Posts tagged with: government spending

Blog author: jcouretas
Thursday, March 10, 2011

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.

Blog author: jballor
Wednesday, March 9, 2011

In this week’s Acton Commentary, “Back to Budget Basics,” I argue that the public debt crisis facing the federal government is such that “All government spending, including entitlements, defense, and other programs, must be subjected to rigorous and principled analysis.” This piece summarizes much of my analysis of various Christian budget campaigns over the last week (here, here, and here).

There are things that are more or less central to the primary task of government, and our spending priorities should reflect that relative proximity. Things like defense spending, whether or not these funds could be spent better and more efficiently, are central to the role of the federal government. Various kinds of social spending, whether or not they are good and effective, are not clearly so central.

I cite the example of Abraham Kuyper as a model to follow in attempting to outline the various responsibilities of social institutions, especially the church and the government, with respect to poverty. Kuyper first says that any resort to government aid for the poor is “a blot on the honor” of Jesus Christ. This relief is first and foremost a task for Christians, not the government. But he also adds that if and when Christians fail in their charitable callings, the State must intervene, “quickly and sufficiently” (snel en voldoende). The “sufficiency” of this response lies at least in part in its ability to address the need and move on, stepping in quickly, addressing the problem sufficiently, and stepping back out.

We have gotten to where we are in this country in part, at least, because private and Christian charity did not fulfill its mandate, at least not completely. But the whole point of “sufficient” government intervention is to be a stop-gap, a last and temporary resort, that provides space for other institutions to step back in and resume their basic responsibilities. It is thus not a permanent and primary purpose of government, particularly at the federal level, to provide direct material assistance to the poor.

My fear is that the social spending at the federal level has moved far beyond intervening “quickly and sufficiently,” and has increasingly crowded out other subsidiary institutions from meeting needs more locally and less centrally. What we need now is not to privilege such government intervention as a fixture of our society, but to reinvigorate and empower other institutions to relieve these burdens from the government. Otherwise government intervention often becomes an obstacle to, rather than a servant of, true justice.

I posted some initial thoughts on “A Call for Intergenerational Justice: A Christian Proposal on the American Debt Crisis,” which was released by the Center for Public Justice and Evangelicals for Social Action yesterday.

I’ve been engaged in what I think are largely helpful conversations on this document in a number of venues in the meantime. Gideon Strauss challenged me to look at the document again, and reconsider my criticisms, and I have been happy to do so.

For instance, I voiced the concern that the core budgetary problem that must be addressed concerns entitlement spending, and I judged that the Call does not sufficiently address that concern. Gideon pointed me to a piece by Michael Gerson, a signer of the Call, that makes precisely this point: “Debates on discretionary spending are important. Our government should not waste money on ineffective programs. But discretionary spending is a sideshow, even a distraction, from the main governing task: getting entitlement spending under control so it does not crowd out all other government spending.”

I also made a related point that we should not be juxtaposing cuts in, for instance, defense spending with those on other discretionary areas, including social programs. As Gerson writes, these debates are largely a “sideshow.” And so Gideon also pointed me to today’s editorial about the Call, which makes a number of important points, not least of which is that “It would be simplistic to portray the present challenge as a simple matter of ‘guns vs. butter’ and to overemphasize the contribution that prudent reductions in defense spending, however necessary, would make to the current debt crisis.”

One further point of concern I voiced is that “what we’re missing here is a really principled and vigorous view of what the government’s legitimate role is in the world and in relationship to a variety of concerns: defense, social welfare, international development, and so on.” Gideon pointed me appropriately to the CPJ “Guideline on Government.”

These are all good and necessary documents for understanding the proper interpretive context for the Call, and I’ll admit, they weren’t the first things I thought of when attempting to understand the petition. I still wonder, though, why some of these things couldn’t be made more explicit in the document itself? If Gerson is right, that debates over discretionary cuts of whatever programs are really a distraction, why not make the focal point of the Call entitlement reform in a more central and explicit way?

And I do think there are other relevant interpretive contexts for understanding the Call. Jim Wallis, Shane Claiborne, and a host of others have been involved over the last days and weeks in a “What Would Jesus Cut?” campaign that bears many similarities to “A Call for Intergenerational Justice.” Much of the material surrounding that campaign does seem to focus on fights over discretionary cuts, even to the point of contrasting military and social spending.

Jim Wallis said, for instance, “On a television program yesterday evening, I said that I want those who now propose major cuts to critical low-income family support programs to say, out loud, that every item of Pentagon spending is more important to our well-being and security than school lunches, child health, and early education programs.” He goes on to highlight particular social spending programs that should be immune to potential cuts.

I don’t think that kind of rhetoric is helpful at all, and is more of what Gerson might call a “sideshow.” But it is important because there is so much continuity between the “What Would Jesus Cut?” campaign and the “Call for Intergenerational Justice.” A significant number of signers of the Call, including Wallis and Claiborne, also are behind WWJC. And even the language about cutting budgets “on the backs of the poor” is reiterated with respect to the Call. Signer Jonathan Merritt writes that the Call means “we cannot balance the budget on the backs of the poor.”

So while the CPJ documents Strauss points to are certainly relevant to understanding the Call, I submit that the “What Would Jesus Cut?” campaign is also relevant. And here we might have a hint at why some of the more substantive theoretical questions regarding the role of the state in the provision of various social goods is not examined in more detail in the Call itself: the signers don’t have a unified view on this principled point. The CPJ Guideline on Government is a good starting point, but I find it highly doubtful that it would be assented to by all of the signers of the Call.

So perhaps there really is more than one way to read this document, and it can be put to various uses by various constituencies. This ambiguity, combined with my own doubts about what it actually does substantively say, are enough for me to refrain from signing it, even while I most certainly do agree with the sentiment that the current debt burden is unsustainable, both fiscally as well as morally, and continue to respect the work of many of those who have signed it.

In yesterday’s edition of the Grand Rapids Press, editorial page editor Ed Golder reflects on the implications of the historically-high levels of government spending, the deficit, and debt.

Most impressively, Golder notes where the government is actually spending money, and it is largely not in the areas of discretionary spending that so many politicians like to talk about. Golder writes,

Neither party is forthrightly honest about what needs to be done. Making the necessary cuts touches on very large and politically sacrosanct programs. About one fifth of federal spending, for instance, is defense. Can we seriously tackle the budget without looking at some prized weapons programs?

And the biggest category of spending, the one growing at the fastest rate, is entitlements – Medicare, Medicaid, Social Security and health insurance for children.

We may have to accept the idea that rich people will pay more than poorer people for medical coverage. We will almost certainly, given life expectancies, have to work longer before receiving Social Security benefits.

Reform of defense spending is important. But the real key is entitlement reform. I’ve often thought that one lasting legacy of the Bush era (beyond the wars and the Great Recession) is found in his insistence on bringing to the national discussion the issue of entitlement reform, particularly Social Security. He wasn’t successful, but it did show some principled political courage to make Social Security reform a major policy goal of his administration.

Golder also relates this entertaining little anecdote:

Speaking to the Economic Club of Grand Rapids Monday, financial forecaster Jason Trennert, was asked by an audience member to handicap Washington’s ability to make meaningful headway in tackling the debt. He wryly quoted theologian Augustine of Hippo, who famously quipped, “Lord make me chaste, but not yet.”

In other words: Sure, we’ll reform. Tomorrow.

Tomorrow’s here. Heck, tomorrow may be yesterday at this point.

That’s one other legacy of the Bush era that we are living with, the legacy of the mantra, “Lord, make me thrifty, but not yet.” That goes for the politician as well as for the citizen.

Golder rightly concludes by pointing to the need for leadership on these pressing fiscal issues. We’ve gotten to this place largely because of a lack of political leadership. “Our leaders have to talk frankly about what needs to be done – programs that will be cut, individual sacrifices that will have to be made,” writes Golder.

Instead of statesmen we’ve been electing those who could bring home the most pork for their districts and constituencies, damn the consequences. That needs to change, and it begins in the renewal of leadership in other spheres of social life, including the family, business, charity, education, and so on.

Blog author: ken.larson
Friday, February 19, 2010

Jordan Ballor’s recent post “What Government Can’t Do” contained a quotation from Lord Acton worth revisiting:

“There are many things the government can’t do – many good purposes it must renounce. It must leave them to the enterprise of others. It cannot feed the people. It cannot enrich the people. It cannot teach the people. It cannot convert the people.”

On February 18th Barack Obama announced a “Debt Panel” – officially termed a Bipartisan National Commission on Fiscal Responsibility and Reform – to be headed by former government veterans Alan Simpson of Wyoming and Erskine Bowles of the Clinton White House years by way of Morgan Stanley; and the university at Chapel Hill. (Wiki terms Bowles an “American Businessman” but the only business he’s been in is financial services. Bankers are money lenders. I know it’s a peculiar distinction but that’s hardly on a par with entrepreneurial spirt or creating wealth with an idea and a lot of sweat.) Bankers use OPM — other people’s money — and put it out for a fee.

Obama wants the debt panel to come up with a solution for dealing with too much government outflow versus what citizens are willing to pay in taxes. It’s a CYA venture and the two guys “leading” the discussion and the fellow appointing them are illustrative of what is wrong with what passes on multiple levels for both elected and hired government leadership in The United States of America these days.

The conceit that brings us debt panels starts with the presumption inherent in such concepts as “schools of government” that are fixtures in many of our leading universities throughout the country. At Texas A&M, there’s a school of public service with former President Bush’s name over the doorway. At Harvard there’s the Kennedy School of Government. At University of Maryland the department is called “Business, Government, Industry” — an interesting ordering of words don’t you think with “government” at the center. And on the left coast, The University of Southern California touts their school of Public Administration as being responsible for training more bureaucrats for city, county and state government jobs than any other in the region.

After three terms in the U.S. Senate Alan Simpson left to take a job as lecturer and Director of the Institute of Politics at Harvard’s Kennedy School whose mission is “studying public policy and preparing its practitioners.” They boast 27,000 graduates in 137 countries. The effort was “born in the midst of the Great Depression and on the eve of World War II. As government grappled with historic challenges both domestic and international” and no doubt has helped bring us such innovations as The World Bank and other drains on our national checkbook.

The cumulative graduate classes from these places has contributed to the burgeoning number of municipal jobs throughout our country. Think about the job fair at your kids’ high school. How many private businesses were there? Okay, maybe a major aerospace company came or JOHN DEERE, but mostly these assemblies are catered by the police and/or fire departments, local public works departments, a county hospital, or Teach for America. The private sector is conspicuous in its absence and that’s too bad because I think it’s one of the reasons the size of government and government’s workforce has become so large, intrusive and demanding on our nation’s treasure.

In a recent post former Bush guy Rich Galen puts the total cost of running Congress at $4,656,000,000 per annum and moans that they can’t or won’t do their job. I did some research last year and was told by the Congressional Budget Office that annual operating costs of the Senate is $800 million and the House $1.2 billion plus security. That’s half of what Galen writes but if you do the math even with the smaller number you get $3.7 million per Congress member. They make over $175,000.00 a year. In fact 19% of all federal employees make over $100K per year. In Los Angeles, California more than a dozen City Council members make $195,000 annually and the city is going broke.

In a neat little book titled Liberty And Learning, author Larry Arnn chronicles among other things, The Northwest Ordinance of 1787 and The Homestead Act in an effort to illuminate the importance of education to the American Founders. He adroitly makes the point that education was never given the high priority it had in the Founder’s lives in order to “provide skilled workers for a changing economy” or insure that citizens would “make more money.” Education, especially knowledge and understanding of this nation’s founding principles was acknowledged by the Founders to be a prerequisite for the insurance of individual freedom and their constitutional republic.

But where are we in this? In the shame of survey and test results such as provided by Intercollegiate Studies Institute that testify to our Civic Illiteracy, many citizens vote present at a time when our nation’s economic and spiritual solvency are at risk. And every day we are told by a fawning news media that Obama and his administration – which does not include one high level official formed by some private sector experience – are the most intelligent assemblage in our country.

Recently I had the chance to read and discuss a story by Flannery O’Connor – The Enduring Chill. In the story a 25 year old son named Asbury has returned to his mother’s farm from an attempt as a writer in New York. There’s an older sister. He’s sick and if you know O’Connor you’re likely to be able to guess what’s missing in his life. While they wait for a country doctor to examine Asbury and make a prognosis the narrative provides us this:

When people think they are smart – even when they are smart – there is nothing anybody else can say to make them see things straight, and with Asbury, the trouble was that in addition to being smart, he had an artistic temperament. She did not know where he had got it from because his father, who was a lawyer and businessman and farmer and politician all rolled into one, had certainly had his feet on the ground…. She had managed after he died to get the two of them through college and beyond; but she had observed that the more education they got, the less they could do.

I think we have to do more for ourselves. And it needs to begin NOW.

In this week’s Acton Commentary, I argue for simplifying the tax code. It should also be evident that any sort of tax reform should coincide with reforming the way Washington currently operates when it comes to spending.

April 15th is of course tax day, and national protests will also be occurring across this nation under the historically significant title of “tea parties.” One of the points I made in my piece is that it is important that these protests are not just a partisan vessel for bomb throwing and another opportunity to just recite talking points. I think people of most political and ideological persuasions can agree that government spending is out of control. It’s hard for numbers to lie. Repackaging partisan characters who have a large hand in the spending crisis won’t be very effective. Fortunately I think some of the organizers understand this.

Back to the tax code, much of my thinking on this issue can be summed up by noting the tax code is only a very visible problem or symbol of the larger crisis, which is government spending and a never ending need for more revenue. In regards to the lobbyist and special interests, there is a great quote I didn’t include in my commentary that is worth mentioning. In an article written by Bill Theobald titled “Budget 101: easy to spend, tough to tax,” University of Cincinnati professor of Law Paul L. Caron says of tax reform:

Major tax reform is possible in our system, but only if it is truly so fundamental that it creates a constituency greater (in the politicians’ eyes) than the special interests that would be hurt.

Blog author: rnothstine
Tuesday, February 17, 2009

In response to the question, “What are the moral lessons of the American Recovery and Reinvestment Act (ARRA)?”

One of the gravest moral issues related to the American Recovery and Reinvestment Act is the matter of dangerous deficit spending. Anybody plugged into our nation’s financial crisis is likely aware of the unsustainable spending path of not just the federal government, but individual states as well. Because many states have balanced budget amendments, they are not entitled to run deficits, so the federal government proposes bailouts, which comes at an even greater cost to taxpayers from fiscally responsible states. One can easily see how policies like these only encourages irresponsible government spending policies.

Dr. Samuel Gregg, who is the director of research at the Acton Institute, touched on this subject and a number of important topics concerning the financial crisis in his recent address “America’s Economic Crisis: Looking Back, Looking Forward.” Offering a scathing critique of Keynesian economic policies, Dr. Gregg directly addressed the moral aspect of deficit spending:

We have every reason to believe that deficit spending on the scale being contemplated is addictive and difficult to stop. Because once we see that the various ways of ‘jump-starting’ the economy do not spark an economic revival, we will undoubtedly be told that the stimulus was not big enough, and that more deficit spending is required. More and more capital will thus be placed in unproductive spending.

The cost of deficit spending is often passed on to future generations. In other words, we force future generations to pay for the sins of the present.

Deficit spending can imply the adoption of inflationary policies. Inflation is like cancer. It acts slowly but is deadly. It attacks the weaker parts of the body, and destroys the economic well-being of the poor, such as those on pensions or other fixed incomes. But I also think that inflationary policies are morally wrong. Why? Because when you inflate the currency, the value of people’s assets is reduced. In other words, once a government introduces inflationary policies, it reduces the value of the assets that people already own. People who work hard to build up the value of their business or property suddenly find that the government has diluted the value of their asset.

In talking to my pastor about these issues a few weeks ago he reminded me of the inscription on the Liberty Bell from Leviticus, “Proclaim liberty throughout all the Land unto all the Inhabitants thereof…” My pastor also reminded me of the meaning of the verse saying, “The passage speaks about the Jubilee year when the Lord forgave people of their debts and sins and allowed for a new beginning of freedom from the slavery debt brought.” And that is a reminder of a subject Dr. Gregg also spoke so well about during his lecture, and that is the moral failings of those on Main Street and Wall Street. If we are going to see fundamental reform of spending in the nation’s capital and beyond, we need to as families and individuals have a moral aspect to our own spending and budgets.