Posts tagged with: budget deficit

Quoting former Chairman of the Joint Chiefs of Staff Admiral Mike Mullen, Mitt Romney was right to make the point that the federal deficit is the biggest national security threat to our country. Romney has also been critical of President Obama for failing to resolve significant cuts to defense spending under the Budget Control Act. Both political parties agree these cuts would be a disaster and they were implemented primarily as a motivational mechanism for real budget reform.

While cuts to defense will not solve our budget crisis, considering the depth of our spending mess, defense cuts can’t be ruled out entirely. Acton’s own principles for budget reform declare, “While no federal spending measures should be immune from cuts, our funding priorities should reflect the constitutional responsibilities and duties of the federal government.”

The defense budget was raised dramatically over the last decade to combat terrorism and fight two wars. Certainly as some forces draw down, savings can be made along with new investments for national defense and readiness. At home, we also have a moral obligation to care for our wounded warriors, which I addressed at greater length in a 2009 commentary, “Veterans First on Health Care.”

The challenge of course is securing savings while not compromising our constitutional charge to defend the country. Defense spending and defense budgets are a complex subject, but there are areas for savings. The military has a fairly long tradition of acting in one degree or another as a social laboratory. Military social programs continue to swallow up even more of the defense budget. I leave you with these words offered by Allen Baker in a discussion I had with him this morning. Baker, a combat veteran, served as a naval aviator:

We are three aircraft carriers short of providing absolute minimum coverage. When the “Arab Spring” sprung, guess what wasn’t in the Mediterranean Sea for the first time in a half-century? (Hint for Pres Obama: It’s a ship where airplanes take off and land). Ditto when terrorists murdered our ambassador in Benghazi. No U.S. carriers nearby (despite the clearly elevated threat). That’s because we have too few, and the ones we have are either worn out, or are wearing out at a faster-than-programmed rate due to the extremely high operations-tempo . . .

They are building multi-million dollar child development centers in places like Columbus, Miss. while the Training Squadrons have broken jets sitting idly on the ramp for lack of parts and maintenance . . .

The Army needs new tanks. Smaller, faster, cheaper. New helicopters, too. Less child development and ‘total warrior support’ and just more warriors and weapons. Simple stuff, really.

Napp Nazworth, a reporter for Christian Post, interviewed Rev. Robert A. Sirico about House Budget Committee Chair Paul Ryan’s budget plan, “The Path to Prosperity: A Blueprint for American Renewal.” Nazworth asked Rev. Sirico, Acton’s president and co-founder, to talk about how closely Ryan’s plan lines up with Catholic social teaching, as the Republican budget chair has claimed, and to speak to criticisms of the plan. “A group of about 60 politically liberal Christian leaders wrote a letter taking exception to Ryan’s comments, calling it ‘morally indefensible,’” the reporter wrote. “In an interview with The Christian Post, Congresswoman Rosa DeLauro (D-Conn.) also said the Ryan budget is in opposition to Catholic teaching.”

Nazworth: Ryan said that subsidiarity is essentially federalism and that the budget considered the poor and vulnerable by reducing or cutting programs that lead the poor to become dependent on government. Did Ryan seem to understand those Catholic doctrines correctly?

Sirico: Subsidiarity is not “essentially” federalism. There is a dimension of federalism that reflects some of the values of subsidiarity. But, federalism is a political structure. And, subsidiarity is more of a social and theological principle, so that federalism speaks about one way of governing people. You could have subsidiarity in a society that didn’t live under an American form of government.

There is a kinship. I wouldn’t say it is essentially the same, but there is a kinship between the two, that you should leave things to people who know best. The motivation of subsidiarity is that human needs are complex and sometimes very nuanced. When you pull back and make human needs abstract, you don’t get to the core of what the need is, so that people closest to human need can make that determination better than bureaucrats or politicians that have other pressures and motivations far away from the person who is actually in need.

Read “Catholic Priest on Ryan Budget and Church Doctrine” by Napp Nazworth on Christian Post.

Blog author: jcouretas
posted by on Tuesday, August 16, 2011

In “Stop Coddling the Super-Rich” investor Warren Buffett, one of the world’s wealthiest men, makes a case for upping the tax rate on the “mega-rich” in America. In a response published on National Review Online, Acton Research Director Samuel Gregg observes that “this is a broken record that Mr. Buffett has taken to re-playing over the past five years.” He points out that the U.S. tax system is already heavily progressive (no pun intended) and that the label “mega-rich” may not be as obvious as Buffett would like us to believe:

It’s safe to say that a substantial number of these people operate small-to-medium-size businesses that don’t play the corporate welfare game a la General Electric, that are already subject to some of the world’s highest corporate tax rates (most of which is paid by the owners of companies), that reinvest much of their income in expanding their activities and taking on new risk, and, above all, that employ people. They are the engine of growth and employment in America today — not the United States government. Why on earth would we disincentivize them from creating value and jobs by raising their taxes?

Read Samuel Gregg’s “Taxing Warren Buffett” on NRO.

Over at ThinkChristian, I take the opportunity to sketch “what a comprehensive Christian response to the crisis of public and private debt might look like.” I focus “on five main areas: the individual, familial, ecclesial, economic, and political.” This is a brief and preliminary set of questions and observations.

But even so, I think even just provisional attempts to evaluate our values shows us that “the problems we face are far more than political – and far deeper than merely political solutions can hope to solve.”

Blog author: jmeszaros
posted by on Wednesday, July 20, 2011

John Boehner recently stated, in the debt-ceiling talks, that “We’re going to continue and renew our efforts for a smaller, less costly and more accountable government,” which most Americans agree with in principle.  However, citizens say that keeping benefits the same for the three big programs, Social Security, Medicare, and Medicaid, is more important than taking steps to reduce the budget deficit by a margin of 60 percent compared to 32 percent for Social Security, 61 compared to 31 percent for Medicare, and 58 compared to 37 percent for Medicaid.

So Americans purportedly want thriftier government, but still want benefits? What gives?  Part of the problem, according to James Kwak, is “the idea that there is one thing called ‘government’–and that you can measure it by looking at total spending–makes no sense.”

What Kwak means is that total expenditure is a misleading measure of the “size” of government. He presents this example:

The number of dollars collected and spent by the government doesn’t tell you how big the government is in any meaningful sense. Most government policies can be accomplished at least three different ways: spending, tax credits, and regulation. For example, let’s say we want to help low-income people afford rental housing. We can pay for housing vouchers; we can provide tax credits to developers to build affordable housing; or we can have a regulation saying that some percentage of new units must be affordably priced. The first increases the amount of cash flowing in and out of the government; the second decreases it; and the third leaves it the same. Yet all increase government’s impact on society.”

So increased spending (or decreasing it) does not necessarily mean the “size” of government has grown (or shrunk). Think how regulation is synonymous with big government, but it does not involve a tax or direct spending of any kind.

In fact, “big” government is often viewed through the lens of regulation, rather than cost. For instance, Kwak explains:

When people say government is too big, they often have in mind something like the Consumer Financial Protection Bureau–a regulatory agency that tells businesses what they can and can’t do…the CFPA’s budget is about $300 million, or less than one-hundredth of one percent of federal government spending.”

Again the divergence between cost and “bigness” is seen.  The CFPA may be viewed as “big,” intrusive, and unnecessary but it is not large in terms of cost like Social Security and Defense spending.

Kwak states, “popular antipathy toward the regulatory state has been translated into an attack on popular entitlement programs.”  Many people dislike certain government regulations and, due to the budget debate, dislike of regulation, the amount of government spending, and specific government programs may have become accidentally intertwined.

As mentioned before, Americans view Social Security, Medicare, and Medicaid as important and worth preserving.  Kwak elaborates: “Rationally speaking, your opinion about Social Security or about Medicare should be based on how much you put in and how much you get out–not on the gross size of the program, and not on how big the rest of the federal budget is. Yet instead the total size of the budget has become the driving force behind potential structural changes in Social Security and Medicare.”

Kwak suggests that “we should make decisions on a program-by-program basis, just like a business is supposed to do.”  His advice is: “If there’s a program that the American people, through our democratic system, agree will provide benefits greater than its costs, we should do it, independently of the existing spending level. And if there’s a program that isn’t covering its costs, we should kill it.”

Instead of focusing on a generality, “government size”, our elected officials should evaluate programs on a cost-benefit level.  Then government agencies that are viewed as too costly or intrusive (the CFPA) could be eliminated and government programs that are viewed as beneficial (SS, Medicare), but need reform, can be focused on in an unbiased way and not be harmed by the “too big” generality.

Jordan Ballor, in a blog post for Acton, wrote: “All government spending, including entitlements, defense, and other programs, must be subjected to rigorous and principled analysis.”  Indeed, although the American people think Social Security, Medicare, and Medicaid are beneficial, 52 percent think Social Security needs significant reform, 54 percent think Medicare needs reform, and 54 percent, likewise, for Medicaid.  However, without having a clear definition of what “too big” means, successful retooling will be difficult to achieve.

Ballor added: “This means that the fundamental role of government in the provision of various services must likewise be explored. This requires a return to basics, the first principles of good governance, that does justice to the varieties of governmental entities (local, regional, state, federal) and institutions of civil society (including families, churches, charities, and businesses).”  True reform requires not simply legal and budgetary change, but a reevaluation of what entities perform certain services, as Ballor suggested.

The Acton Institute is committed to real budget reform, and, to make sure that programs, like Social Security, are evaluated fairly and reformed properly, the United States should make sure it clearly defines the costs and benefits of individual programs before taking drastic action.

Two weeks ago, President Obama ventured courageously into the debt crisis debate with soak-the-rich proposals aimed at the usual suspects—“oil companies,” “hedge fund managers,” “millionaires and billionaires,”—and a new enemy, “corporate jet owners.” That phrase may have tested well with focus groups, but economists and pundits weren’t duped. The imprudence of a new punitive tax on a segment of the country’s manufacturing industry was immediately mocked up and down the Twitterverse, and longer arguments have since been made.

There’s also the “small” problem of the size of the tax break for corporate jet owners: over a decade, the government could collect three-quarters of one-tenth of one percent of the portion of our debt that the President aims to eliminate. The proposal begins to smell like demagogic nonsense.

Then we have this towering irony: the President wishes to harm a segment of the economy (manufacturing) which he claims at the same time to support. His union base insists that he sign no new free trade agreements until Congress passes protections for workers whose jobs are outsourced. There is no talk, however, of protections for Gulfstream employees who will be laid off when the higher price of jets brings down demand. Focus groups can’t provide much in the way of economic analysis. Perhaps the President’s team should have talked to Steve Rooney, president of the International Association of Machinists and Aerospace Workers in Wichita, Kan., who told the AP:

I think it’s just insulting. He acts like it is just a luxury for somebody to own a business jet when they’re used as tools. And I don’t think he realizes how many people that this industry employs and how much revenue is brought in here from those types of aircraft.

Senate Majority Leader Harry Reid, who claims that lawmakers are fighting the President’s tax agenda “to protect the owners of yachts and corporate jets. To protect corporations that ship jobs overseas” misses this inherent contradiction.

The Heritage Foundation’s Mike Franc calls it an “off with their heads” mentality, and he’s right. That successful businessmen should be bled dry out of a “sense of shared sacrifice” is not the instinct of a free society. It is a Marxist sentiment, one based in a view of historical progress as class conflict.

The creation of wealth, from which the U.S. can pay down its national debt, is not a zero-sum enterprise.  It requires the cooperative striving of the whole business ladder. As Pope John Paul II pointed out in his 1981 encyclical Laborem Exercens, management and labor ought not to be separated at all. “Isolating … ‘capital’ in opposition to ‘labor,’” he says, “is contrary to the very nature” of wealth and its creation.

In concocting a solution to this country’s fiscal problems, our leaders would do well to remember that.

Jordan Ballor, research fellow at the Acton Institute, will be a panelist at the American Enterprise Institute’s event “I Hope I Die Before I Get Old” on Wednesday, April 20. The event runs from 6-8 pm at the Wohlstetter Conference Center in Washington (1150 Seventeenth Street, N.W., Washington, D.C. 20036). The panel will be discussing and fielding questions on America’s long-term budget crisis and “The Call for Intergenerational Justice.”

Ballor has been very active in both topics. He recently wrote a commentary titled “Back to Budget Basics” and engaged in a discussion with Gideon Strauss, CEO of The Center for Public Justice and co-author of “The Call for Intergenerational Justice,” on The Call. Audio from the discussion can be found here.

If you plan to attend the event please be sure to register. The American Enterprise Institute will also be broadcasting live footage of the event for those who are unable to make it. To register for the event, find out more information, or to watch the event live on April 20th please click here.

Blog author: jwitt
posted by on Wednesday, February 23, 2011

Michigan’s State Board of Education is now calling for expanded funding to pay for universal preschool for 3- and 4-year olds.

One could hope that this news story slipped through a worm hole from a parallel universe in which Michigan has a budget surplus, where businesses are flocking to the state to take advantage of a business-friendly tax structure, and where government-funded preschool strongly correlates with future educational performance.

But no, the story comes from our universe, where the state of Michigan faces a major budget shortfall, has been chasing businesses and workers out of the state with a business-unfriendly tax structure, and where, as Carrie Lukas notes, new data shows that government-funded preschooling does not give children a “Head Start”:

The Head Start program was launched in 1965 and today provides subsidized preschool for about 900,000 children from low-income families at a cost of more than $7 billion. The logic behind Head Start is that it is more than just a transfer program (subsidizing childcare for lower-income Americans). Head Start champions argue that the investment in higher quality preschool will lead to better educational outcomes — and therefore better life prospects — for participants. The government books are ultimately supposed to benefit due to participants’ reduced use of welfare programs and greater economic productivity.

Unfortunately, there’s very little evidence to suggest that this is how it actually works. The Health and Human Services department released a congressionally mandated study that examined how former Head Start students fare. The study revealed that what gains Head Start participants enjoyed during the program all but vanished by first grade. In other words, the billions invested in Head Start failed to change the prospects of participants in any meaningful, measurable way.

And keep in mind that Head Start has achieved these disappointing results while bringing kids into preschool who are at higher risk of coming from dysfunctional home environments. Imagine the effect if Michigan begins subsidizing children out of generally healthy home environments and into public preschool?

Certainly preschool is a good option for many families, and there are many loving, conscientious preschool teachers touching the lives of young children in positive ways. But none of this means the government should be in the business of providing free preschool for anyone and everyone. State governments should focus on their core competencies and let families do what families do best–raising children.

Blog author: sgregg
posted by on Saturday, January 23, 2010

This week’s Acton commentary:

As 2010 unfolds, many countries are confronting a public deficit crisis of disturbing proportions. Since 2008, countless politicians have underscored that a cavalier attitude to debt on the part of Main St. and Wall St. contributed significantly to the recent financial crisis. It’s therefore ironic to observe these contemporary preachers of thrift plunging developed economies into an abyss of public liabilities.

In 2009, for example, the Obama Administration spent more money on new programs in nine months than the Clinton Administration did in eight years, thereby increasing America’s annual deficit to $1.4 trillion.

To be fair, the federal government’s annual deficit rose steadily under the Bush Administration. Indeed, this spending-pattern helped create an atmosphere which made it easier for politicians to push through the stimulus packages of late 2008 and 2009. America’s long-term annual federal deficit is now at its highest level since the early 1990s. The Office of Management and Budget presently predicts that by 2019 America’s public debt will be $18.4 trillion – approximately 148 percent of America’s GDP.

In an age when political, civic, and religious leaders endlessly invoke “intergenerational solidarity,” that’s hardly a proud legacy to bequeath our children. It’s akin to forcing them into a form of indentured servitude to us which will last long after we’ve gone to meet our maker.

A former American Vice-President once reportedly stated: “Deficits don’t matter”. Actually, they do. For one thing, much economic policy of the 2010s is going to be dominated by efforts to reduce government deficits. This assumes, of course, that our political masters have retained some lingering sense of fiscal prudence. Here the Federal government’s recent lifting of borrowing limits for financially-disgraced Fannie Mae and Freddie Mac does not inspire confidence. Nor does Congress’s quiet Christmas Eve raising of the federal debt limit to $12.394 trillion.

Deficits also matter because reducing them presents us with difficult choices. One is to raise taxes. This, however, reduces incentives to create wealth. A second is simply to inflate the deficit away. But apart from poisoning a currency, inflation discourages savings and negatively impacts those on fixed incomes: i.e., the elderly and the poor.

Another option is to reduce government expenditures. But politicians would then not have as much taxpayer money available to pay off the various interest groups that support them during elections. Unsurprisingly, they’re not so inspired by this, all protestations to the contrary.

Naturally, it’s very easy to blame politicians for the deficit nightmare confronting America and other developed countries. But one of the Bible’s most useful pieces of advice is to “remove the wooden beam from your eye first; then you will see clearly to remove the splinter from your brother’s eye” (Matthew 7:5).

It’s true that many politicians in America and Western Europe consistently vote for public expenditures not covered by revenue. But they are not in office because they inherited their positions. They hold public office because many of us vote for them.

Some of us do so because we’re happy for them to use their legislative powers to make others to pay for particular projects that we can’t or won’t pay for ourselves. It’s part of an unspoken agreement between politicians and the rest of us. We want to have our pork and eat it too.

Others vote for such political candidates because we actually want the state to take care of us rather than assume responsibility for ourselves and our families. Yet others vote for deficit-enhancing politicians because we think we can have mutually-exclusive things, such as countless entitlement programs and low taxes.

And then there are those of us who vote on the strange basis of identity-politics or emotionally-satisfying-but-content-less slogans like “Hope and Change,” while ignoring the woeful fiscal records of politicians of all parties espousing such mottos. The same politicians habitually make absurd promises to solve all our problems, and we go along with it. In short, we routinely throw our reason out the door and succumb to messianic sentiment and utopian daydreaming. That’s what adolescents do – not mature, responsible citizens.

At some point, however, the irreconcilable must be reconciled. All those promises and pork-barrels must be paid for. Neither raising taxes nor cutting expenditures are electorally-palatable solutions for most politicians. So why not run large deficits?

But in the end, out-of-control deficits matter because they tell us something about who we are, what we want, and our unwillingness to make the necessary sacrifices to achieve our goals. Ultimately, it’s not just politicians who need to be held accountable and repent for our deficit crisis. It’s us.

Blog author: lglinzak
posted by on Tuesday, June 30, 2009

Over at World Magazine, Lee Wishing cites a speech by Rev. Robert A. Sirico, president and co-founder of the Acton Institute, on the subject of putting our faith in God and our own abilities instead of the government to manage economies. He quotes Rev. Sirico: “Many thinkers throughout the ages have noted that we face a choice between holding a robust faith in God or putting faith in man and institutions such as the state.”  In such tough economic times, we are reminded that we need to put our faith and trust in God first.