The Hoax of the 10-Year Federal Budget Plan

The partisan rancor continues over the federal budget battle.  Analysts travel out 5, 8, 10 or more years comparing the Obama budget proposal with the Paul Ryan plan and form opinions of the merit of each on that basis.  Some people think that Paul Ryan is a hero, taking on entitlements and eviscerating discretionary spending across the board.  Others say the Ryan plan is “draconian,” and that it will put millions of poor people out in the street and cause millions of children to go without food.

There is one big problem – all of the “draconian cuts” come after the first year of the plan.

Jonathan Alter, writing for Bloomberg, says that the Ryan plan will fulfill Grover Norquist’s desire to shrink the federal government “down to a size where we can drown it in the bathtub.”  While he acknowledges that under the Ryan plan it will take “years” to achieve a balanced budget, he goes on to criticize all of the cuts that will eventually take place and says that his big concern is that the budget plan will actually be implemented if Romney is elected in the fall.

Huh?

Mitt Romney is sounding a lot more like a fiscal conservative since he began his bid for the Presidency, but his track record hardly argues convincingly that he is in any danger of slashing spending any time soon.  Even if he had been a politician with a history of cutting government spending, there is no historical precedent to suggest that on that basis the federal budget is going to be trimmed.  With THIS Republican party?  Have we forgotten the Bush years so soon?

A friend of mine recently told me that he had a relative who works for the National Weather Service who says that any weather forecast beyond 72 hours is basically fiction.  The same is true with budget plans.  Anything after the first year in the budget is a fantasy.  Where in the Ryan plan will the congress of 2014 be bound to follow its directives?  Or the congress of 2015?  Or 2018?

In each of those years the congress is going to pass a budget. When the time comes for that budget to be approved they are going to do whatever is politically expedient, just as they always have.  Do you remember any talk in this year’s budget debate that congress would have loved to cut spending if it weren’t for the provisions passed in the 2008 budget?  Do you honestly think that in 2014 anyone in congress is going to care what was in the Ryan budget of 2012?

We all need to set aside the hysteria – if the Republican party was interested in actually cutting spending on any meaningful scale they would have long ago gotten behind Ron Paul.  The proof is plainly evident in the Presidential nominees they have fielded since Ronald Reagan left office: George H. W. Bush, Bob Dole, George W. Bush, John McCain, and now Mitt Romney.  There is not a fiscal disciplinarian in the lot.  A Romney presidency is likely going to look a lot more like a George W. Bush administration than a Calvin Coolidge administration.

Don’t you worry – regardless of whom the American voters elect in November there will be plenty of spending for everyone in the years ahead.  That is, until the dollar is destroyed and we are forced to face reality once and for all…

By Stan Brusoski

Ron Paul Polls Nearly as Well as Romney in a General Election Against Obama

Now that Santorum has exited the Republican primary it is all but a certainty that Mitt Romney will get the Republican nomination.  However, it is still an interesting statistic that the supposedly unelectable Ron Paul is polling just a few percentage points behind Romney in a head-to-head contest against President Obama in a general election.

Real Clear Politics shows the following polling data for Romney against Obama in a general election:

Poll Date Sample Obama (D) Romney (R) Spread
RCP Average 3/20 – 4/9 48.5 43.2 Obama +5.3
Rasmussen Tracking 4/7 – 4/9 1500 LV 45 45 Tie
ABC News/Wash Post 4/5 – 4/8 RV 51 44 Obama +7
IBD/CSM/TIPP 3/30 – 4/5 816 RV 46 38 Obama +8
USA Today/Gallup 3/25 – 3/26 901 RV 49 45 Obama +4
CNN/Opinion Research 3/24 – 3/25 925 RV 54 43 Obama +11
McClatchy/Marist 3/20 – 3/22 846 RV 46 44 Obama +2

They show the following data for Ron Paul against Obama in a general election:

Poll Date Sample Obama (D) Paul (R) Spread
RCP Average 3/10 – 4/1 47.2 39.6 Obama +7.6
Rasmussen Reports 3/31 – 4/1 1000 LV 43 40 Obama +3
McClatchy/Marist 3/20 – 3/22 846 RV 50 40 Obama +10
PPP (D) 3/15 – 3/17 900 RV 46 43 Obama +3
Reason-Rupe 3/10 – 3/20 1200 A 47 37 Obama +10
FOX News 3/10 – 3/12 912 RV 50 38 Obama +12

Granted Romney has a statistical lead over Dr. Paul in the polls – Obama leads Dr. Paul by an average of 7.6% across all the polls, while Obama enjoys only a 5.3% lead over Mitt Romney.

But consider the amount of media attention that has been paid to the Romney campaign.  Consider the amount of talk-time given the putative Republican nominee in all of the various debates that have taken place, all of which featured Romney center stage with Dr. Paul relegated to a far corner of the stage.

In contrast, the Paul campaign has been all but ignored by the media.  News commentators and political analysts have openly discounted his campaign and have called him unelectable.  In one 90-minute debate he had a whopping 89 seconds of talk time in the entire program – the broadcast channel that hosted the debate justified this by saying that they weighted the amount of time for each candidate based on where the candidates were in the polls, but in fact Dr. Paul was pulling third place in most polls in what was then a field of eight candidates.

One wonders where Dr. Paul’s polling numbers would be if there had not been a concerted effort in the media and by the Republican party to marginalize his campaign.  What the polls show is that despite the best efforts of the “establishment,” Ron Paul is – and always has been – a serious candidate for the highest office in the land.

The Inflation Tax

The “Inflation Tax” is a very real phenomenon, and it is very much a part of our current economic and political condition.  Why can’t the government just go and print the money for all the spending we want to do?  Until you understand that inflation is a tax, you will never really be able to give a great answer to that question.

The first thing you need to understand is that no government, no matter how big or how small, has any purchasing power of its own; it has to get its purchasing power from its citizens.  If a government wants to spend $100 on a new street sign, it first must go to its citizens to get the money to do so.  This is all very simple and obvious when you are talking about a local or state government, but it becomes less obvious when dealing with the Federal government because of the size of the budgets, and because of the Fed’s ability to print money.

In general, the government has one of three sources for its purchasing power: taxation of its citizens, borrowing from foreign and domestic lenders, or the printing of money.

It is the money-printing thing that causes all of the confusion.

The second thing you need to understand is that there is a difference between wealth and money.  Wealth is an accumulation of purchasing power – it is the difference between what you produce versus what you consume.  This is true of a household and of a nation.  If you produce a lot but consume relatively little, the production that you did not convert into consumption will accumulate as future purchasing power. Thus you have created wealth.

Money is NOT wealth – it is the tool we use to allocate purchasing power among members of a society.  Increasing the amount of money in circulation does NOT create more wealth, it just changes the allocation of the existing purchasing power.  The creation of wealth has nothing to do with the money supply – wealth can be created even if the money supply is decreasing as long as production exceeds consumption.  It can also be created when the money supply is increasing, but the point is that the expansion of the money supply is not what creates a nation’s wealth.  Just ask the folks in Zimbabwe.

To return to our first point, the government has no purchasing power of its own, so when it prints money it creates this illusion that it has fashioned wealth (or demand, or whatever term they want to use) out of thin air.  But it is an illusion.  They have not created more wealth nor more purchasing power, because the government has no purchasing power of its own that it has not taken from its citizens in one form or another.  By printing new money, the government transfers some of the purchasing power of the dollars that are currently in circulation to those new dollars that roll steaming off of the figurative printing press.

That means that the government gets new dollars that can buy things, but at the expense of your old dollars that cannot buy as much as they used to before the new ones were printed.  There is no increase in purchasing power because the printed money has not produced anything – there has been no creation of wealth and thus no increase in purchasing power.

It would be like adding yards to a football field, but leaving the field the same actual length.  You could double the number of yards on the field and it would not make the field any longer – it would just reduce the size of each yard.  But the consequence of playing football on a 200-yard field that is the same physical length as the 100-yard field with which we are all familiar would be that the players on the “200-yard” field would re-write all the statistical records.  There is no increase in the factual length, but there is a difference in the way it is measured.

If you can imagine your purchasing power as yards on that football field, when the number of yards on the field were doubled the actual length of your yardage was cut in half.  Maybe you had 6 yards on that field; when the field was increased to 200 yards you still had your 6 yards, but they were only worth what 3 yards would have been worth before the measurement was changed.

That is exactly what happens when the government prints money.  It robs the dollars you presently own of some of their purchasing power by putting that purchasing power in the new dollars they create.

For all that the proponents of inflationary money printing will say that it is for the good of the working man, nothing could be further from the truth.  Working-class people have precious little savings to begin with – the last thing they need is for those savings to be diminished by the printing of money.  Furthermore, their wages are also eroded by the shrinking purchasing power of each dollar they earn, so their cost of living skyrockets and their standard of living plummets.  Inflation is THE most regressive form of taxation that could ever be conceived.

It is an insidious and dishonest way to fund a government.  By printing money the politicians can seize your purchasing power without taxing you, and that usually means that they can do so without you really realizing it.  They can then use that purchasing power for whatever purpose they want – but you can be assured that at the end of the day the purpose they choose will be one that gets them reelected.

This is the reason that sound money is crucial to the survival of a society.  A money supply that is based on a real and tangible sum of wealth cannot be debased so easily or so casually.  Sound money – a gold standard – imposes discipline on lawmakers and forces them to spend only that purchasing power they come by through honest and transparent means.  Without that discipline the only thing that stands between the US and Zimbabwe is the character, integrity, and intellect of our elected officials.

Does that concern you as much as it concerns me?

Did You Hear the One About the President Who Called Out the Supreme Court…

It is almost becoming a joke.  Things are getting to be laughable in Washington these days.  I mean, more so than usual.

Set aside the irony that the President, who is also supposed to be a Constitutional scholar, would have his historic signature piece of legislation taken in front of the Supreme Court to determine whether or not it is constitutional; he has many times shown that he believes our charter document to be a doctrine much too limiting for his taste. Earlier this week the President challenged the Supreme Court directly, even as they considered the constitutional merits of Obamacare.

If you have not been paying attention to this one you have been missing one of the most significant political showdowns in years.

The President was recorded early this week saying that if the Court were to strike down the individual mandate in Obamacare it would be “an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress.”

Such a small sentence, but there are so many things wrong with it!

First of all, it would hardly be “unprecedented” for the Supreme Court to overturn an Act of Congress!  The founding fathers deliberately set up a system of checks and balances in our Constitution because they knew that each branch of the government would tend to want to expand their powers; the three “co-equal” branches of government are intended to prevent any one branch from stepping outside of its Constitutional authority.  In that role, striking down an unconstitutional Act of Congress is exactly what the Court is supposed to do.  That is a record and tradition that goes back to the beginning of the American government.

This is pretty simple stuff – it is taught to every middle-school student in Civics class.  Obama is touted as a Constitutional scholar, so surely he must know that history.

Consider also that one of his great heroes, FDR, had plenty of trouble on his own with the Supreme Court at that time overturning his radical New Deal programs.  Roosevelt got so frustrated that he threatened to increase the size of the court so he could appoint his own sympathetic justices.

Returning to the President’s comments, he also suggested that the Act passed by a “strong majority” of a democratically-elected congress – thus making it sound like there was broad, sweeping and bi-partisan support for the measure.  There was not!  The Obamacare vote was strictly along party lines and it only passed by a vote of 219 to 212 – a mere 7 votes.  A “strong majority” this is not.

Even if it were a large majority – 100% consensus, even – it would have no bearing on the Court’s decision.  Their role is to ensure that laws are written in accordance with the Constitution.  How popular a law might be is not relevant.  The President should know this.

This is not the first time the President has publicly disparaged the SCOTUS.  In his 2010 State of the Union Address he ridiculed the court for “reversing a century of law” in a campaign finance decision – on national television, with the Court sitting directly before him in the front row.

This week, the 5th Circuit Court of Appeals demanded that Attorney General Eric Holder explain what the White House meant by its recent comments about the Court’s role in reviewing Obamacare.  Mr. Holder responded as instructed in a 3-page single-spaced letter in which he defended the President’s position.  The letter closes with the Attorney General quoting text from prior Supreme Court cases that indicate the Court would exercise restraint in overturning Congressional acts,and would respect the Congress as a co-equal branch of government.

One wonders if the Executive Branch will decide now to reciprocate and begin to show a little respect to the Court.

THERE ARE NO CUTS in the Ryan Budget – so can we please stop pretending that there are?

The President is out speaking publicly about the horrific cuts in the Ryan budget proposal, and claiming that it is going to throw poor people out in the streets and take food from the mouths of babes.  Republicans, on the other hand, are all congratulating one another for passing sweeping reforms that will save the Republic from fiscal doom.

It is all a charade.

The budget proposal does plan some dramatic reforms to entitlement programs – but those proposed reforms are far in the future.  The entitlement reforms do not begin until 2018 – 2022.  Says ABCNews.com concerning Medicaid and Medicare reforms proposed in the budget:

“The changes would take effect in 2022 and impact those who are currently 55 years of age or younger. Also starting in 2022, the age of eligibility for Medicare would increase by two months per year until it reaches 67 in 2033.”

Here is the point:  nothing matters in a budget proposal if it is in a year after this one.

A budget was passed in 2005 – do you think that there were no plans for what congress was supposed to be doing this year in that budget?  There was another budget passed in 2009 – do you think there were no plans for this year’s spending in THAT budget proposal as well?  Do you think that the plans in 2009 had anything in common with those proposed in 2005?

Congress proposes a budget every year.  When they construct that budget, they do not go back to a prior year’s budget proposal to see what they are supposed to be spending – if they did, they would have a real problem because they would have to choose among all the different budget proposals that had been passed in previous years that all had different spending plans projected for the current year.

This is a part of the reason why Americans are getting sick and tired of their elected officials.  Why are we arguing over spending cuts projected for 6 or 10 years in the future, when the Congress at that time will not even remember that the proposed cuts were ever discussed?  Does anyone think that when 2022 comes around the Congress is going to pull out an old dusty copy of the 2012 budget proposal and read off the changes to entitlement programs they are supposed to enact – and then actually follow those proposals without argument or modification?

It is ridiculous.  What is even more ridiculous is that we as citizens allow ourselves to be pulled into the discussion as if it even matters.

Here is what you need to know about the Ryan budget:  the proposal for 2012 aggregate spending is $3.529 trillion.  Government spending in 2011 was $3.7 trillion.  You do the math – does that look like draconian cuts to you?

It gets better!  The Ryan plan actually criticizes the Obama 2012 budget plan for having a third straight year with a budget deficit of $1 trillion. The Ryan plan has a deficit that is much better – it is less than $1 trillion.  Do you want to know what the Ryan budget deficit is proposed to be?

$995 billion.

Yep! It is not $1 trillion – it is $.995 trillion!  That is MUCH more responsible than what those spendthrift Democrats wanted to do!

Cuts in spending and program reforms that are projected into the future are nothing more than political theater.  We as citizens need to wake up and hold our elected officials accountable.  Let’s talk about what you are going to do – THIS year, not in 2018 when you may not even be in office…

By Stan Brusoski