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Government Spending

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Published: Tue, 25 Jul 2017 00:00:00 -0400

Last Build Date: Tue, 25 Jul 2017 19:08:57 -0400


Stossel: Departments Grow and Cherries Rot

Tue, 25 Jul 2017 09:30:00 -0400

John Stossel investigates what government agencies actually do and finds out that your tax money goes to ridiculous things.

The Agriculture Department actually forces farmers to dump cherries on the ground so you pay higher prices at the supermarket.

President Trump wanted to cut the budgets for many government departments – like the Commerce Department and the Agriculture Department. But Congress increased spending on the very departments Trump wanted to cut.

Departments that almost nobody knows what they even do.

John Stossel investigates and finds a ton of waste. The departments blow your money on welfare for the rich, global warming hype, and destructive regulations.

Ed Stringham, President of the American Institute for Economic Research, tells Stossel about how the Agriculture Department even forced one farmer to dump cherries on the ground and let them rot. The government wanted to keep the price of cherries higher, which helps some cherry farmers.

Stossel agrees with founding father Robert Morris, who once said, "for heaven's sake, what is meant by a [government] chamber of commerce?"

Produced by Maxim Lott. Edited by Josh Swain.

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Can a Governor Save Rural Regions? Should He?

Wed, 19 Jul 2017 12:00:00 -0400

When the final days of the Virginia gubernatorial contest arrive and you find yourself hurling vases at the television because you're sick of snarling attack ads, just remember: The candidates offered much substance back in summer. Republican Ed Gillespie has laid out extensive policy proposals on taxes and the opioid crisis, for example. Yesterday, Democrat Ralph Northam unveiled his plan for economic growth in rural Virginia. You can understand why he did. While the crescent from Northern Virginia through Richmond and over to Hampton Roads holds the bulk of the state's vote, rural areas will be key to the GOP effort, and if Northam can make inroads there, he could sew up the contest by October and coast to victory. And you can understand why his plan would appeal to voters in the rural southwest, what with the decline of the coal industry and so on. Still, it's worth digging a little deeper into Northam's plan and the premises behind it. "When I travel around the commonwealth," Northam writes, "I hear a lot of folks say they're from rural Virginia, but not enough who say they've stayed in rural Virginia. And that's what we need to fix." It is? Why? One possible reason: There is intrinsic value in keeping the region populated. But that doesn't seem very plausible. If anything, you could argue that, environmentally speaking, it might be better to keep some swaths of the state unpopulated. A more plausible explanation is that the government should help the residents of Southwest Virginia. But are they better off staying there? If they can improve their economic circumstances by moving to urban areas, then why not let them? Of course, some people in Southwest Virginia might want to improve their economic circumstances and still stay put. But is it the state's job to ensure they can? And if the answer is yes, then what does that imply about, say, struggling economic sectors? Should the state help people stay in fading industries as well as fading regions? If not, why not? The other day The Washington Post reported on the federal flood insurance program, which has racked up $25 billion in debt. The story cited a $56,000 house in Baton Rouge that, thanks to repeated floods, has run up almost $429,000 in claims. Another house, in Mississippi, is valued at $90,000 and has collected more than $600,000 in claims. Critics of the program say it encourages people to stay in place when what they really need to do is move. The point could apply to more than just flood plains. Northam also says the "top concern" he hears from large manufacturers and economic developers is "whether we have the skilled workforce necessary to grow and attract new jobs and industries." To address that concern, he wants to create "flexible, business-oriented workforce training programs across the commonwealth" that can teach people the "unique skillset(s)" that are "oftentimes required to meet that company's needs." Northam isn't suggesting anything we haven't heard many times before. But the idea does raise two questions—one practical and the other philosophical. The practical question is whether skill-specific training will help workers as much as it's cut out to. The New York Times recently noted a new study in the Journal of Human Resources that suggests technological and other changes often leave skill-trained workers behind—and rather than retrain them, employers often let them go and bring in new talent. As one of the authors of the research put it, the real need is "for more general cognitive skills that give workers the ability to adapt to new circumstances and new jobs." That's the practical question. The philosophical one is this: If companies need workers who are trained to perform specific tasks, then why don't those companies do the training themselves? Why should the state—i.e., the taxpayers—shoulder the burden of doing it for them? After all, labor is a production input just like raw materials. If Acme Semiconductors said to Virginia, "We'd like to build a plant in your state, and we want you to provide u[...]

5 Cities That Won't Be Hosting the 2024 Olympics, and Why That Makes Them Winners

Fri, 14 Jul 2017 16:00:00 -0400

The International Olympics Committee (IOC) announced this week that the 2024 Summer Olympics would be awarded to either Paris or Los Angeles, the only two cities bidding for the games. The other city would be awarded the 2028 Summer Olympics. It's a far cry from the 1990s, when the IOC had six cities to choose from for the 1996 Summer Olympics and five for the 2000 Summer Olympics. City residents, especially in democratic countries, are starting to figure out what a rip-off hosting the Olympics can be. Every Olympics games since 1960 for which data is available has faced cost over-runs, with the Summer Olympics costing an average of 176 percent more than the original estimates. Additionally, as a 2015 paper in World Economics points out, "short-run costs for venue construction and operations invariably exceed Games-related revenues by billions of dollars and long-term gains are elusive." The IOC has also squeezed host cities out of other ways to make money off hosting the Olympics. In the 1990s, for example, the IOC took just a 4 percent cut of the revenue from the TV rights, but now it takes more than 70 percent. It seems the best way for a city to win on the Olympics is to decline to bid. Here are five cities that will be better off for not hosting an Olympics in the next decade: Boston Boston's bid had the support of local and state government when the U.S. Olympics Committee (USOC) chose it as the American city that would bid to host the 2024 Summer Olympics. The state legislature had set up a "feasibility commission," members of which were appointed by the state governor, state senate leaders, and the mayor of Boston. The commission concluded that hosting the Olympics was a "monumental" but "feasible" task that the region was better prepared to handle than other parts of the country. In 2015, the organizers of the Boston bid released the salaries of its executives. The public thus learned that former Gov. Deval Patrick, who had been involved in the feasibility commission, would be paid $7,500 per day of travel on behalf of the bid, and that Boston 2024 would be spending at least $120,000 a month on consulting firms. Public opinion had already been turning on the Olympics bid, with complaints that there had been no space for public input before the USOC selected Boston as the American bid city. When the decision was announced in January 2015, polling found support in Boston for hosting the Olympics at 51 percent and opposition at 33 percent. By the end of March, support had plummeted to 33 percent. As explains in a detailed timeline, this reflected not just the salary revelations but the heightened sensitivity to government incompetence in the wake of crippling winter snowstorms. Eventually, Mayor Marty Walsh admitted he hadn't read the entire bid proposal before pitching it to the USOC. In July, two members of the city council threatened to issue subpoenas to get copies of two redacted chapters of Boston 2024's bid books. By the end of the month, Walsh had withdrawn his support for the bid, saying he would not sign the host city contract. The USOC in turn withdrew its support and backed Los Angeles instead. The grassroots campaign No Boston Olympics was also crucial to the bid's failure. Its activists campaigned against the bid after it became official, and they declared victory when the bid was withdrawn. "Boston is a world-class city," a statement from the group read, adopting a phrase frequently used by the bid's supporters. "We are a city with an important past and a bright future. We got that way by thinking big, but also thinking smart." Hamburg When deciding whether to back Berlin or Hamburg for the 2024 games, the German Olympics Sports Confederation surveyed residents in both cities. It found higher support in Hamburg, but by the time the decision was brought up for a referendum the city's residents had reconsidered. In the November 2015 vote, 51.6 percent of Hamburg voters rejected the Olympics bid. Hamburg estimated the cost of hosting the [...]

Chris Christie Enjoying a Public Beach During a Government Shutdown Is What Politicians Do

Mon, 03 Jul 2017 13:25:00 -0400

(image) Gov. Chris Christie (R-N.J.) took his family to his government beach home over the weekend while state beaches were closed for a budget-impasse-induced government "shutdown." A journalist snapped photos of Christie and family on the otherwise empty beach, producing a PR disaster. Chris Cillizza, a political analyst at CNN, tweeted that Chris Christie's "tone-deafness" was "truly remarkable."

But was it really?

Christie's electoral career is over. His approval rating in New Jersey is scraping the bottom of the barrel. He can't run for governor again, and New Jersey hasn't elected a Republican to the Senate since 1972. Unconstrained by the need to face the voters again, he isn't tone-deaf so much as he's revealing his true self.

That true self is pretty typical of politicians. As Lawrence Reed wrote last year, the bigger a government is, the less likely it is to attract office-seekers who are "honest, humble, fair, wise, independent, responsible, incorruptible, mindful of the future and respectful of others." Lord Acton noted that power corrupts more than a century ago, and his premise has been tested scientifically.

The fact that Christie's actions caught so many political reporters by surprise illustrates the myths the political class like to tell each other—prime among them, that politicians have some innate sense of decency. The rise and success of Donald Trump should have dispelled that idea, but evidently it hasn't. They see Trump as something totally different from most previous politicians, not as a distilled version of what came before.

Christie's senioritis illustrates another problem. The New Jersey governor already has a government home: Drumthwacket, a mansion outside the state capitol. Why the hell does he need some beachfront property too? In a sane world, Christie's historic unpopularity would create the momentum for scaling back the governor's perks. But that would require a shift in attitude toward the people attracted to high office. It would require people like Cillizza to recognize that Christie isn't an aberration; he's the norm.

The Illusory Savings From Cutting Medicaid

Sun, 25 Jun 2017 00:00:00 -0400

When economists talk in their sleep, they say, "There is no such thing as a free lunch." This axiom is drilled into them from day one of their undergraduate education and never leaves their minds. Any economist who tried to deny it would find herself suddenly choking in pain and unable to speak. What it means is that if the government does something that costs money, some human somewhere will bear the expense. "Free" public schools, "free" parks, and "free" roads all have to be paid for by the citizenry. Collectively, we can't get something for nothing. This useful insight has long been offered as an objection to costly government programs. But it applies as well to measures that extract savings from costly government programs. In their replacement of Obamacare, congressional Republicans promise to achieve greater frugality in Medicaid, which helps low-income Americans, without inflicting more hardship. The melancholy truth: Not gonna happen. Last year, total spending for Medicaid amounted to $533 billion. Nearly two-thirds of the funds come from the federal government, and the rest comes from the states. Some 69 million people are covered by it, up from 54 million in 2012. The expansion was intentional. Under the Affordable Care Act (ACA), Washington signed on to cover 100 percent of the cost of expanded coverage at the outset, with its share falling to 90 percent from 2020 on. The health care plan offered by Senate Republicans, like the one passed by the House, would reverse the trend by giving states a certain amount per Medicaid recipient or a block grant for a fixed amount. Either way, the federal contribution would steadily shrink compared with what it would do under the ACA. Under the House plan, the federal savings would amount to $880 billion over a decade. The Senate bill is supposed to wring out even more. Supporters say Medicaid enrollees would be better off because states would be free to redesign their programs to make them more efficient and responsive to beneficiaries. But remember that fundamental economic proposition. Just as you can't get something for nothing, you generally can't get more for less. The House changes, according to the nonpartisan Congressional Budget Office, would reduce the number of people on Medicaid by 14 million by 2026. Many people who now have coverage would lose it, and many who would have become eligible would be turned away. States could always protect the vulnerable by boosting their contribution to make up for the lost federal funds. But that would mean requiring their taxpayers to foot the bill. Republicans say the changes would be positive because Medicaid coverage is often useless. House Speaker Paul Ryan claims that "more and more doctors just won't take Medicaid." In fact, 69 percent of physicians currently accept new Medicaid patients, and the percentage has been stable for decades. It's lower than for privately insured patients, because Medicaid provides doctors with lower reimbursements, but budget cuts would probably exacerbate that malady. Some recipients would get cut off under the GOP plans, and some would get less coverage. That—surprise!—would leave them worse off, because comprehensive health insurance is a good thing to have. Medicaid coverage, reports the Kaiser Family Foundation, is proven to ensure "earlier detection of health and developmental problems in children, earlier diagnosis of cancer, diabetes, and other chronic conditions in adults, and earlier detection of mental illness in people of all ages." Cutting back Medicaid coverage would save taxpayers some cash, but only by taking it from others. The reduction would raise costs for low-income people and most likely degrade their health. It would also increase the financial load on hospitals, which treat a lot of people who have no coverage. A study by scholars at Northwestern University and Columbia University figured that each new uninsured person costs nearby hospitals an average of $9[...]

California Lawmakers Spend More, Avoid Reform

Fri, 23 Jun 2017 00:30:00 -0400

Legislators in California announced a budget deal last week that spends a record $125 billion in the general fund. But most interesting isn't what's in the deal, but what isn't. There's plenty of new spending, of course, but not so much that it outpaces the rate of inflation. There are controversial "trailer" bills that attempt to change the rules in an ongoing recall election and take away power from elected members of the Board of Equalization, the state's tax board. Missing are any attempts at serious reform of existing government programs or ways to stretch the already hefty tax dollars Californians send to Sacramento. The budget's authors talk quite a lot about funding important priorities, especially the public-education programs that consume an awe-inspiring 43 percent of the general fund. Yet Gov. Jerry Brown (D) and the Democrat-dominated Legislature refuse to confront the main reason such programs typically are so costly and ineffective: public-sector unions. These unions are so powerful that they stifle cost-saving reforms in every conceivable area of government – from the prison system to policing to transportation programs to the public school and college systems. Union work rules don't allow for experimentation and creativity, or even the firing of poorly performing employees. The state is thus left with just one approach: throwing more money at the problem. This is why every year's budget kerfuffle centers on figuring out ways to come up with more money to spend in the exact same ways. The only difference this year is, because of Democratic supermajorities in both houses of the Legislature, the state now plans to spend more than ever. What else would you expect, given that the minority party has no power to thwart such efforts? The investigative news site CALmatters provides perhaps the best example of the disconnect between higher spending and better outcomes, noting in a June 18 report that there's no evidence the tens of billions of dollars the state has pumped into failing schools under its new public education system have done much of anything to help the most disadvantaged students. The investigation found "the biggest districts with the greatest clusters of needy children found limited success with the policy's goal: to close the achievement gap between these students and their more privileged peers. Instead, test scores in most of those districts show the gap is growing." The same is true for myriad programs, but as the single largest chunk of the budget, any failures in the K-14 education system certainly have the deepest financial ramifications. As I reported recently for the California Policy Center, while voters in the Los Angeles Unified School District and elsewhere are supporting candidates who back expanded access to charter schools for poor children, state legislators are backing legislation pushed by the California Teachers' Association that would make it much harder for locals to start such schools. Charters operate with less funding than comparable school districts, yet often (but not always, of course) show remarkable progress in closing the achievement gaps that aren't being closed by truckloads of new state spending. Think of it this way: If a system is failing, there's little chance that giving the same agencies more money to do things in the same way will yield significantly different results. It's obvious, but not to legislators or Gov. Brown. The budget deal also includes a provision that lets the state borrow $6 billion from a short-term investment fund to pay down some of California's growing pension debt. It's another example of the state's money-dumping approach to a massive financial problem. Instead of taking aim at overly generous pension formulas, or myriad pension-spiking and disability abuses, the state is borrowing money at low interest rates from one account and putting the money into another account (that is supposed to earn highe[...]

Trump's New Line on NATO: Expensive, But Worth It!

Fri, 09 Jun 2017 20:38:00 -0400

Candidate Donald Trump delighted some and depressed others with a seeming willingness to rethink the necessity of our NATO alliance. He worried out loud about how much it cost us versus how little it cost our allies, most of whom are not living up to their commitment to spend 2 percent of their GDP on their military. He even called NATO straight-up "obsolete" in the post–Cold War, war on terror age.


Today Trump gratified NATO fans by saying out loud that of course we will always live up to our obligations under its Article 5, the most dangerous part, requiring us to come to the defense of any ally in case of attack (even, say, countries like recent entrant Montenegro, a corrupt nation, home to illegal arms smuggling and dealings and on the edge of many potential conflicts with neighbors).

In keeping with Trump's general fecklessness about spending, he uses NATO—in his eyes that once-obsolete alliance in which our fellow members took advantage of us—as an excuse for more U.S. spending.

As Huffington Post reports today, Trump said at a Rose Garden press conference this morning that our need to go to war in defense of our NATO allies is "one of the reasons that I want people to make sure that we have a very, very strong force by paying the kind of money necessary to have that force."

Our NATO commitments and expenses of billions and over 60,000 troops may reasonably seem less than relevant to actual U.S. security concerns in the age of the war on terror. But when it comes to keeping the military spending ball rolling to crushing debt and beyond, Trump will go along, any earlier rhetoric questioning spending or commitments ignored.

Prison Unions Punish California Taxpayers

Fri, 09 Jun 2017 01:00:00 -0400

If you ever wondered what's wrong with California's state government, then mull over this simple example: While California cuts its prison population and staff, it's increasing the amount of money it spends to operate its massive prison system. In the private sector, a decline in the number of "customers" and workers would mean lower overhead. But in state government—or, at least, this state government—the opposite is true. The higher costs are driven by escalating pay and benefit packages negotiated by unions that represent prison guards and other staff. It's an example of how powerful public-sector unions keep the state from getting spending under control, even when the need for such spending plummets. That example comes from a new report by the Vera Institute for Justice. "Despite a decline in both its prison population and the number of prison staff, California's prison spending rose $560 million between 2010 and 2015, primarily because salary, pension and other employee and retiree benefits continued to increase, also a result of union-negotiated increases," explained the New York-based think tank that promotes criminal-justice reform. California is unusual from a national perspective, per the report. Thirteen states have reduced prison populations since 2010, but they've also cut their prison spending by $1.6 billion. Seven states have increased their populations, but have managed to decrease their prison spending, (by $254 million). Fifteen states have increased their prison populations and also increased their total prison spending by a half-billion dollars. California is in an ignominious group of 10 states that saw declines in the prison population since 2010, but which increased spending by $1.1 billion. Furthermore, California's spending increase accounts for more than half of that number. California has by far the costliest system of incarceration in the nation at more than $75,000 per inmate per year—more than triple the average cost of the 18 states with the least-costly rates. Regardless of one's views on prison-reform issues, it's clear that California gets far less bang for its buck than other states. The savings could go to other parts of the criminal-justice bureaucracy, or to other programs or, heaven forbid, back to taxpayers. Instead, the money goes to maintain a system that isn't changing to reflect new realities. The study focuses on the 2010 to 2015 period, and some major prison-related laws—e.g., 2014's Proposition 47, which reduced many felonies to misdemeanors and resulted in further reductions of prison populations—got started toward the end of the study period. Yet, if anything, these disturbing spending trends only accelerated in the ensuing years. "Gov. Jerry Brown's spending plan for the fiscal year that starts July 1 includes a record $11.4 billion for the corrections department while also predicting that there will be 11,500 fewer inmates in four years because voters in November approved earlier releases for many inmates," wrote Don Thompson for The Associated Press. "Since 2015, California's per-inmate costs have surged nearly $10,000, or about 13 percent." That's a whopping increase in a short period of time, and even more amazing given that state just raised gas taxes because it claims to be out of cash. Some argue that there was no "safety dividend" from the passage of Prop. 47, the AP article explained. That's an unresolved point. After hitting record lows, crime rates in some big California cities have gone up the past couple of years. There is no definitive data-driven answer to the causes yet, but many conservatives blame Proposition 47 and the governor's "realignment" policies, which fulfilled a federal prison overcrowding order by moving many state prisoners to county jails. Of course, early-release decisions and the like should be driven by public safety and civil-liberties is[...]

Trump's Medicaid 'Cuts' Actually Increase Federal Spending

Mon, 29 May 2017 12:00:00 -0400

Last week, President Trump proposed massive spending increases for Medicaid. Of course, most of the media didn't report it that way. They reported that the president's proposal "slashes spending." That he wants to cut "at least $610 billion" from Medicaid. That "Trump's Budget Cuts Deeply Into Medicaid." And so on. That might be vaguely true in the Washington sense. It's not at all true in the real-world sense. Here's the difference. If you look at the actual White House budget proposal, you'll note that it includes tables for "baseline" spending and "proposed" spending. Baseline spending is spending that would occur if nothing changes—if Congress doesn't order any new aircraft carriers, and America doesn't start any new wars. If entitlement eligibility rules remain the same, and expected benefits for each recipient neither shrink nor grow. Things like that. Make some minor adjustments for inflation and population growth and, barring some unforeseen windfall or cataclysm, you can project how much a program will cost in future years. The baseline spending curve for Medicaid points upward. In 2017, the program is expected to cost roughly $378 billion. A decade from now, the baseline spending for Medicaid rises to $688 billion—an 82 percent increase in nominal dollars. Trump's proposed spending for Medicaid points upward, too—just not as sharply. Under his budget proposal, Medicaid spending would rise from $378 billion this year to $524 billion in 2027. That's a 38 percent nominal increase. True, inflation will reduce the effective size of either increase to some extent. And population growth could increase demand for Medicaid and other social programs, although population growth in the U.S. is the slowest it's been in nearly a century. Either way, the Medicaid budget is going to grow. But under Trump's proposal, it would grow more slowly. This is how Democrats and the media can scream about supposedly savage "cuts" to the program. The same goes for Medicare. Under the current baseline, Medicare would grow from $593 billion to $1.19 trillion. Under the Trump budget, it would grow to only (!) $1.16 trillion. Or take non-defense discretionary programs. Those are the expenditures for just about everything else the federal government does, from environmental protection to bridge construction. Unlike entitlement programs, whose spending is formula-driven (until Congress changes the formulas, anyway) spending on discretionary programs is set each year by the appropriations process. The growth of entitlement spending has squeezed discretionary spending mercilessly. In 1965, so-called mandatory spending consumed just under 27 percent of the federal budget. Discretionary spending got 65.8 percent, and interest on the debt made up the rest. Today, the spending figures have almost reversed. Mandatory spending makes up almost two-thirds of the federal budget and discretionary spending less than 32 percent. If current trends continue, by 2044 Medicare, Medicaid, Social Security, and interest on the debt will consume 100 percent of federal revenue. Everything else will be financed with debt—and debt will reach 150 percent of GDP. That's roughly where Greece stood five years ago. Discretionary spending falls into two buckets: defense and non-defense. In 1965, defense made up 43 percent of the federal budget. Now it makes up only about 16 percent. Don't let that fool you into thinking defense spending has shrunk, though. In 1980, Pentagon spending stood at $143 billion. Adjusted for inflation, that's $446 billion in today's dollars. Baseline defense spending for next year is $600 billion. Under the current baseline, non-defense discretionary spending is going to grow, too. Over the next decade, it is slated to rise from $624 billion to $739 billion. Under Trump's proposed budget, though, it would shrink to $429 billi[...]

Trump's Transportation Boondoggles

Thu, 25 May 2017 11:15:00 -0400

The Federal Transportation Administration has just approved $658 million to electrify commuter rail lines in Silicon Valley. That money will allow California's long-delayed and wildy over-budget high-speed rail project to pass through the area. This approval came Monday even though the entire California GOP congressional delegation is opposed to the subsidy, and even though Transportation Secretary Elaine Chao said just last week that we don't have the money for it. Baruch Feigenbaum—a transportation analyst at the Reason Foundation, the nonprofit that publishes this website—suspects that the administration buckled because Sen. Diane Feinstien (D–Ca.) pledged to oppose all Department of Transportation nominees if the funds weren't approved. "I think it was a decision that it just was not worth the political risk," he says. "There's no policy reason they would change." That isn't the only dubious transit project getting a thumbs-up from Donald Trump's team. Also in their good graces is the currently stalled Maryland Purple Line, which would add another 16 miles of track to the fire-prone D.C. light rail system. The plans call for a cool $2 billion in public funds, $900 million of which would come from the feds. Congress has already appropriated $325 million for the Purple Line, and the Federal Transportation Administration indicated this week that it will follow through with a full funding agreement. That leaves just one more hurdle: all the federal court rulings saying the project can't go forward until it conducts a more thorough study of the poor safety standards and ridership numbers of the light rail network that it plans to join. As recently as March, the administration was promising to cut or phase out two major transportation grant programs. Now it's approving controversial rail projects that it could easily veto. Trump's recently released 2018 budget blueprint leaves little room for this funding. The document calls for a 13 percent reduction in transportation expenditures, and a senior transportation official has declared that the department wants to "wind down new investments." In principle, Feigenbaum says, this is the kind of transportation budget he can get behind. But what actually gets funded, he cautions, will probably look very different. "Congress," he notes, "is going to be the one with ultimate say." And there are few things legislators love more than bringing transit pork to their districts. That's why almost all the transportation cuts in Trump's "skinny budget" earlier this year were nixed. If Trump can't even say no to a rail project advocated exclusively by the opposition party, at a time when that party is in the minority, there's little reason to think his latest proposal for transportation cuts will survive.[...]

Trump's Half-Baked Budget

Thu, 25 May 2017 00:01:00 -0400

Donald Trump's first budget proposal is a brazen mix of ideology and dishonesty, seasoned with irresponsibility and pulled out of the oven as soon as it was half-baked. Those qualities make it surprisingly similar to the budgets of Barack Obama and George W. Bush—and largely in accord with public desires. Its defects are neither new nor accidental. The plan has been assailed by Democrats and various activist groups for coddling the rich, punishing the poor and shortchanging important functions. Trump proposes to cut outlays for Medicaid, food stamps, Head Start and Social Security disability. Ditto for Environmental Protection Agency enforcement and State Department security. He would close the National Endowment for the Arts (NEA), the National Endowment for the Humanities and the Corporation for Public Broadcasting. This list may give the impression that the president is fiercely determined to tame runaway federal spending. Not so. The portions of the budget that he attacks are those that matter least. As Brian Riedl of the conservative Manhattan Institute points out, Trump has spared Social Security, Medicare and defense, and he can't control interest on the debt. These outlays make up more than half the federal budget, and under his plan, they would balloon over the next decade. "Advocates of all other budget priorities are left to fight viciously over the rapidly—shrinking scraps," writes Riedl. Even if he got everything he requests, overall spending would not fall. It would rise. But many of the proposed cuts stand little chance on Capitol Hill. The problem with cutting small programs is that it can produce a lot of bad publicity without saving much money. Diplomatic security? That would invite "a lot of Benghazis," said Sen. Lindsey Graham (R-South Carolina). Medicaid? Some dozen Senate Republicans have expressed worry about the impact back home. The NEA? Its grants are disbursed to every single congressional district. And what member of Congress wants to be pilloried for endangering Daniel Tiger? A lot of these ideas are familiar because they've been raised before and rejected. Former NEA Chairman Dana Gioia notes that Ronald Reagan's budget director wanted to eliminate funding for the agency, but by the time Reagan left office, its budget was bigger than ever. "Republicans have been trying to strip government subsidies from public broadcasting almost since the inception of the Corporation for Public Broadcasting in 1967," reported Politico in 2010. Yet it's still there, where it is likely to remain. Cutting expenses is thankless work that carries more political risks than rewards, which is why many of these programs will come through intact. Democrats have no powerful attraction to fiscal austerity. Republicans champion it mostly when there is a Democrat in the White House. Touching Social Security and Medicare is even more politically explosive, and the payoffs come mostly in the future. For the member of Congress worried about the next election, bringing down entitlement costs in 2035 is not a priority. Tax cuts hold more allure, because they let lawmakers assume the posture of giving something to voters rather than taking things away. It's possible Trump could work out a tax plan satisfying enough members in both parties to get through Congress. The catch is that it would leave the government spending far more than it takes in, just as it did under Bush and Obama. But that's not a deal breaker. Few of our leaders care to insist that the public pay for all the government it gets. They would rather go on running big deficits and let posterity figure out how to pay the cost, and the American people are OK with that. Putting off hard choices indefinitely is the common theme of the Bush, Obama and Trump budgets. That approach has consequence[...]

Trump's Budget Plan: The Good, the Bad, and The Ugly

Tue, 23 May 2017 18:00:00 -0400

As Ronald Bailey notes, Donald Trump's first full budget plan is based on what Ronald Reagan's budget director David Stockman denounced as "rosy scenarios." Trump's budget rests upon an assumption of 3 percent annual growth, which is in stark contrast to the 1.4 percent average growth between 2008 and 2016.

As important and despite headlines talking about the massive spending cuts embodied in Trump's plan, his budget increases spending:

(image) When you look at the overall numbers (above), spending increases to $4.1 trillion in 2018 and rises to $5.7 trillion in 2027. So much for reductions. When figured as a percentage of the economy (GDP), we see a slow decline from 20.5 percent next year down to 18.4 percent in 2027, but those figures are screwy because they're based on the phoney-baloney growth projections. The same goes for receipts, whether estimated in dollars or percentages. Only in the fantasyland of government accounting can a budget that projects spending $900 billion more in 2027 than 2018 be described as "Trump seeks to slash $3.6 trillion in austere budget."

(image) If Trump's rosy growth projections are bad and his year-over-year increases in spending are ugly, what's good about his budget? The president is calling for the elimination of no fewer than 66 programs, including four in the Department of Agriculture that will spend nearly a billion dollars, another four in Commerce that cost $633 billion, and almost $5 billion worth in Education. Similarly, he is calling for rolling back food-assistance programs whose ranks swelled during the recession but have stayed high despite low unemployment rates. While many of these sorts of cuts won't be realized at all, it's always worth pushing the idea that government programs shouldn't always become permanent fixtures.

In this sense, Trump's budget encapsulates his promise and peril as president. He is devoid of clearly articulated principles and there are many reasons to expect him to do real damage to the economy and the country. At the same time, he also may well augur the end of the slow car wreck that represents consensus politics in the post-World War II era. The United States is running out of other people's money and we need to start the hard work of figuring out a sustainable level of government that we can both pay for and thrive under. In some of his deregulatory gestures, Trump points in that direction, and he has clearly shown himself willing and able to push hard against the status quo.

If we're lucky, he is the last 20th-century president and will set the table for a much-needed, much-delayed way of doing politics for the 21st century.

Vive La Trump? Definitely Not Yet.

Thu, 11 May 2017 12:01:00 -0400

There is a lot of debate over President Donald Trump's record after his first 100-plus days in office. Defenders of the president point to his successful efforts on deregulation, the successful appointment to the Supreme Court of Neil Gorsuch and his steadfast desire to implement substantial tax reform. Critics point to his insistence on counterproductive immigration and trade policies, an incoherent foreign policy, and his overall lack of policy acumen. One thing is for sure, however: The United States is headed toward French-style economic sclerosis if Washington continues its reckless spending spree. My native France is an economic mess. It might sound wonderful to some that the French are "entitled" to health care, can retire at age 60, have to work for only 35 hours a week and get "free" education. But this spending comes at a cost; 57 percent of the French economy (as measured by the gross domestic product) is spent every year by the government. To pay for it, you need more taxes—and not just high marginal income tax rates and payroll taxes. The French also pay a 20 percent value-added tax, pay a 33.33 percent corporate income tax and have hundreds of other punitive revenue-generating measures. French policymakers have responded to the resulting sluggish economic growth and persistently high unemployment by making the market for labor horrifyingly inflexible and insulating workers from the competitive market forces that generate long-term prosperity. This results in stubbornly high unemployment rates, mounting debt and the exodus of intelligent French brains to other countries with brighter economic prospects. The mood has become so grim that more than 10 million French voters just turned to the National Front party of Marine Le Pen for hope. Although Le Pen lost to centrist Emmanuel Macron, little will change unless major reforms are made to the debilitating French welfare system, which pays people not to work while providing handouts for everything from the rent to subway tickets. It's admittedly hard for me to be optimistic, given how ingrained government dependency is in France. But my bigger concern is that the United States is on the same path—even if there's a substantial reduction in red tape here and Trump is able to implement reforms to a tax code that currently suffocates job producers and disincentivizes working, savings and investment. Although we can still pat ourselves on the back for not having fully embraced France's combination of big government and low growth, any hope for 3 or 4 percent annual economic growth that Trump officials are relying on will fade if federal spending—and its byproduct, debt—isn't curtailed. Unfortunately, there remains scant evidence that the Trump administration is interested in pursuing the measures necessary to bring federal spending and debt under control. Trump never misses a chance to tout his alleged deal-making prowess, but his administration's first budget negotiation just ended with higher spending and Democrats getting most of what they wanted. Then there's the American Health Care Act (already being labeled "Trumpcare"), just passed in the House. Despite what its apologists claim, even if it were to be signed into law as is, it wouldn't get rid of Obamacare. Sure, Trumpcare would cut taxes, but as we've seen in the past, tax cuts don't last long if spending continues to flow unabated. Indeed, if critics are correct, Trumpcare could end up making health care in this country worse. That outcome would most likely translate into more government spending (including potentially massive bailouts), and promised cuts to Medicaid could actually turn into an expansion of a program that is already a budgetary problem at both the federal level[...]

Rand Paul: Budget Deal Should Be Renamed ‘The Status Quo Protection Act’

Wed, 03 May 2017 12:01:00 -0400

(image) I was at one of those infamous D.C. cocktail parties the other night when Rep. Thomas Massie (R-Ky.), one of the two most libertarian-leaning members of the House of Representatives, sidled up to me at the bar and croaked, "How ya liking our new trillion-dollar budget deal?!"

The $1.16 trillion agreement hikes current spending levels, largely by vomiting forth $93.5 billion worth of "Overseas Contingency Operations" (OCO)—a disreputable gimmick that current Office of Management and Budget Director Mick Mulvaney has long and correctly railed against. Unlike the budgetary "dark ages" and government-dismembering prophesied by dullard hysterics in the media, this latest last-minute Continuing Resolution very predictably maintains just about every pre-existing spending level and pet project/agency. A House vote is scheduled for this afternoon.

So who's against it? Massie's pal Sen. Rand Paul (R-Ky.), for one. Paul has a piece over at explaining why:

It not only rejects President Trump's calls for cuts to multiple agencies, but it increases their funding by millions of dollars.

It paves the way for those agencies to engage in more "use it or lose it" September spending.

It leaves our deficit at well over $500 million. […]

Former Joint Chiefs of Staff Chairman Admiral Michael Mullen tried to warn us in 2010 when he called debt "[t]he most significant threat to our national security." History is littered with the ruins of nations who fast-tracked their own decline by becoming overextended. […]

[A]s long as we continue to spend with abandon, pile it on the backs of the taxpayers we claim to serve, and pretend it's all okay, we are ultimately our own worst enemies.

Read my interview with Massie last month basically predicting all this, and my April 2016 column asserting that the GOP's abdication on budgetary/sequestration issues helped sink Rand Paul's presidential bid. Below, Nick Gillespie helps explain why maintaining a "Pentagon slush fund" is no way to run a country.

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Congress Reaches Spending Deal; 'Skinny Budget' Goes Out the Window

Mon, 01 May 2017 10:48:00 -0400

(image) Take Big Bird off the altar; they're not going to sacrifice him after all. (*) Congress has reached a deal to keep the government funded til September and, as usual, the GOP's talk about defunding public radio and TV has turned out to be an empty threat. The Corporation for Public Broadcasting isn't being zeroed out. In fact, the bill will fund it at the same level as last year.

The National Endowment for the Arts? It'll get more this year than last. The National Endowment for the Humanities? Same. The Environmental Protection Agency is getting less money, but not the 31 percent cut proposed in the administration's so-called "skinny budget"; instead it's losing just 1 percent. And no, Planned Parenthood isn't getting defunded.

I highlighted those five items not because they're big parts of the budget—only the EPA really spends that much—but because they're the sorts of red-meat issues that get Republicans and Democrats worked up. If they're basically unchanged, you can be sure that there won't be major reductions in the areas where there's a lot of bipartisan agreement. Sure enough, there will be more money for medical research, for national parks, for NASA, for the DEA, for Homeland Security, and—of course—for the Pentagon. The military won't be getting the $54 billion hike that Trump proposed, but the $25 billion boost that it's getting instead isn't so shabby.

There are a few small victories here and there for limited government. The plan won't fund Trump's border wall (though border security in general is getting a spending spike), and Jeff Sessions may be unhappy to hear that the Department of Justice won't be allowed to use its funds to keep states "from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana." And yes, some offices will be seeing some cuts under Trump, just as some offices saw some cuts under Obama.

Overall, though, Bloomberg's Sahil Kapur summed it up pretty well:


If that sounds familiar, it's because it's pretty much what we've been telling you to expect here at Reason. We may live in weird times, but some things are still predictable.

(* Yes, I know: These days Big Bird airs on HBO. He is nonetheless fated to forever be a synecdoche for the CPB.)