We have a pretty good idea of what President-elect Trump’s priorities are:
Faster Economic Growth, accomplished with tax and regulatory reform, to create more jobs and higher paying jobs for the blue-collar middle class.
Rethinking NAFTA and TPP to make sure that American companies and workers are not being penalized by unfair trade agreements.
Immigration Reform to make sure that law-breaking illegal immigrants are deported and then figuring out some sort of legal (guest worker?) status for the remainder.
What remains to be determined is the role of Congress under the new administration. Utah’s Senator Mike Lee makes a very strong argument that one of the biggest problems with American government is the weak authority of Congress in recent years and the need for Congress to reassert itself.
With a new president who is more populist than partisan, now is an excellent opportunity for Congress to do exactly this. Here is what Congress should do:
Reinstitute annual budgeting and appropriations for executive branch agencies. This is essential for controlling how the funds are spent.
Pass new legislation for healthcare, tax reform, immigration policy and financial regulation, giving up lazy policy delegation to the executive branch and relearning the art of legislating and collective choice.
Cry foul if President Trump tries to settle these and other momentous matters through Obama-style executive decrees without legislative input.
Conclusion. Our system needs the disruption which Donald Trump will provide and that is why he got elected. But at the same time Congress has a golden opportunity to restore its prerogatives which have withered away in recent years. It would be a shame if Congress doesn’t take this golden opportunity to get this done.
As I occasionally remind my readers, I am a non-ideological fiscal conservative and a registered independent. In November I will vote for the presidential candidate who has the most credible plan to address what I consider to be our country’s two more serious problems:
Slow Economic Growth, only 2.1% per year for the past seven years since the end of the Great Recession in June 2009. Faster growth will create more jobs and bigger wage gains for America’s workers.
Massive Debt. Our public debt (on which we pay interest) is now 75% of GDP, the highest it has been since the end of WWII, and likely to keep getting worse unless strong measures are taken to prevent this from happening.
According to current polls, Hillary Clinton is strongly predicted to be elected our next president. However her policy proposals will do little, if anything, to stimulate economic growth and are likely to make our debt much worse than it already is. Donald Trump has a strong base of support among working class whites who are suffering in today’s economy and blame illegal immigration and unfair foreign trade for their woes. However this base of support, while large enough for Mr. Trump to win the Republican nomination, is not nearly large enough to bring victory in November. The only way Mr. Trump can win is to greatly expand his base of support by appealing to moderate Republicans and Independents who are highly concerned about the direction our country is taking. The best and most direct way for him to do this is to endorse the reform program, “A Better Way,” developed by the Republican House of Representatives, under Speaker Paul Ryan. This reform program has already unified the fractious Republicans in the House, and could easily serve as a vehicle for unifying the entire Republican party as well as many independents.
In my next post I will delineate how the Trump platform could easily mesh with “A Better Way.”
The Budget Committee of the House of Representatives has just issued a report “The War on Poverty: 50 Years Later”, providing an excellent summary of federal antipoverty programs and their cost at the present time (budget year 2012). Highlights are:
The federal government spent $799 billion on 92 different programs to combat poverty
Over $100 billion was spent for 15 different food aid programs
Over $200 billion was spent on cash aid
Over $90 billion spent on education and job training (over 20 programs)
Nearly $300 billion spent on healthcare
Almost $50 billion spent on housing assistance
The report also points out that many low-income households face very high effective marginal tax rates, approaching 100%, if any members are employed, because making more money means losing welfare benefits. This discourages low-income individuals from working at a time when the labor-force participation rate has fallen to a 36-year low of 62.8%. Here’s the situation: we have a rapidly growing federal budget with huge deficit spending (see above chart), a stalled economy with low labor-force participation, and an inefficient welfare system which encourages people not to work. Surely our goal should be to motivate welfare recipients to become productive citizens by returning to the workforce. So doesn’t it make sense to revamp our welfare system to be more efficient as well as to create more incentives for recipients to get and hold a job?
Apparently this does not make sense to the New York Times. Two days ago they ran an editorial “Mr. Ryan’s Small Ideas on Poverty”, castigating Paul Ryan for “providing polished intellectual cover for his party to mow down as many antipoverty programs as it can see.” The editorial goes on to say that “it’s easy to find flaws or waste in any government program, but the proper response is to fix those flaws, not throw entire programs away as Mr. Ryan and his Party have repeatedly proposed. . . . For all their glossy reports, Republicans have shown no interest in making these or any other social programs work better.”
Putting it as charitably as possible, the NYT is being unhelpful. It is a beacon of progressive thought for millions of Americans. But it is apparently unwilling to give any credence to a sincere effort by fiscal conservatives to reform a major government program to make it operate more efficiently and effectively.
Beltway insiders are praising the just announced budget deal between the Democrats and the Republicans. For example, a news analysis in today’s Wall Street Journal, “Accord Is Departure for Capitol”, suggests that budget politics may be changing, getting any deal is very hard, that perhaps bipartisanship isn’t dead in Washington but that there is still unfinished business. This is a purely euphemistic assessment. All this deal really does is to let the big spenders off the hook.
What it does is to relax the sequester by $63 billion for the next two years for very little in return. The $84 billion in new fees over ten years “officially” reduces the deficit by $21 billion but two year’s worth of new fees is just $16.8 billion. This means that the deficit will actually increase by $46 billion over the next two years.
But the real problem is that the leverage represented by the sequester is being thrown away for the next two years and this sets a bad precedent for the future. For example, we can now assume that the debt limit will also be raised for two more years in February 2014 because there will no longer be any leverage for bargaining for any other changes.
This in turn means that entitlement reform is for all practical purposes dead for the next two years. This is the really hard problem to solve. Big spenders will do anything to avoid dealing with it. Responsible fiscal conservatives know it must be addressed and need all the help they can muster to get something done.
What happens if the budget deal is not passed by Congress? It simply means that the sequester remains in effect and that discretionary spending will be $43 billion lower this current budget year than otherwise. The value of the sequester is to force action on the really thorny issue of reducing entitlement spending. Let’s preserve it for this purpose and not throw it away for nothing significant in return.
Leaders are supposed to address issues, not walk away from them!
The New York Times has a story today, “A Dirty Secret Lurks in the Struggle Over a Fiscal ‘Grand Bargain’”, suggesting that there are really two reasons why the House-Senate Budget Conference Committee, chaired by Representative Paul Ryan and Senator Patty Murray, is unlikely to accomplish very much. The simple reason is that the Republicans will not support tax increases, on which the Democrats insist, and the Democrats will not support major changes to entitlement programs, on which the Republicans insist.
But the “dirty secret” (according to the NYT) is that Republicans don’t really want to trim either Social Security or Medicare, which many Tea Partiers receive, and Democrats don’t really want to raise taxes on the upper income individuals who support them. Furthermore, the deficit for 2013 was “only” $680 billion, and is expected to drop further in the next few years, while interest rates are so low that borrowing hundreds of billions of dollars each year is not expensive. In other words, just kick the can down the road. Let somebody else worry about the problem in the future.
My previous post “Nowhere to Cut”, based on the report from the Congressional Budget Office, “Options for Reducing the Deficit: 2014 – 2023”, picks 14 possible budget cuts or revenue enhancements out of a total of 103 such items listed. Just these 14 items alone amount to a savings of $566 billion over ten years, more than enough to offset half of the entire sequester amount.
For example, raising the eligibility age for Medicare to 67 would save $23 billion (over 10 years), using the ‘chained’ CPI to measure inflation for all mandatory programs would save $162 billion, tightening eligibility for food stamps would save $50 billion, taxing carried interest as ordinary income would save $17 billion, limiting highway funding to expected highway revenues would save $65 billion, reducing the size of the federal workforce through attrition would save $43 billion, limiting medical malpractice torts would save $57 billion, and modifying Tricare fees for working-age military retirees would save $71 billion. Just these eight savings total $456 billion and would offset almost half of the entire sequester.
What is so difficult about making a tradeoff deal like this? Isn’t this what we send people to Washington to do?