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Posts Tagged ‘spending’

The Washington Post chart above (H/T Cato) clearly lays out three key truths: 1. The United States government has a structural problem controlling it’s level of debt and spending 2. The growing size of the federal government and its debt has been a bipartisan affair 3. President Obama’s tenure has greatly exasperated America’s short and long term financial situation.

In 30 years the United States’ debt has increased from $1 trillion dollars to $14 trillion and if the chart continued into the projected future, well, you would have had to scroll even further down to read this. I may not be an economist or an expert on Congressional budgets, but I don’t have to be to know we are on the wrong track. The past few weeks we have constantly heard the President and numerous other political leaders strongly defend the status quo. Sure there is much talk about ‘cutting spending’, but where are the details?

We need much more than gimmicks and baseline budgeting tricks to solve our real problems. We need leaders to tackle the transparent challenge shown in the aforementioned chart and we just aren’t getting it from this White House and Senate. For gosh sakes, the US Senate has put a constitutionally mandated budget in over two years! Why haven’t they? It’s pretty simple: If you never take a stand, you never have to take responsibility. I’ll finish with the first and last entries on Congressman Paul Ryan’s (a man who put out a budget all by himself, are you listening US Senate?) timeline of the Obama administration’s financial stewardship:

January 20, 2009
President Obama sworn into office

  • President tells the American people in his Inaugural Address: “Those of us who manage the public’s dollars will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.”
  • Debt Held By Public = $6.31 trillion

……..

July 15, 2011
President Holds Press Conference: “We’re Running Out of Time” to Deal with Debt

  • President Obama tells reporters: “I’ve got reams of paper and printouts and spreadsheets on my desk, and so we know how we can create a package that solves the deficits and debt for a significant period of time.  But in order to do that, we got to get started now.”
  • The American people have still not seen any “paper” or “printouts” of what specific spending cuts the President supports.  The American people have still not seen any “spreadsheets” from the White House to corroborate their claims of having offered a deficit reduction plan.
  • While it’s long past time for Washington “to get started now” on tackling our debt problems, President Obama has still not proposed a credible budget, and Senate Democrats have still not proposed any budget.
  • Debt Held by Public = $9.75 trillion

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The United States has suffered through unserious leadership for years now. Besides a flawed, but well-intentioned effort to reform our faltering social security entitlement system, President George W. Bush did little to curb the relentless government spending that is putting our remarkable country in peril. In his three years so far in office, President Barack Obama has not only done absolutely nothing to contain our out of control deficits and spending, but actually put them on an even more unsustainable path.

The numbers don’t lie; the American financial system and economy is in deep trouble:

Obama’s ten year budget projections, which include optimistic GDP growth estimates, contain over a trillion dollars in debt annually. Our dire situation is not just for policy wonks or Chicken Littles. One only has to look to what is happening in Greece this very day to remind us how bad things can become. How did we get here?

Walter Russell Mead attempts to answer that question in a piece called ‘When Government Jumps the Shark‘. He brings his readers along the progressive path to a growing government with more and more responsibilities. The first few stages usually have gone well with small government programs providing services that the American people want and can use, but then comes trouble….

The fourth stage of life comes when the Great White Elephant morphs into a Great White Shark: a man-eating terror of the deep that ruthlessly attacks anyone who gets in its way.  At this stage the government program has moved beyond being wasteful and has become unsustainable.  Fannie Mae goes from providing mortgages to creditworthy households to providing vast numbers of mortgages to uncreditworthy households, poisoning the financial system with bad loans.  Medicare is unsustainable in the medium term and hugely expensive day to day — even as the procedures and regulations of Medicare warp investment decisions across the entire health care system.

But even as these programs become unsustainable, they have become so powerful — there are so many interests and industries that grow rich on these programs, and so many families for whom these programs have become the cornerstone of what little financial security they have — that they cannot be touched.  One way to tell when an elephant has morphed into a shark: when pundits and politicians start describing a government program as a ‘third rail’: you touch it, you die.

The Great White Shark is a menace that cannot be controlled.  The program has gone rogue: the Army Corps of Engineers isn’t just building pointless dams.  It is building bad dams.  The agricultural subsidies aren’t just encouraging farmers to plant wasteful crops; by subsidizing corn ethanol they are contributing to food price inflation that threatens political stability in countries like Egypt.  But just as the programs are most in need of reform, reform becomes impossible.  If you try to stop Fannie Mae from tempting poor urbanites into ruinous mortgages..

The problem today is that we are looking not just at one or two government programs that have succumbed to elephantiasis or turned into sharks; the progressive complex of social and economic policy as a whole has reached this point.  Today many of our New Deal and Great Society programs are either elephants or sharks.  They either lead us to misallocate scarce resources in ineffective ways or they threaten us with ruin by becoming politically untouchable budget busters.

Progressivism itself, and not simply the individual government programs it spawns, is moving through the same cycle of life.  The most urgent social problems that progressivism set out to solve have been dealt with.  Child labor and lynch mobs are no longer common in the United States.  The greatest natural and scenic treasures of the country are protected by the National Park system.  Food is much less dangerous, buildings are better built, cars are safer, the air and water is in better shape and the charismatic megafauna (big interesting animals) have been saved from extinction.  Many more people have much more access to education today than was true 100 years ago; ditto for lifesaving medical treatment.

The progressive vision morphed from Great White Hope and Great White Father into Great White Elephant over the years.  Early progressives picked the low-hanging fruit; they addressed the most important problems that were most susceptible to progressive interventions.  Increasingly they are left with more expensive, less effective approaches to big problems (like Obamacare) or the agenda moves from issues of great moral and political significance like equal rights for African-Americans to less consequential issues like wider social acceptance of the transgendered.  To raise the percentage of young Americans attending college from 2 percent to 20 percent is a significant achievement; to extend it from 40 percent to 60 percent will likely cost much more and accomplish much less in terms of raising social productivity.

We now see the progressive agenda dealing with issues like high speed rail, where the gains are so small and the rationale are so weak from the beginning that the program is a white elephant before it is fully set up.

If you aren’t already shaken, beware, as there’s one final stage and it isn’t pretty. Think Greece, but on a massive scale. Instead of jumping the shark we might be eaten by a whale.

(Chart: Courtesy of Keith Hennessey)

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I would like to thank David Harsanyi of the Denver Post and The Detroit News for helping me compile this small list featuring just some of the bureaucratic web that is our federal government:

  • 56 separate programs to help people better understand their finances
  • 18 federal food and nutrition assistance programs, costing taxpayers $62.5 billion in 2008
  • 10 agencies or departments administering 82 programs dealing with teacher quality
  • 80 different economic development programs
  • 15 different agencies overseeing food safety
  • 18 programs responsible for delivering food assistance to the poor
  • 24 federal agencies operating data centers
  • 20 programs dealing with homelessness
  • 44 programs among Education, Labor and Health and Human Services Departments delivering employment and job training programs
  • 5 agencies within the Transportation Department administering more than 100 involved in surface transportation, highway, traffic safety, and railroads

I’m sure many of these programs serve a valuable purpose, but the redundancy of similar programs showcases a federal government that has grown to such a size that it is just feeding off it self. Bureaucracies by their nature grow they don’t wither and the plethora of these programs and departments listed above is proof. Eighty-two programs for promoting teacher quality! We are just talking federal level here, folks. Under President Obama, the budget of the Department of Education has more than doubled, with even this year, where ‘austerity’ is in vogue, seeing it grow another 4.2%. This is not money for books or better teachers, this is a raise for the bureaucracy known as the Department of Education.

In this chart below made by the Cato Institute, one can easily see the growth of all aspects of government from 2007-2012:

I would like to highlight the tremendous growth of ‘Other Mandatory’, which according to CATO features federal employee benefits, food stamps, etc and ‘Domestic Discretionary’, which of course features funding for bureaucracies like the Department of Education, Transportation, etc. President Obama has said that he wants to freeze spending on these sectors. Well, that’s nice, but how about we bring them back down to a level pre-Stimulus spending binge instead. It’s like our government has had 10 shots of patron and said ‘that’s enough, I’m done’. Unfortunately, that leaves us all in a sick and woozy position.

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Since passage of Obamacare, Democrats of all stripes have been interested in talking about almost any subject other than health care. Put aside talk of a signature achievement, this has been a Pandora’s box of bad policies and politics that Democrats have had to either defend at their peril or run from without directly insulting their party’s leadership and President. At this point, it’s almost a contest to see what claim proved the most outrageous, non-sensical or downright not true.

One of the first claims to fall apart was President Obama’s oft-repeated promise, “If you’ve got health insurance, you like your doctors, you like your plan, you can keep your doctor, you can keep your plan.” Since passage, health care providers have begun consolidating to avoid business-killing taxes and regulations. Insurance companies have been forced to raise premiums to account for scores of new benefit mandates and restrictions on what types of plans they can offer. And small businesses are looking to cut costs by dropping coverage for their employees who will now have to look to the expanded Medicaid program and the state exchanges to cover them. All of these adding tremendous costs and weight to a system that was supposed to become more efficient and cost-effective.

What this has mean for the private sector so far is an effort to get out. And one year out, over 1,000 waivers have been granted by the Department of Health and Human Services (HHS) to unions, non-profits and companies negatively affected by the legislation. Ironically, a cursory review of the waiver list shows a disproportionate number of unions, whom you may remember, were some of the bill’s loudest proponents while it was being debated. Unsurprisingly, when forced to comply with its provisions, unions demonstrated their special status with the Obama Administration and demanded to be saved from this very expensive law.

And it’s not just the basic health care plans that are being altered. Millions of Americans who rely on their FSA’s (Flexible Spending Account) to pay for their child’s special education schooling or HSA’s (Health Saving Account) to pay for over-the-counter medicines will have to find other, likely more expensive options , to get these benefits or pay for these services. Unfortunately, those seeking to actually restrain health care costs are the real losers because it was programs like HSA’s, FSA’s and Medicare Advantage – which also took a major hit under Obamacare – that sought to inject competition into the process and more importantly, give more control over health care costs to the consumer.

Strangely, Nancy Pelosi’s statement that “we have to pass it to find out what’s in it” has proven quite prescient. Slowly but surely, as more of the law’s thousands of provisions are painfully unearthed, we are forced to deal with the explosion of costs, rosy revenue projections, overly burdensome nature of the regulations, and generally unconstitutional nature of the bill’s central provision. I could go on – and I plan to in future posts – but I feel each (broken) promise and corresponding reality deserves its own special attention.

Perhaps next time I’ll discuss what I think could be the biggest whopper of them all, “Obamacare is going to add 30 million people to the insurance rolls AND save billions of dollars doing it.” I know, try not to laugh too hard.

So, what’s your favorite broken promise of Obamacare?

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