11 months of Fiscal Year 2014, Washington nevertheless compiled a deficit of $589 billion due to total outlays of $3,253 billion.

It is important to place this in context.  Key national endeavors such as defense have been reduced. Federal hiring to run the government is at an all-time low. Investments in the future, such as NASA, are a fraction of what they were decades ago.

According to a prior year’s USNEWS report ,  “49%  of the entire federal budget goes to entitlement programs… Entitlement spending is the highest in American history… The proportion of Americans taking antipoverty funds has soared…”

USNEWS noted that “The growth of entitlement spending has coincided with an unprecedented decline in the number of working adult men over the last several decades…” According to the Heritage Foundation, the 79 means-tested federal welfare programs cost about a trillion dollars annually.
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The Heritage Foundation’s   senior research fellow Robert Rector notes that these programs increased during President Obama’s first two years in office at a rate two and a half times larger than at any prior period in American history. It’s clear that Obamacare will add dramatically to that figure.

The problem is more than just spending too much, as serious as that challenge is. It’s the fact that these funds are taken out of the productive economy and placed into programs that will not produce jobs or tax revenue in the future—a true downward spiral. If a family spends thousands on a new home, that’s an investment; if it spends thousands on a luxury vacation, that’s just dollars gone forever.

As the New York Analysis of Policy & Budget noted in a prior report, even comparisons with other periods of major increases in government spending aimed at reducing poverty reveal the harmful nature of poverty spending under the current Administration. FDR’s New Deal programs developed infrastructure and provided job skills in programs such as the Civilian Conservation Corps. During the period of 2009 to the present, neither serious employment skills nor infrastructure development resulted from the vast spending increase.