Federal Debt is Killing Middle America by Jim Ley

For the last 10 years of my career as a public administrator, I preached fiscal responsibility for two reasons.

First, I was concerned that we were approaching a cyclical recession and I wanted to build reserves so that service levels could be maintained and property tax increases could be avoided during a challenging financial period.

Second, I was fully aware that, at best, the intertwined fiscal and monetary policies of the federal government were devaluing the purchasing price of the dollar, affecting not only municipalities’ purchasing power, but that of the taxpayer. I was concerned that municipalities’ labor forces, facing this reality, would demand more wages and that the taxpayer would be hurt even worse through increased property taxes.

Little did I know that the inevitable recession would be the worst since the Great Depression and the fiscal policies would devalue the purchasing dollar even further.

Debt machinations boil away buying power

I often wonder if we as taxpayers are clueless.

We have been conditioned to look at the ever growing federal debt number as meaningless because nothing bad seems to be happening in any visible fashion that we can translate into our lives. And we believe the politicians who spin the same stories so that they don’t have to do their real job, because it is what we want to hear.

But whether a frog is boiled to death by being immersed in boiling water, or whether it is boiled to death as the temperature is slowly increased to boiling — the frog is still dead. At least in the former case, the frog is at least incentivized to jump out of the boiling water, as opposed to adapting to the increasing but eventually deadly temperature in almost total ignorance of its imminent demise.

We have gone through a period of time where the lower and middle class in this country has seen the value, the purchasing power of their paycheck, decreased by as much as 20 percent. Retirees have seen their retirement funds sit stagnant, while the lack of return on their savings accounts permits inflation to eat into the value of their savings. They can buy less and less.

Anyone with a simple understanding of economics should be able to see what is happening. With a trillion dollar deficit each year, the federal government has to borrow roughly $83 billion a month. How does it do that?

From a little office in Washington, D.C. it auctions off that debt to bankers and governments around the world. As long as things stay relatively depressed economically, and given the good faith and credit of the United States, the interest payment demanded is kept low — thank God.

Irresponsibility will bring it to a crash

The debt doesn’t always sell, or a concern arises that too much of our debt is owned by a foreign power, possibly giving them an economic weapon.

So who buys it then? The U.S. Treasury Department looks to the Federal Reserve, which it funds through the printing of dollars, to buy the remaining debt. So more money is printed to buy the debt. The Fed now owns about $4.5 trillion in U.S. Treasury Bonds on its balance sheet. To control the supply of money in circulation, the Fed promulgates a spider’s web of regulation and control requiring banks to reserve large sums of money to cover the risk associated with future obligations.

Exploring this system of controls, and the impacts the system has had on our financial well being, would require way more space to explain than I have here.

Everyone knows that China owns a huge chunk of our debt — $5 trillion. And of course, there is the debt the Fed owns. But who do you think, what entity do you think, also owns a huge chunk of the federal debt? It is the Social Security and Medicare trust funds with $2.8 trillion. Rather than investing these funds in instruments that could return more to their trust funds, thus ensuring their long-term solvency, these funds are used by the federal government to lower the overall cost of borrowing.

If nothing else, it is a fiduciary conflict of interest. But Congress does not require itself or the federal government to operate under the same rules with which private and nonprofit fiduciaries must comply.

Too bad for all the rest of us.

Because all of these machinations combine to diminish the purchasing power of the dollar, severely impacting the working middle class.

ABOUT JIM LEY

Jim Ley has more than 35 years in public service, the last 25 of which were in top level administrative positions in two of the more dynamic counties in the U.S. Jim served two terms as President of the National Association of County administrators and was a leading “small government” voice in the profession. His administrative focus has been on financial sustainability and accountability to the taxpayer.

EDITORS NOTE: This column originally appeared in The Revolutionary Act.

Cut Subsidies, Get Rich by David Boaz

Ever since President Trump and budget director Mick Mulvaney released a proposed federal budget that includes cuts in some programs, the Washington Post has been full of articles and letters about current and former officials and program beneficiaries who don’t want their budgets cut. Not exactly breaking news, you’d think. And not exactly a balanced discussion of pros and cons, costs and benefits. Consider just today’s examples:

[O]ver 100,000 former Fulbright scholars, among them several members of Congress, are being asked to lobby for not only full funding but also a small increase.

As a former Federal Aviation Administration senior executive with more than 30 years of experience in air traffic control, I believe it is a very big mistake to privatize such an important government function.

On Thursday, all seven former Senate-confirmed heads of the Energy Department’s renewables office — including three former Republican administration officials – told Congress and the Trump administration that the deep budget cut proposed for that office would cripple its ability to function.

This is nothing new. Every time a president proposes to cut anything in the $4 trillion federal budget — up from $1.8 trillion in Bill Clinton’s last budget — reporters race to find “victims.” And of course no one wants to lose his or her job or subsidy, so there are plenty of people ready to defend the value of each and every government check. As I wrote at the Britannica Blog in 2011, when one very small program was being vigorously defended:

Every government program is “well worth the money” to its beneficiaries. And the beneficiaries are typically the ones who lobby to create, expand, and protect it. When a program is threatened with cuts, newspapers go out and ask the people “who will be most affected” by the possible cut. They interview farmers about whether farm programs should be cut, library patrons about library cutbacks, train riders about rail subsidy cuts. And guess what: all the beneficiaries oppose cuts to the programs that benefit them. You could write those stories without going out in the August heat to do the actual interviews.

Economists call this the problem of concentrated benefits and diffuse costs. The benefits of any government program — Medicare, teachers’ pensions, a new highway, a tariff — are concentrated on a relatively small number of people. But the costs are diffused over millions of consumers or taxpayers. So the beneficiaries, who stand to gain a great deal from a new program or lose a great deal from the elimination of a program, have a strong incentive to monitor the news, write their legislator, make political contributions, attend town halls, and otherwise work to protect the program. But each taxpayer, who pays little for each program, has much less incentive to get involved in the political process or even to vote.

A $4 trillion annual budget is about $12,500 for every man, woman, and child in the United States. If the budget could be cut by, say, $1 trillion — taking it back to the 2008 level — how much good could that money do in the hands of families and businesses? How many jobs could be created? How many families could afford a new car, a better school, a down payment on a home? Reporters should ask those questions when they ask subsidy recipients, How do you feel about losing your subsidy?

Republished from Cato Institute.

David Boaz

David Boaz

David Boaz is the executive vice president of the Cato Institute and the author of The Libertarian Mind: A Manifesto for Freedom and the editor of The Libertarian Reader.

The Deficit Problem Is a Spending Problem by John Tamny

After 2008, the US economy has experienced relative stagnation. The  common refrain from the Left was that federal budget deficits weren’t big enough. Of the belief that government spending is what lifts economies out of slow-growth ruts, Paul Krugman, Lawrence Summers and other neo-Keynesians called for federal borrowing beyond what Treasury took in as a way of allegedly boosting the economy.

Who cares that excessive spending failed so impressively in the U.S. back in the 1930s, and who cares that massive increases in Japanese debt have failed to awaken its economy from its “lost decades?” The Keynesians most associated with America’s Left (they populate the Right too, but most who think this way don’t admit it, or know it) pointed to increased deficits as the certain source of our economic salvation.

This is interesting mainly because with the election of Donald Trump in 2016 in concert with promises of big tax cuts, the same left that cheered deficits as the path to recovery suddenly claimed they would hold the economy down. This requires mention as a reminder that budget deficits and national debt are political props, first and foremost.As for their economic implications, governments can only spend insofar as they tax or borrow from the private sector. Period. As such, and in a very real sense, all government spending is deficit spending; the deficits and national debt a bit of a distraction.

Spending Is What Matters

The level of government spending is what matters the most because the wealth we produce in the private sector is precious. The spending consumes capital that otherwise might reach innovators. Government spending is the worst kind of tax mainly because its horrors are mostly unseen.

Taxes we see and feel in each paycheck, devaluation of the dollars we earn (a tax like any other) we suffer through reduced work opportunity and spending power, but government spending represents the unseen; as in what would intrepid, innovative minds do with the expropriated capital if government weren’t consuming it?

How many Apple, Amazon and Microsoft equivalents haven’t, and will never emerge from start-up infancy thanks to government’s consumption of crucial resources, how long ago would cancer and heart disease have been cured; only for bright minds to train their genius on the erasure of other life-ending maladies, or the fulfillment of other market needs?

The Salsman View

All of the above at least partially explains why I approached Duke political economy professor Richard M. Salsman’s new book, The Political Economy of Public Debt: Three Centuries of Theory and Evidence, with some reservation.

Salsman’s genius and broad knowledge have long been evident, but e-mail exchanges over the years between author and reviewer revealed a friendly difference of opinion about budget deficits. Though no deficit “hawk,” Salsman views them as a problem in their present state, while I view government spending as the real problem. If given the choice between a balanced budget of $4 trillion, and annual deficits of $1.4 trillion on $1.5 trillion in spending, I would take the latter. In a heartbeat. It represents less government waste of precious capital to the tune of $2.5 trillion.

So while my views on what Salsman refers to as “public debt” haven’t changed much, Salsman’s book forced a very healthy rethink of the debt question, though for reasons different from the traditional critiques of deficit spending. And while this review will reveal some ongoing areas of disagreement with the author, none of the differences should be construed as a non-endorsement of what I’ll refer to going forward as “Public Debt.”Salsman has written something beyond special, a book dense with information and history that I’ll be referencing for years to come. It’s perhaps commonly thought that Carmen Reinhart and Kenneth Rogoff’s This Time Is Different is the definitive history of government debt, but Salsman’s Public Debt trumps their book by many miles. It’s quite simply spectacular, and informative in a way that few academic economics books (or, for that matter, any economics books) are.

To give readers a sense of how the book is constructed, it “examines three centuries of the most prominent political-economic theories of public debt.” Salsman addresses the debt through the eyes of some of the grandest names in economics, along with others who similarly deserve stature, but who have in a sense been forgotten. One of Salsman’s many triumphs is the staggering amount of research he conducted in order to explain to readers the myriad ways economists of different persuasions viewed government debt in the past, and how some do in the present.

Salsman divides up the economists of varying Schools into three groups. “Public debt pessimists” typically “argue that government provides no truly productive services,” that the “taxing and borrowing detract from the private economy, while unfairly burdening future generations,” plus they generally believe that government debts are “unsustainable and will likely bring national insolvency and perpetual economic stagnation.” David Hume, Adam Smith and Nobel Laureate James Buchanan were three public debt pessimists, and then the list today is endless: Niall Ferguson, Laurence Kotlikoff, David Stockman, etc. etc. To the debt pessimists, the world is seemingly always about to end.

“Public debt optimists” think “government provides not only productive services, such as infrastructure and social services,” but they also think deficit spending can lift economies out of “savings gluts, economic depressions, inflation, and secular stagnation.” Interesting about the optimists is that while they’re convinced of the wonders of deficits, they almost universally despise the creditors (the “rentier class”) who make deficits possible. Those who lend to governments in return for an income stream are almost invariably immoral financiers in the eyes of the optimists, and so the optimists fully support defaulting on those who provide government with the funds to waste.

Alvin Hansen and Abba Lerner are prominent in Public Debt as some of the old-style optimists, but the list of neo-optimists in today’s commentariat is similarly endless; think once again, Krugman, Summers, Alan Blinder, Christina Romer, etc. At book’s end, Salsman correctly points out that the “pessimists and optimists have more in common than is commonly realized – and each perpetuate long-established falsehoods.” Salsman was being kind….

The Realists

And then there are the “public debt realists.” They “contend that government can and should provide certain productive services,” but within strict limits. Realists neither whine all the time about world-ending government debts, nor do they claim that they can be essential sources of economic sustenance as the equally confused optimists believe.

Realists who favor “constitutionally limited government” don’t think public debt is “inevitably harmful” mainly because when government is limited, so will borrowing be. Alexander Hamilton was the most famous public debt realist. Of the moderns in our midst, Steve Forbes is a realist, so is George Gilder, and so of course is Salsman. More on your reviewer’s stance later.

Up front, public debt isn’t some recent concept reflecting the supposed immorality of the modern world whereby governments borrow today only to heartlessly pass the debt on to future generations. Salsman notes early on that public borrowing by governments such that the citizens were “ultimately responsible for servicing the debt” came about in the “late seventeenth century” through the issuance of “tangible securities traded in secondary, liquid markets with prices and yields visible on public exchanges.”People have long wanted a way to securely store wealth today in favor of future consumption tomorrow, governments have long looked for ways to borrow existing wealth, and financiers brought the two together. This isn’t to defend the public borrowing as much as it’s to say that it’s not something that arose in the 20th century.

The Founding

Going back to the U.S.’s founding, Salsman writes that “Alexander Hamilton and Thomas Jefferson differed pointedly over whether government should borrow at all, whether it should fully pay its debts (even when trading at a discount), whether the currency in which debts were to be repaid should be gold backed and of uniform consistency nationally or instead be cancelled, and whether private banking was legitimate. On all such questions Hamilton answered in the affirmative, Jefferson in the negative.” Based on Salsman’s analysis, Jefferson would be grouped with the pessimists, and Hamilton as mentioned with the realists.

Hamilton felt a national debt would be very additive to the U.S.’s early fortunes as a sign of the new country’s strength. Issuance of debt would “show the world the United States could and would pay its debts.” This was a particularly important signal to send to creditors analyzing what was again, a new country. Salsman is very clear that Hamilton wasn’t a “proto-Keynesian optimist” as much as the world was then, as it is now, uncertain. If the U.S. was seen as creditworthy, borrowing for national defense (defense spending a legitimate function of government in the eyes of realists) during times of war would be easier.

David Hume

At the same time the great philosopher David Hume said “sovereign borrowing breeds ‘poverty,’ national ‘impotence,’ and ‘subjection to foreign powers.'” Salsman classifies David Ricardo as a debt pessimist too, but acknowledges the differences within the group. Ricardo felt, like your reviewer, that “public spending itself constitutes the real economic burden, regardless of how funded, because it deprives private actors of the saving, capital accumulation, and productivity gains necessary for long-term prosperity.”  Absolutely. Government spending brings instantaneous injury to the economy for it depriving the productive of resources that would otherwise be put to higher use.

On the optimist side Robert Malthus believed in the impossible whereby supply could exceed demand, so he viewed deficit spending “as a ‘cure’ for gluts.” Interesting there is that Malthus apparently knew, like Ricardo, that the spending dissolved wealth, but still felt it was necessary “to dissipate ‘excess’ aggregate supply.” A.C. Pigou was more sanguine about British borrowing since so much of the debt was owed within Britain itself.And to show how much Pigou influences public debt optimists today, Salsman adds that he cheered deficit spending that would redistribute the wealth of the rich to the middle class and poor “because they save less.” As Pigou put it, “The bulk of this money is pretty sure to be expended on the purchase of consumption goods, and so indirectly in creating money income for producers of those goods.”

Ok, per Pigou, the rich should be fleeced, then paid back a percentage of what was taken from them through consumption. Naturally Pigou’s analysis ignored that his scenario included no production, and worse, no investment in future production; investment that would have been more likely had the rich been able to hold onto their wealth in the first place. Fear not, it gets worse.

Secular Stagnation

Lawrence Summers’ hero Alvin Hansen, he of “secular stagnation” fame, felt “prodigality may be the appropriate social virtue in a society in equilibrium at underemployment.” Forget that savings never sit idle, and also forget that no economy can progress without the savings that fund innovation, to Hansen government issuance of debt with an eye on spending was a “means of providing adequate liquidity in a growing economy.”

Abba Lerner felt debt was ok since “we owe it to ourselves,” plus the debt wasn’t burdensome in a broad sense because debt payments are “received by the citizens and government bondholders.” This is perhaps what helped inform Keynes’s line about the “fools” in the economics profession who were allegedly carrying the banner for his views. For an economist to presume no present burden when government is extracting capital from the private economy is the height of foolishness. Fear not, however, it gets even stupider.

Thomas Piketty loves wealth redistribution while bemoaning debt because “it usually has to be repaid.” Piketty would prefer to “tax the wealthy rather than borrow from them.” To this endlessly naïve economist, when governments sell debt to the rich, the rich grow wealthier through ownership of bonds and their income streams. You can’t make this up, except that you don’t need to. Never forget that Piketty isn’t a fan of private investment either because in the process of capitalizing companies (on the way to voluminous opportunity creation for individuals), investors are getting rich in the process if their courageous investments bear fruit. When they succeed, it’s the rich getting richer.

Misesian Fresh Air

On the other hand, Ludwig von Mises was a breath of fresh air. Mises all-too-correctly pointed out that “Keynesian economics and the political process are almost entirely focused on short-run demand-side concerns while largely ignoring the long-run importance of economic productivity.” Precisely. Along these lines, a few years ago Alan Blinder penned an op-ed for the Wall Street Journal in which he talked up the allegedly positive demand implications that would spring from increased government spending. What he missed is that demand is always and everywhere the result of production first, and production is more abundant the more that savings and investment power enhancements that boost individual productivity.

Yes, Keynesianism is all about short-term demand, all at the expense of much greater production (and much greater subsequent demand) in the long-term given the truth that savings author progress. Demand is the easy part, and it’s not something economists or politicians should spend any time worrying about. Much thanks go to Salsman for compiling countless opinions on the subject of spending and debt. There are more to come, but this review will only scratch the surface.

Back to government spending in a broad sense, Salsman adds that government borrowing was relatively cheap in the 18th and 19th century (“typically 3-6 percent”) because “most sovereigns were fiscally prudent.” Other than issuing larger sums of debt during war, Salsman indicates that they “otherwise eschewed chronic budget deficits.” Of greater importance is that governments used “various pre-commitment devices – sinking funds, annuities, and the gold standard – to assure creditors of timely repayment in money that would hold its value over time.”

There’s no real mystery here behind the government debt surge. Governments could borrow because investors trusted the quality of the debt securities paying out income streams in currencies backed by gold, but most important was that good money correlated with surging investment, and subsequent economic growth.

Debt doesn’t power growth as much countries with growing economies can issue lots of debt. Add to all that a theme that Salsman returns to throughout Public Debt: “Only a state can legally compel tax paying, which is crucial to its capacity for debt servicing.” Governments can borrow fairly easily precisely because they can ultimately use force to extract payment on their debt from others. Debt servicing is logically much easier if the people are flush. The latter is important with the book’s future direction in mind.

Credit Worthy

Indeed, rich countries can borrow with ease. Poorer ones struggle to borrow, if at all. If readers doubt this, they need only pull up lists of the nations with the most debt versus the ones with very little. The big debtor nations are predictably the richest countries, while the ones with little debt are almost invariably the poorest. It’s worth repeating that this isn’t to say that deficits and debt power economies forward. Of course they don’t.

Government spending amounts to politicians misallocating precious resources that would otherwise be directed to their highest use by the profit motivated. Government spending is a huge tax on progress.

At the same time, politicians exist to spend. And if we don’t provide them with enough of our earnings, they’re happy to borrow against our future earnings. It’s much easier for them to borrow if investors feel the future earnings of the citizenry will be abundant, and easily taxable. Just as rich individuals and companies can borrow with ease, so can politicians who rule countries populated by the rich.The above truth brings us to one of many myths slayed by Salsman in his excellent book. Reinhart and Rogoff’s alleged insight that countries tip toward decline once their debt to GDP ratios move beyond 90 percent is accepted wisdom within the commentariat. Except that it’s not true. As Salsman reveals throughout Public Debt, England’s debt/GDP ratio reached the 261 percent mark in 1819, but far from it foretelling the country’s long decline, England was on the verge of a century of staggering growth. Considering the U.S., its debt/GDP ratio blew past 120 percent during World War II, only for the U.S. to experience pretty impressive post-war prosperity.

What To Do?

What all of this speaks to is that while debt isn’t on its own the source of country decline, socialistic responses to heavy debt loads are. High levels of taxation are what cause stagnation, and so do efforts by politicians to reduce their debt burdens sans payment. In pressing the previous point with great regularity, Salsman began to soften my broad dismissal of deficits. To me, they still don’t matter in a normal sense simply because the spending is the problem.

Bolstering the previous point for this reviewer, Salsman brings countless economic names from the past back from obscurity, including Italian aristocrat De Viti De Marco who asserted crucially that “the purchase of a public bond is voluntary, hence open to a self-interested, utility-maximizing calculus, while the payment of a tax is compulsory.” De Marco’s observation is one I’ve often made; as in it’s better if governments pay for the right to waste money than it is for them to take it from the productive without compensation. Again, deficits don’t matter. It’s the spending that does. That’s the tax, how the money is raised immaterial.

At the same time, Salsman’s exhaustive discussion of debt once again forced a rethink, and caused me to partially change my mind. No doubt spending is the real tax, but the problem with deficits is that while the borrowing is an act of government expropriating precious capital in order to waste it, we don’t feel it right then. No doubt we do soon enough, no doubt the waste leads to reduced innovation and lower pay, but it’s not seen as quickly and intimately as a direct tax. In that case, wouldn’t taxation meant to pay for all government spending free of borrowing force more prudence on politicians whose spending would fleece voters with tangible immediacy?

Along the same lines, the way in which public debt optimists have long dismissed the creditors, and worse, called for default on creditors (see Piketty), was a reminder of another horror of deficits; as in how politicians dispose of them.

Enter Keynes

Indeed, as one can imagine in a book about government debt, Salsman writes about how politicians go about shrinking it; albeit on the sly. This brings us to John Maynard Keynes. Though Salsman is very critical of the British economist, he indicates that “arguments for perpetual deficit spending and public debt accumulation come not from Keynes but Keynesians.” Those “fools” once again. While Keynes was in no way a public debt pessimist, “he never counseled unmitigated deficit spending.” More notable about Keynes is that while he had no problem with debt per se, he loathed creditors and sought “the euthanasia of the rentier” class.

Most important about Keynes from a public debt perspective is that in describing ways for governments to shrink their debt, he invariably offered up false solutions the harm of which would extend well beyond the supposedly “immoral” creditors.

Explaining Keynes’s suggested ways to default on debt, Salsman said governments could do so “explicitly (by a repudiation, or deliberate non-payment), implicitly (by inflation), and by a taking (levy on rentiers).” Governments have regularly employed the first two, and did so long before Keynes was prominent. Yet here’s the problem with deficits and debt: while government debt is an effect of the wealth produced by the citizenry, governments often respond the wrong way, thus adding insult to the wasteful borrowing/spending injury.

First up is repudiation or deliberate non-payment. To show just how delusional and contradictory are Keynesian debt optimists, they love the extra government spending that debt enables, but loathe the creditors who make the debt possible. Their position is impossible.

At the same time, I’ve long liked the idea of debt “haircuts” or repudiation not out of dislike for the creditors as much as maybe one or the other will cause creditors to skip buying government debt altogether. Arguably the latter would be more prevalent today if institutions like the IMF weren’t so ready to bail out governments, which has long been a way for governments to bail out banks and other creditors with high exposure to government debt.

Devaluation

Of course the much more problematic form of debt default or repudiation is devaluation of the income streams that debt securities pay out. Amazingly, Keynes well understood the horrid implications of devaluation, yet his dislike of creditors trumped the pain experienced by everyone thanks to devaluation. As Keynes so correctly put it, devaluation “is the form of taxation which the public find hardest to evade.”

While there are myriad ways for the citizenry to get around excessive headline rates of taxation, when governments repudiate debt through currency devaluation, everyone suffers. People earn dollars, pounds, euros, yen, and all manner of other currencies, which means devaluations meant to reduce government debt mean everyone suffers a shrinking paycheck. Much worse, the devaluation is a repellent to the very investors and savers whose capital commitments author economic progress to begin with.The point of all this is that deficits in isolation trump direct taxation as a way for governments to raise funds simply because they’re paying for the right to consume precious capital, as opposed to expropriating it without compensation for those fleeced. The problem is that deficits don’t occur in isolation. Or they don’t always. Precisely because governments want to borrow and spend sans the long-term implications of doing just that, we all frequently suffer the cruel tax that is devaluation so that wasteful governments can shrink what they owe.

To those who think the U.S. has never defaulted, think again. Even Reinhart and Rogoff described FDR’s 1933 decision to devalue the dollar from 1/20th of an ounce of gold to 1/35th as a debt default, and looked at in terms of the dollar since then, it’s apparent that the U.S. Treasury has been rampantly defaulting ever since. As of this writing a dollar buys 1/1200th of a gold ounce. America’s creditors have long suffered defaults, and the American people have had to accept the slower growth that is the tautological result of “implicit,” or “stealth” default. The seen is that despite Treasury’s horrid oversight of the dollar the U.S. remains the richest, most dynamic country in the world. But imagine the unseen. Imagine where the U.S. economy would be today absent the serial dollar devaluations that have needlessly shrunk investment that would have otherwise been directed to mass experimentation ahead of stunning advance.

Why Deficits are Bad

So, at risk of being repetitive, Salsman has me convinced of the horrors of deficits, but not for the reasons that compel most. Spending remains the problem. The problem with deficits is once again the socialistic responses of governments whereby they make everyone pay the massive, economy-sapping tax that is devaluation as a way of shrinking what they owe.

All of this speaks to another area of disagreement with Salsman ahead of the ones that will conclude this review. He correctly notes that the Keynesian “demand-side model was so discredited in the 1970s” in concert with vindication for supply-side economics, which “delivered such positive financial-economic results in the 1980s and 1990s.”

There’s no dispute that supply side won precisely because the latter is a tautology: when the tax, regulatory, tariff, and debased money barriers to production are shrunk, booming economic growth is the result. Supply side makes perfect sense, but it’s arguable that supply-siders have become ridiculous to the point that their policies have become self-suffocating. Indeed, supply siders, in their worship of the rising revenue implications of tax cuts, have forgotten that government spending is the biggest tax of all.

And in ignoring rising government spending, they’ve allowed the genius of their tax cut, deregulation, free trade, good money policy mix to be neutered. Figure that the posthumous John F. Kennedy tax cuts were great for economic growth, and as a result, gifted Treasury with a revenue surge in 1965. The latter gave Congress the means to for instance introduce Medicare; a program that was initially funded with $3 billion. The problem modernly is that a program which once cost $3 billion is projected to cost $1 trillion by 2025. Taking nothing away from the good of supply side policies, if not met with spending cuts, they’re not nearly as effective as they otherwise would be.

The Supply Side Problem

The problem with supply siders isn’t their belief that deficits don’t matter, but it’s a major problem their belief that government spending doesn’t matter. This reviewer wishes Salsman had spent more time on this point. As a deficit realist, Salsman plainly doesn’t like government expanding beyond strict constitutional limits. Ok, but rising federal revenues have enabled just that, not to mention that it’s much easier for governments to issue new debt if incoming tax revenues are abundant.Moving on from this quibble, Public Debt is wildly informative, and once again a magisterial myth slayer. Salsman spends a lot of time on Nobel Laureate James Buchanan’s contributions to the debt story, contributions that were important. He showed the “public choice” side of this whereby politicians act in what they deem their self-interest which is to spend with abandon.

At the same time, the public debt pessimist in Buchanan presumed to know a number, or a “critical threshold” after which government debt would cause economic decline. Buchanan offered a “moral case” for repudiation that supports Salsman’s wondrous contention previously mentioned that the pessimists and optimists are more alike than they know. Both sides endorse clipping the creditors who make all the waste possible.

As to magisterial myths slayed, through England and the U.S. Salsman as previously mentioned shows that if governments don’t respond to major debt with excessive socialism, it’s not an economy killer as Reinhart and Rogoff contend, and as did Buchanan. While England once again had a debt that was 261 percent of GDP as of 1819, by 1914, amid booming economic growth, the number had declined to roughly 35 percent.

The U.S. ratio as previously mentioned grew beyond 120 percent during World War II, but it shank to 35 percent by 1982. Japan presently has a debt/GDP ratio of over 225 percent. That it does exposes the absurdity of Krugman’s contention that deficit spending boosts growth, but at the same time it exposes as faulty the Reinhart/Rogoff magic number. Though not booming as it once did, Japan remains a very rich country. Rich countries can easily borrow. The problem is, as always, the spending. Imagine how much more advanced Japan’s economy would be today had its political class not responded to the country’s early 1990s recession with so much waste.

Deficits and Interest

Regarding the wildly popular view that deficit spending drives up interest rates, Salsman makes a mockery of what’s plainly absurd. Tracking the deficit spending of G-7 nations, Salsman finds that amid average debt/GDP ratios of 37.7 percent in 1980, the average interest rate on 10-year government bonds paid by those countries was 11.9 percent. Fast forward to 2000 when the debt/GDP ratio for those same countries was 74.5 percent, the average rate was 5 percent. In 2015, with the debt/GDP ratio having surged to 116 percent, the average 10-year government bond coupon was 1.3 percent. Though it’s common to say that rising deficits correlate with rising rates to service those deficits, there’s no evidence that the latter is true. Salsman’s book is beyond valuable, yet at the same time his statistics unearth another quibble.

On the same page that he provides the above numbers, Salsman contends that central banks “now also act as lenders of last resort to profligate governments,” and that the “reach of central banking expands virtually without limit.” Salsman’s explicit contention is that politicians created central banks to enable their borrowing given his oft-stated view that there’s “no effective limit on central banks’ power and willingness to create fiat money.”

This is not compelling. Sure enough, in communications with Salsman he’s acknowledged that most vastly overstate the power of the Fed, and central banks in general. How then could that which interacts with increasingly neutered banks have so much economic influence, let alone enable broad debt issuance by governments? My view here is that Salsman reverses causation. Central banks that buy a lot of government debt are a certain effect of an otherwise powerful economy, as opposed to an enabler of government debt issuance.

My evidence is Salsman’s very own mention of England’s adoption of a gold standard after the Glorious Revolution. Once a desperately poor country, the issuance of good money authored an economic surge that enabled borrowing that subsequently enabled England’s wars, and its colonization of one quarter of the world’s land mass.

In Salsman’s case, he cites the establishment of Britain’s Bank of England in 1694 as the facilitator of Britain’s “financing yet another war with France.” Ok, but if all it took for France to fight toe to toe with England was a central bank, then it could have mimicked Britain’s establishment of one. In truth, what enabled England’s warring was economic growth that gifted its politicians with abundant revenues, not a supposed lender of last resort to governments. Salsman himself references central bank independence as “a mere shibboleth,” which reminds us that any purchasing of debt amounts to one government entity buying from another.

Reducing all of this to the absurd, if central banks could truly enable reckless spending, the central banks of Nigeria and Bahamas could theoretically monetize massive government growth, as could the creation of a central bank in Haiti. But nothing like the latter would materialize simply because central banks can’t alter economic reality. If a government is “desperate for funds,” why the need for a central bank in the first place? What could a central bank do?

Going back to his assertion that there’s “no effective limit on central banks’ power to and willingness to create fiat money,” Salsman is making somewhat of a Keynesian statement himself (in fairness, members of the Austrian School regularly commit the same error) in presuming that central banks, for being central banks, can fix the alleged problem of credit scarcity. But they can’t. Individuals, businesses and governments seek access to “central bank notes” not to stare at the money, but instead do so because of what “money” can be exchanged for.

Credit is always and everywhere created in the private sector; money just a measure that facilitates its exchange and its direction toward future wealth creation. In short, the limit on central banks is that governments, like individuals and businesses, want to exchange money for real things. None of this means that government always does a good job with money, but it does mean central banks are a sideshow contra Salsman and other central bank critics. Much as central bank critics might wish otherwise, and much as the very existence of central banks is an offense to common sense, governments themselves ultimately decide whether to issue good or bad money, not central banks as is so commonly assumed.

Democracy and Deficit

Salsman is not a friend of democracy, and with good reason. Like most reasonable thinkers, he prefers a constitutionally limited federal republic that has very little power; spending or otherwise. Unrestrained democracy is unquestionably bad simply because it empowers the mob to theoretically vote all manner of benefits to itself on the backs of others. Where we part ways somewhat is in his assertion that democracy is the source of excessive spending.

Politicians who exist to spend. If the money’s there, they’ll spend it. India is a democracy, but the size of its debt isn’t very notable. What ultimately powers spending and borrowing is the wealth of the citizenry that sadly gifts politicians with surging revenue streams that enable endless spending and borrowing. Rich countries can borrow, and they do. The fix is constitutionally limited government. Always.

Lastly, Salsman asserts that “political elites’ electoral incentive is to maximize spending, minimize taxation, and borrow or print money to plug the gap, while treating wealth minority groups and future generations as fiscal commons worth exploiting.” This doesn’t ring true.

Indeed, to separate direct taxation from borrowing and spending is to make a distinction without a difference. Either way, the damage done by government is immediate since government spending (even that which is constitutional) amounts to instantaneous mis-allocation of precious resources. As for the popular notion that deficits burden future generations, it’s accepted wisdom that is also utter nonsense. The burden isn’t debt that can easily be grown out of if government is limited.

More realistically, we all suffer government spending in the here and now thanks to greatly reduced progress wrought by government consuming the resources necessary for advance. As for future generations, the true burden of spending in the here and now is that experimentation and advance that would have otherwise taken place in the past, only to set the stage for greater advance in the future, hasn’t happened.

The burden we leave for those in the future is a world that is much less advanced than it otherwise would be. The spending burdens future generations with work and experimentation that would have otherwise already been completed, and that will detract from much more productive toil had government not previously wasted resources. Something tells me Salsman knows this, but the idea of debt as “someone else’s” burden is very much ingrained.

Still, the minor quibbles should in no way be taken as a reason for readers to not purchase The Political Economy of Public Debt. Richard Salsman has written an endlessly excellent book that expertly tells the story of debt and its implications. Readers will come away exponentially more knowledgeable, and with minds that have been changed at the very least a little, but most likely a lot.

Readers will come away exponentially more knowledgeable, and with minds that have been changed at the very least a little, but most likely a lot.

John Tamny

John Tamny is a Forbes contributor, editor of RealClearMarkets, a senior fellow in economics at Reason, and a senior economic adviser to Toreador Research & Trading. He’s the author of the 2016 book Who Needs the Fed? (Encounter), along with Popular Economics (Regnery Publishing, 2015).

EDITORS NOTE: Get trained for success by leading entrepreneurs.  Learn more at FEEcon.org

8 Big-Government Policies that Hurt the Poor by Patrick Tyrrell

It’s clear that many big government policies are creating winners and losers in America.

The story has been the same for decades. Government makes friends with a company or an industry, blocks out the competition with regulation, and in some cases gives the company subsidies.

Such cronyism is bad for innovators and for consumers. But fewer people realize that it’s also bad for the poor. A recent report from The Heritage Foundation detailed 23 of these big government policies that hurt the poor, and provided concrete ways to address them.

Winners and losers from big government policies are not always clear. And yet for some crony policies, the winners and losers are very clear. The winners are a small group of identifiable government cronies, while the losers include people of little or no influence with the government.

Here is a look at eight big government policies from the report that benefit government cronies at the expense of other groups of people, including the poor.

1. Renewable Fuel Standard

The Energy Policy Act of 2005 mandated that renewable fuels be mixed into America’s gasoline supply, primarily by using corn-based ethanol. Then, the 2007 Energy Independence and Security Acts significantly increased the amount that must be mixed in.

This mandate is known as the Renewable Fuel Standard. It forces the use of higher levels of biofuels than the market would otherwise bear. The result has been higher food and fuel prices.

Who Wins: Corn farmers, soybean farmers, and biofuel companies.

Who Loses: Consumers of gasoline, consumers of food, and farmers that rely on feedstock and restaurants.

2. Federal Sugar Program

The federal government tries to limit the supply of sugar that is sold in the United States.

This federal sugar program uses a combination of price supports, marketing allotments that limit how much sugar processors can sell each year, and import restrictions that reduce the amount of imports.

As a result, the price of American sugar is consistently higher than world prices.

Who WinsSugar growers and sugar harvesters.

Who Loses: Workers in sugar-using industries, and consumers of food (including bread) that contains sugar.

3. Catfish Inspection Program

As a result of the U.S. Department of Agriculture’s catfish inspection program, the USDA inspects catfish while the Food and Drug Administration inspects all other seafood.

This creates duplication because seafood processing facilities that produce both catfish and any other seafood will have to deal with two different types of seafood regulatory schemes instead of just one.

This program also creates a non-tariff trade barrier that will make it extremely difficult for foreign catfish exporters to export to the U.S., likely reducing competition for the domestic catfish industry.

Who WinsDomestic catfish producers.

Who Loses: Domestic catfish consumers.

4. The Merchant Marine Act of 1920 (the Jones Act)

The Merchant Marine Act – nicknamed after Sen. Wesley Jones, R-Wash. – requires the use of domestically built ships when transporting goods between U.S. ports. The ships must also be U.S.-owned, and mostly U.S.-crewed.

Who WinsThe U.S. domestic shipping industry.

Who Loses: The U.S. military, automobile drivers, users of propane and heating oil, and anyone benefitting from the trade and transportation of goods between U.S. ports.

5. Occupational Licensure

Licensure laws create government requirements for being allowed to practice a profession. These requirements exist even though the market would produce certification options if consumers desired such information.

Who WinsWorkers who have already obtained licenses.

Who Loses: People wanting to work who can’t because they don’t have a license, and consumers who have to pay higher prices for services.

6. Economic Development Takings

On June 23, 2005, the U.S. Supreme Court held in Kelo v. City of New London that the government can seize private property and transfer it to another private party for economic development.

This type of taking was deemed to be for “public use” and ruled a proper use of the government’s eminent domain power under the Fifth Amendment of the United States Constitution.

Who Wins: People who successfully lobby the government to seize other people’s property for financial gain.

Who LosesProperty owners who have their property seized.

7. Home-Sharing Regulations

Local governments sometimes ban or excessively regulate home-sharing – that is, renting out one’s home to accommodate travelers, such as through Airbnb.

When this happens, consumers have less choices of where to stay when traveling, hotels can charge higher prices, and homeowners and renters can’t make full use of their legally possessed homes to earn income for themselves.

Who WinsHotel employee union lobbies, and the hotel industry.

Who Loses: Homeowners and renters.

8. Ride-Sharing Regulations

In some state and local jurisdictions (such as outside Portland, Oregon; Alaska; and Austin, Texas), the government bans or heavily regulates ride-sharing companies like Uber and Lyft.

These companies are popping up all over because they meet consumers’ needs, but they are being held down in certain cities where the government backs the establishment industry.

Who WinsTraditional taxicab companies.

Who Loses: Uber, Lyft, and drivers looking for low barriers to entry; taxicab customers; customers who want to go in or out of certain neighborhoods that traditional taxi drivers avoid; and users of public transportation seeking to complete the “last mile” of their trips.

When industries or groups win special favors from politicians at the expense of ordinary Americans and the poor, it is an affront to freedom – especially to the economic freedom of the poor.

Policies that drive up prices – especially of commodities – are harder to absorb if you are poor.

The policies listed above can block off the only escape route that poor people have from poverty, preventing them from doing what they are good at for a living, for example, or from renting out their home or other property.

All Americans should have the same opportunities open to them. But when government cronyism rears its ugly head, they don’t.

Those who fall on the losing side of cronyism are more likely to agree with President Ronald Reagan when he said, “The nine most terrifying words in the English language are: I’m from the government and I’m here to help.”

Reprinted from Daily Signal.

Patrick Tyrrell

Patrick Tyrrell is a research coordinator in The Heritage Foundation’s Center for Data Analysis.

EDITORS NOTE: Get trained for success by leading entrepreneurs.  Learn more at FEEcon.org

Tillerson Cuts 2,300 Jobs From Bloated State Department

Let’s hope that as he makes these cuts and streamlines State Department operations, Tillerson clears out the Obama loyalists who are trying to impede President Trump from draining the swamp and implementing needed reforms.

state_department“Tillerson Cuts 2,300 Jobs From Bloated State Department,” by V Saxena, Conservative Tribune, April 29, 2017:

Secretary of State Rex Tillerson has begun fulfilling President Donald Trump’s mission to reduce the size of government and save taxpayers a boatload of money by proposing to eliminate 2,300 jobs at the State Department.

If implemented, the plan would trim the State Department’s budget by more than a quarter and its staff by approximately 3 percent, according to The Associated Press.

The majority of the job cuts would be attained through attrition, or the process of waiting for employees to simply retire, while the remainder would be acquired via buyouts. As noted by The AP, buyouts would be offered first to employees over the age of 50 who have at least two decades of government service under their belts.

The cuts were expected to take approximately two years to materialize, according to Bloomberg, though the results could wind up lasting far longer.

During an interview Friday with NPR, Tillerson explained that he was hoping to make the department far more efficient and effective.

“We are undertaking a reorganization of the State Department, but it’s not just a collapse of boxes,” he said. “What we really want to do is examine the process by which the men and women — the career foreign service people, the civil servants, our embassies — how they deliver on that mission.”

Suffice it to say, just throwing a bunch of people together into one department wasn’t doing the trick. Changes were needed, and he intended to bring forth those changes.

Also on the chopping block were departmental policies: “(T)here are a lot of rules — and people follow the rules, and you look at the rule, and you say … ‘Why do we do it that way?’ And no one can seem to remember why we did it that way.”…

EDITORS NOTE: This column originally appeared on The Geller Report.

The President’s Tax Plan Massacres the 1%ers in the 10 States with Highest-Tax Rates

As the media slices and dices the proposed tax plan offered by President Trump’s Treasury Secretary Steven Mnuchin on April 26th, one thing is clear – the rich will pay more in taxes than the working class.

In the Daily Signal article How Trump’s Tax Plan Would Affect High-Tax States Like California, New York Fred Lucas writes:

High-income earners in high-tax states would see a federal tax rate cut, but may pay more in the end if they’re unable to deduct state and local taxes under President Donald Trump’s tax reform proposal announced Wednesday.

The White House released the contours of his tax reform proposal that would lower tax rates and reduce the number of tax brackets. However, the plan would also reduce the number of tax deductions.

When a reporter asked if deducting taxes on state and local income taxes would also be eliminated, Treasury Secretary Steven Mnuchin answered, “Yes.”

U.S._Democratic_Party_logo_(transparent).svgSo, Democrats should be very excited about taxing the rich, so will the 99%ers, like Occupy Wall Street, who have been for taxing the rich. This has been the mantra of the Democrat Party – Tax the Rich!

So which are the states with the highest tax rates? The national average for state income taxes is 9.9%. According to the 2017 Tax Guide published on BankRate.com the 10 highest taxed states are:

  1. New York – Tax burden: 12.7%

  2. Connecticut – Tax burden: 12.6%

  3. New Jersey – Tax burden: 12.2%

  4. Wisconsin – Tax burden: 11%

  5. Illinois – Tax burden: 11%

  6. California – Tax burden: 11%

  7. Maryland – Tax burden: 10.9%

  8. Minnesota – Tax burden: 10.8%

  9. Rhode Island – Tax burden: 10.8%

  10. Oregon – Tax burden: 10.3%

President Trump’s plan does what Democrats have made the goal of their platform. Make the rich pay more. But wait!

Lucas reports, “House Republicans were already reportedly considering eliminating the deduction on state and local taxes, which could disproportionately affect wealthy people in high-tax blue states such as New York and California.” The question is: Why?

The President’s tax plan would put pressure on the ten states listed above to lower their state income tax rates. Isn’t this ultimately good for the successful working class people of New York and California? The 99%ers!

This provision, among the other key policy shifts in the President’s tax plan are bold and make good on his promise to cut taxes, just not on the rich, many of whom have said they are happy to pay more in taxes.

Seems like a win-win to me. How about you.

RELATED ARTICLES:

Trump goes big on tax reform

Trump tax plan prompts GOP fears about deficit

Trump Tax Plan Cheat Sheet | Fox Business

This Senate Bill Will Make Federal Regulations Smarter and More Effective

Americans complain about over regulation. As rule after rule has piled up over the decades, they have good reason to complain.

But here’s an interesting observation: Regulations written by the Obama administration operated under something like a power law. The biggest regulatory costs came from a few regulations, as this American Action Forum chart shows.

American Action Forum chart: Regulatory costs for Top 3 rules versus all others, by year, 2009-2016.
Source: American Action Forum.

Another way of looking at this is a chart from an important report, Taming the Administration State, by the U.S. Chamber’s Environment, Technology & Regulatory Affairs Division.

4x

“The regulatory world is top-heavy, where a majority of costs and benefits are concentrated in three or four measures,” explained AAF’s Sam Bakins.

Regulations with massive burdens include the FCC’s Open Internet Order that converted the internet into a publicly utility, the (stayed) Waters of the United States rule that would give EPA authority over how land is used over large portions of the country, and the (also stayed) Clean Power Plan that would wipe out affordable coal-fueled power plants.

Businesses—especially small businesses— have had to cope with these costly rules and know full well they hold back investment, job creation, and economic growth.

If we focus on the costliest rules, regulators can limit their detrimental effects, make them more effective at achieving their intended goals, or even reevaluate their intended purpose.

To the rescue is the Regulatory Accountability Act (RAA). Sens.  Rob Portman (R-Ohio) and Heidi Heitkamp (D-N.D.) introduced the bipartisan bill in the Senate that would make the first major changes to the federal regulatory process in seven decades.

The RAA is based on three principles for regulatory reform William Kovacs, U.S. Chamber Senior Vice President, Environment, Technology & Regulatory Affairs, laid out earlier this year:

·  Accountability. Federal agencies need to show that the costliest rules are truly needed and are written to use the least costly option available to achieve their objective.

·  Transparency. Agencies must be open about why and how they make key decisions to regulate, and avoid making those decisions in secret under pressure from special interest groups, entirely outside of the normal rulemaking process.

·  Participation. Agencies should be required to inform the public of pending regulatory decisions on high-impact rules early in the process, share their data and economic models, and allow those who will be affected adequate time for public input.

The RAA would focus federal agency efforts on proposed regulations that would have the biggest effects on the economy. The federal government would still have the ability to write necessary regulations. The RAA would only require additional effort on the most-expensive ones in order for them to achieve their intended goals at the lowest cost to our economy.

“Our bipartisan bill would make federal regulations smarter and more effective for everyone impacted by them, support job growth, create certainty, and provide an important check and balance on the president no matter who is in charge,” said Sen. Heitkamp. “Can you imagine if we still used telecommunications systems from World War II? They might get the job done, but they would be slow, potentially faulty, and incredibly inefficient. The same goes for the current 70-year old law which still governs the way federal agencies propose and establish regulations.”

“This legislation would bring our outdated federal regulatory process into the 21st Century by requiring agencies to use the best scientific and economic data available, strengthening checks and balances, and giving the public a voice in the process,” Sen. Portman added.

Business groups support the RAA. Neil Bradley, U.S. Chamber Senior Vice President and Chief Policy Officer, said in a statement:

The rules governing the federal regulatory system were written in the Truman administration, with few updates since then. Now, under the Trump administration, it’s past time to modernize the process. The Regulatory Accountability Act would increase scrutiny of the most expensive rules that cut across industries and sectors, requiring greater transparency and agency accountability. We encourage all Senators to support this bipartisan reform legislation that can encourage business expansion, spur job creation, and ultimately help grow the American economy.

After the House passed the RAA earlier this year, business groups urged the Senate to do the same. “The RAA stands for good governance and getting rules right by bringing transparency, accountability, and integrity to the rulemaking process at federal agencies,” the letter stated. “With the passage of RAA, Congress would be restoring the checks granted to it by the Constitution over a federal regulatory bureaucracy that is opaque, unaccountable, and at times overreaching in its exercise of authority.”

President Trump and the Congress have done quite a bit in the first 100 days of the new administration to lower regulatory burdens on businesses. By passing the RAA into law and improving how federal regulations are made, it would be a victory for a more competitive economy.

Watch Sens. Portman’s and Heidkamp’s press conference where they introduced the RAA.

MORE ARTICLES ON: REGULATORY REFORM

EDITORS NOTE: The featured image is by photographer Andrew Harrer/Bloomberg.

Muslim legislator thinks Islamic terrorists should get their life insurance policies

By voting against a bill that would block life insurance payments to terrorists killed while killing Americans, Minnesota legislator Ilhan Omar shows her allegiance to her people.

From Leo Hohmann at WND:

Omar as the inspiration for a Somali Muslim Barbie doll.

She burst on the scene last August when she upset a 44-year incumbent Democrat in the Minnesota state primary elections to become the nation’s first female Muslim state legislator.

Ilhan Omar, the 34-year-old community organizer who came to America as a refugee from Somalia, was touted by Democrats as a model success story.

“From a refugee camp to the State Capitol with intelligence and insight,” beamed former Minneapolis Mayor R.T. Rybak, who endorsed Omar. “This is a wonderful story to tell as Americans, and a great source of pride for the state of Minnesota’s open arms.”

But on Thursday Omar made her mark in another way.

She was one of only two members of the Minnesota State House to vote against a bill that would allow life insurance companies to deny payouts to the beneficiaries of terrorists who die in violent attacks on Americans.

The House voted 127-2 to pass the bill, which now moves on to a vote in the State Senate.

Omar, who represents the heavily immigrant Cedar Riverside area of Minneapolis, was joined by fellow Democratic Rep. John Lesch of St. Paul in voting against the bill.

Omar’s vote sticks out because at least 42 Somali refugees have been confirmed by the FBI to have left the U.S. to join overseas terrorist organizations, including al-Shabab, the al-Qaida affiliate in Somalia, and ISIS in Syria and Iraq.

[….]

The Minnesota insurance bill was introduced by Rep. Joe Hoppe, R-Chaska, in response to Syed Farook’s jihadist rampage in San Bernardino, California, in December 2015 in which he shot and killed 14 people and injured 22 at an office Christmas party. Farook made sure his life insurance policies worth $275,000 were valid before conducting the deadly shooting with help from his wife, Tashfeen Malik.

After Farook died in a shootout with police, his mother fought to remain the beneficiary of the life insurance policies. The insurance company balked and the case has gone to court.

There is much, much more including an interview with our friend Debra Anderson, continue here.

See our previous posts on Omar by clicking here.

Why can’t someone in Congress introduce (and get passed!) a federal bill to bar life insurance payouts in cases like the San Bernardino slaughter.  There will surely be more as the US Muslim population increases!

EndNote: There will be many more Muslim legislators like Omar as well if this group has it’s way:  See Jetpac Inc.

RELATED ARTICLES:

Trump Admin comes in at just short of 900 refugees in past week; Syrian numbers way down

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The Cost of the Tax Code, Understandably

Complying with the tax code costs the United States a cool trillion dollars per year. That’s the entire GDP of Mexico, wasted because of the sheer complexity of our tax code, which runs to 74,000 pages or so when taken with the IRS policies and parts of the CFR (Code of Federal Regulations) that bear directly on it.

And let’s imagine that we outsourced all the work done by Americans to comply, so that we could spend our time doing more good for ourselves and each other: it would require the whole population of Paraguay to spend every working hour calculating and filing our taxes for us… with no time for anything else!

As for those penalties that the IRS collects from us, largely for making honest mistakes and not rectifying them in time – they total up to the GDP of Estonia.

Think about that – about the shear human cost and waste – all the good not done for others, all the time not spent with families, all the industrial production foregone – because our politicians can’t wrest themselves away from the special interests and campaign donors, or put the well-being of Americans before their re-election or their preferred political ideology.

Disgusted by this state of affairs, a few folks from an outfit called the Tax Revolution Institute are about to draw a little attention to the problem.

They won’t be marching in the street or writing letters to politicians to explain the need to solve this problem, knowing full well that they are utterly incapable of working out how.

Rather, their protest will be altogether more sedentary and civilized.

They are just going to read it.

… But they are going to do so outside the IRS building in DC from dawn to dusk on Tax Day, April 18th, and they’re going to livestream the whole event on their website at TaxRevolution.us.

Now that I’d like to see… but probably not for the full 14 hours…

They will have the entire tax code with them… along with, I hope, plenty of water.

They’re really going to do it. How many of the 74,000 pages will they get through, though…?

Robin Koerner

Robin Koerner

Robin Koerner is British-born and recently became a citizen of the USA. A decade ago, he founded WatchingAmerica.com, an organization of over 200 volunteers that translates and posts views about the USA from all over the world, works as a trainer and a consultant, and recently wrote the book If You Can Keep It.

Leading Scientists Determine Sun Plays Major Role in Climate

By  on 31. March 2017:

Climate scientists at Switzerland’s renowned ETH Zurich and the University of Bern have long warned of the risks of man-made global warming.

But in a brand new study their results now appear to have compelled them to postpone the expected global warming – by a few decades!

They now claim that a weaker sun (now expected over the coming decades) could reduce temperatures by half a degree Celsius.

Moreover the scientists clearly concede that the earth’s climate system is nowhere near as well understood as some scientists would like to have us believe and that the sun indeed plays a major role after all – enough so to override and postpone the effects of the often hyped greenhouse gases.

This will be hugely disappointing news for the catastrophe-hopers and cheerleaders, who hold front row tickets to the announced climate catastrophe, which according to some should be happening already.

The Swiss scientists say that sun’s impact on climate change has now been quantified “for first time” (see postscript below).

The Swiss scientists say that their model calculations show a plausible way that fluctuations in solar activity could have a tangible impact on the climate. The Swiss National Science Foundation-funded studies now expect human-induced global warming to tail off slightly over the next few decades. A weaker sun could reduce temperatures by half a degree.

The sun a factor after all

There is human-induced climate change, and there are natural climate fluctuations, the scientists acknowledge, and say one important factor in the unchanging rise and fall of the Earth’s temperature and its different cycles is the sun. As its activity varies, so does the intensity of the sunlight that reaches the earth’s surface. Previously IPCC reports assumed that recent solar activity was insignificant for climate change, and that the same would apply to activity in the near future.

“Significant effect”

However, researchers from the Physical Meteorological Observatory Davos (PMOD), the Swiss Federal Institute of Aquatic Science and Technology (EAWAG), ETH Zurich and the University of Bern are now qualifying this assumption. Their elaborate model calculations now provide a robust estimate of the contribution that the sun is expected to make to temperature change in the next 100 years and a significant effect is apparent.

They expect the Earth’s temperature to fall by half a degree when solar activity reaches its next minimum.

Project head Werner Schmutz, who is also Director of PMOD, says this reduction in temperature is significant and believes it could win valuable time if solar activity declines and slows the pace of global warming a little.

Strong fluctuations could explain past climate

At the end of March, the researchers working on the project will meet in Davos for a conference to discuss the final results. The project brought together various research institutions’ capabilities in terms of climate effect modelling. PMOD calculated what is known as “radiative forcing” taking account of particle as well as electromagnetic radiation, ETH Zurich worked out its further effects in the Earth’s atmosphere and the University of Bern investigated the interactions between the atmosphere and oceans.

Read more…

RELATED ARTICLE: The Flimsy Statistical Models Obama Administration Used to Justify Environmental Agenda

AHCA was NOT Obamacare Repeal or Replacement by Congressman Louie Gohmert (R-TX)

The following was contained in an email from Congressman Louie Gohmert (R-TX District 1)to his constituents:

Republicans have been promising to repeal Obamacare for seven years now. Some of us have proposed bills that had good provisions that would repeal Obamacare. In fact, we voted on a bill that would have been more of a repeal than this one through the House and Senate last year and put it on then-President Obama’s desk for signature. He vetoed the bill. But let’s be clear: the bill last week was NOT a repeal. It was NOT a replacement. It was an Obamacare tweak giving additional power to the federal government in hopes that our Republican Health and Human Services Secretary could make good changes.

Most east Texans are not in favor of giving the federal government MORE power to solve the problem of the federal government having too much power over our health care. If a true history of the rise and demise of the greatest, freest country in history is written, a chapter will detail how decade after decade, good ol’ go along folks kept providing more and more authority to the federal government rather than reining it in. But we still have a window to stem the tide and get back on track.

In closed meetings we were assured, if we will just give my friend Health and Human Services Secretary Tom Price this extra power, he can weaken Obamacare substantially, though he could not repeal it administratively. However, no one could give an adequate answer regarding all that additional power in the hands of the next liberal Democrat who will one day take the reins at that behemoth department. The answer is obvious: the next liberal Secretary of HHS would bring back Obamacare with gusto, never to be repealed until it does its job—to hand over full control of your health care decisions to the government, paid for by crushing tax burdens.

There were a myriad of reasons to vote against Speaker Ryan’s rejected bill. It would hit people between the ages of 50-64 with additional costs for premiums and deductibles—in addition to what Obamacare does now. In addition to the original $716 Billion that Obamacare cut from Medicare, this bill was going to hit our seniors yet again.

Most troublesome to me was that in our own Republican meetings we heard from experts who believed that this bill would not bring premiums, deductibles or co-pays down at all and they would most likely be increasing for the next two years, though there was hope costs MIGHT come down 10% three years from now.

From what I hear from my constituents in east Texas, they are really overwhelmed with health insurance and healthcare costs. They need help, and they cannot afford to wait three years. They need help now.

Some of us were exceeding concerned about a new “tax credit” entitlement scheme that did not require proof of citizenship, not even legality, before the U.S. Treasury sends a check.  This entitlement was another transfer of wealth from those who work hard and pay taxes to those not legally present in this country.

The bill also assured that nearly 1% of your hard-earned money would be paid for a Medicare tax to be sucked out of your paycheck that already has a tax of 2.9%, half paid by you and half by your employer.

To help east Texans with the higher premiums this bill would bring, my Freedom Caucus friends and I twice agreed to vote FOR the bad bill, if the Speaker would take out a few of the requirements that were going to increase premiums. We were convinced by knowledgeable analysts that removing these provisions would drive premiums down.

Please understand, we agreed to let the “pre-existing condition” provision in Obamacare remain, though some falsely reported that we refused. We agreed to let children stay on their parents’ plans up to age 26, though I would agree to a higher age or no age limit if you are still living with your parents.

There were numerous other provisions that caused some heartburn, such as giving authority to HHA to create, for the first time ever, FEDERAL high risk insurance pools at the cost of billions of new dollars. We were told not to be alarmed, and that the hope was to eventually devolve that responsibility back to the states. As President Reagan warned, however, the closest thing to eternal life in this world is a new federal program.

Even though I was called an uncompromising “purist,” I was willing to compromise significantly if we could just get the premium costs down for my constituents.

People should also be aware that if the vote had been taken, there would have been as many moderate Republicans voting “No,” which some believe is why the vote was pulled in the first place. Republican leaders would not have been able to lay blame unfairly on conservatives when it was clear within our conference that at least as many moderates were concerned about the bill as conservatives.

The House Freedom Caucus reached an agreement to vote for the bill twice with President Trump, only to have Reince Priebus or Speaker Ryan notify us that such a compromise could not be put in the bill because, they told us, it would risk violating the budget reconciliation rules in the Senate and kill the bill.

Repeatedly we were told by our Republican leadership that the Senate Parliamentarian could not tell us in advance how she would “rule” on whether we could include our requested language in the bill without killing the bill. Late last week, we learned that the reason they could not find out was because they simply had not asked her, as Senator Mike Lee reported.

Yet the whole truth of the matter is that the Parliamentarian never “rules” on anything. She or he may only whisper a recommendation into the ear of the Senate President, either Vice-President Mike Pence or a designee of the Republican Majority Leader Mitch McConnell who sits in the chair with the gavel on the Senate floor. It is the President of the Senate who “rules” on admissibility, not the Parliamentarian. And if 51 Republican Senators support the ruling of the presiding officer, his or her ruling stands untouchable.

This letter offers just a glimpse of the many reasons that the last two weeks played out as they did. It is very disappointing that despite the several compromises that were offered by conservative members, we still were not near fulfillment of our promise to truly and completely repeal Obamacare. That is a promise I did not make lightly, and I will continue the fight to honor my pledge to my constituents and the American people by working aggressively to make sure we get a good bill, get it passed, and signed into law.

Faithfully Yours,

Congressman Louie Gohmert
First District of Texas

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Promising Advice on Car Injury Claims

When a person makes a car injury claim, two things come up to mind: settle or go to court?

Many people do not know that settling can be the more viable option. Settling is even a good choice even if the possibility of going to court has yet to surface.

Settling can be a good option, but what if the insurance company ignores you? Or the terms presented to you might be considered too small? How about when you strongly feel that you are a victim of injustice? Going to court might be the wisest option you can have.

In this article, we weigh in the advantages of both Settling and Going to court.

Settlement

As mentioned above, settlement can be the most viable option there is. If you find that the company that you are suing presents you with fair and appropriate solutions, settling may not be such a bad idea.

Here are some advantages of settling:

You can get compensation much faster

You’ll be able to get a quicker settlement because the terms between you and the company you are suing, are usually settled off the court. Therefore you can avoid those long hearing schedules which could delay you much more in the long run.

Avoiding Expensive Attorney’s fees

Depending on your agreement with your attorney, you might have to incur expensive costs. These charges are sometimes too expensive to the point that the whole settlement and compensation you make out of this lawsuit can be just for the payment fees.

Make it a point to your lawyer to talk about his fees and always consider some lawyers who do pro bono services that may greatly be beneficial for you.

Cost Efficient

Hearing schedules are what you need to endure should you decide to go to court. When you do go to court, hearings are not given automatically, instead they are scheduled. The wait for your time in court may reach a few weeks, months and even worse, some cases even take years.

Avoiding an Unpredictable Decision From the Jury

Panel members significantly affect the outcome of your trial. If you don’t understand how a jury makes its decisions, then settle to avoid any unpredictability when it comes to your trial.

Even if the trial or hearing has started, you can reach the company you are suing to agree on settling. It is always safe to say to try and talk at any point in the case to come to an agreement.

The central question that we should ask ourselves is, how much risk is there in losing the trial? If you are confident and feel good about the outcome of the case, ask for guidance from a good lawyer and proceed to court.

Going to Court

Proceeding to a hearing should be the last thing you consider. If all conditions do point towards it, then you must be prepared with the work that comes with it.

Here are some advantages of going to court:

Receiving full compensation

If a settlement is out of the question or if you feel that the compensation is unfair, then going to court can help you in claiming what is rightly yours. A court decision can legally enforce your rights for you, making the company liable for paying for the damages wrongfully done to you.

Gratification

Sometimes, companies can also refuse a re-negotiation. Compelling the defendant through the court’s powers can reverse that. If you do win in a court, gratification can sometimes be even a much greater thing than the compensation itself.

People at times feel that they have been wronged too much and be victims of injustice that they feel the whole process of going to court is the only way to alleviate their feelings. Compensation, as they say, can be the “icing on top.”

Takeaway

Settlement and going to court is a coin toss. Either you win the case, or you lose it. To avoid this situation, you have to carefully weigh your arguments and claims to make sure that no facts can disprove it. Knowing the advantages and the risks that come with it is hugely beneficial because it can make or break you when the time finally comes.

In California, Florida and Illinois 50% of all babies are born on Medicaid

Terence P. Jeffrey in his March 24th, 2017 column In 24 States, 50% or More of Babies Born on Medicaid; New Mexico Leads Nation With 72% writes:

In 24 of the nation’s 50 states at least half of the babies born during the latest year on record had their births paid for by Medicaid, according to the Kaiser Family Foundation.

New Mexico led all states with 72 percent of the babies born there in 2015 having their births covered by Medicaid.

[ … ]

In California, Florida and Illinois, for example, 50 percent of all babies were born on Medicaid in the latest year on record.

Read more…

According to the Kaiser Family Foundation (KFF) report Implementing Coverage and Payment Initiatives: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2016 and 2017:

Medicaid has become one of the nation’s most important health care programs, now providing health insurance coverage to more than one in five Americans, and accounting for over one-sixth of all U.S. health care expenditures. [Emphasis added]

The KFF report concludes that, “Medicaid programs now play a significant leadership role in the health care systems in every state.”

Kaiser Family Foundation published a map showing the percentage of babies by state who are born on Medicaid:

babies born medicaid by state

You may view a chart with the details of each states births paid for by Medicaid by clicking here.

american_health_care_actMedicaid reform is much needed and will be part of the next version of the House of Representatives American Health Care Act (AHCA). The AHCA website lists 8 Need-To-Know Facts About the AHCA, one of which addresses Medicaid:

6. Modernizes and strengthens Medicaid by transitioning to a “per capita allotment” so states can better serve the patients most in need.

KFF gave this analysis of “per capita allotment” contained in a previous House Republican Healthcare Plan:

The House Republican Plan (“A Better Way”) released on June 22, 2016, includes a proposal to convert federal Medicaid financing from an open-ended entitlement to a per capita allotment or a block grant (based on a state choice).

This proposal is part of a larger package designed to replace the Affordable Care Act (ACA) and reduce federal spending for health care.  Often tied to deficit reduction, proposals to convert Medicaid’s financing structure to a per capita cap or block grant have been proposed before.

Such changes represent a fundamental change in the financing structure of the program with major implications for beneficiaries, providers, states and localities.

Read more…

There was a time in America when babies were paid for by their families. Perhaps it is time for government to get out of the baby funding business and let families take control?

Trump’s Budget Defunds Leftist Bastions NEA, NEH, NPR

These are all propaganda arms for the far-left. They don’t deserve a penny of taxpayer money. Why should American citizens have to pay for globalist, anti-American, socialist propaganda? This budget is urgently needed.

“Trump’s Budget Would Finally Fire Big Bird, Defund NPR,” by Thomas Phippen, Daily Caller, March 16, 2017:

The new White House budget proposal, a wish list of President Donald Trump’s policies, would cut funding to several arts and grants programs that Republicans have decried for decades.

Trump’s 2018 budget, called “America First: A Budget Blueprint to Make America Great Again,” requests increases in defense spending and reduction of domestic programs.

Specifically, the budget “proposes to eliminate funding for other independent agencies,” including the National Endowment for the Arts (NEA), National Endowment for the Humanities (NEH), and the Corporation for Public Broadcasting, which sends some amount of funding to PBS and National Public Radio.

Though Big Bird only re-airs on PBS (“Sesame Street” is now on HBO), eliminating funding to things like the NEA Corporation for Public Broadcasting is not a new idea. Former Massachusetts Gov. Mitt Romney suggested cutting the CPB during the 2012 presidential campaign, and was quickly criticized. Former President Barack Obama even accused Romney of trying to kill Big Bird in a campaign ad.

Congress has the final say over all discretionary budgets, so Trump faces a tough fight to get rid of agencies like the NEA and the NEH, even though many Republicans don’t believe the federal government needs to fund arts projects, especially those seen as subversive or frivolous.

Former President Ronald Reagan tried to eliminate the NEA in his first year in office, but ultimately failed when a council of his his friends convinced him government funding of the arts was important and beneficial….

RELATED ARTICLE: Trump’s ‘Skinny’ Budget Paves Way for a Leaner Government

EDITORS NOTE: This column originally appeared in The Geller Report.

Citizens can actually read the ‘American Health Care Act’ bill Online! Refreshing

Remember this:

Speaker Paul Ryan in an email to all Americans wrote:

I want you to be the first to know: we just introduced our bill to repeal and replace Obamacare. It is called the American Health Care Act, and it is a plan to drive down costs, encourage competition, and give every American access to quality, affordable health insurance. It protects young adults, patients with pre-existing conditions, and provides a stable transition so that no one has the rug pulled out from under them.

Unlike the Democrats, we are not going to pass legislation to find out what is in it. The American Health Care Act will proceed through a transparent process of regular order in full view of the public.

Visit www.ReadTheBill.gop to download and read the bill.

How refreshing.

Michael A. Needham, Chief Executive Officer Heritage Action for America, in an email writes:

For seven years, Republican lawmakers have campaigned on the promise of full repeal. The American people elected a Republican House, Senate, and White House to ensure this promise was kept. For most people in the individual market, there would be no significant difference between the Affordable Care Act (Obamacare) and the new American Health Care Act proposed by Republicans.

This is bad politics and, more importantly, bad policy.

If Republicans move forward with this bill, they will be accepting the flawed premises of Obamacare. Instead, they should fully repeal the failed law and begin a genuine effort to follow through on their seven year promises to create a free market health care system.

Let the negotiations on the proposed American Health Care Act begin.

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