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Downsizing Washington, Part 2

The effects on governance and individual freedom in America of Washington’s growing dominance of domestic program spending has not been beneficial. Josh Eboch, writing for the Tenth Amendment Center   explains that State obsequiousness to central authority in exchange for federal tax dollars has resulted in significant loss of individual freedom over the years.

Leaving aside the vital issue of Constitutionality, did Washington’s intervention in matters legally left to the states produce positive results? David Muhlhausen, Ph.D, writing for the Heritage Foundation,, found that the answer was no.

“Missing almost completely from debates over federal funding levels is any discussion of whether the programs being bankrolled actually achieve their stated goals. American taxpayers deserve better…One sensible approach to effectively allocating tax dollars is what is known as evidence-based policymaking. Evidence-based policymaking would use scientifically rigorous evaluations of government programs to inform decision-making. Unfortunately, policymakers rarely base their funding decisions on real evidence of effectiveness. The federal government has spent decades trying to improve the earnings of low-income individuals through various employment and training programs, but the Government Accountability Office has concluded that there is little evidence indicating that any of them actually work. It’s been estimated that only about one percent of federal non-defense discretionary spending is backed by any evidence of effectiveness. Clearly, very few federal programs have been evaluated to determine how well they’re working—or if they’re working at all.”

The American people have noticed the negative results.

The CATO Institutes’  Roger Pilon, testifying  before the House of Representatives’ Subcommittee on Human Resources and Intergovernmental Relations, Committee on the Government Reform and Oversight in 1995 stated:
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“the people and the states no longer trust Washington not simply because Washington has been doing a less than satisfactory job but, more deeply, because Washington has assumed a vast array of regulatory and redistributive powers that were never its to assume—not, that is, if we take the Constitution seriously. Thus, the question the people and the states are increasingly putting to Washington is simply this: By what authority do you rule us as you do?”

A 2012 Pew Research Center poll  reported that “Just a third of Americans have a favorable opinion of the federal government, the lowest positive rating in 15 years. Yet opinions about state and local governments remain favorable, on balance. As a result, the gap between favorable ratings of the federal government and state and local governments is wider than ever. Ten years ago, roughly two-thirds of Americans offered favorable assessments of all three levels of government: federal, state and local. But in the latest survey by the Pew Research Center for the People and the Press, conducted April 4-15, 2012 among 1,514 adults nationwide, the favorable rating for the federal government has fallen to just 33%; nearly twice as many (62%) have an unfavorable view.By contrast, ratings of state governments remain in positive territory, with 52% offering a favorable and 42% an unfavorable opinion of their state government. And local governments are viewed even more positively. By roughly two-to-one (61% to 31%) most Americans offer a favorable assessment of their local government.”

A 2016 Gallup poll  confirmed that finding. “A majority of Americans (55%) favor the theory of government that concentrates power in state governments, outnumbering the 37% who favor power concentrated in the federal government. The latest update of this question — asked only twice before, in 1936 and 1981 — is from a June 14-23 Gallup poll…”

The issue is primed to rise in prominence. The Dallas Morning News  reported last January that Texas Gov. Greg Abbott is leading a call for a convention to “ wrest power from a federal government ‘run amok,’ noting that “If we are going to fight for, protect and hand on to the next generation, the freedom that [President] Reagan spoke of … then we have to take the lead to restore the rule of law in America.”

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Why America’s Economy is Failing

The federal 2017 fiscal year began this month, and the news about its 2016 predecessor is deeply worrisome.

According to the Treasury Department, Washington spent more than $587 billion than it took in in revenue, a deficit that jumped 34% from last year. The government spent $3.9 trillion dollars, but took in “only” $3.3 trillion, a record high amount.  USGovernmentRevenue  notes that “Government Revenue in the United States has steadily increased from 7 percent of GDP in 1902 to over 35 percent today… by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years.”

The US Debt Clock notes that as of the time this report was being prepared, the federal debt was $19,703,158,000,000. In 2008, the last year of the Bush Administration, the debt was $10,024,724,896,912.49, as recorded by Polidiotic,  As a sign of the weakening economy, the federal budget deficit will increase in relation to economic output for the first time since 2009.

Relief is nowhere in sight, The Congressional Budget Office reports that “If current laws generally remained unchanged—an assumption underlying CBO’s baseline projections—deficits would continue to mount over the next 10 years, and debt held by the public would rise from its already high level.”

The Obama Administration has almost doubled the national debt. What’s worse, it has nothing to show for all that spending. It cannot blame the 2007—2009 recession (which was the result of federal policies that forced lending institutions to give credit to individuals with a poor prospects of paying it back.) “Even seven years after the recession ended, the current stretch of economic gains has yielded less growth than much shorter business cycles…In terms of average annual growth, the pace of [the post recession period]… has been by far the weakest of any since 1949” notes the Wall Street Journal.

The Obama approach to spending and federal budgeting has devastated the middle class. The Institute for Policy Innovation notes that when it comes to the middle class he “has failed miserably… Median household income is lower today than when he took office.” Senior Citizens have been poorly treated, receiving less in cost of living increases than they have at any time in decades.

Where has the money gone?

America’s infrastructure needs are certainly not being met.

The American Society of Civil Engineers “2013 Report Card for America’s Infrastructure” graded the nation’s infrastructure a “D+” . In 2013, for surface transportation categories:

  • Roads received a grade of D as compared to a grade of D- in 2009;
  • Bridges received a grade of C+, up from a C in 2009;
  • Transit received a D, showing no change from 2009; and
  • Rail received a grade of C+, up from a C-, the greatest increase in the 2009 Report Card.”

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There has been no noticeable improvement since that analysis was completed.

The spending hasn’t gone into defense, either.  In constant 2015 dollars, the Pentagon has been cut from $740 billion in 2009 to $525 billion in 2016, as reported by Heritage. Even crucial needs are going unmet. As Russia, China, and North Korea ramp up their nuclear arsenals, President Obama has actually decreased his funding requests for crucially needed missile defense. The last request by President Bush was for $9.3 billion; the 2016 request by President Obama was $8.1 billion. Nor has the current White House taken any effective action to protect the nation’s electrical grid from an EMP disaster resulting either from a natural occurrence or an enemy attack. Such an incident could destroy the entire U.S. electrical grid, resulting in massive casualties from the lack of power, shut down reservoirs, and the elimination of any means to transport food or provide medical care. Other more conventional military elements, such as manpower, have also been cut.  America’s Army is now smaller than North Korea’s, our navy is the smallest it has been since World War I, and the air force’s inventory of planes is the smallest and oldest it has been in the entire history of that service.

Even comparatively tiny federal programs have been slashed. NASA’s manned space flight effort was virtually eliminated by Obama.  The Space Shuttle program was prematurely shut down. Its planned successor was also cut. NASA will not be capable of putting an astronaut in space until the next decade. At a Congressional hearing earlier this year reported by the Daily Caller.  Rep. Brian Babin,(R-Texas)  chairman of the House Subcommittee on Space stated that the White House “budget takes our human spaceflight program nowhere fast. This budget undermines our space program and diverts critical funding to lower priority items…Orion and [the Space Launch System] are strategic national assets and must be sufficiently funded. Proposed cuts to the planetary science division are equally disturbing.”

The basic, and very expensive,  thrust of President Obama’s budgetary policies has been de-emphasizing a capitalist approach that, despite occasional recessions, was responsible for developing and maintaining the planet’s most robust economy, replacing it with one that more closely resembles the social democrat approaches of other nations, including large welfare programs (the supplemental nutrition assistance program has grown 42% under his watch) and the transformation of America’s medical system into a more federally centered effort. In large part, “Obamacare” is based on federal subsidies. Not unsurprisingly, many report that the quality of care has been reduced.

Mr. Obama’s emphasis on attempting to reduce poverty through vast spending programs has backfired. Indeed, the poverty rate has actually gone up on his watch, increasing from 13.2% in 2008 to 13.5%, while destabilizing the federal budget.

Attacking the engine of economic growth–the free market–with excess regulations and continued high taxes–while initiating massive spending on social programs driven more by ideology and politics than the hope of actually producing a growing economy has caused significant harm both to the federal budget and the overall economic health of the nation.

 

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Wrong Decisions from White House Harm Middle Class and U.S. Economy

The U.S. Economy is severely mismanaged, and the impact is being felt most sharply by the middle class.  From high taxes which drive employers to move overseas, to the diversion of funds from crucial needs to nonessential programs, Washington has steered America in the wrong direction.

The U.S. Treasury reports that the federal debt as of May 10 had reached $19,204,514,007,221.38. CNS notes that this catastrophic figure exists despite the fact that FY2016 Taxes set a record through April– $12,679 Per Worker!  Revenue isn’t the problem. Government spending on the wrong priorities is.

Not to be overlooked in the factors affecting the economy is the White House’s environmental policies, emplaced without the consent of Congress. For example, Hot Air  reports that there is “visceral disgust” for Obama’s environmental policies in the Appalachian counties… West Virginia…energy costs are expected to go up 40 percent under Obama’s Clean Power Plan (CPP), which sets to cut greenhouse gas emissions by 32 percent by 2030 from 2005 levels. It’s a regulatory nightmare, a job killer, and a policy that Hillary Clinton plans to continue if she’s elected.”

The Stratfor intelligence organization reported in 2013: “The threat to the United States is the persistent decline in the middle class’ standard of living, a problem that is reshaping the social order that has been in place since World War II and that, if it continues, poses a threat to American power… In the 1950s and 1960s, the median income allowed you to live with a single earner — normally the husband, with the wife typically working as homemaker — and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well…  Government programs frequently fail to fulfill even minimal intentions while squandering scarce resources…”

A just released report from the Pew Research Center  reveals that “The American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee. From 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new Pew Research Center analysis of government data. The decrease in the middle-class share was often substantial, measuring 6 percentage points or more in 53 metropolitan areas, compared with a 4-point drop nationally.
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“The shrinking of the middle class at the national level, to the point where it may no longer be the economic majority in the U.S., was documented in an earlier analysis by the Pew Research Center. The changes at the metropolitan level, the subject of this in-depth look at the American middle class, demonstrate that the national trend is the result of widespread declines in localities all around the country.”

The reason for the recent decline of the U.S. middle class and the general weakness in the U.S. economy is not the result of a cyclical downturn in business, or the bursting of a bubble.  It is not a reflection of the 2007—2009 recession.  It is the specific result of federal tax and spending practices which ignore the needs of the private sector, and redirects federal dollars away from essential needs such as economic growth, defense and infrastructure and towards entitlements (but NOT Social Security of Medicare.)

In the 1950s, Washington spent significantly on infrastructure, building the interstate highway system. The nation prospered. In the 1980s, President Reagan spent vast sums on the military, and the economy grew stronger. Just as it did in the period before World War II, the dollars spent on defense provided jobs—middle class jobs. The shrinking of programs to build badly needed replacement weapons for the aging equipment in the armed forces depresses the economy, and the shrinking manpower of the military increases unemployment.

The huge increase in entitlements (such as the 41% increase in the Supplemental Nutrition Assistance Program) drains funds from essential needs and provides a drag on economic growth.  If, instead of spending more on entitlements, the Obama Administration had lowered taxes and cut back on regulations, business would have expanded, more jobs would have been created, and the resulting growth would have strengthened the economy.

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Trillions spent, nothing gained

The United States Treasury Department has revealed that America now has a record debt of over $18 trillion ($18,005,549,328,561.45 to be precise.) That amounts to 103% of the nation’s entire gross domestic product.70% of that debt was accumulated during the Obama Administration.

The news isn’t getting any better going forward.  The Treasury Department figures demonstrate that since the start of the new federal fiscal year several weeks ago, it has issued another $1,040,965,000,000 in additional debt to pay off its maturing securities and to cover new deficit spending. It has been estimated that an additional $6 trillion in deficit spending will take place over the next ten years due to current plans.

All of this growing debt has been incurred despite record intakes in revenue, both in the previous year and during the new fiscal period. As noted in a recent New York Analysis of Policy and Government article, in 2014, “Statistics released from the U.S. Treasury Department reveal that for the first time in history, the U.S. took in over $3 trillion in revenue, $3 trillion and 21 billion to be precise. That’s a $247 billion jump from the prior year.  A significant part of the additional revenue largely came from huge tax hikes resulting from the expiration of the Bush tax breaks and Obamacare taxes.

“Despite that, the government ran a $483 billion dollar deficit, even though key areas of federal responsibility, such as Defense and homeland security spent less. Even the Social Security Administration spent less.

“The agencies that spent more included the Environmental Protection Agency, and the General Services Administration.  And of course, spending on welfare type programs have increased significantly during the Obama years.”

Much of that increase in revenue doesn’t come from a productive economy; indeed, the US economic engine has been sputtering.  Taxes, however, have been in a significant upwards trajectory, rising by $3 trillion, according to studies by the Heritage Foundation, as noted in an article in the Daily Signal The “fiscal cliff” deal of 2013 resulted in a number of significant hikes, as noted in an article in the Daily Signal:

“1. Payroll Tax: increase in the Social Security portion of the payroll tax from 4.2 percent to 6.2 percent for workers. This hits all Americans earning a paycheck—not just the “wealthy.” For example, The Wall Street Journal calculated that the “typical U.S. family earning $50,000 a year” will lose “anannual income boost of $1,000.”

  1. Top marginal tax rate: increase from 35 percent to 39.6 percentfor taxable incomes over $450,000 ($400,000 for single filers).
  2. Phase out of personal exemptionsfor adjusted gross income (AGI) over $300,000 ($250,000 for single filers).
  3. Phase down of itemized deductionsfor AGI over $300,000 ($250,000 for single filers).
  4. Tax rates on investment: increase in the rate on dividends and capital gainsfrom 15 percent to 20 percent for taxable incomes over $450,000 ($400,000 for single filers).
  5. Death tax: increase in the rate (on estateslarger than $5 million) from 35 percent to 40 percent.
  6. Taxes on business investment: expiration of full expensing—the immediatededuction of capital purchasesby businesses.

Obamacare tax increases that took effect:
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  1. Another investment tax increase: 3.8 percent surtax on investment incomefor taxpayers with taxable income exceeding $250,000 ($200,000 for singles).
  2. Another payroll tax hike: 0.9 percent increase in the Hospital Insurance portion of the payroll taxfor incomes over $250,000 ($200,000 for single filers).
  3. Medical device tax: 2.3 percent excise tax paid by medical devicemanufacturers and importers on all their sales.
  4. Reducing the income tax deductionfor individuals’ medical expenses.
  5. Elimination of the corporate income tax deductionfor expenses related to the Medicare Part D subsidy.
  6. Limitation of the corporate income taxdeduction for compensation thathealth insurance companies pay to their executives.”

CATO notes that taxpayers are rebelling against tax hikes:

“In several states, voters turned down proposals to hike taxes, even when tied to popular initiatives such as education or transportation.  In Missouri, for instance, voters overwhelmingly turned down a sales-tax increase that would have funded a number of transportation projects.  And, in Nevada, voters turned down measures that would have removed a cap on the state;s mining tax and imposed a 2% tax on gross receipts for businesses with revenues over $1 million.  And…voters in Massachusetts approved that ballot measure eliminating the inflation adjustment on the gas tax. When they weren’t turning down proposed tax increases, voters were making sure that there would be fewer such proposed hikes in the future.”

The pertinent question is what has the nation gained from all that spending?

According to the CATO Institute, “Traditionally, the national debt as a percentage of GDP rose during major wars and the Great Depression. But… there’s been no major war or depression … we’ve just run up $16 trillion more in spending than the country was willing to pay for. That’s why our debt as a percentage of GDP is now higher than at any point except World War II.”

The absence of war or depression is only the beginning of the analysis, however.  The nation’s military has seen decreased, rather than increased, spending, and whole areas such as defense against EMP impacts from either natural causes or nuclear attacks, as well as the development of an adequate missile defense program, have been wholly ignored.  America’s infrastructure continues to be neglected. High-tech development vital to the future U.S. economy, including space exploitation, continue to receive inadequate funding as other nations move forward quickly. The poverty rate remains relatively unchanged, despite massive increases in programs such as food stamps.

Washington’s culture of wasteful spending, which merely serves to get incumbents re-elected, is devastating the national fiscal health. According to Senator Tom Coburn: “Our nation is on an unsustainable fiscal course that is threatening our future as a republic. Reducing wasteful spending is the first step Congress should take in order to bring down our debt and deficits.”

The problem, however, goes beyond waste, and beyond spending meant only to help incumbents get re-elected.  It also rests in the federal government getting involved in whole areas that are, frankly, outside of its constitutional jurisdiction.

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Economic Crisis Unreported

The U.S. economy is in a state of crisis, but you would hardly know it from listening to the major media. The facts, recently released by the U.S. Bureau of Economic Analysis, are damning:

America’s real gross domestic product  marginally ticked upwards during 2014’s first quarter at 0.1%, a figure that is only technically not indicative of a recession.

In a clear symptom of a failing economy, exports are down, as is nonresidential fixed investment.  But federal spending—(except for the crucial area of defense, at time when Russian, Chinese, Iranian, North Korean, and Islamic extremists threats are growing exponentially)—has increased, perhaps the only reason the numbers don’t reflect an actual recession in the civilian economy.

At the same time, inflation increased at an annualized rate of 5.6%, and that excludes the price hikes in the most inflationary areas of late, food and energy.In a clear indication of the descending strength of the U.S. economy, real exports of goods and services decreased 7.6 percent in the first quarter.
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While Americans struggled, federal government consumption expenditures and gross investment increased 0.7 percent. But as Russia, China, Iran and North Korea drastically expand their militaries and engage in threatening behavior, that extra government spending didn’t include defense, which, in these times of crisis, dropped 2.4%, while nondefense spending was hiked an unsustainable 5.9%.

Making life more difficult, Personal current taxes increased $18.9 billion in the first quarter. Personal saving — disposable personal income less personal outlays –dropped 28.7 billion from the prior quarter. The personal saving rate — personal saving as a percentage of disposable personal income – dropped .2%

Combined with the nation’s ongoing unemployment crisis, the drastic increase in the national debt, the expenditure of over $700 billion dollars by the White House in a stimulus program that accomplished nothing, the mismanagement of the American economy is clear and drastic.

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Americans Pay More for Taxes than Food, Clothing & Shelter

With the April 15 tax deadline finally over, Americans must begin the onerous task of coping with this year’s tax liabilities.

In a stunning analysis, a Tax Foundation study  has revealed that the combined burden of federal, state and local taxes will cost the average citizen more than food, clothing and housing combined.

The study finds that in 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income.  That contrasts with 1900, when Americans paid only 5.9 percent of their income in taxes.

Despite calls to increase taxes on the rich, made popular by the Occupy Wall Street movement, President Obama, and progressives nationwide, a Heritage Foundation report  finds that recent increases disproportionately affect the working wealthy.  The top 10 percent of all income earners paid 71% of federal taxes in 2010, yet they earned 45% of all federal income.  On the other hand, the bottom 50% earned 12% of income yet paid just 2% of federal income taxes.

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Will all those extra dollars mean that Washington can pay down its debt? (pegged at $17, 580,937, 100 by the  US Debt Clock ) Unfortunately, that will not happen. According to the CBO, Federal outlays are expected to increase by 2.6 percent this year, to $3.5 trillion, or 20.5 percent of GDP.  The CBO projects that under current law, spending will grow faster than the economy during the next decade and will equal 22.4 percent of GDP in 2024. With no changes in the applicable laws, spending for Social Security, Medicare (including offsetting receipts), Medicaid, the Children’s Health Insurance Program, and subsidies for health insurance purchased through exchanges will rise from 9.7 percent of GDP in 2014 to 11.7 percent in 2024. Net interest payments by the federal government are also projected to grow rapidly, climbing from 1.3 percent of GDP in 2014 to 3.3 percent in 2024.

Will that extra spending make our nation safer? Apparently not. The Congressional Budget Office notes that spending for defense, benefit programs other than those mentioned above, and all other nondefense activities—is projected to drop from 9.4 percent of GDP this year to 7.3 percent in 2024 under current law.

Should taxes be raised—or just kept at current high levels—to provide more funds for Washington? History indicates that higher taxes do not lead to higher revenues.  The Tax Foundation notes that “The Reagan tax cut ushered in an economic boom; federal revenues grew but the economy grew even faster. Despite pressure on state and local taxes following taxpayer revolts like Proposition 13 in California, the strong economic growth led to increased tax collections…”