Category: News and Events

A new commentary from Acton Research Director Samuel Gregg. Sign up here to get the latest opinion pieces delivered to your email inbox on Wednesday with the free weekly Acton News & Commentary.

Deficit Denial, American-Style

By Samuel Gregg

Until recently it was thought the primary message of the 2010 Congressional election was that Americans were fed up with successive governments’ willingness to run up deficit-after-deficit and their associated refusal to seriously restrain public spending.

If, however, the results of a much-discussed Wall St Journal-NBC News poll released on March 2 indicate what Americans really think about fiscal issues, then much of the country is clearly in denial – i.e., refusing to acknowledge truth – about what America needs to do if it doesn’t want to go the way of many Western European nations.

While the poll reveals considerable concern about government debt, it also underscores how unwilling many Americans are to reduce those welfare programs that, in the long-term, are central to the deficit-problem.

Here are the raw facts. America’s federal social security program has become the largest government pension scheme in the world in terms of sheer dollars. It is also by far the federal budget’s single greatest expenditure item.

According to the Office of Management and Budget, “human services” ― Social Security; Medicare; Health-expenditures; Education, Training, Employment, and Social Services; Veterans benefits; and the euphemistically-named “Income Security” (i.e., unemployment-benefits) ― were consuming 4 percent of America’s GDP in 1949. By 1976, this figure had increased to 11.7 percent. In 2009, it was consuming 15.3 percent of GDP.

During the same period, human services began consuming a steadily-increasing size of federal government expenditures. In 1967, human services spending was 32.6 percent of the federal budget. By 2009, this figure had increased to 61.3 percent. It is predicted to rise to 67 percent by 2016. In 2010, 75 percent of human services spending was on Social Security, Medicare, and Income Security ― in short, the core welfare state.

These disturbing numbers make it clear any serious federal deficit reduction must involve spending-cuts to federal welfare programs. That doesn’t mean other areas of government-spending should be immune from cuts. But the deficit simply can’t be properly addressed without a serious willingness to reduce welfare-expenditures.

And yet despite all the passionate rhetoric from Americans about the need to diminish government-spending, the Wall St Journal-NBC News poll suggests that fewer than 25 percent of Americans favor cutbacks to Social Security or Medicare as deficit-reduction measures. As the Wall St Journal’s own commentators noted: “Even tea party supporters, by a nearly 2-to-1 margin, declared significant cuts to Social Security ‘unacceptable.’

Unacceptable? Think about that word. Do large numbers of Americans really believe there is something morally evil about significant reductions to welfare-spending under any circumstances? Since when – apart from Greece and other models of fiscal rectitude – have welfare payments assumed the status of an absolute right subject to no qualification? Have we really gone so far down the path of economic-Europeanization?

Granted, the same poll suggests much larger numbers of Americans are willing to raise the retirement age to 69 and means-test social security. But is that the best Americans are willing to do?

Spain’s unreconstructed-1960s-lefty Socialist government has just lifted Spain’s retirement-age to 67. Unsurprisingly, that won’t fully kick-in until 2027, long after Spain’s political class and their tame voting constituencies have met their Maker and no longer need to live off their children’s futures. But can Americans who proclaim their attachment to free enterprise and personal responsibility really do no better than left-wing Western Europeans?

Back in 2007, the journalist Robert J. Samuelson summarized the situation perfectly. “Most Americans,” he wrote, “don’t want to admit that they are current or prospective welfare recipients. They prefer to think that they automatically deserve whatever they’ve been promised simply because the promises were made. Americans do not want to pose the basic questions, and their political leaders mirror that reluctance. This makes the welfare state immovable and the budget situation intractable.”

Presidential campaigns are invariably accompanied by a great deal of posturing. It would be helpful, however, if some serious candidates for the nation’s highest office in 2012 – Republican or Democrat – would use their moment in the spotlight to educate Americans about what’s at stake.

One former American vice-president once reportedly insisted, “Deficits don’t matter.” Unfortunately, there is mounting proof he was wrong. After examining data on 44 countries over approximately 200 years, two economists recently found evidence suggesting that developed nations with gross public debt levels exceeding 90 percent of GDP (i.e., America) find that their medium-growth rates fall by one percent, while average growth declines by an even greater proportion.

That’s worrying because while deficit-cutting matters, wealth-creation matters even more if we are to dig ourselves out of our fiscal hole. America now seriously risks seeing its burgeoning welfare costs suffocating the productive sector of the economy that makes social welfare possible in the first place.

Incidentally, it won’t be the rich who suffer. It will be the poor. In their laudable concern for the weakest among us, Americans ought to remember that and start matching political rhetoric with consistent fiscal action.

Dr. Samuel Gregg is Research Director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, and Wilhelm Röpke’s Political Economy.

One of the main points of the “What Would Jesus Cut?” campaign is the pitting of defense spending against charitable social programs. The assumption is that Jesus would obviously endorse and campaign for the welfare state over the military. A common perception of the U.S. armed forces by many of the religious left is that they are the perfect embodiment of America as “corrupt empire.”

At Acton, all of our commentators on the budget have consistently said all spending measures must be on the table for addressing the federal deficit and debt, including defense. But entitlement promises and their mismanagement is by far the biggest obstacle towards a plan for fiscal responsibility.

Previously, in “Shane Claiborne’s Budget Babbling,” I pointed out the absurdity of Claiborne quoting Martin Luther King’s maxim: “A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.” Does Claiborne not see entitlements as social spending, which is by far the largest expenditure?

In his column, I think Claiborne is frankly disrespectful to our military, viewing them solely as bomb hurlers and keepers of arsenals of death. He says, “cutting $3 mosquito nets that can save lives while continuing to spend $200,000 a minute on the military should raise some flags of a different sort.”

In his disrespect for the military, Claiborne makes no mention of all the humanitarian aid and assistance provided by the U.S. armed forces. One could make an argument that the military does not need to be involved in humanitarian aid, but weighed against the things Claiborne says should not be cut, the military towers over those efforts when it comes to humanitarian assistance and aid. Often, the military is vital for not just logistically delivering all the aid but helping to secure a troubled nation so aid is delivered efficiently, humanely, and in a fair manner.

The United States military has recently led humanitarian missions in Haiti after the earthquake, the Republic of Georgia, the Philippines, Indonesia, and no doubt stand ready to deliver food and medical assistance to Libya. Those nations are only a few examples of some of the humanitarian benefits of our military might. The Navy has ships that serve as floating hospitals for people in need of evacuation for medical care. In fact, their secondary mission is supporting humanitarian relief, one such example is the USNS Comfort. The Comfort deployed to Haiti after the earthquake in 2010.

My point here is I think the religious left has for too long stereotyped our armed forces and its mission. While they should be applauded at times for raising awareness of issues of peace and justice, it needs to be done responsibly and with greater respect to those who serve.

The military, after all, is under the authority of the civilian government. Shane Claiborne’s bumper sticker theology where he toasts “all who would rather see ice cream dropped from planes rather than bombs,” and proposes that the military hold bake sales so the men and women will be able to wear the uniform of our armed forces is demeaning. It cheapens the men and women who have not only shown courage in defense of our nation but compassion.

Here’s today’s offering from Jim Wallis’ Rediscovering Values for Lent on the Sojourners website:

Today, instead of statues, we have hedge funds, mortgage-backed securities, 401(k)s, and mutual funds. We place blind faith in the hope that the stock indexes will just keep rising and real estate prices keep climbing. Market mechanisms were supposed to distribute risk so well that those who were reckless would never see the consequences of their actions. Trust, security, and hope in the future were all as close to us as the nearest financial planner’s office. Life and the world around us could all be explained with just the right market lens. These idols were supposed to make us happy and secure and provide for all our needs. Those who manage them became the leaders to whom we looked, not just for financial leadership, but direction for our entire lives. That is idolatry. (page 29).

Last month, Fidelity Investments reported that the average 401(k) balance reached a 10-year high at the end of 2010 — two years after the financial crisis and recession. It also pointed out that “the majority (53%) of participants in 401(k) plans … earning between $20,000 and $40,000 do participate, and 71 percent of participants earning $40,000 and $60,000 participate.” That’s a lot of lower-income idolatry.

This is not a picture of the stock market

According to a report (issued in 2008) by the Investment Company Institute and the Securities Industry and Financial Markets Association, “ownership rates for equities and bonds across U.S. households grew dramatically between 1989 and 2001, but have since tapered off. In the first quarter of 2008, 47 percent of U.S. households (54.5 million) owned equities and/or bonds. The overall ownership rate in 2008 is still much higher than it was in 1989.” The report noted that “ownership of these investment assets has declined since 2001, as increasing market volatility has reduced Americans’ tolerance for risk.” But, most likely, those investment funds will be saved somewhere or moved into lower risk vehicles.

Of course, if you are afraid that investing in the stock market, a mutual fund, a money market account, etc., makes you an idol worshipper, the cure would be to stuff your cash into the mattress or bury it in a coffee can. But would that be good stewardship?

Blog author: lglinzak
Wednesday, March 9, 2011
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A big report is due out tomorrow which may have a positive or negative impact on economies across the globe. These numbers are not coming from the New York Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the London Stock Exchange, or any other stock exchange; they are actually coming from a report being released by the U.S. Agriculture Department (USDA). It will talk about the role the U.S. will play in preventing or reducing the effects of a global food shortage.

There have been many pundits warning about a global food crisis resulting in a substantial increase in food prices. Shoppers are already experiencing the effects of higher food prices, with wheat prices up 80 percent from a year ago and U.S. retail food prices expecting to climb about 4 percent this year.

And prices are not expected to come down any time in the near future. The Ogallala Aquifer in the U.S. is depleting, and without a way to replenish itself, experts are wondering if the U.S. is on the verge of seeing another dust bowl. Texas’ wheat crop is also predicted to not meet harvesting expectations as 56 percent of its crop is rated in poor to very poor conditions by the USDA with dry weather persisting. Furthermore, an article published in Foreign Policy articulates many variables contributing to the increase in food prices and the potential food crisis which include population increase, arable lands depleting, the increasing demand for water for numerous uses, and urban sprawl. The industry is left with a lot of factors to compete with while trying to keep prices as low as possible.

It is important to note that the developed world is not immune from the adverse effects of a potential food crisis. Karen Ward, senior global economist at the worldwide bank HSBC, explains slow wage growth and use of food crops in alternative fuels are going to result in problems for those living in developed countries. While speaking on Jeff Randall Live, Ward also warned the UK may be subject to the food riots similar to those that occurred in other countries:

“Even in the developed world I think we have very, very low wage growth, so people aren’t getting more in their pay packet to compensate them for food and energy, and I think we could see social unrest certainly in parts of the developed world and the UK as well.”

She went on to highlight the link between high food prices and the escalating cost of crude oil.

“More and more we are seeing that some of these foodstuffs are actually substitutes for energy itself, particularly biofuels. So I think the energy markets are a significant contributor to these food price gains.”

While farmers are continuing to produce bigger crops, the U.S. is expected to see a 4 percent increase in the area planted along with a harvest record for corn of 13.73 billion bushels, it still may not be enough. However, corn is on such high demand due to the increase of the ethanol industry in the U.S., and current rising oil prices are even further contributing to the demand for ethanol. As a result, the 10 percent increase that is projected in the corn harvest will only add to reserves in the U.S. by five days, and by the time the fall harvest begins, the USDA predicts the U.S to only have enough corn left to satisfy the country’s appetite for 18 days.

Whether there is a food crisis of 2011 or not does not avoid the much needed ethical debate involving the use of crops. As I discussed in an earlier post, the U.S. is mandated to continue to increase its ethanol production, and with biofuels increasing the demand on crops and ever increasing population that demands food, priorities need to be evaluated and questions need to be raised. Shall more emphasis be placed on crops being harvested for food consumption or fuel usage?

Blog author: kschmiesing
Wednesday, March 9, 2011
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Robert Kennedy, author of Acton’s CSTS volume, The Good that Business Does, weighs in on the Wisconsin/Ohio flap over public sector unions and collective bargaining in this interview with ZENIT. A sample:

The Church has certainly been a champion of the right of workers to form labor unions but has never argued that unions have the liberty to undermine the common good.

Like many other kinds of organizations in many other sectors of society, unions can lose sight of their responsibility to respect the common good in the pursuit of their legitimate objectives. A union, no less than a business trade association, can position itself to exercise disproportionate influence in public life….

A well-ordered society, in the Catholic view, is one in which the appropriate independence and freedom of each sector — labor, business and government, for example — is preserved for the sake of the common good. If this balance breaks down, the common good is likely to suffer.

Writing in the Boston Globe, columnist Jeff Jacoby says that a “more fundamental problem with the “What Would Jesus Cut?’’ campaign is its planted axiom that Jesus would want Congress to do anything at all.”

As a believing Jew and a conservative, I don’t share the religious outlook or political priorities of Wallis and his co-signers. But you don’t have to be Christian or liberal to believe that in God’s eyes, a society is judged above all by its concern for the unfortunate. Jesus’ teaching in Matthew 25 — “For I was hungry and you gave me food, I was thirsty and you gave me drink, a stranger and you welcomed me, naked and you clothed me, ill and you cared for me . . . Whatever you did for one of these least . . . you did for me’’ — echoes what Isaiah and other Hebrew prophets preached centuries earlier: “Learn to do well: seek justice, relieve the oppressed, judge the fatherless, plead for the widow.’’

But does it really follow from these timeless injunctions that God expects legislators never to eliminate any poverty program or social-welfare line item, or even to roll such spending back to where it stood a few years ago?

Read Jacoby’s “Separation of Jesus and Congress” in the Boston Globe.

In this week’s commentary, which will appear tomorrow, I summarize and explore a bit more fully some of the discussion surrounding evangelical and religious engagement of the budget battles in Washington. One of my core concerns is that the approaches seem to assume too much ongoing and primary responsibility on the part of the federal government for providing direct material assistance to the poor. As “A Call for Intergenerational Justice” puts it, “To reduce our federal debt at the expense of our poorest fellow citizens would be a violation of the biblical teaching that God has a special concern for the poor.”

In one real sense this perspective lets Christians, individually and corporately, off the hook too easily. I highlight the following quote from Abraham Kuyper: “Never forget that all state relief for the poor is a blot on the honor of your Savior.”

My basic contention is that we can only move to address the secondary role of governments of various levels (local first, federal last!) providing relief when we have thoroughly grappled with Kuyper’s basic insight here. Lester DeKoster and Gerard Berghoef explore this dynamic in a bit more detail in their Deacons Handbook, in a section on “The Church and the Welfare State.” They take as their starting point the position that “Government has undertaken to do what conscience, tutored out of the Scriptures, demands but fails, through the Church, entirely to achieve.”

In this way their emphasis is on revitalizing the diaconate first. They recognize that in many ways the government has filled in the gaps, but in so doing has often eroded the foundations and space for other organizations to step back in and fulfill their own mandates. DeKoster and Berghoef, writing in 1980, anticipate something like the faith-based initiative as part of the move back for the church to meet its social responsibility.

I’m less sanguine about that proposed solution, but I do think that the tax credits for charitable giving are something that ought to be protected, or perhaps even enhanced (President Obama’s latest proposal would limit exemptions for wealthy citizens.). In this context it is also worth noting the conclusions of a recent NBER paper, which shows that government subsidy tends to “crowd out” the initiative of private institutions from seeking their own sources of funding (imagine that!).

Kuyper’s quote comes from his opening address to the First Christian Social Congress in Amsterdam, November 9, 1891, and is published in translation as “The Problem of Poverty.”

Update: Over at the CRC Network, Karl Westerhoff, who guides the “Deacons” topic, asks some pertinent questions:

But how is this a diaconal matter? Well, I’m wondering…. Does this national conversation have echoes in our churches? In our families? Should it? Are there implications for how we make OUR budgets? And what about our families? Is there an opportunity here for some fresh conversation about family spending patterns? Can we talk about the choices we make with our money, and the expectations we have for the money we spend on charity? Where has the church spent benevolent money that really had the result we hoped for? What can we learn from that? How are we shaping our family lives and our congregational lives in ways that address need in truly Christ-like ways?

These are precisely the kinds of questions we need to be asking. I think what we’ll find is that government has a far larger and more expansive role in some of these answers than many often think.

Writing for the Huffington Post, Shane Claiborne is also asking “What Would Jesus Cut?” I’m still opposed to the whole notion of reducing Christ to budget director, as my earlier post points out. But Jesus as Secretary of Defense of the United States or rather, Jesus as secretary of peace as proposed by Congressman Dennis Kucinich is equally unhelpful. Mark Tooley, president of IRD, has already weighed in on Shane Claiborne’s not so brilliant drafting of Jesus for president.

As a signer of “A Call for Intergenerational Justice,” one should assume Claiborne is serious about deficit reduction. We should take him at his word, but what about defense spending for deficit reduction and the proper role of government? And as John has already pointed out in his post, and what everybody should know, is that defense cuts alone will not balance the budget.

There are responsible conservative lawmakers, like U.S. Congressman Justin Amash from right here in West Michigan, that have rightfully said defense cuts should be on the table as part of plan for fiscal responsibility. In terms of the proper role of government, defense spending is a clear federal mandate for taxing and spending (Article 1, Section 8). The constitution should still be relevant, and one could assume we may not be in the same spending mess we are in right now if it was taken more seriously.

Claiborne says, “Even though the 533 billion dollar military budget is the elephant in the room and the gushing, bleeding wound of America’s deficit … it has been the sacred cow.”

This is what is unhelpful, and Mark Tooley has already pointed this out in his own response to “What Would Jesus Cut?”, that “probably Claiborne doesn’t know that ‘programs of social uplift’ have out expensed defense for 40 years, starting with the Nixon Administration.” Defense spending is 20 percent of the annual budget, while Medicare and Medicaid takes up 23 percent of the budget and social security is 20 percent as well, but tack on another 12 billion in annual dollars. Claiborne says “As Dr. [Martin L.] King said, ‘A nation that continues year after year to spend more money on military defense than on programs of social uplift is approaching spiritual death.” But this is clearly not the case as Clairborne just pulled out a pithy maxim without ever looking at any real numbers.

Tooley also makes a good point about Claiborne’s Anabaptist tradition as well:

Claiborne, an Anabaptist, is author of Jesus for President, a 2008 book describing government as the biblical Whore of Babylon. Oddly, many neo-Anabaptists ferociously denounce government as demonic, almost sounding Libertarian, while still demanding more and more government for politically correct social programs.

Claiborne believes America is the evil imperialist par excellence. But why is it then okay for God to ordain that same ‘evil’ state to fill the bellies of the masses and provide for their every social need through government fiat?

This brings up a good point about rhetoric versus reality. The nuclear freeze crowd of the 1980s hyperventilated across the United States and Western Europe with help from Moscow because Ronald Reagan was strengthening the NATO alliance by sending nuclear Pershing II missiles into Europe. Reagan’s efforts were disastrous for the Soviet Union, and the peace he achieved dwarfed the objectives of the same old arms agreements advocated by the nuclear freeze movement.

Perhaps, “A Call for Intergenerational Justice” would have been better served without the inclusion of such names as Jim Wallis and Claiborne. Serious matters call for a more serious discussion. I reviewed The Scandal of Evangelical Politics by Ronald Sider, who is also a signer of “A Call for Intergenerational Justice.” Still left of center, Sider praised market forces, saying, “On balance, a market economy respects human freedom better, creates wealth more efficiently, and tends to be better at reducing poverty.”

Claiborne can make no such statement. He seems to view the free-market as a construct of an evil imperialistic American empire. Markets seem only useful to him in the context of underpaid enlisted military men and women selling cookies to buy their uniforms. Claiborne may have something worthwhile to say every once in a while, his bio is interesting to say the least, but on budget matters and defense spending he’s clearly babbling.

With the surge in oil prices, there’s renewed interest in alternative energy options. Numerous countries have gradually taken steps to promoting renewable or clean energy technologies, and it seems the United States is drifting more towards favoring alternative energy options as the Obama Administration is looking at banning off shore drilling along the continental shelf until 2012 and beyond. However, before we move farther down this road, a critical analysis of the pros and cons is a must.

A more serious assessment is now being applied to ethanol and its effect on food production. There’s now more caution on the use of ethanol, based on both economical and moral arguments, and the same approach also needs to be taken when analyzing clean technologies such as the use of wind turbines.

As a recent article in the Mail Online demonstrates, many countries in Europe are currently seeing the unintended consequences of their policies favoring the use of wind power.

The article notes that the wind turbines are proving to be very inefficient:

The most glaring dishonesty peddled by the wind industry — and echoed by gullible politicians — is vastly to exaggerate the output of turbines by deliberately talking about them only in terms of their ‘capacity’, as if this was what they actually produce. Rather, it is the total amount of power they have the capability of producing.

The point about wind, of course, is that it is constantly varying in speed, so that the output of turbines averages out at barely a quarter of their capacity.

This means that the 1,000 megawatts all those 3,500 turbines sited around the country feed on average into the grid is derisory: no more than the output of a single, medium-sized conventional power station.

The wind turbine’s production of energy not only fluctuates based on the varying speeds of the wind, but is also seasonal. For example, Britain’s wind turbines became largely inefficient in the winter when the weather was mostly freezing and windless, and to keep homes warm Britain was forced to import immense amounts of power from nuclear reactors in France.

Furthermore, the article also notes, each country in Europe is required to produce more wind turbines each year which will result in a higher increase of CO2 emissions because of the need to build more gas-fired power stations to function as a back-up energy source when the wind drops. Due to the unreliability of the wind, these gas-fired power stations must run for twenty-four hours a day to be prepared for any moment when the wind may diminish.

The article is also quick to point out how the production and installation of the wind turbines also brings forth an increase in CO2 emissions:

Then, of course, the construction of the turbines generates enormous CO2 emissions as a result of the mining and smelting of the metals used, the carbon-intensive cement needed for their huge concrete foundations, the building of miles of road often needed to move them to the site, and the releasing of immense quantities of CO2 locked up in the peat bogs where many turbines are built.

It is such unintended consequences of wind turbines that possibly make them counterproductive to their stated goal of reducing greenhouse gas emissions.

Like the production of ethanol in the United States, the production of wind turbines in Europe is a market that relies on the government. Wind turbines are very expensive to build, and often require a government subsidy in order to get them built.

Many countries in Europe are seeing the disastrous effects of relying on wind turbines, and some are even beginning to shift away from their reliance on them. Germany, for example, which has produced more turbines than any other country in the world, is now building new coal-fired stations.

Yes, wind turbines were supported with good intentions: to provide clean sustainable energy while also supporting environmental stewardship. However, wind turbines may be actually counter-intuitive to their original goals. While the rising oil prices are having adverse effects on everyone, when searching for alternative fuels, we need to be critical of the potential of unintended consequences they may bring upon us.

Posts on ethanol production and the ethanol subsidy can be found here and here.

While there is much to applaud in the Center for Public Justice and Evangelicals for Social Action’s “A Call for Intergenerational Justice,” the lack of discussion of the problem of economic growth is troubling. I believe Don Peck is correct when he writes in The Atlantic:

If it persists much longer, this era of high joblessness will likely change the life course and character of a generation of young adults—and quite possibly those of the children behind them as well. It will leave an indelible imprint on many blue-collar white men—and on white culture. It could change the nature of modern marriage, and also cripple marriage as an institution in many communities. It may already be plunging many inner cities into a kind of despair and dysfunction not seen for decades. Ultimately, it is likely to warp our politics, our culture, and the character of our society for years.

The only solution here seems to be economic growth. And while tackling the staggering problem of the debt is an integral component to ensuring the younger generation gets a fair shot to succeed the first and most pressing issue is employment itself. There is little in ‘A Call for Intergenerational Justice’ that takes this challenge seriously as it calls for cuts in programs (Such as military spending and business subsidies) which do create jobs for many Americans. This is not to say that these cuts should be taken off the table but rather that there needs to be an acknowledgement that these cuts will also affect Americans negatively and may, in the short term at least, add to the ranks of the poor in America.

These are not easy questions to answer but I believe that any solution to the question of intergenerational justice must begin with the question of economic growth. We need solutions that empower entrepreneurs, invigorate the private sector, and accelerate economic growth informed by an understanding of the role of markets and free enterprise.