Posts tagged with: fiscal responsibility

I was thinking about just this thing after reading an opinion piece in today’s Detroit News from yet another technocrat who thinks he’s got a solution to the city’s deep, decades-old problems. His plan, dressed up with a lot of happy talk about building “vibrant central cities,” defaults to (surprise) convincing Michigan taxpayers that they should fund “local services” for Detroiters. This sort of abstract theorizing, divorced from political and public policy reality, always defaults to more taxes, bigger government and “public-private partnerships” led by corporate execs and teams of technocrats. This has been going on for close to 50 years in Detroit.

The writer of this article, Lou Glazer of the nonprofit Michigan Future, Inc., says the city, and places like Flint, Grand Rapids, Lansing and Kalamazoo (full disclosure: I’m from Pontiac) need new “delivery systems” for services. And light rail and bike paths. “If Michigan will not reinvest in cities, then there needs to be some new system of municipal finance put in place,” he writes. Yes, investment. Nowhere, however, amid all the talk of growing the city with “young, mobile talent” does he suggest that there might be some people in Detroit with new ideas about how to come to grips with the city’s problems. Or do they all lack what it takes to turn Motown into a “talent magnet,” as he puts it. (more…)

Blog author: eamyx
posted by on Thursday, July 14, 2011

Back in February 2008, then candidate for president Barack Obama addressed a crowd at a General Motors Assembly Plant in Janesville, Wis. He said,

…I am my brother’s keeper; I am my sister’s keeper– that makes this country work. It’s what allows us to pursue out individual dreams, yet still come together as a single American family. E pluribus Unum. Out of many, one.

It is ironic that Obama preached a “we’re-in-this-together” economic philosophy yet three years later, Main Street is carrying Washington’s debt burden.

Debt negotiations are currently at a deadlock in Washington over taxes. President Obama doesn’t want to follow through with $4 trillion in spending cuts without a $1 trillion tax increase, while Senate Democrats are asking for a whopping $2 trillion in new taxes. Democrats also do not want to sacrifice entitlement programs. Top leaders worry they will not be able to reach a deal in time to avoid a government default. With the predicted default deadline of August 2 creeping around the corner and unemployment on the rise at 9.2 percent, citizens feel a sense of urgency about the debt crisis.

When Obama said “I am my brother’s keeper,” what did he really mean? If the government is to act as our brother’s keeper, this means it should be accepting responsibility for the welfare of all citizens. Raising taxes to cover up Washington’s nasty spending habits is certainly not accepting any responsibility.

If the government was really acting in the best interest of its citizens, it would stop raising taxes. According to the Tax Foundation, Americans will need to work from January 1 to April 12 before they have earned enough to pay off their taxes. Tax increases may seem like a quick way to reduce the deficit as opposed to spending cuts alone, but the bottom line is that Washington has a spending problem, not a revenue problem. A Goldman Sachs report found that tax increases usually fail to correct fiscal imbalances and are damaging to economic growth while spending cuts correct fiscal imbalances and boost growth. Milton Friedman explains in his essay titled Fallacy: Government Spending and Deficits Stimulate the Economy why government spending does not mean “stimulus”:

Getting the extra taxes, however, requires raising the rate of taxation. As a result, the taxpayer gets to keep less of each dollar earned or received as a return on investment, which reduces his or her incentive to work and to save. The resulting reduction in effort or in savings is a hidden cost of the extra spending. Far from being a stimulus to the economy, extra spending financed through higher taxes is a drag on the economy.

The $2 trillion tax increase Senate Democrats are pushing has the potential to suffocate economic growth and job creation, which would not be good news for 14 million unemployed Americans. Today, the Great Recession now has more idle workers than the Great Depression. An article in The Fiscal Times claims the employment level is nowhere near where it should be for a typical recovery:

In a typical recovery, we would have had several hundred thousand more hires per month than we are seeing now—this despite unprecedented fiscal and monetary stimulus (including the rescue of the automobile industry, whose collapse would likely have lost a million jobs).

If spending binges don’t work for a family, why would they work for a government? When a family spends more than they are making, the only sensible solution would be to cut spending. Bureaucrats should take House Minority Leader Eric Cantor’s advice and be willing to share the sacrifice:

Everyone understands that Washington has been on a spending binge of late and we’ve got to start spending money the way taxpayers are right now and that’s learning how to do more with less.

The debt crisis is not just an economic hazard but a prodigious moral issue of poor stewardship as explained in an Acton commentary by Jordan Ballor and Ray Nothstine titled The Fiscal Responsibility of Mall Rats and Bureaucrats:

Responsible stewardship of one’s material resources is a consistent and recurring biblical theme. At the conclusion of a parable on stewardship, Jesus said, “Whoever can be trusted with very little can also be trusted with much, and whoever is dishonest with very little will also be dishonest with much” (Luke 16:10 NIV). We shouldn’t be duped into granting the use of greater and greater portions of our paychecks to a federal government that has been unfaithful with what it has already claimed.

Our economy will continue to hobble along until Washington is willing to truly act as a brother’s keeper in showing that it too can share the sacrifices necessary for getting spending under control. Until then, we will pay the price for Washington’s fiscal irresponsibility and millions of Americans will continue to struggle.

With the ongoing budget debate there is much discussion about what to cut and what not to cut, whether taxes should be raised, and if we should avoid even considering cutting certain programs. At the center of the discussion is the state of entitlement programs.

One program everyone in Washington seems to be leery of is Social Security. Whether it is because of ideologically supporting the program or afraid of ruining a political career, Social Security, again, may remain untouched. Political culture has taught elected officials to avoid the topic of reforming Social Security. In the past, those who have attempted to address issues related to it have been demonized. And when re-election time came around, many private interest groups made sure to fund ads to negatively attack anyone’s past attempts of reforming Social Security. However, with our current debt crisis and economic problems, now is not the time to ignore Social Security. Leadership is needed to tackle the hard problems.

Social Security has run aground. The Congressional Budget Office (CBO) reported that program will officially run out of money by 2037 if the program is not reformed.  Furthermore, the CBO also projects that this year Social Security will collect $45 billion less in payroll taxes than it pays out.

Just as alarming as the lack of leadership is the number of Americans who benefit from it who will be dramatically affected if Social Security does fail. According to the Social Security Administration (SSA) over 54 million Americans will receive $730 billion in benefits in 2011, these numbers also includes those who are disabled our receiving survivor benefits. For the month of February, the SSA paid over $58 billion to its beneficiaries. The numbers get even more daunting when they are coupled with the number of Americans who rely on Social Security as their sole source of income.

The SSA states, “Among elderly Social Security beneficiaries, 22 percent of married couples and about 43 percent of unmarried persons rely on Social Security for 90 percent or more than their income.” The Institute of Women’s Policy Research also provides alarming numbers. According to their data, in 2009, 29 percent of women and 20 percent of men relied on Social Security for all of their income. It is important to keep in mind that Social Security provides many elderly members with the necessary money to avoid poverty. As a result, instead of letting Social Security continue to run its unsustainable course, it is imperative to fix to program so vulnerable members in our society can continue to be aided by it. (more…)

My commentary this week is a simple message about the importance of returning to our founding principles and embracing the liberty granted to all of us as Americans. Independence Day should always serve as a significant reminder of the freedom narrative of this country that has provided so many people with opportunities to flourish and live out their dreams:

America’s Destiny Must Be Freedom

Ralph Waldo Emerson described America as “the land that has never become, but is always in the act of becoming.” Many Americans don’t feel that way as pessimism has replaced a once vibrant optimism about the future. Economic malaise, crippling debt, and a mammoth oil gush in the Gulf Coast are daily reminders of seemingly unmovable obstacles.

Bob Herbert wrote a New York Times column echoing the sentiment of an aimless America titled “When Greatness Slips Away.” While many claim to have the answers to our economic woes and lack of confidence, we would do best to return to the principles of the Declaration of Independence, the American Founding, and our freedom narrative. In past crises, they have been sources of American endurance and strength. They can be again.

Those sacred words from the Declaration—“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”—have been an inspiration to billions of people at home and abroad for centuries. Freedom from excessive centralization of power and the right of the citizenry to flourish without undue interference are hallmarks of what it means to be American. And while the federal government has used activism for good at times, most notably for securing civil rights in the American South, it is revealing itself more and more as the obstacle to progress.

Many in the academy and the modern left scoff at what they call the “Horatio Alger myth.” Alger wrote stories such as “Ragged Dick” and “Only an Irish Boy.” He told stories of poor children achieving the American dream through hard work, determination, and virtue. But Alger also depicted an important spiritual component to his impoverished characters. He gave them dignity and natural rights, just as our founding document did. His tales reflected the kind of egalitarianism that asserts that the value and dignity of a destitute human person is equal to that of another born into prominence and prosperity. These ideas grew right out of our religious heritage and founding.

But if Alger’s stories were not myths before, they will be soon. Future generations’ enjoyment of the liberty to flourish is in jeopardy. The Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, last week called the $13 trillion national debt the “biggest threat to our national security.” Annual interest on the national debt in 2012 will grow larger than the entire defense budget. Currently 43 cents of every federal dollar spent is borrowed.

This kind of dependency is antithetical to our tradition of self-reliance. Pick up any honest textbook about American history and the march of America is about freedom and opportunity. On the day of the invasion of the greatest army of liberation ever assembled, General Dwight D. Eisenhower told his armed forces “The eyes of the world are upon you. The hopes and prayers of liberty-loving people everywhere march with you.” These men are often called “The Greatest Generation.

Succeeding generations may call our own “the debt generation” as their dreams become enslaved to deficits so colossal that they sap their entrepreneurial spirit, savings, and earning potential.

Big government activists are already using the BP oil spill to double down on their claim that the federal government is too small, even while the federal response is crippled by a multilayered bureaucratic decision making process and excessive regulation. Others say the BP oil spill is the perfect sign that America’s economic and moral might has peaked.

In his 1993 Inaugural address, President Clinton said, “There is nothing wrong with America that cannot be cured by what is right with America.” It’s a simple yet profound point. Similarly, the primary reason Russell Kirk penned The Roots of American Order in 1974 was to remind his country of the moral bedrock at its base, and to thereby show the way to how it could maintain greatness. In the first chapter, Kirk quotes a passage from the book of Job saying if the nation lacks foundation and order “even the light is like darkness.”

As American citizens pontificate about the future of America this July 4th, they should ask themselves what they can do to curb the contraction of liberty and promote its expansion. It is the citizens, thankfully, who will decide America’s destiny.

Blog author: jcouretas
posted by on Tuesday, May 25, 2010

Over at Public Discourse, a new article by Acton’s research director Samuel Gregg examines the deeper reasons behind the problems of the euro. In “Europe’s Monetary Sins,” Gregg points out that many of the euro’s present difficulties reflect a basic refusal of Europe’s political class to acknowledge some of the unpleasant economic realities associated with the EU’s social model, as well as a tendency to say one thing while really doing another. In short, Gregg argues that many of Europe’s economic predicaments flow from a crisis of truth, an unwillingness to recognize it, and the subsequent formulation of policy on the basis of untruths and half-truths. The most recent result of this process, Gregg says, is that the independence of the European Central Bank has been severely compromised:

Ever since its foundation in 1998, the ECB has been a whipping boy for European politicians from the left and right who argue that the ECB’s legally mandated priority of maintaining price stability has kept productivity and economic growth rates in the EU far below those of America. In reality, these problems have little to do with monetary policy and everything to do with low rates of entrepreneurship, unsustainable levels of welfare expenditure, an aversion to competition, high rates of public sector employment, and structural rigidities associated with some of the world’s most inflexible labor markets. Indeed, it is probable that the ECB’s avoidance of the low interest-rate policies adopted by the Federal Reserve in the 2000s may have made the 2008 recession in Europe more bearable than it might otherwise have been.

Against considerable political pressures, the ECB has hitherto doggedly defended its independence. All that, however, changed when the European Union decided to set up its 750-billion-euro bailout fund in early May 2010 to stabilize financial markets and rescue the holders of not only Greek government debt, but also, implicitly, the holders of any EU government debts that seemed shaky.

Edmund Conway, economics editor of The Telegraph, looks at a new analysis of government debt by Dylan Grice of Societe Generale. The charts are eye popping. It’s not just a Greek, or EU problem. It’s also something that Americans must come to grips with, and soon. You might call it a moral issue — too long living beyond our means.

Conway quotes Grice, and then sums up:

“The most chilling similarity between the Greeks and everyone else isn’t in the charts above showing that their various debt metrics are in the same ballpark, it’s in the realisation that we too are subject to the same iron-clad laws of budget sustainability and that we too are as helplessly vulnerable to any reassessment of sovereign risk by the famously fickle Mr Market.”

In the end, all Western nations face a long-term dilemma (which has been the case since before the crisis, but is more front-and-centre of everyone’s minds now). Over the past 50 years we have committed ourselves to massive welfare states which our economies are simply not generating enough cash to finance.

Read “Greek lesson: we are all in the same boat” on the Telegraph site.