Tag Archives: jack heidel

The Republican Budgets Focus on Entitlement Savings

Posted on by
Reply

 

Last week, both the House and the Senate passed ten year budget plans which would bring the federal budget into balance by 2025.  I have devoted several recent blog posts to discussing these budget proposals and how they address our very serious debt and deficit problems.
CaptureThere are several important points to make:

  • Under both of these Republican plans, overall spending will continue to increase by an average of 3.3% per year, from $3.8 trillion in 2016 to just over $5 trillion in 2015. The President’s budget would increase spending to $6.17 trillion by 2025 and would achieve no balance between spending and revenue.
  • Most of the savings in the Republican budgets, as indicated in the above chart, come from the mandatory (entitlement) programs of Social Security, Medicare and Medicaid. Medicare would be transformed into a subsidy program along the lines of the exchanges set up under the Affordable Care Act. Medicaid would be turned into a block grant program administered by the states. Social Security would be studied by a bipartisan commission to recommend operating efficiencies.
  • Other social welfare programs would be affected to a much smaller extent. For example, the Supplemental Nutrition Assistance Program (SNAP), or Food Stamps, has seen a growth of recipients of 69% between 2008 and 2013 while the poverty rate increased by just 16.5% during the same period. The Republican budgets would block grant Food Stamps to the states in order to achieve operating efficiencies.
  • It is true that both the House and Senate budgets would increase military spending by about 10%. But so would the President’s budget and we live in a very dangerous world. Military defense is one of the most very basic functions of our federal government.

Our country is in dire fiscal condition with large annual deficits projected indefinitely into the future, contributing to an exploding national debt.  It is heartening that our political system is responding to this threat to our future security and prosperity.  Let’s hope that House and Senate majorities continue to keep a sharp focus on the urgent task of fiscal restraint.

An Open Letter to Representative Brad Ashford

Posted on by
2

 

You’re off to a great start in Congress!  You’ve clearly established that you’re independent minded and that you vote your conscience.  I expected that you would act in this way and that is why I supported you during last year’s election campaign.  We need more people like you in Congress.
As you perhaps know, I am a non-ideological fiscal conservative and social moderate.  I am, like you, mainly interested in finding practical, workable solutions to difficult and complicated problems.  But I do have one guiding principle to which I strongly adhere.  I believe that, as a general rule, every level of government should refrain from spending more money than what it can pay for with tax revenue.
CaptureUnfortunately our federal government has gotten away from this principle in recent years.  This is clearly demonstrated in the above chart which shows an already very large national debt getting much, much worse in the coming years.
There is a movement in the new 114th Congress to address this perilous situation which we have gotten ourselves into.  I am referring to the bills drafted by the Budget Committees of both the House of Representatives and the Senate which would produce balanced budgets over the ten year period, 2015 – 2025.
It was reported in today’s Wall Street Journal that the full House voted yesterday to approve the budget bill by a 228-199 margin but without any Democratic votes.  This means that either you voted against the Budget Bill or you did not vote on it.
I don’t believe that any one vote is so important that it constitutes a decisive litmus test determining my support of a candidate in a future election.  However, as I mentioned above, I feel very strongly that we must greatly shrink our very large budget deficits and that now, not later, is the time to get started on this urgent task.
I hope to be able to support your re-election campaign in 2016 and beyond.  That is why I am writing to you at the present time.

Status Quo on the Budget Is Not Good Enough!

Posted on by
Reply

 

As I like to remind readers, I am a non-ideological fiscal conservative.  I am not hard core anything.  I just want to find practical, workable solutions for difficult and complicated problems.  There is basically only one exception to my generally moderate outlook.  I detest huge amounts of deficit spending except for unusual circumstances.  Most of the time we should be willing to either raise taxes and/or cut spending to do what needs to be done and to live within our means.
This is why the current efforts by the Budget Committees of both the House and the Senate to devise a plan to balance the budget, i.e. eliminate deficit spending, over a ten year period is so exciting to me.
An analysis in today’s New York Times suggests that Congress should be content to just extend the so-called Ryan-Murray Budget from 2014-2015.  “Ryan-Murray didn’t decisively move the needle one way or the other, which is why it was able to attract bipartisan support.  Rather it preserved the status quo.  In a world of divided government and polarized politics, keeping the government running without a lot of brinkmanship and high drama may be the best we can hope for.”
CaptureAs I pointed out in my last post, current policy will raise government spending by 5.1% annually over the next ten years.  The President wants to increase spending by an additional $1 trillion over this time period.  The Republican budgets, which lead to balance in ten years, still allow spending to increase by 3.3% annually.  The difference between the two plans is illustrated in the above chart from last Sunday’s Omaha World Herald.
Congress is finally in a position this year to start digging us out of the deep fiscal hole we have fallen into.  Let’s hope that too much “bipartisan” status quo thinking doesn’t get in the way of progress!

How the Obama and Republican Budgets Compare

Posted on by
Reply

 

The Budget Committees for both the House of Representatives and the Senate have now passed plans to achieve balanced budgets within a ten year period.  My last two posts have discussed the compelling need to get deficit spending under control and an overall rationale for how to approach this difficult task. Today I will take a look at the major differences between the Obama budget and the House and Senate budgets.  The two congressional budgets are quite similar and will surely be reconciled into a single budget.
CaptureHere are the major differences:

  • Revenue. The President wants to raise taxes by $3 trillion over 10 years to pay for more spending while the Republicans wants revenue-neutral tax reform in order to increase economic growth.
  • Spending. Under current policy the government will spend $48.6 trillion over the next ten years which represents a 5.1% annual rate of spending increase over the present. The President wants to spend an additional $1 trillion over this time period on new initiatives. The Republicans propose spending about $5.4 trillion less, or $43.2 trillion, which still works out to a 3.3% annual rate of increase over the present.
  • Deficits. Under current policy the deficit would start to increase, as a percentage of GDP, in 2018. The President proposes to stabilize the deficit at 2.5% of GDP. The Republicans would balance the budget within ten years by shrinking the deficit down to zero.
  • Public Debt. Under current policy the public debt (on which interest is paid) will increase to 79% of GDP by 2025. The President’s budget would stabilize the debt at the current level of 73% of GDP. The Republican’s balanced budget would shrink the debt to 57% of GDP by 2025.

 

There are stark differences between the President’s proposed budget and the Republican alternative.  Which is the better route to progress and prosperity?  Is it to raise taxes, increase government spending and only stabilize the debt or is it to streamline taxes, slow down the growth of spending and shrink the debt?  This is a fundamental question of government policy which will not be quickly resolved.  But at least the question is being raised in a dramatic way!

It’s Time to Bite the Bullet and Set up a Balanced Budget Plan

Posted on by
Reply

As a result of the 2014 elections, both the U.S. House of Representatives and the Senate are controlled by Republicans.  The House Budget Committee and the Senate Budget Committee are now gearing up to produce plans to balance our federal budget over the next ten years.  Accomplishing this goal will be a formidable challenge.
CaptureMaya MacGuineas, President of the Committee for a Responsible Federal Budget, has recently testified before Congress as to how hard it will be to get this job done.  The gist of her testimony:

  • Even though the deficit has dropped by two-thirds since the 2009 peak, our deficit and debt problems are far from solved, as indicated in the above chart.
  • CBO estimates that under current law the deficit will rise from $485 billion in 2014 (2.7% of GDP) to more than $1 trillion (3.8% of GDP) by 2025.
  • If nothing is done to slow down these runaway deficits, annual interest payments on the debt will rise from $230 billion this year to $810 billion in 2025. Even with a balanced budget by 2025, interest payments will take up $630 billion in that year.

Capture1

  • As the chart above shows, it will require a ten year savings of $5.5 trillion to bring the budget into balance by 2025. Even to reduce the debt to 60% of GDP by 2025 (compared to 74% today), will take a ten year savings of $4.7 trillion.
  • As if this isn’t hard enough by itself, there will be additional “speed bumps” along the way, whose additional one-year costs alone are $210 billion. See chart below.

Capture2Clearly it will require much pain and shared sacrifice to find trillions of dollars in budget savings over a ten year period as well as avoiding additional costly speed bumps.  But the longer we wait to get started the harder it’s going to be to get the job done.  We need to stop delaying and get started on a budget recovery program this year!

How to Restore Manufacturing in America

Posted on by
Reply

The former CEO of Nucor Steel Company, Dan DiMicco, has written a book, “American Made: why making things will return us to greatness” describing why and how U.S. manufacturing dominance has shrunk in the past 50 years and how it can be restored.  Nucor is the largest American steel company and has never laid off an employee in its 42 years in existence, even during the recent recession.
CaptureHere is Mr. DiMicco’s prescription for a return to industrial greatness:

  • Build public-private partnerships to restore the manufacturing base. For example, only $60 billion out of the $765 billion stimulus bill in 2009 was devoted to infrastructure spending.  As another example, the corporate income tax rate should be significantly lowered.
  • Level the playing field in international trade. When Germany and Japan built up huge trade surpluses in the 1970s and 1980s, the Reagan Administration responded with the Plaza Accord in 1985 outlawing foreign currency manipulation. Since then China especially has adopted a strongly mercantilist trading policy, subsidizing key industries, exporting as much as possible and importing as little as possible. No president since Reagan has insisted on equitable rule-based trade agreements where the rules are enforced.  This would help immensely.
  • Rebuild the nation’s infrastructure. Mr. DiMicco would be willing to increase deficit spending for such needs as highways, bridges, fiber-optic lines, mobile networks, and urban wastewater systems.
  • Develop our energy resources. Go all out on natural gas production by fracking. This will lower our carbon footprint and has the potential to make us completely energy independent, thereby greatly reducing our trade deficit.
  • The skills gap myth. It would help if the U.S. had better career education for high school students unlikely to go to college. But Nucor sponsors cooperative training programs at all of its locations and has no trouble finding workers.

A strong revival of U.S. manufacturing has the potential to create 30 million new jobs and thereby revitalize the American middle class.  Mr. DiMicco’s prescription makes a lot of sense.

When Liberals Blew It

Posted on by
2

 

“It is important and right that all privileges of the law be ours, but it is vastly more important that we be prepared for the exercise of these privileges.”
                                                                       Booker T. Washington, 1856 – 1915

My last two posts have discussed the theme of a new book by Dennis Prager, “Still the Best Hope: why the world needs American values to triumph.” Mr. Prager’s thesis is that there are three competing ideologies for the allegiance of humankind, namely Islamism, Leftism and Americanism and, furthermore, that these three ideologies are incompatible.  Any one of them succeeds at the expense of the other two.
As I said on March 8, Mr. Prager’s broad framework helps me place my own ideological views into perspective.  Here is one example of this. As everyone knows, 2015 is the 50th anniversary of the March from Selma to Montgomery.  But it is also the 50th anniversary of Daniel Patrick Moynihan’s report “The Negro Family: The Case for National Action.”  Nicholas Kristof’s Op-Ed in today’s New York Times, “When Liberals Blew It” reminds us how prescient Moynihan was about a breakdown in family structure and how reviled he was by liberals when he issued his report.  Mr. Kristof points out that:

  • In 2013, 71% of black children were born to an unwed mother (compared to 53% of Hispanic children and 36% of white children), far more than in 1965.
  • Growing up with just one biological parent reduces the chance that a child will graduate from high school by 40%.
  • A father’s absence from the home increases antisocial behavior especially for boys.

CaptureA column by the black author, Jason Riley, in yesterday’s Wall Street Journal, “Drawing the Wrong Lessons from Selma about America today,” points out that the main problem for blacks today is not racial discrimination but rather:

  • A lack of preparation for many jobs which are now available.
  • A black subculture which rejects attitudes and behaviors conducive to upward mobility.
  • That too few blacks are taking advantage of the opportunities now available to them.

In other words, more and more spending on welfare and public services is not what blacks need for further advancement.  Rather it is to stop thinking of themselves as victims and to develop a greater sense of personal responsibility.  This is the American way to get ahead!

What Are American Values?

Posted on by
Reply

 

Americans have the chance to “begin the world all over again”                                                                                          Thomas Paine, 1737 – 1809, Common Sense

As I reported in my last blog, I have been reading the relatively new book, “Still the Best Hope: why the world needs American Values to triumph” by Dennis Prager.  His thesis is that there are three competing ideologies for the allegiance of humankind: Islamist, Leftist and American and, furthermore, that these three ideologies are incompatible.  Any one of them succeeds at the expense of the other two. He identifies the American Trinity of Values as Liberty, In God We Trust, and E Pluribus Unum.
These three expressions appear on all American coins.
Capture

  • Liberty

  • Liberty is the essence of the American idea
  • Liberty necessitates small government
  • The bigger the government, the smaller the citizen
    i)           Moral character begins with taking responsibility for oneself
    ii)         Reliance on the state creates a sense of entitlement
    iii)       The smaller the government, the more the individual is needed
  • In God We Trust
  • We are “endowed by our Creator with certain unalienable rights …”
  • Judeo-Christian Values, not Judeo-Christian Theology
    i)           People are not basically good
    ii)         God-based morality
    iii)         Holiness – we are not like other animals
    iv)         Hate evil
    v)         Material well-being is one of many values
  • E Pluribus Unum – From Many One
  • Nationalism – the opposite of multiculturalism
  • American Exceptionalism – the U.S. is qualitatively different from other nations
  • America is Good – not perfect but good in comparison with other nations

The above values are selected and abbreviated from Mr. Prager’s complete list, to most accurately reflect my own views.  I strongly identify with these values which characterize America and its unique role in the world.  We are the strongest, freest and wealthiest nation the world has ever known.  For everyone’s sake let’s keep it that way!

A Provocative, Controversial and Illuminating New Book

Posted on by
5

 

I am currently registered as an independent.  Ideologically I am a fiscal conservative and a social moderate.  For most of my life I have been a registered Republican and have almost always voted Republican in national elections.  But most of my friends are Democrats and I often agree with them on specific issues.  So why do I identify more closely with the Republican point of view overall?  I may have finally figured it out!
CaptureI have just come across and read the provocative book, “Still the Best Hope.  Why the world needs American values to triumph” by the public intellectual, Dennis Prager.  Here is his message:

  • There are three ideologies competing for the allegiance of humankind. They are Islamist, Leftist and American. “Islamist” refers not to Muslims in general but those within the Muslim world who want to see the world governed by Sharia, or Islamic law. “Left” refers to the values associated with the western welfare state, secularism, and to contemporary socialist democratic parties. Americanism refers to the American Trinity of values: ‘Liberty,’ ‘In God We Trust,’ and ‘E Pluribus Unum’ which appear on all American coins.
  • The three ideologies are incompatible. Any one of them succeeds at the expense of the other two. All Islamists know this, many Leftists know this, but most Americanists do not know this.
  • Of the three, only Americanists do not proselytize.
  • One of the three is being promoted violently.
  • Leftism is a religion.
  • Americanism is the major impediment to Leftist success.
  • The impediments to the spreading of American ideals. Islamism and Leftism each dominate many countries. Americanism only dominates one country: America. Neither religious values, individual liberty nor market values are secure in America. Few are teaching the next generation of Americans what constitutes the American value system. The most important battle for American values is the ideological one within America.
  • Is there a fourth – Chinese – alternative? Either China will become a freer society or it will fail. It will have to affirm values beyond material success in order to succeed, as America has.

 

Such a stark framework as this hasn’t occurred to me before.  But it makes sense and I totally identify with Americanism as opposed to Islamism or Leftism.  This is not going to change the way I do things but it helps me understand why I am the way I am!   

We Need Fundamental Tax Reform!

Posted on by
11

 

Most Americans would agree that our tax code is a mess and needs major reform.  The last reform was in 1986 when the top rate was reduced from 50% to 28% and many deductions were eliminated.  However this reform effort turned out to be short lived in the sense that many of these deductions have now been added back in.  The Romney plan of 2012, cutting all tax rates by 20% in a revenue neutral way, would have been an improvement over our current system.  But, it’s gains would likely also have been only short-lived.
CaptureConsumption taxes are now being used in many parts of the world and, in recent years, the idea of a national sales tax has gained popularity in the U.S.  The so-called Fair Tax would impose a single 30% tax on all sales at the retail level.  The proponents claim that this would raise enough income to replace all federal taxes: the individual income tax, the corporate income tax, the payroll tax and the estate tax.
The tax attorney, Michael Graetz, has evidence that a 34% tax rate would be necessary to replace just the individual and corporate income taxes alone.  This is a large discrepancy.  Regardless, a major argument against the Fair Tax is that such a high single tax of 30% or higher would create a compliance problem because of the incentive for people to try to avoid paying it.
Mr. Graetz has proposed a hybrid consumption and income tax, which he calls the Competitive Tax Plan, as a more reasonable but still fundamental change to our current tax system.  Although I have discussed this proposal previously, I will summarize it again here:

  • A broad-based Value Added Tax of about 14% is enacted on goods and services.
  • Families earning less than $100,000 per year are exempted from the income tax. The tax rate would be 15% for incomes between $100,000 and $250,000, and 25% above this level.
  • The corporate income tax rate is lowered to 15%.
  • The Earned Income Tax Credit is retained and used to provide relief from the Payroll Tax for low-income families.
  • The plan is designed to be revenue neutral as verified by the Tax Policy Center.

There are many advantages of the Graetz Plan over our current system.  100 million returns, for all those with incomes under $100,000, would be eliminated.  This would, in turn, make it less politically expedient for Congress to constantly add new exemptions and preferences into the code.  Lower income tax rates for both individuals and corporations would give the economy a big boost.
The Competitive Tax Plan is an example of the type of bold, fundamental reform that we need to make to our federal tax system.