Wednesday, May 26, 2010

Economic Contrast

Two proposals. Two plans. Two very different outcomes. Check 'em out (emphasis mine)...

Democrats Keith Hennessey suggests in his must-read deconstruction of the big-spending bill Congress will approve this week, the Call It Anything But Don’t Call It Stimulus Act. Nancy Pelosi calls it the American Jobs and Closing Tax Loopholes Act of 2010, which forms the acronym AJCTLA, and that sounds like nonsense when spoken. It’s a perfect match for its title, as Hennessey explains, because it does nothing to help American jobs and everything to allow Congress to help itself to even more fantasy money.

In fact, it manages to both increase the deficit and hike taxes, a rather neat little trick that one might think would embarrass even Democrats in 2010. The CBO confirms that AJCTLA has the following long-term consequences:

  • $40 B net tax increase
  • $174 B spending increase
  • $134 B deficit increase

How does it manage to do that? Hennessey gives us the bullet points:

  • increases infrastructure spending by $26 B over ten years;
  • extends a raft of expiring tax provisions, mostly for one year
  • provides funding relief for certain employer pension plans;
  • raises a bunch of taxes, mostly on businesses and a certain kind of partnership income called “carried interest;”
  • extends unemployment insurance benefits, increasing federal spending by $47 B over the next two years;
  • increases Medicare payments for doctors for eighteen months at a $63 B cost;
  • increases health insurance subsidies for the unemployed (through “COBRA”) by $8 B over the next two years; and
  • increases federal Medicaid spending by $24 B for a six-month policy change.
Yes, at exactly the moment when businesses need pricing signals for a decrease in costs in order to attract the kind of investment that spurs growth, Congress wants to hike taxes instead — in order to pay for its own aggrandizing public projects.


Democratic attempts to paint Republicans as the Party of No got a little tougher today with the release of a new plan from the House Republicans on the Budget Committee. The GOP has demanded spending cuts, and today the group led by Rep. Paul Ryan (R-WI) laid out a preliminary slate of specifics. If adopted, they predict that they can save over $1.3 trillion over the next ten years. In the preamble, the GOP caucus slams the Democrats for failing to provide a budget for FY2011:

Having shoveled out trillions of dollars in new spending and debt, House Democratic leaders now admit they cannot budget for all of it – and won’t even try. For the first time, the House will fail even to propose a budget. Instead the Democratic Majority will resort to an ad hoc, spend-as-you-go process that abandons any pretense of governing.

The primary responsibility of any Congress is to develop a budget for the next fiscal year. One hundred and ten Houses have managed to meet that responsibility, even when the chambers were narrowly divided along partisan lines, and when control between Capitol Hill and the White House was divided between Republicans and Democrats. In this year, Democrats have an 18-seat majority in the Senate, more than a 70-seat majority in the House, and they control the White House. What possible excuse could Democrats have for not producing a budget, other than incompetence or dishonesty?

In contrast, the Republicans list a number of spending proposals to close the budget gap, most of which has already been introduced to the House and ignored by Nancy Pelosi. It counters the entire narrative of the Party of No, showing that Republicans have attempted to offer ideas to reduce spending and the national debt, or at least to slow down the growth in both. Had Democrats decided to actually produce a budget, they would have had to consider the following:

  • Cancel Unused TARP Funds. Prohibit the Treasury Secretary from entering into new commitments under the Troubled Asset Relief Program [TARP]. Ending TARP would prevent up to $396 billion in additional disbursements; CBO estimates savings of $16 billion. H.R. 3140 introduced by Rep. Tom Price of Georgia.
  • Cancel Unspent ‘Stimulus’ Funds. Rescind all unobligated budget authority authorized under the “stimulus” bill and dedicate to deficit reduction. Saves up to $266 billion. H.R. 3140 introduced by Rep. Tom Price of Georgia.
  • Cut and Cap Discretionary Spending. Return non-defense discretionary spending to pre-Obama (fiscal year 2008) baseline levels. Saves up to $925 billion. Legislation introduced by Reps. Ryan and Hensarling (H.R. 3964) and Rep. Jim Jordan of Ohio (H.R 3298) include caps on discretionary spending.
  • Reduce Government Employment. Hire one person for every two who leaves civilian government service until the workforce is reduced to pre-Obama levels (exempting the Departments of Defense, Homeland Security, and Veterans Affairs). Saves an estimated $35 billion. H.R. 5348 introduced by Rep. Cynthia Lummis of Wyoming.
  • Freeze Government Pay. Freeze Federal civilian pay for 1 year. Saves an estimated $30 billion.
  • Adopt the Legislative Line-Item Veto. Enact a constitutional line-item veto law. The President’s FY 2011 budget included terminations, reductions, and savings that would achieve $23 billion in one year. While Congress may not accept all these savings, the Line Item Veto can help reduce spending. H.R. 1294 introduced by Rep. Paul Ryan of Wisconsin.
  • Reform and Bring Transparency to Fannie Mae and Freddie Mac. Reform these companies by ending conservatorship, shrinking their portfolios, establishing minimum capital standards, reducing conforming loan limits, and bringing transparency to taxpayer exposure. According to CBO, the cost to taxpayers of putting government in control of Fannie and Freddie is $373 billion through 2020. Saves an estimated $30 billion. H.R. 4889 introduced by Rep. Jeb Hensarling of Texas. H.R. 4653 introduced by Rep. Scott Garrett of New Jersey.
  • Create a Sunset Commission. Establish a commission to conduct systematic reviews of Federal programs and agencies, and make recommendations for those that should be terminated; and provide for automatic sunset of programs unless expressly reauthorized by the Congress. H.R. 393 introduced by Rep. Kevin Brady of Texas.
Dems are being flamingly hypocritical on this by not only failing to play by their own financing rules, but by not even attempting to play by their own financing rules. They just rubber-stamp everything they want to do as an emergency so they can drive the debt truck through a loophole the size of Jupiter. There is also the usual bag of goodies for preferred lobbyist groups, the making permanent of temporary programs, and more accounting gimmicks than Enron had ever heard of. Hit the Hennessey link for all the details.

On the other side of the coin, i
ronically, some mighty big chunks of the GOP cutting plan are very similar to some of the things Pelosi promised when the Dems took over the House back in 2007. Not that they followed, through, of course, but these ideas are absolutely nothing new or shocking to them. They loooove to promise such lovely sounding things as tax cuts and reduced spending, but show me the last time a Democrat in national office actually did it (as opposed to just promising it) and I'll show you the very beginnings of the Moon Lander program.

This is the contrast between the two parties now. Pick which you like better, then remember that when you go vote this November. And bring some friends - this is one election America simply cannot afford to get wrong.

There's my two cents.

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