Tag: government spending

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Quick Analysis

All Spending is Not Equal

Attempts to corral spending often hit the wrong targets entirely. Recently, Senators Lee (R-Utah) and Paul (R-Kentucky) objected to some provisions of legislation designed to provide continuing funding designed to cover the medical costs of First Responders who developed terrible illnesses from exposure to dangerous substances in the aftermath of the 9/11 attacks. This is an absurd attack on a comparatively minor budget item designed to provide appropriate support for heroes who abundantly deserve it. 

As every family knows, all spending is not equal. Repairing a busted roof, for example, has priority over taking a luxury vacation.  They also understand that timely budgeting and planning are the most efficient ways to use income. It’s a vital practice. The federal government has yet to understand that logic. 

Both Democrats and Republicans, trying not to offend any potential constituency and apparently incapable of coming to an agreement on what the national priorities should be, have engaged in ludicrous procedures that treat vital necessities, such as national defense, on the same par as the latest pork barrel project. 

The most well-known manifestation of that nonsense is Budget Sequestration,  a law and a concept that purportedly seeks to limit the federal budget, but in substance shields Congress from its responsibility to make hard decisions and spend wisely.  It sets a hard cap on spending. The idea is that if Congress enacts annual appropriations that exceed the limit, an across-the-board spending cut is automatically imposed on general categories, affecting all departments and programs equally. The current incarnation of this ridiculous idea came into effect (it has antecedents going back to 1985) is the Budget Control Act of 2011 which came about during the Obama Administration, a period which doubled the national debt with nothing to show for all that spending. Indeed, despite slashing defense spending, and doing little to stabilize key programs such as Social Security and infrastructure repair, and despite excessively high taxes on individuals and businesses, it didn’t stop the doubling of the national debt, from about $10 trillion to approximately $20 trillion.

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The Center on Budget and Policy Priorities reports that “Unless Congress and the President reach a new budget agreement, both non-defense and defense discretionary program areas will face deep cuts in 2020 and 2021, forced by tight funding limits and additional cuts… Since 2013 lawmakers of both parties have broadly agreed that the BCA-mandated caps are too low to meet national priorities in both defense and non-defense areas. To address this shortfall, Congress has enacted a series of temporary budget deals, generally lasting two years, that have increased funding above the sequestration levels. Each deal increased both the defense and non-defense discretionary caps by roughly equal amounts, recognizing that the BCA’s sequestration provision cut defense and non-defense programs by equal amounts. The most recent deal covered fiscal years 2018 and 2019. Unlike prior agreements, it fully reversed the harmful discretionary sequestration cuts and provided additional resources for new investments…”

The irrationality and political cowardice of Congress’s approach to the budget hurts the nation across the board. The inability to timely come to a broad budget agreement in compliance with sequestration results in “continuing resolutions” which, due to uncertainty and a lack of program continuity, results in higher expenses.  The General Accounting Office (GAO) describes the problem: “In all but 4 of the last 40 years, Congress has passed continuing resolutions (CR) to keep agencies running between budgets. Without appropriations or a CR, the government may partially shut down. We testified that CRs, possible shutdowns, or both create uncertainty and inefficiency for agencies. For example, our past work found that agencies have reported delays and rework in contracts, grants, and hiring.”

A Heritage study of this process provides one example: “Continuing resolutions impose a considerable cost on the military’s readiness levels through loss of training time, delayed maintenance, and delayed availability of new ships.”

The point is hammered home by an American Enterprise study: 

“Continuing resolutions negatively impact the military in three main ways. First, because CRs freeze individual appropriations accounts at last year’s levels, tens of billions of dollars will be misaligned. For instance, though the difference between the 2020 requested level of $750 billion and the 2019 spending level of $716 billion is only $34 billion, the actual effect of the CR is greater because the additional funding is misaligned compared to the budget request—and often at a lower level. This misalignment negatively affects all accounts, but particularly creates problems for troop training and maintenance of equipment and facilities—the core of military readiness. Near-term readiness is perishable and must be constantly maintained for the “fight tonight” or it is lost. It takes longer to rebuild readiness than to maintain it. Second, continuing resolutions do not allow the military to start new weapons programs or increase the production of existing weapons. This year, that means hundreds of new programs necessary for regaining the military’s edge against Russia and China will not be able to move forward until the CR is lifted. Third, by injecting uncertainty into every process, these spending freezes create significant sums of financial and personnel waste through duplication of work, higher prices, and contracting delays.”

Illustration: Pixabay

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NY Analysis

Washington’s Worst Mistake

Proposals for Washington’s 2016 budget, like so many before it, allow for the continuation of  a failed effort that is so vast it hampers the federal government’s ability to fulfill its traditional responsibilities.  it’s clear that the “War on Poverty” hasn’t produced results.  So why do the programs and concepts of this failed effort continue?

The federal debt was $18 trillion as of the filing of this New York Analysis report in late March 2015, a figure that grew by $483 billion in 2014.  The future looks grim. According to the Congressional Budget Office (CBO) “The deficit in 2025 is projected to be $1.1 trillion, or 4.0 percent of GDP, and cumulative deficits over the 2016–2025 period are projected to total $7.6 trillion. CBO expects that federal debt held by the public will amount to 74 percent of GDP at the end of this fiscal year—more than twice what it was at the end of 2007 and higher than in any year since 1950. By 2025, in CBO’s baseline projections, federal debt rises to nearly 79 percent of GDP.”

The lion’s share of the federal budget goes to War on Poverty-type entitlement programs. According to a Heritage  study, “In 2003, the entitlement share of the budget was 44 percent, compared with 49 percent today. Without reform of these massive and growing programs, Washington will have to borrow increasing amounts of money, piling debt onto younger generations and putting the nation on a dangerous economic course.”  (By contrast, 2014 spending on defense was 3.5 percent of GDP, or less than half of what it was in 1965, and falling.)

Heritage notes that “In his January 1964 State of the Union address, President Lyndon Johnson proclaimed, ‘This administration today, here and now, declares unconditional war on poverty in America.’ In the 50 years since that time, U.S. taxpayers have spent over $22 trillion on anti-poverty programs. Adjusted for inflation, this spending (which does not include Social Security or Medicare) is three times the cost of all U.S. military wars since the American Revolution. Yet progress against poverty, as measured by the U.S. Census Bureau, has been minimal, and in terms of President Johnson’s main goal of reducing the ‘causes’ rather than the mere ‘consequences’ of poverty, the War on Poverty has failed completely. In fact, a significant portion of the population is now less capable of self-sufficiency than it was when the War on Poverty began.”

A New American study, discussing the rise in entitlements, emphasized that “Even more troubling is that analysts say the trends look set to accelerate as Washington, D.C., intensifies its failed efforts to supposedly achieve “victory” in the “war” while the Federal Reserve conjures ever greater quantities of currency into existence…Since Obama took office, 13 million more Americans have become dependent on food stamps, with the numbers now hitting a record 47 million — about a third more than when he was sworn in. In 2007, there were 26 million recipients. Spending on the scheme has more than doubled just since 2008. The explosion of the program, along with other welfare schemes, has resulted in countless commentators and critics labeling Obama ‘the Food Stamp President.”

Ironically, the National Tax Limitation Foundation notes that before the War on Poverty began, the U.S. poverty rate had been declining precipitously.  “The poverty rate fell from 32% in 1950 to 17.3% in 1965 to 14.7% in 1966.”

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The CATO Institute outlined the amounts spent in a single year: “In 2012, the federal government spent $668 billion to fund 126 separate anti-poverty programs. State and local governments kicked in another $284 billion, bringing total anti-poverty spending to nearly $1 trillion. That amounts to $20,610 for every poor person in America, or $61,830 per poor family of three. Spending on the major anti-poverty programs increased in 2013, pushing the total even higher. Over the last 50 years, the government spent more than $16 trillion to fight poverty. Yet today, 15 percent of Americans still live in poverty. That’s scarcely better than the 19 percent living in poverty at the time of Johnson’s speech. Nearly 22 percent of children live in poverty today. In 1964, it was 23 percent. How could we have spent so much and achieved so little?”

In their book, The Poverty of Nations,” by Dr. Wayne Grudem and economist Barry Asmus explain why they believe government programs have largely failed. They summarized their  analysis in a recent WND interview: “The solutions to poverty come when people … are enabled to produce their own prosperity. The question is not equality. The question is, ‘Is there opportunity? Is there freedom in the workplace? Is there economic freedom? Is there governmental freedom from excessive regulations so that people who are at the lower end of the income bracket can progress and hope to progress toward higher income?…What about the things we’re doing in the United States? Aren’t we having more government regulation, higher taxation, disincentives to productivity, disincentives to work? Aren’t we having moral breakdown in the way that people think of honesty and truthfulness, not breaking contracts and obedience to the rule of law?’” he said. “There are many things our country is doing that are actually hindering our economic growth and, of course, that results in a stagnant economy essentially.”

Why do the failed concepts of the War on Poverty continue to exist, and continue to deplete the taxpayer’s pockets?  Part of the answer is politics. Progressive candidates, who depend on class warfare for their electoral success, view them as a war of redistributing the “wealth” to those on the lower rungs of the economy. But there is another, heavily vested interest as well.  The War on Poverty has created an entire special interest of bureaucratic jobs. As noted in a Philly.com article written decades ago,

“Whatever this approach does for poverty, it’s going to be a boon to poverty workers, the one class that benefits most from anti-poverty programs. They’ll be the ones running the classrooms, job training sessions, work programs, and child-care centers authorized by this bill – all in the name of making the poor independent. Some early studies have shown that any training beyond the most basic seldom gets people off the dole…Back when government actually put millions to work – through the Works Progress Administration, the Civilian Conservation Corps, and a spate of other New Deal programs – job preparation might consist of showing up and being handed a shovel. Yet the country is still rich in libraries built, roads paved, and lands reforested that way.”

It is troubling that the War on Poverty, despite failing to address the problem it was created to resolve, has, due to politics and special interests, grown to the point where it dominates the federal budget.

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Quick Analysis

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…”