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Government Spending

All articles with the "Government Spending" tag.

Published: Fri, 23 Feb 2018 00:00:00 -0500

Last Build Date: Fri, 23 Feb 2018 12:19:08 -0500


The Federal Government's Finances Are a Total Wreck

Thu, 22 Feb 2018 15:00:00 -0500

The federal government's latest financial statements came out last week and they paint a dire picture of our nation's fiscal health. It's not just the annual deficit, which is too large and growing. The new report shows trillions in long-term liabilities that could burden the country for years to come. And it suggests that financial management in large government agencies, like the Department of Defense, is appallingly poor. The federal government reports assets of $3.5 trillion and liabilities of $23.9 trillion yielding a negative net position of $20.4 trillion. Although this last amount is similar in size to the national debt, net worth is conceptually different. Federal audited financial statements use accrual accounting, which means that obligations are recognized as they are incurred. For example, the $23.9 trillion in liabilities includes $7.7 trillion in veterans benefits and retirement benefits earned by federal civilian employees. Another $200 trillion in liabilities arise from various guarantees the government has made, including its commitment to backstop private pension plans—many of which are becoming insolvent. But the biggest federal liabilities of all do not appear on the government's balance sheet. According to a supplemental schedule, the federal government has $49 trillion in Social Security and Medicare liabilities. Although these retirement obligations are just as politically sacrosanct as federal employee pensions and federal guarantees for private pension systems, they receive very different accounting treatment. If these obligations were placed on balance sheet where they belong, the government's negative net position (i.e., its unfunded debt) would balloon to $69 trillion—well over triple the nation's $19 trillion gross domestic product. As the accompanying chart shows, the federal government's net position has been deteriorating throughout the 21st century. The only apparent bright spot occurred in 2010 when actuaries bumped down Medicare liabilities amidst optimism about Obamacare's prospects for reining in medical costs—a hope that has not fully panned out. The big spike between 2003 and 2004 was largely the result of George W. Bush's unfunded Medicare prescription drug benefit. Although the government's fiscal year 2017 deficit was an already alarming $666 billion, its balance sheet net position worsened by over $1.1 trillion. Social insurance obligations increased a further $2.3 trillion. So, while the government added less than $700 billion in red ink during fiscal year 2017 on a cash basis, the total bleeding in accrual terms was closer to $3.4 trillion. Just as accountants and regulators insist that corporations use accrual accounting to properly inform investors about their financial condition, we should have similar expectations for sovereigns such as the federal government. Even worse, the chart doesn't include all federal liabilities. Government financial statements exclude $5 trillion in outstanding mortgage backed securities issued by Fannie Mae and Freddie Mac. These Government Sponsored Enterprises (GSEs) were placed under federal conservatorship during the financial crisis. Although the federal government owns 79.9% of each of these entities and would undoubtedly cover any shortfalls they experience with taxpayer money (as they did in 2008), their liabilities are not consolidated onto the federal government's balance sheet. Finally, it is worth noting that the 2017 federal financial statements—incomplete as they are—received a negative audit opinion, as they do every year. Specifically, the Government Accountability Office (GAO) acting in its role as the federal government's CPA concluded: The federal government is not able to demonstrate the reliability of significant portions of the accompanying accrual-based consolidated financial statements as of and for the fiscal years ended September 30, 2017, and 2016, principally resulting from limitations related to certain material weaknesses in internal control over financial reporting and other limitations affecting the re[...]

Trump’s New Budget Plan Is a Fiscal Disaster

Mon, 12 Feb 2018 16:20:00 -0500

The federal government's fiscal outlook has been in decline since the Bush administration, and President Trump's new budget plan is another step in the wrong direction. Trump's 2019 budget ramps up spending on the military and border security. Although the budget offers some ideas for domestic spending cuts, most of these won't see the light of day. In other words, it continues the long-term unwinding of the nation's fiscal discipline. The newly released 2019 plan calls for $4.407 trillion* of expenditures while forecasting $3.422 trillion* in revenue, resulting in an anticipated deficit of just under $1 trillion. The budget forecasts a similar amount of red ink in 2020, followed by declining deficits—but never a budgetary balance—through the rest of the ten-year projection window. Normally, it would be possible to benchmark White House forecasts against Congressional Budget Office (CBO) projections. Not this year. In late January, CBO typically issues its own ten-year budget forecast. But that document has yet to appear, because CBO says it needs more time to calculate the impact of December's tax measure. CBO won't say when it expects the report to appear. The delay is just the latest milestone in the collapse of federal budgetary procedure—one in which a deliberative annual review process has given way to last-minute continuing resolutions and omnibus spending bills. Under Trump's new budget, the White House projects a $363 billion deficit in 2028. However, It only reaches that level by assuming over $1 trillion in unlikely cuts and reforms. Among the major deficit shrinking proposals in the budget are the repeal and replace of Obamacare, elimination of Overseas Contingency Operations (i.e., ending the endless wars in Afghanistan and elsewhere) and the "two-penny plan" which involves annual unspecified 2 percent reductions in non-defense discretionary spending. These concepts are likely to be dead on arrival in a divided Congress. The budget offers nothing on entitlement reform and combines increased military spending with new outlays for the President's wall, now that he has finally realized that Mexico won't pay for it. Trump's proposal might thus be called a "Guns and Walls" budget. Back in the sixties, the Johnson administration gave us the concept of "Guns and Butter"—the idea that we could lavish money on new social programs while also funding the Vietnam War. That policy gave rise to runaway inflation and weak economic performance in the seventies. After decades of deficits, Congressional Republicans and the Clinton Administration finally balanced the federal budget in the late 1990s. But fiscal restraint quickly unraveled under George W. Bush's administration, which launched wars in Afghanistan and Iraq as well as a Medicare prescription drug benefit without raising offsetting revenue. Trump's new budget includes $686 billion for the Department of Defense—13 percent more than the 2017 level—and matching the amount in the bipartisan spending bill approved Friday morning. But DoD spending is only part of the true cost of America's national security establishment. Spending on Intelligence, the Department of Energy's nuclear stockpile activities and the Veteran's Administration also need to be included. Those additional functions together raise the total defense tab to around $1 trillion annually. To get the higher defense spending they so desperately wanted, Republicans had to agree to Democratic demands for more domestic spending. Earlier in the decade we used to talk about a "grand bargain" between Republicans and Democrats to resolve the nation's fiscal problems through spending cuts and revenue increases. Instead, the bipartisan grand bargain we got last week busts through all previously agreed spending caps, and does not offset the added spending with new revenue. It sends us further down the road to fiscal Armageddon. The Trump administration now suggests that Congress does not have to enact all the domestic spending it just agreed to. To enable this yet-to-be-achieve[...]

Did We Get the Tea Party Wrong?: Podcast

Mon, 12 Feb 2018 14:40:00 -0500

On Friday, President Donald Trump signed into law a two-year budget deal presented to him by the Republican-led Congress. The bill increases federal spending by around $300 billion, removes the last restraints imposed by the Budget Control Act of 2011, and pushes annual deficits back toward the awful $1 trillion level. On Saturday in this space, Matt Kibbe, formerly a key organizer in the Tea Party movement, wrote a piece headlined (in part) "The Tea Party Is Officially Dead." Today's Reason Podcast, which features Katherine Mangu-Ward, Nick Gillespie, Peter Suderman, and yours truly talking news of the week, begins with an autopsy of sorts. Did we delude ourselves about the strength of the fiscal conservatism in the Tea Party? When and where did the message of limiting government overreach get diluted by tertiary concerns and culture-war bombthrowing? Also discussed: the Nork Queen media outrages at the Winter Olympics, why certain libertarians are confused by nationalism and sports, and whether we should even be talking about the initial White House mismanagement of wife-beating accusations against the now-resigned Rob Porter. Audio production by Ian Keyser. Relevant links from the show: "How GOP Fiscal Sanity Died, in 7 Easy Steps," by Matt Welch "In Memoriam: The GOP Pretending to Care About Fiscal Restraint," by Austin Bragg and Meredith Bragg "Please Enjoy These Videos of Paul Ryan Being Concerned About Debt and Overspending," by Eric Boehm "Rand Paul Single-Handedly Tries to Stop Massive Spending Plan (Update: Congress Passes Budget Deal)," by Eric Boehm "The Senate Budget Deal Proves Republicans Love Government Spending," by Veronique de Rugy "Senate Reaches Bipartisan Deal to Keep the Government Open By Spending More Money On Everything," by Peter Suderman "Give Us Liberty? Q&A with Dick Armey & Matt Kibbe of FreedomWorks," by Nick Gillespie, Jim Epstein, and Meredith Bragg Subscribe, rate, and review the Reason Podcast at iTunes. Listen at SoundCloud below: src="" width="100%" height="300" frameborder="0"> Don't miss a single Reason Podcast! (Archive here.) Subscribe at iTunes. Follow us at SoundCloud. Subscribe at YouTube. Like us on Facebook. Follow us on Twitter.[...]

The Tea Party Is Officially Dead. It Was Killed by Partisan Politics.

Sun, 11 Feb 2018 08:00:00 -0500

It has finally happened: The Tea Party is dead. The grassroots movement that fought so hard for fiscal sanity in government over the past decade is no more. It was killed off by the very same Washington establishment it sought to overthrow. Its death leaves proponents of limited government with some big questions: What went wrong? And what do we do now? For me, it's personal. For years, the Tea Party was my life, and I have the the battle scars—and tattoos—to prove it. When I was the President of FreedomWorks, I worked side by side with tens of thousands of citizen activists as a Tea Party organizer, organizing protests and knocking on doors, hoping to topple the Goliath of government. But now the party's over. I know, you've heard it before. Virtually every Beltway pundit in DC has pronounced the Tea Party dead at one time or another. Republican Senators well past their sell-by dates and Democratic apparatchiks alike have gleefully built a cottage industry on the prediction. But this time is different. Republicans, now controlling both the legislative and executive branches, jammed through a "CRomnibus" spending bill that strips any last vestiges of spending restraint from the budget process. Gone are the Tea Party's biggest and most hard-fought policy victory—mandatory caps in domestic and defense spending. The budget deal replaces them with $300 billion in new spending over the next two years, and, in all likelihood, sets a precedent for greater spending in the decade to come. It's 2009 all over again, with trillion dollar deficits, and red ink as far as the eye—or at least CBO projections—can see. As budget deals go, it's a total fiasco. The supposed fiscal hawks in the House Freedom Caucus drew a line in the sand on House budget plan that was only slightly less bad. They demanded "full funding for the military and community health centers." In the Senate, Rand Paul and Mike Lee fought the good fight, but they couldn't even convince Ted Cruz to stand firm. Cruz, the one-time Tea Party darling, "reluctantly" supported the spending measure, making sure to itemize all of the spending increases he helped procure with his fellow Texas senator, John Cornyn, while simultaneously decrying "unfettered spending." Cruz's statement is world class political jujitsu. Meanwhile, there are plenty of Republicans and Democrats in our nation's capitol celebrating the Tea Party's demise. Majority Leader Mitch McConnell, the primary architect of this steaming pile of budget prolificacy, has been actively plotting the Tea Party's demise for years. So what went wrong? Ultimately, I think partisan politics broke the Tea Party. To understand what I mean, we need to clear away some popular tropes employed by critics to discredit what I still believe to be one of the most important social movements in my lifetime. The Tea Party was never the product of some top-down design, and it wasn't owned or controlled by anyone. It was organic and leaderless. That's why it was so powerful, fueled by new social technologies that allowed citizens to self organize outside of traditional political parties. Like-minded people, once anonymous and silent, found each other and found their collective voice. The Tea Party also wasn't partisan. It was held together by a common set of values that united an otherwise disparate group. What did the Tea Party stand for? I would ask everyone I met as I traveled the country. The answer was always some iteration of the same thing: "Individual freedom, fiscal responsibility, constitutionally-limited government, and free markets." This consistency of purpose made the Tea Party community a potent counter balance to the typical special interest inertia that drives the growth of government. The grassroots backlash against the Obama Administration's "shovel ready" stimulus spending shifted broad public opinion against the package. The same thing happened with Obamacare, which became so unpopular that even deep blue Massachusetts rejected [...]

In Memoriam: The GOP Pretending to Care About Fiscal Restraint

Fri, 09 Feb 2018 17:10:00 -0500

Congress is "spending us into oblivion," Sen. Rand Paul (R-Ky.) said in a blistering speech on the Senate floor yesterday.

This morning, President Donald Trump signed a massive new spending bill that will increase the discretionary budget by about $400 billion.

In memoriam: The GOP once actually pretended to care about fiscal restraint.

Produced by Austin Bragg and Meredith Bragg.

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Our Infrastructure Is Not 'Crumbling.' Repeat: Our Infrastructure Is Not 'Crumbling'

Fri, 09 Feb 2018 13:15:00 -0500

One of the great myths of American politics, no matter who is president and no matter who runs Congress, is that our infrastructure is "crumbling." Former President Barack Obama repeatedly warned us about our "crumbling infrastructure." President Donald Trump now tells us that our infrastructure is "crumbling." The next president is going to hatch a giant plan to fix our crumbling infrastructure as well, because most voters want to believe infrastructure is crumbling. The infrastructure is not crumbling. Ask someone about infrastructure and his thoughts will probably wander to the worst pothole-infested road he traverses rather than the hundreds of roads he drives on that are perfectly safe and smooth. That's human nature. So "crumbling infrastructure" peddlers play on this concern by habitually agonizing over things like the impending outbreak of tragic bridge collapses that will kill thousands. They bring up tragedies like the 2007 disaster with the Interstate 35 bridge over the Mississippi River in downtown Minneapolis even though, according to federal investigators, the collapse was due to a design flaw rather than decaying infrastructure. Many outlets and politicians simply ignore the inconvenient fact that the rare fatality involving infrastructure typically has nothing to do with "crumbling" and everything to do with natural elements or human error. In reality, the number of structurally deficient bridges, never high to begin with, has been dropping over the past 30 years despite all the hand-wringing. The overall number has fallen from over 22 percent in 1992 to under 10 percent in 2016. According to a Reuters analysis of those bridges, only 4 percent of those that carry significant traffic need repairs. Of the nation's 1,200 busiest bridges, the number of those structurally deficient falls to under 2 percent—or fewer than 20 bridges in the entire country. And none of those bridges need repair to save them from collapse. That has never stopped politicians from fearmongering, however. "Our roads and bridges are falling apart; our airports are in Third World condition," Trump claimed during his 2016 campaign. Yet as the Heritage Foundation's Michael Sargent points out, the percentage of airport runways deemed as poor has fallen from 4 percent in 2004 to 2 percent in 2016. And for the past 30 years, the number of "acceptable" or above roads has remained relatively consistent at approximately 85 percent. Perhaps because they're constantly being told that America's roads are on the verge of disintegrating into dust, some voters aren't aware that federal, state and local governments spent $416 billion on transportation and water infrastructure in 2014—around the same 2.4 percent of gross domestic product they've been spending for decades. About $165 billion of that $416 billion, incidentally, was spent on highways. (This doesn't count the bipartisan Fixing America's Surface Transportation Act of 2015, which added another $305 billion over five years.) It's also worth remembering that when liberals talk about infrastructure, they don't necessarily mean roads or bridges or airports or water-processing plants. They mean expensive social engineering projects and Keynesian job-creation schemes. In 2017, Senate Democrats unveiled their own $1 trillion infrastructure plan, claiming the additional spending would create 15 million jobs over 10 years. Despite years of hearing otherwise, there is still no evidence that infrastructure bills create self-sustaining jobs—or any jobs, for that matter. According to a 2010 Associated Press analysis, the first 10 months of Obama's economic stimulus plan showed virtually no effect on local unemployment rates, which rose and fell regardless of money spent on infrastructure projects. It barely even helped construction jobs. What it did do was fund cronyistic ventures and debt-padding waste. Around $90 billion of Obama's infrastructure-heavy "stimulus[...]

The Senate Budget Deal Proves Republicans Love Government Spending

Thu, 08 Feb 2018 14:30:00 -0500

Warning: This post contains numbers that may upset anyone who dreams of a smaller government. With the Senate budget deal announced yesterday, congressional Republicans have proved that they aren't merely big spenders: They bear primary responsibility for Washington's complete lack of fiscal responsibility. At the same time, they have reaffirmed the fact that bipartisanship means a determination to spend us into oblivion. The bipartisan budget deal that the senators proclaimed so proudly yesterday would add $300 billion over two years to discretionary spending, not counting emergency funds and other add-ons. It would yet again burst the budget caps that Republicans negotiated in 2011 during a debt ceiling deal in exchange for giving more borrowing authority to the Department of Treasury. The debt ceiling would be hiked once again, allowing the Treasury to keep borrowing without asking Congress for an increase. Legislators wouldn't even have to pretend they care about how fast our national debt is growing. Trillion-dollars deficits are coming back fast and probably are here to stay. And this time you can't blame that on a recession or a major war. It's a direct result of a Republican spending binge—an unwillingness to couple tax cuts with reductions in spending. Republicans claim to be the party of fiscal responsibility, but the GOP has repeatedly broken the budget caps imposed during the Obama administration. Yes, Democrats were often partners in these deals; they get a good portion of the blame too. But they have never pretended that they wanted these budget caps. And they could not have repeatedly broken through federal spending limits without Republicans leading the effort. The Budget Control Act of 2011 imposed separate caps on military and nonmilitary spending. Yet before the ink of President Obama's signature was dry on that deal, Republican hawks were throwing fits about imposing any fiscal restraint whatsoever on the Pentagon. The party that won't shut up about fraud and abuse in government when it's in the minority also believes that military spending is immune to waste, fraud, and abuse. Republicans refuse to accept that the Pentagon budget is burdened by a poorly designed spending strategy, which leads to malinvestment and outdated military goals. They also seem to believe that an increase in Pentagon spending always, always, always leads to more security and that the military budget should always go up, even when we are not at war. As a result, we've repeatedly witnessed Republican hawks make deals with Democrats that amount to mutual back scratching: You can spend more at home if we can spend more abroad. This week's deal resembles those earlier ones in many ways, except that it's even worse. Military spending caps were $549 billion. The Senate wants to jack that up to $629 billion, with an addition $71 billion for war supplementals and emergency funding. The total for this year would be a cozy $700 billion, rising to $716 billion in the 2019 fiscal year. In exchange, the Democrats get to hike nonmilitary spending by $131 billion over two years. The spending cap in this area stood at $516 in the 2018 fiscal year. It will now be $579 billion, with an extra $12 billion for war supplementals. That results in a sweet balance of $591 billion this year and $605 billion in the 2019 fiscal year. All this extra money will be spending on largely bipartisan priorities, such as infrastructure and the opioid crisis. The deal will probably pass in the House, despite the objections of the Freedom Caucus. Worse still, the Republican leadership is trying to sell this spending spree as a bipartisan budget victory. Majority Leader Mitch McConnell admits that it isn't perfect. But he says he was glad to finally get a longer-term budget agreement. Speaker of the House Paul Ryan, meanwhile, is trying to appease disgruntled Republicans by noting that Democrats didn't[...]

Senate Reaches Bipartisan Deal to Keep the Government Open By Spending More Money On Everything

Wed, 07 Feb 2018 15:34:00 -0500

After weeks of negotiation, Republicans and Democrats in the Senate have reached the outlines of a spending deal that would avert a government shutdown. Democratic Senate Minority Leader Chuck Schumer called the deal "the first real sprout of bipartisanship," and said he hoped it would "break the long cycle of spending crises that have snarled Congress." Majority Leader Mitch McConnell, the chamber's top Republican, called the agreement a "significant bipartisan step forward" and suggested that it could help "make 2018 a year of significant achievement for Congress." So how did the two sides finally come together? They decided to spend more—on everything. And they'll worry about paying for it later (or maybe not at all). The Senate bill would lift current federal spending limits by about $315 billion through 2019, according to The Washington Post. The bill also includes $90 billion in disaster aid funding, making for a total of roughly $400 billion in spending. The deal placates Republican defense hawks by boosting spending for the military, lifting the spending cap put in place by the 2013 sequester agreement by $80 billion this year and $85 billion next year. The deal pairs the boost in defense spending with a roughly equal increase in domestic spending. On the homefront, the plan includes $10 billion for infrastructure spending, as well as billions for federal health initiatives, including $6 billion to respond to the opioid crisis, $7 billion for community health centers, and a decade-long extension of the Children's Health Insurance Program (CHIP), up from the six-year extension Congress passed earlier this year. All this additional spending will, of course, significantly increase the budget deficit. The deal follows a House vote yesterday that passed a separate spending bill. But that bill was thought to be largely dead on arrival since the Senate would negotiate its own deal, which the House would eventually accept. For the moment, however, it is not entirely clear whether the House will accept the deal. House Minority Leader Nancy Pelosi said as the deal as announced that she and many fellow Democrats would oppose the deal unless there is a separate vote on immigration legislation. Speaker of the House Paul Ryan has declined to make any commitment to holding an immigration vote. Some House Republicans, meanwhile, have already objected to the bill on the grounds that it spends way too much money. This spending proposal is disgusting and reckless—the biggest spending increase since 2009. I urge every American to speak out against this fiscal insanity. — Justin Amash (@justinamash) February 7, 2018 Amash is likely to be relatively lonely in his objections to the bill, however. In the end, this agreement, or something similar, will probably become law with plenty of Republican support. Republican leadership in Congress spent the better part of the Obama years warning that mounting debt posed a dire threat to the nation's future. But now, with control of both chambers of Congress and the White House, it looks likely that the GOP's two most signifcant legislative achievements will be a tax reform law that raises the deficit by $1.5 trillion and a spending deal that increases the federal tab by hundreds of billions more.[...]

Woman Still Getting Civil-War Survivor Benefits Shows How Federal Policies Mortgage the Future

Sun, 04 Feb 2018 00:01:00 -0500

Twenty or 50 years from now, the uproar over the House Intelligence Committee memo will be no more than a footnote to history, and many Americans living then will have fading memories, if any, of the Trump administration. But they will be sure to feel the consequence of other policies, little noticed now, that will weigh more heavily with each passing year. You may have never heard of Irene Triplett, who illustrates something politicians often forget: Decisions made for immediate purposes can reverberate for a long, long time. During the Civil War, to bolster military recruitment, the U.S. government established pensions for veterans wounded in battle and widows of those killed. After the war, the system was repeatedly expanded to cover ever more beneficiaries, including men whose disabilities had nothing to do with their service in uniform. As economist John Cogan of Stanford University and the Hoover Institution notes in his new book, The High Cost of Good Intentions, Congress eventually granted pensions to widows of Union veterans who married after 1890. Then it included all widows whose marriages had lasted 10 years. "In 1957," he writes, "Congress dropped the 10-year requirement. Incredibly, a year later, Congress granted pensions to widows of Confederate soldiers." In 1924, Mose Triplett, who had served in both the Union and the Confederate armies, married a woman who bore him a daughter named Irene. Born five years later, she is still getting survivor benefits from the Civil War, 153 years after it ended. Cogan's book chronicles the steady growth of federal entitlements. Social Security was originally meant to ensure protection against poverty to about half of future retirees. But "every Congress, save one, and every president during the years from 1950 to 1972 took action to expand the program." The pattern is logical. New programs "confine benefits to a group of individuals who are deemed to be particularly worthy of assistance," says Cogan. But groups outside the category push to be included and ultimately prevail. The change puts another group closer to qualifying, and that group does the same thing. The process repeats until the original rationale is lost. Today, federal entitlement assistance of one type or another goes to more than half of U.S. households—and 31 percent of beneficiaries are in families whose income exceeds the national average. In 2015, households in the top fifth of earners collected $225 billion in federal benefits. Restraining the cost of entitlements such as Social Security and Medicare is especially hard now. The ongoing retirement of the baby boom generation automatically swells their rolls. With a commitment to fiscal responsibility and regard for future generations, our elected officials might devise humane ways to curb this growth. But to the extent that commitment ever existed, it is gone. It vanished on December 22, when President Donald Trump signed a tax bill that the Committee for a Responsible Federal Budget projects will generate $1.8 trillion in additional deficits over the next decade—on top of the $10.2 trillion already in the pipeline. The bipartisan watchdog group also says, "Congress is likely to consider increasing discretionary spending caps for the next two years, disaster relief to deal with last year's hurricanes, (and) extensions of temporary tax provisions that expired at the end of 2016." In that scenario, the extra 10-year deficits would be more like $2.2 trillion. Conservatives claim the gap will force Congress to slash domestic spending. Fat chance. In the late 1990s, President Bill Clinton and the Republican Congress could envision and reach a clear achievement: balancing the budget. But once that goal is hopelessly out of reach, politicians have nothing to gain from spending discipline. Once deficits are considered the immutable norm, el[...]

Who Wants a Big Gas Tax Hike?

Fri, 19 Jan 2018 17:15:00 -0500

As the Trump administration prepares its plan on how to deliver the $1 trillion infrastructure investment that it keeps promising, some voices are calling for a steep hike in the federal gas tax. On Thursday the Chamber of Commerce unveiled its set of infrastructure policy priorities. It included a whopping 140 percent increase in the federal gas tax, from 18.4 cents per gallon to 43.4 cents per gallon. The Chamber estimates that this will bring in an additional $394 billion in revenue over the next decade. "It's the simplest, fairest, and most effective way to raise the money we need for roads, bridges, and transit," the group's president, Tom Donahue, said in a speech yesterday. "Our leaders need to stop hiding behind the fallacy that this can't be done and just go do it." Long been a priority of American businesses interests, a higher gas tax has also attracted a good deal of center-left support. The New York Times editorial board has endorsed an increase. So have the ranking Democratic members of the House and Senate Committees dealing with infrastructure spending. Donald Trump himself has expressed his openness to the idea. The federal gas tax was last raised in 1993. Proponents claim that failing to increase it has left the roads crumbling and the Highway Trust Fund underfunded. They're wrong, says Baruch Feigenbaum, a transportation policy expert at the Reason Foundation (the nonprofit that publishes this website). The quality of road infrastructure "often has to do more with management and priorities rather than it does with funding," Feigenbaum says. On the state level, he notes, there is little correlation between high gas taxes and high-quality, well-maintained roads. That is most obvious in the state of California, which has both high gas taxes and terrible roads. Bureau of Transportation Statistics data from 2013 found that only about 15 percent of the state's highways were in good condition, as measured by the International Roughness Index; a full 40 percent were in poor condition. Meanwhile, California was levying 48.7 cents in taxes on every gallon of gas sold in the state. Georgia, by comparison, was adding only 28.5 cents in taxes to every gallon of gas in 2013, and yet it was able to keep 54 percent of its roads in good condition. Only 12 percent were in poor condition. Georgia "has very good roads of high quality because that is where they spend their resources," Feigenbaum says. "California has crappy roads because they spend their money somewhere else." California's latest gas tax hike saw hundreds of millions of dollars siphoned off to pay for high-speed rail, local transit, and recreational trails. The federal Highway Trust Fund—where the gas tax is deposited—has a similar problem of spending on local transit and other non-road-related projects, undercutting the argument that it is simply a user fee paid by drivers. Some 15 percent of the federal gas tax is deposited straight into the Highway Trust Fund's Mass Transit Account, which disburses money for local bus, light rail, and other mass transit services. Another $850 million or so of the trust fund is diverted to the Transportation Alternatives Fund, which goes to beautifying streets and building recreational trails. "Do you really want to increase taxes when you have this waste going on?" Feigenbaum asks. On top of this, continual improvements in fuel efficiency and the potential growth in electric vehicles are making the gas tax an increasingly obsolete way to fund and finance new infrastructure improvements. "I like to describe it as a rock star on their farewell tour," he says. "It's getting old, it's not going to be around forever, and we have to come up with a solution." Feigenbaum suggests that Congress make greater use mileage-based user fees, and that it rely more on the private sector for [...]

The Annual Federal Spending Frenzy Is a Terrible Year-End Tradition

Sun, 10 Dec 2017 06:00:00 -0500

What do you do if you wind up with a little extra money in your household budget at the end of the year? Perhaps you pay down your credit card debt or save it for an earlier retirement. Maybe you replace old appliances or go on a much-needed but unplanned vacation. One thing is clear: Because you're spending your own cash, you make sure to get as much out of it as possible. You might expect our tax dollars to be treated the same way. You would be mistaken. The end of the fiscal year—September 30—triggers a spending frenzy in Washington, where the driving order isn't "do something worthwhile" but rather "make sure nothing is left." Because agencies can't carry over any part of their operating budgets into the next fiscal year, politicians and bureaucrats spend to the last dime, knowing that leftover resources will be returned to the Department of the Treasury. They also worry Congress will reward frugal agencies with cuts to their future allotments. As a result, every October, newspapers brim with shocking stories about wasteful and possibly corrupt spending behaviors. Think military vehicles driving in circles to drain the last pennies of their gas allowances, or hundreds of thousands of dollars for booze and party favors. These aren't just anecdotes. Empirical evidence confirms the sharp spike in end-of-year consumption. Jason Fichtner, my colleague at the Mercatus Center, has shown that a remarkably large percentage of federal contract spending occurs near the end of the fiscal calendar. Contracting expenditures represent only 11 percent of the overall budget, but due to their more robust transparency requirements they are the only ones we can easily track. For executive branch departments, Fichtner shows that on average, 16.3 percent of contract expenditures happen in September. This is twice as much as the 8.3 percent of the annual budget you would expect to be spent in a given month if the money were split evenly across the year. The State Department and the Department of Housing and Urban Development are even worse, consistently spending a third of their total contracting budgets in September. This happens regardless of administration, party control of Congress, or type of budget resolution. And it is not new. Back in 1978, the Government Accountability Office sounded the alarm with a report finding that agencies on average spent 21 percent of their budgets in the final two months of the fiscal year. How much money are we talking about? In 2017, federal agencies excluding the Department of Defense spent $11.1 billion in the final week of September. Despite Trump's big promises to find cost savings, the Office of the President alone spent $21.8 million on furniture, electrical hardware, supplies, and flooring—four times as much as Barack Obama spent during the same period a year earlier.'s Adam Andrzejewski provides some juicy examples of what certainly looks like reckless end-of-year spending in Forbes, such as $7.3 million by nonmilitary agencies on guns, ammo, and related equipment (including $306,617 by the Department of Agriculture on wares from Glock Inc. and $1.5 million by the Department of Health and Human Services). The government also apparently had a sudden furniture shortage requiring $83.4 million in expenditures, not counting the $23 million on office supplies and equipment. Some $18.6 million went to public relations, $11.7 million to market research and public opinion, and $5.5 million to communications—just in the last week of September. But does a spike in and of itself mean the funds were wasted? There is substantial evidence suggesting that the rush to spend leads to less efficient acquisition outcomes than at other points in the fiscal year. A well-known 2010 study of federal information technology (I.T.[...]

$25,000 Challenge Grant Time! Donate to Reason If You Think Government Is Too Big No Matter Who’s President

Mon, 04 Dec 2017 09:10:00 -0500

There is good news and bad news to report on this, the penultimate day of Reason's annual webathon, in which we plead with you for a long week to give us some of your hard-earned tokens of value in exchange for promises to deliver even more and better libertarian journalism and commentary next year. The good news is that with more than 778 individual donors and $112,000 in beautiful booty, this year's haul has already surpassed every year from 2008-2012 on both counts with room to spare. And thank you for that! The bad news is that we've only got about 39 hours left to get to 2013's final count of $163,000, let alone 2016's $187,000 or the $200,000-plus performances in 2014-2015. To get this final sprint toward the finish line started, an anonymous member of Reason's Board of Trustees has pledged up to $25,000 today, but here's the catch—he/she needs YOU people to cough up that much TODAY in order to write all those pretty numbers on the check. The rest of y'all shell out just $16,000 on this manic Monday, and we're leaving a lot of green on the table. Come correct, and we'll have last year's total in our sights by the end of Monday Night Football. Match the challenge with your own damn check for 25 large, and we've got a whole new ballgame. You know what to do. PLEASE DONATE TO REASON RIGHT THE LIVING HELL NOW. Because who else is out here saying, year after everloving year, "No, screw you, cut spending"? Democratic and Republican politics, particularly in the wake of huge moments like Saturday morning's tax reform vote in the Senate, is a decreasingly persuasive game of whataboutism. Free-spenders rediscover a national debt they safely ignored from 2009-2016, fiscal conservatives remember that deficits don't matter when Republicans are in charge, both sides yell "hypocrite," and the long-term fiscal outlook for the United States continues frog-marching toward the abyss. In times like these the majority of Americans who believe that government is doing too much are starved for journalism that approaches the issue consistently, regardless of which party hold power. That's where Reason comes in. Our present moment, in which Republicans have gleefully waved the white flag on cutting government, while Democrats bide their time to unleash Bernienomics on the country as soon as they have the votes, was predicted in our October 2016 cover story "Debt Denialists," which traced how both major parties have since 2014 totally abandoned even the rhetorical nod toward fiscal sobriety. Whataboutism here doesn't fully capture it—no one's even pretending to care about this stuff anymore. But we have, and always will. Long before the Tea Party located the courage to protest the size and scope of the federal leviathan, Nick Gillespie was declaring that President George W. Bush was a "big-government disaster." We were lonely in opposition to both bailout and stimulus, documenting the failures we predicted in real time, and never forgetting to point out that spending trillions of dollars on wars and death is not good public policy. Not content to be Debbie Downers, we've also penned a bunch of constructive, in-depth suggestions, like how to tackle entitlements, how to realign government expenditures with revenue, and "How to Slash Government Before it Slashes You." That last issue is no small thing. Yes, we care about how debt dampens economic growth, and how old-age entitlements crowd out all other spending (and therefore economic activity), and how countries with bleeding balance sheets are putting themselves in unnecessary danger. But as libertarians are always reminding people, a government that's big enough to be $20 trillion in debt, is also going to be big enough to do some truly heinous and/or monumentally trivial things. I've alrea[...]

Ye Shall Know Them by Their Debt

Fri, 01 Dec 2017 12:00:00 -0500

Donald Trump certainly knows how to drive the news cycle. When archivists of the future pore through the headlines from September 2017, they will see not only the real-world calamities of Hurricanes Harvey, Irma, and Maria, but such Trump-driven ephemera as calling the leader of North Korea "Rocket Man," accusing old sparring partner Sen. John McCain (R–Ariz.) of delivering "a tremendous slap in the face to the Republican Party," and sending the entire country into a culture-war tizzy over the once-small number of professional football players who kneel in protest during "The Star-Spangled Banner." Jesus taught us that "ye shall know them by their fruits," but as the Republican-led 115th Congress stumbles from one legislative nonstarter to the next, it's becoming clearer that the president's main fruits are his tweets. It took Barack Obama five years to get to the "pen and phone" executive-action phase of his presidency; it has taken Trump around five months. "It's really caught on. It's really caught on," the president reportedly bragged to GOP lawmakers on Day 5 of his fabricated National Anthem feud with the National Football League. One subject that hasn't received much of the president's attention, even though it dominated Republican politics as recently as four years ago, is the national debt. In fact, the month of September included some of the grimmest milestones in recent memory for those of us who prefer government to pay its own way, rather than incur massive debt overhangs that dampen economic growth and impoverish the future. To wit: On September 6, in the wake of Hurricane Harvey (Irma and Maria had not yet hit), only three members of the House of Representatives—Justin Amash (R–Mich.), Andy Biggs (R–Ariz.), and Thomas Massie (R–Ky.)—voted against spending $8 billion on hurricane victims because the bill did not include offsetting cuts. That compares to the 179 Republicans and one Democrat who voted against a $60 billion aid package after Superstorm Sandy back in January 2013. On September 8, Trump signed into law a deal he forged with Democratic congressional leaders to raise the debt ceiling from $19.84 trillion to $20.16 trillion. On the grim anniversary day of September 11, the nation's debt clock crossed the ominous $20 trillion threshold. Most economists agree that growth becomes dampened after a country's ratio of debt to gross domestic product creeps higher than 90 percent; we've been north of 100 percent for some time now, and the Congressional Budget Office estimates that we are on pace to soon break the all-time record set at the height of World War II. On September 18, the Senate passed the $700 billion National Defense Authorization Act, showering more money on the military than even the pro-buildup president had sought. "It's a grandiose spending plan," Sen. Dick Durbin (D–Ill.) observed to The New York Times. Meanwhile, the Republican Congress has shown zero ability to accomplish the minimal task of passing an annual budget, let alone to enact revisions to an Affordable Care Act that is putting future generations even further in the red. In the middle of this monthus horribilis, I asked Amash, one of the last true fiscal conservatives left, what we can expect for the trajectory of federal spending. His answer should be chilling to anyone who favors limited government: "It's looking as bad as any time I've seen since I've been in Congress," he said. "Overwhelmingly, Congress continues to move in the wrong direction, the federal government continues to move in the wrong direction." It's the age-old story: Republicans' interest in spending cuts is inversely proportional to the amount of power they hold. "I think this tends to happen when one party has full con[...]

What Charles Manson Teaches Us About Harvey Weinstein, Al Franken, and Tax Reform: Podcast

Mon, 20 Nov 2017 15:15:00 -0500

On this week's Reason Podcast, Nick Gillespie, Katherine Mangu-Ward, Peter Suderman, and Matt Welch discuss everything that's wrong with the Republican tax reform bill, what it would mean for Obamacare, whether the neverending stream of sexual-assault revelations will turn America into a desert wasteland of fierce Beyoncé woman warriors, gubernatorial candidate and Ohio Supreme Court Justice William O'Neill's announcement that "in the last 50 years" he has been "sexually intimate with approximately 50 very attractive females," and whether Harvey Weinstein is the "Charles Manson" of the 21st century.

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Audio production by Ian Keyser.

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Film Subsidies Are Real Losers

Mon, 20 Nov 2017 09:45:00 -0500

Put a question to any two economists and you will get three answers back. That old joke is not very funny, and it is even less accurate. On some topics economic analysts are, if not unanimous, at least largely in accord. Example: sports stadiums. As the St. Louis Fed pointed out earlier this year, 86 percent of economists agree that state and local governments "should eliminate subsidies to professional sports franchises." Study after study has found that giving public money to pro sports teams brings little to no return on the investment—and sometimes actually induces negative effects on the local economy. Another example: film subsidies, which get close scrutiny in a new report by Virginia's legislative watchdog agency. According to the Joint Legislative Audit and Review Commission: Virginia's "film tax exemption has little effect on film location decisions, a negligible benefit to the Virginia economy, and provides a negligible return on the state's investment." The film tax credit provides a return of 20 cents on the dollar; direct grants return 30 cents on the dollar. Yet in five years, the commonwealth has more than doubled its film subsidies, from $5.8 million in 2012 to $14.3 million last year. The idea—as with so many other subsidies—is to lure economic activity. But JLARC points out that this hasn't worked—not for Virginia, and not for the many other states that have engaged in a bidding war over Hollywood during the past couple of decades: "The percentage of nationwide film production employment located in California and New York (67 percent) in 2016 has barely changed since 2001 (69 percent)... Georgia, which offers one of the most generous film tax credits in terms of the rate, ranks third after California and New York, but its share of national film production employment is only four percent (12,500 workers)." The JLARC report adds useful data specific to Virginia. But its overall point hardly breaks new ground. Massachusetts has been fighting over its film subsidy since 2008, when the state issued its first critical review of the program. According to the Massachusetts Department of Revenue, each job ostensibly created by the subsidy costs the state $118,000. "State Film Subsidies: Not Much Bang for Too Many Bucks," was the title of a 2010 study by the liberal Center on Budget and Policy Priorities. The report noted that "subsidies reward companies for production that they might have done anyway." And because most people outside California and New York don't have the requisite skills, "the best jobs go to non-residents." And "subsidies don't pay for themselves. The revenue generated by economic activity induced by film subsidies falls far short of the subsidies' direct costs to the state." Two years later, the conservative Tax Foundation reported similar findings: "Surveying the literature, we found that aside from studies paid for by economic development authorities and the Motion Picture Association of America, an industry trade association, almost every other study has found film tax credits generate less than 30 cents for every $1 of spending." "Film Tax Incentives Are a Giant Waste of Money, New Study Finds," ran a headline in Variety last year. The story reported on a study by the University of Southern California Price School of Public Policy's Michael Thom. He found that tax credits produced zero to minimal employment gains and zero to only short-term gains in wages. Sales tax and lodging tax breaks also accomplished bupkes, and "none of the incentives had a measurable effect on the share of the motion picture business located in each state." To be fair, having a major motion picture filming on location in your hom[...]