Posts

Steyn: American Banana Republic

/1 Comment/in , /by

Photo Credit:spdracerkmw

Photo Credit:spdracerkmw

“This is the United States of America,” declared President Obama to the burghers of Liberty, Mo., on Friday. “We’re not some banana republic.”

He was talking about the Annual Raising of the Debt Ceiling, which glorious American tradition seems to come round earlier every year. “This is not a deadbeat nation,” President Obama continued. “We don’t run out on our tab.” True. But we don’t pay it off either. We just keep running it up, ever higher. And every time the bartender says, “Mebbe you’ve had enough, pal,” we protest, “Jush another couple trillion for the road. Set ’em up, Joe.” And he gives you that look that kinda says he wishes you’d run out on your tab back when it was $23.68.

Still, Obama is right. We’re not a banana republic, if only because the debt of banana republics is denominated in a currency other than their own — i.e., the U.S. dollar. When you’re the guys who print the global currency, you can run up debts undreamt of by your average generalissimo. As Obama explained in another of his recent speeches, “Raising the debt ceiling, which has been done over a hundred times, does not increase our debt.” I won’t even pretend to know what he and his speechwriters meant by that one, but the fact that raising the debt ceiling “has been done over a hundred times” does suggest that spending more than it takes in is now a permanent feature of American government. And no one has plans to do anything about it. Which is certainly banana republic-esque.

Is all this spending necessary? Every day, the foot-of-page-37 news stories reveal government programs it would never occur to your dimestore caudillo to blow money on. On Thursday, it was the Food and Drug Administration blowing just shy of $200 grand to find out whether its Twitter and Facebook presence is “well-received.” A fifth of a million dollars isn’t even a rounding error in most departmental budgets, so nobody cares. But the FDA is one of those sclerotic American institutions that has near to entirely seized up. In October 1920, it occurred to an Ontario doctor called Frederick Banting that insulin might be isolated and purified and used to treat diabetes; by January 1923, Eli Lilly & Co were selling insulin to American pharmacies: A little over two years from concept to market. Now the FDA adds at least half-a-decade to the process, and your chances of making it through are far slimmer: As recently as the late Nineties, they were approving 157 new drugs per half-decade. Today it’s less than half that.

But they’ve got $182,000 to splash around on finding out whether people really like them on Facebook, or they’re just saying that. So they’ve given the dough to a company run by Dan Beckmann, a former “new media aide” to President Obama. That has the whiff of the banana republic about it, too.

Read more from this story HERE.

What Soaking the Rich Gets Us: Deficits Forever

/3 Comments/in , /by

Last week, the progressive think tank Center for American Progress (CAP) released their tax reform plan [pdf], supported by prominent left-wing budgeters and economists like Robert Rubin and Lawrence Summers. The net effect of this tax reform plan is a massive tax hike on “the rich” in order to fall far, far short of the revenue necessary to eliminate America’s deficit.

The CAP plan would eliminate deductions, close loopholes raise rates, implement new taxes, increase sales taxes, create new taxes… basically every form of a tax hike you can think of, all implemented on households with income above $250,000 per year.

What this gets, according to the Center for American Progress, is a tax system that barely raises Clinton-era levels of tax revenue, while the spending side of the ledger still projects to explode. CAP’s plan gets tax revenue of 20.3% of GDP, below the Clinton years’ high of 20.6% of GDP, with government spending projected to be significantly higher even under the most optimistic of situations. And by the 2030s, government spending is still projected to be over 25% of GDP in the most optimistic of scenarios. (You do not want to know what the pessimistic scenarios are. Something along the lines of an apocalypse.)

Read more from this story HERE.

Obama Wrong Again: Tax Cuts Do Increase Government Revenue, Deficits Due to Spending

/1 Comment/in , /by

By Paul Sperry. The historical tables in the back of the latest “Economic Report of the President” show that the Bush tax cuts generated more, not less, federal revenues — a phenomenon that also held true for Presidents Clinton, Reagan and Kennedy.

All four leaders, two Republicans and two Democrats, slashed taxes for top individual earners or investors. And once these rate reductions took effect and began stimulating economic activity, record individual income-tax receipts poured into the U.S. Treasury. (See the charts above.) Revenues increased even after adjusting for inflation and population growth.

Kennedy’s major tax cut, which included chopping the top marginal rate to 70% from 91%, became law in early 1964, after his untimely death. It promised to grow the economy and close the budget gap.

“Coming at a time of substantial deficit in the federal budget, this was a startling proposal to many observers,” said New York University economist Richard Sylla, co-author of “The Evolution of the American Economy.”

To the shock of many naysaying Democrats, the plan worked. The economy grew at an average 5.5% clip, and unemployment fell to 3.8%. In turn, the annual deficit shrank to $1 billion from $7 billion as individual income-tax receipts nearly doubled. (See the chart.) Read more from this story HERE.

Obama Spending, Not Bush Tax Cuts, Drives Deficit

By John Merline. President Obama often talks about the need for a “balanced” approach to deficit reduction, by which he means tax hikes in addition to spending cuts.

At the recent presidential debate, for example, he said, “We’ve got to reduce our deficit, but we’ve got to do it in a balanced way — asking the wealthy to pay a little bit more along with cuts.”

The only problem with this approach is that the massive projected deficits over the next 10 years aren’t the result of too few taxes. They are entirely the result of too much spending.

Here’s the proof: According to the latest budget forecast from the Congressional Budget Office, even if every expiring tax cut were kept in place permanently — including all the Bush tax cuts and various other expiring cuts from last year and this year — and even if the alternative minimum tax were permanently indexed to inflation, federal revenues would still rise to 18.6% of GDP by 2022.

To put that figure in perspective, from 1948 and 2008, federal revenues averaged 18% of GDP. Read more from this story HERE.