Government programs & regulations, spending, deficit, and budget process

[Crafty_Dog]

BTW, an underreported element of BO's COLA adjustment is that it also applies to the indexing of tax brackets i.e. the lower COLA means that tax bracets will move up slower as well.  In other words, it serves to increase taxes.

=============

The 'Smoke and Mirrors' Budget
April 12, 2013         
"The natural cure for an ill-administration ... is a change of men." --Alexander Hamilton, Federalist No. 21
 

Finally, after more than two months of delays and excuses, Barack Obama released his budget for fiscal 2014. "It's a budget that doesn't spend beyond our means," he boasted. Unless, of course, you consider a projected $744 billion deficit to be "beyond our means." Furthermore, he added, "it's a budget that doesn't make harsh and unnecessary cuts that only serve to slow our economy." That would be because he doesn't make any real cuts at all, much less harsh ones.
Obama's $3.8 trillion budget relies on further tax increases on the wealthy, despite his having just won a $660 billion tax increase on top earners at the beginning of the year. Now he wants to limit deductions and institute the "Buffett Rule" that households earning $1 million or more must pay at least 30 percent in taxes. In exchange, Obama threw in something new to ostensibly appeal to Republicans -- slowing the growth of Social Security and Medicare through revising benefit calculations and reimbursement rates. In reality, that allows him to reinforce that he's only doing it to "compromise" with the GOP, from whom he hopes to extract the aforementioned tax hikes.
The president claims $1.8 trillion in so-called deficit reduction over a decade, but all of the supposed deficit reduction is achieved through tax increases. As National Review's Veronique de Rugy points out, "$1.2 trillion of the $1.8 trillion number comes from replacing the sequester cuts" that are already in place. And his tax increases will likely add up to over $1 trillion -- nearly twice what he claims.

But not to worry, he says, "There's not a lot of smoke and mirrors in here."

On top of that, Obama's budget is not the "middle road" or "compromise" that his Leftmedia minions would have you believe. Under his plan $5.3 trillion will be added to the deficit over 10 years. Since he was off by $1.6 trillion on his first five-year projection, we'll pass on believing this one. Spending for FY2014 would be $170 billion higher than the Congressional Budget Office's baseline (which by the way is also twice this year's sequester), $240 billion higher than Paul Ryan's House budget and even $80 billion higher than the Senate Democrats' budget.

Other lowlights include the following:

He trims defense spending growth by a further $100 billion over 10 years, bringing it to just 2.4 percent of GDP -- lower than any year since before World War II. That's a disastrous gamble that displays the commander in chief's contempt for his constitutional duty to ensure national defense.

His budget caps tax-free retirement savings because, as the White House explains, some people are putting away "substantially more than is needed to fund reasonable levels of retirement savings." He proposes to "limit an individual's total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, or about $3 million for someone retiring in 2013." So Obama now gets to decide how much of your hard-earned money you can save for retirement?
He increases the cigarette tax to $1.95 per pack (from $1.01 now and $0.39 when he took office) to pay for preschool for all four-year-olds from low- and moderate-income families.

He adds new or increased spending on infrastructure, high-speed rail, green energy, college tuition subsidies, job training, and so on and so on.

We would list the cost of ObamaCare, but the White House worked diligently to so spread and bury the burden that it's becoming difficult to identify. We do know that Obama admits the insurance exchanges will cost at least twice initial projections, and that's only counting the less-than-half of states that are participating. That doesn't bode well for the rest of ObamaCare, though it's certainly in line with what we feared all along.

None of this is to say we expected better of Obama. He's a tax-and-spend statist through and through, and it will take a change of administration to get this nation back on the right course.

[DougMacG]

This chart is from Scott G (and BEA):


Looking at the past 45 years we should constitutionally set federal spending limits at 19.5% of the economy.  Below that is wishful thinking and spending above that is generational theft.

[Crafty_Dog]

Yes.

At the same time something we here need to include more in our analysis of BO's deficits in the unusually low percentage of tax revenues.  What is our sound bite answer to somone who says that if revenues were 19.5% then the deficit would be "only" $xxx and "only "x& of GDP?

[DougMacG]

Yes.

At the same time something we here need to include more in our analysis of BO's deficits in the unusually low percentage of tax revenues.  What is our sound bite answer to somone who says that if revenues were 19.5% then the deficit would be "only" $xxx and "only "x& of GDP?

How does a retailer with anemic sales increase revenues?  Raise the price?  Never. 

The amount of capital gains taxes the government is collecting from me is zero, same as it would be at the 100% tax rate.  The transactions that don't happen because of high tax rates are impossible to measure.  In a healthy, low tax rate economy, these same investments could have been sold and captured a new gain every 2 or 3 years.  I made a point earlier about velocity.  When things are moving, that same dollar can be paid to and earned and invested by many people and taxed many times in a year instead of once, or sitting still, or sitting on the sidelines.

Spending should be capped as percent of the economy.  But with taxes, we need to maximize the dollars to pay for the expenses, not increase or maximize the percentage.  When we try to maximize the percentage, we get the stagnation instead of revenue growth.

The other 'tax' is over-regulation.  Also hard to estimate the amount of revenue that is killing.

[Crafty_Dog]

http://www.foxnews.com/world/2013/04/12/despite-sequester-state-department-ups-support-for-un/

[DougMacG]

http://www.washingtonpost.com/opinions/george-f-will-whats-behind-the-funding-of-the-welfare-state/2013/04/17/8686d412-a6bd-11e2-8302-3c7e0ea97057_story.html

What's behind the funding of the welfare state
By George F. Will,

The regulatory, administrative state, which progressives champion, is generally a servant of the strong, for two reasons. It responds to financially powerful and politically sophisticated factions. And it encourages rent-seekers to exploit opportunities for concentrated benefits and dispersed costs (e.g., agriculture subsidies confer sums on large agribusinesses by imposing small costs on 316 million Americans).

Such government inevitably means executive government and the derogation of the legislative branch, both of which produce exploding government debt. By explaining these perverse effects of progressivism, the Hudson Institute’s Christopher DeMuth explains contemporary government’s cascading and reinforcing failures.

Executive growth fuels borrowing growth because of the relationship between what DeMuth, in a recent address at George Mason University, called “regulatory insouciance and freewheeling finance.” Government power is increasingly concentrated in Washington, Washington power is increasingly concentrated in the executive branch, and executive-branch power is increasingly concentrated in agencies that are unconstrained by legislative control. Debt and regulation are, DeMuth discerns, “political kin”: Both are legitimate government functions, but both are now perverted to evade democratic accountability, which is a nuisance, and transparent taxation, which is politically dangerous.

Today’s government uses regulation to achieve policy goals by imposing on the private sector burdens less obvious than taxation would be, burdens that become visible only indirectly, in higher prices. Often the goals government pursues by surreptitious indirection are goals that could not win legislative majorities — e.g., the Environmental Protection Agency’s regulation of greenhouse gases following Congress’s refusal to approve such policies. And deficit spending — borrowing — is, DeMuth says, “a complementary means of taxation evasion”: It enables the political class to provide today’s voters with significantly more government benefits than current taxes can finance, leaving the difference to be paid by voters too young to vote or not yet born.

Two developments demonstrate, DeMuth says, how “delegation and debt have become coordinate mechanisms of legislative abnegation.” One is Congress’s anti-constitutional delegation of taxing authority to executive-branch regulatory agencies funded substantially or entirely by taxes the agencies levy, not by congressional appropriations. For example, DeMuth notes, the Federal Communications Commission’s $347 mil­­lion operating expenses “are funded by payments from the firms it regulates,” and its $9 billion program subsidizing certain Internet companies is funded by its own unilateral tax on telecommunication firms. The Consumer Financial Protection Bureau, another freebooting agency not tethered to the appropriations process, automatically receives a share of the profits of the Federal Reserve banks.

A second development is “the integration of regulation and debt-financed consumption.” Recently, a Post headline announced: “Obama administration pushes banks to make home loans to people with weaker credit.” Here we go again — subprime mortgages as federal policy. Is this because lowering lending requirements and forcing Fannie Mae and Freddie Mac to securitize the loans worked so well last time? This illustrates DeMuth’s point about how unfettered executive government uses debt-financed consumption and “regulatory conscription of private markets” to force spending “vastly beyond what Congress could have appropriated in the light of day.”

High affluence and new technologies have, DeMuth believes, “led to unhealthy political practices.” Time was, the three basic resources required for effective political action — discretionary time, the ability to acquire and communicate information and persuasion skills — were scarce and possessed only by elites. But in our wealthy and educated society, interest groups can pressure government without being filtered by congressional hierarchies.

Legislative leaders — particularly, committee chairs — have lost power as Congress has become more porous and responsive to importuning factions using new media. Congress, responding to the increased difficulty of legislating, has delegated much lawmaking to specialized agencies that have fewer internal conflicts. Congress’s role has waned as that of autonomous executive agencies has waxed. The executive has driven the expansion of the consumption of benefits that are paid for by automatic entitlement transfer payments, by government-mandated private expenditures and by off-budget and non-transparent taxation imposed by executive agencies.

Government used to spend primarily on the production of things — roads, dams, bridges, military forces. There can be only so many of such goods. Now, DeMuth says, government spends primarily for consumption:

“The possibilities for increasing the kind, level, quality and availability of benefits are practically unlimited. This is the ultimate source of today’s debt predicament. More borrowing for more consumption has no natural stopping point short of imploding on itself.”

Funding the welfare state by vast borrowing and regulatory taxation hides the costs from the public. Hence its political potency. Until the implosion.

[Crafty_Dog]

Doug:

This seems to me a very powerful observation by Will.  Would you please post it in the American Creed thread as well please?

TIA,
Marc

[ccp]

Damn - just when I was about to become a minority as a white man.  After 10 of millions of illegals are granted amnesty.  Why stop at 33 million amnesties?  Why not simply replace the ENTIRE work force of the United Staes with poorer people from around the world who would love to come here work harder for less?  But I digress:

http://www.economist.com/news/leaders/21576662-governments-should-be-colour-blind-time-scrap-affirmative-action

[ccp]

I put this under government programs.   I notice a lot of liberal media blowback about gasoil potential (through fracking) in the form of recent articles about the "huge" potential of electric cars, methane, biofuels, wind and still with the solar.

****GM Still Taking Taxpayers for a Ride

By Rich Duprey  | More Articles  | Save For Later     
May 1, 2013 | Comments (9) 


Last September when Reuters calculated that General Motors (NYSE: GM  ) was losing almost $50,000 on every Chevy Volt it sold the carmaker was apoplectic with indignation at the "grossly wrong" numbers being thrown around. Sure they were losing money, every new technological advance does, but as they built more cars and then released Volt 2.0 they would become profitable.

Well, GM has certainly built more Volts over the last six months or so and they've even sold a few more, too, but then so has Tesla Motors (NASDAQ: TSLA  ) and Nissan (NASDAQOTH: NSANY  ) . In fact Tesla sold more of its all-electric Model S cars in the first quarter of the year than GM did with its Volt, and Nissan turned itself around enough so that its LEAF outsold the Volt in March.

We'll get the April sales numbers in a day or so to see if any traction has been made as spring has gotten under way, and if GM was able to recover from March sales plunging 35%. One thing hasn't changed month to month and that is that the Volt is still a money-losing proposition for GM and for the taxpayers who bailed it out.

In a presentation yesterday, CEO Dan Akerson admitted GM is still losing money on every Volt sold and will continue to do so for the foreseeable future. So what's the solution? Not to admit defeat, that's for sure, at least certainly not when the taxpayer is still nominally footing the bill for your company. Nope, what you do is double down and say you're going to make even more of your money-losing cars than you did before and you're going to make them even cheaper than they are now!

Akerson didn't say how much GM was losing on each Volt, but he did say that if it ever hoped to make a profit on them the carmaker would need to cut as much as $10,000 from the cost of production. That, however, won't be happening until the next-gen model is introduced, which won't be until 2015 or 2016 at the earliest.

The already heavily subsidized Volt starts at less than $40,000 before a $7,500 tax credit kicks in. Last year the Congressional Budget Office estimated that the government's efforts to foist electric vehicles on a public that doesn't really want them will cost taxpayers $7.5 billion through 2019, including grants of $2.4 billion to lithium-ion-battery makers (you know, like bankrupt A123 Systems and Ener1). So how GM will be able to take that much cost out of building the Volt without eliminating any of its features is anyone's guess.

Despite generous rebates, ridiculously low leasing offers, and using fleet sales to juice monthly sales numbers the Volt remains rather unpopular among the car-buying public. In the meantime, though, taxpayers can enjoy the ride GM is taking them on.


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[DougMacG]

Yes, unfortunately the electric car is a government program.  General Motors still needs a subsidy?? In the US the electric car runs on coal more than any other fuel source, so the fuel emission argument over gasoline is false.  Like Ethanol.  Don't tell the taxpayers and motorists paying for it.  If we shifted our electricity to all-nuclear, the electric car would be CO2-free, but we aren't.  The best advancement we could make right now would be to encourage more vehicles to run on compressed natural (CNG).  To go down that road we would have to legalize fracking.  The environmental protesters don't want us to even use sand:  http://minnesota.cbslocal.com/2013/04/29/cops-35-arrested-in-two-winona-sand-fracking-protests/

[Crafty_Dog]

JPMorgan Warned Over ‘Manipulative Schemes’ in Energy Markets

Government investigators have found that JPMorgan Chase devised “manipulative schemes” that transformed “money-losing power plants into powerful profit centers,” and that one of its most senior executives gave “false and misleading statements” under oath.
The findings appear in a confidential government document, reviewed by The New York Times, that was sent to the bank in March, warning of a potential crackdown by the regulator of the nation’s energy markets.
The possible action comes amid showdowns with other agencies. One of the bank’s chief regulators, the Office of the Comptroller of the Currency, is weighing new enforcement actions against JPMorgan over the way the bank collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, according to people who were not authorized to discuss the cases publicly.
READ MORE »
http://dealbook.nytimes.com/2013/05/02/jpmorgan-caught-in-swirl-of-regulatory-woes/?emc=na

[ccp]

Instead of my rambling in a somewhat unorganized fashion here is one post from a think tank.  I will try to explore more on these sites.

http://www.cato.org/sites/cato.org/files/articles/gokhale_article.pdf

[Crafty_Dog]

http://www.washingtontimes.com/news/2013/may/7/tax-increases-begin-ease-budget-deficit/

[DougMacG]

http://www.washingtontimes.com/news/2013/may/7/tax-increases-begin-ease-budget-deficit/

Let's keep an eye on this, tax revenues are a pretty good measure of economic activity.

"In April alone the federal government ran a $112 billion surplus."

April is always a 'surplus' tax collection month. 

If we are seeing a year to year improvement right now, it is in the context of comparing with a record fifth straight trillion dollar deficit year, not exactly the gold standard of fiscal performance.

[Crafty_Dog]

OK, gents, some challenging data in here.  How do we explain?  Regarding alleged slower rise of medical costs due to Obamacare is what I posted the other day in the Health Care thread from the WSJ-- that other forces, market forces were in play prior to Obamacare.  This may be a tough point to make in sound bite form however , , ,



By David Lauter, Washington Bureau

May 14, 2013, 6:56 p.m.

WASHINGTON — The federal deficit is shrinking more quickly than expected, and the government's long-term debt has largely stabilized for the next decade, the Congressional Budget Office said Tuesday in a report that could strengthen the Obama administration's hand in the budget battles with congressional Republicans.

The budget office continues to say the federal government faces a long-range budget problem — mostly caused by the costs of an aging population — but its new forecast pushes the crunch point for that problem off into a considerably more distant future: well after the 2020 presidential election.

The deficit projection for this year — $642 billion — is almost 25% less than the deficit the budget office had forecast as recently as February. At the new level, the annual deficit would be back to where it was before President Obama took office. It would continue to fall for the rest of Obama's tenure, the budget office now projects. By contrast, the deficit for fiscal year 2012 came in at just over $1 trillion.

Three major factors account for most of the long-term improvement: a better economy, a continued slowdown in the rate of medical inflation — which reduces the cost of Medicare and Medicaid — and higher taxes that Congress approved as part of the "fiscal cliff" deal in January, the budget office said.

In addition, the automatic budget cuts that took effect this spring have reduced spending in the short term. The government also will benefit this year from dividend payments it is getting from the two giant housing finance agencies bailed out during the financial crisis.

The federal government's annual deficit this year amounts to about 7% of the gross domestic product. By 2015, the budget office forecasts, the deficit will fall to just over 2% of GDP, a level that most economists would consider relatively insignificant. At that point, the deficit would begin to climb slowly again, reaching about 3.5% of GDP by the end of the decade.

The report also forecasts that the federal debt will shrink relative to the size of the economy for the rest of Obama's term. The budget office expects the debt to begin to rise slowly after 2018 as the effects of an aging population increase the cost of retirement programs.

The federal deficit is the gap between what the government spends each year and its revenue, mostly taxes. The government has run a deficit almost every year for the last half-century. The federal debt represents the accumulated money that the government borrows to cover that deficit.

The numbers have an important political impact. Republicans have pushed for big reductions in government programs this year, arguing that the country could face a debt crisis if spending is not curtailed. The Obama administration and congressional Democrats have argued that big new reductions have less urgency because the budget picture is already getting better. The new figures from the budget office, which both parties rely on as a nonpartisan arbiter, will probably give more impetus to the Democrats' position.

The report also signaled that the next confrontation in Washington's budget wars may not come until late fall. Republican leaders have planned to push for budget cuts when Congress next votes on raising the federal debt ceiling. Because the debt is now growing more slowly than expected, the deadline for that vote probably won't come until October or November, the report says.

Underscoring the political dynamic, Republicans, who trumpeted news of higher deficits during Obama's first term, fell largely silent in reaction to the new figures.

The office of House Speaker John A. Boehner (R-Ohio) declined to comment. The House Budget Committee, chaired by Rep. Paul D. Ryan (R-Wis.), issued a short statement calling the report a "fresh reminder of Washington's out-of-control spending" and noting that by decade's end the federal government will collect $5 trillion in tax revenue.

Liberal Democrats, by contrast, said the new numbers showed that government spending was falling too fast and that the sharply lower deficits amounted to an austerity policy that is hurting economic growth.

"It would be nice if policymakers … recognized that we need less austerity now and more health savings [and revenue] later," Jared Bernstein, a former administration economic advisor, noted on his blog. The deficit, he wrote, "is coming down too fast given the still weak economy."

Other Washington deficit hawks reacted cautiously. Maya MacGuineas, head of the Campaign to Fix the Debt, issued a statement calling the updated numbers "a good sign" but added that the country still faced a "long-term fiscal imbalance."

"We need to keep making steady improvements to keep the good news coming," she said.

The revised outlook comes as congressional Republicans are trying to figure out a budget strategy that can unite their disparate factions.

In January, GOP leaders got a deal through the House to avert the so-called fiscal cliff, but only by relying on Democratic votes. Aides to the leadership admit that no consensus exists among their members about how to raise the debt ceiling and avoid a default by the government when the deadline hits.

The president maintains that the debt ceiling should be raised without any conditions attached. Republicans are expected to continue to insist upon some concessions — either new budget cuts or, perhaps, a commitment to reforming the federal tax code.

"We're going to have a big conversation with our members … to talk about a way forward," Boehner said last week. "Dealing with the long-term structural spending problem we have, frankly, is at the core of it. But we also know we can't cut our way to prosperity. We need real economic growth."

House Ways and Means Committee Chairman Dave Camp (R-Mich.) and House Majority Leader Eric Cantor (R-Va.) have been meeting with members to discuss options for a tax reform plan. Camp said last month that he expected a tax plan to pass the House but did not hazard a guess about whether agreement could be reached with the Democratic majority in the Senate.

david.lauter@latimes.com

[G M]

Gee, panic liquidation of assets boosts taxes received for now...

Bet you won't see this trend continue.