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Only $780 Billion
Posted By:  - 04/06/12

From the CBO Director's Blog: "The federal government incurred a budget deficit of almost $780 billion in the first half of fiscal year 2012...."  The good news, if this can be viewed as such, is that the deficit is $53 billion less than it was at this point last year.  It's too bad that the deficit is still projected to exceed $1.2 trillion for the entire fiscal year.

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Look Maryland, No Tax Hikes! Virginia Shows How It Can Be Done
Posted By: Brent Mead - 03/29/12

This week, Virginia gives preliminary approval to a new budget proposal absent of major tax hikes and free of most gimmicks. Yet, neighboring Maryland is seeking another round of record-setting, job-killing tax hikes.

It is an old story, but not a good one for taxpayers, as the Maryland State Senate and Governor O’Malley continue to mislead citizens by claiming tax hikes offer the only path to a balanced budget. A familiar refrain, reminiscent of the talk in states like Illinois and California, that have forsaken any shred of budgetary discipline.

Maryland continues to risk going down this economically damaging tax and spend path. Indeed, Virginia was tempted to take this direction as well, but its leaders chose a different approach. It may not be perfect, but promises a more prosperous destination for its citizens.

Some stark examples of how Maryland and Virginia's policy differences have impacted both states:

  • Virginia went from a projected deficit of over $4 billion to a budget surplus of $402 million, primarily by controlling spending and easing tax and regulatory burdens.
  • Maryland, despite passing the largest tax increase in state history four years ago, faces a billion-dollar deficit this year and is again considering massive tax hikes.
  • Virginia won a high-stakes regional battle in 2010 over Maryland and the District of Columbia to lure defense giant Northrop Grumman’s headquarters.
  • Maryland-based Bechtel Corporation announced it would relocate to Virginia, bringing 625 jobs and $18 million in investment.
  • Acentia, located in Silver Spring, also announced it would move to Fairfax, costing Maryland 60 jobs and investing $3.1 million in its new Virginia headquarters.
  • Maryland is ranked 42nd in business climate versus Virginia’s 26th. It comes as no surprise that Maryland has the 5th-highest tax burden in the nation.

Virginia lawmakers deserve praise for making the right decisions on their budget. On the other side of the border, taxpayers and businesses must keep fighting to prevent Maryland politicians from perhaps permanently crippling their economy.

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U.S. Exports to China Up Despite Dwindling Ex-Im Bank Funds
Posted By: Nan Swift - 03/14/12

Knowing that the Export-Import Bank (Ex-Im) will reach its $100 billion lending cap in the near future has sent defenders of the corporate welfare institution into a tizzy.  Yet, despite worries that trade and perhaps even capitalism will grind to a complete halt, trade has continued to flourish.  The Washington Post reports that “American exports to China have increased by 468 percent since 2001, when the country joined the World Trade Organization, and are up by nearly 50 percent since 2008.”

Surely, these amazing numbers are the product of our government’s “lender of last resort” and the taxpayer backed dollars we loan to businesses that were unable to get private funding?

Sadly, for those who are pushing reauthorization, no.

China imported more soybeans from the U.S. because people’s living standard has improved and they need more nutritious food,” said Zheng Fengtian, a professor of agriculture and rural development at Beijing’s Renmin University. Importing soybeans “satisfies people’s needs for meat, eggs and milk,” he said.

The effects of China’s newfound wealth and tastes are showing up elsewhere in the food business, to the benefit of American exporters. For the first three quarters of 2011, the Agriculture Department saw increases in exports to China in four categories: snack foods, pork, dairy products, and beer and wine.

“You’re seeing the impact of the economic growth in China that has brought much of the population into that middle-income consuming status,” said Scott Sindelar, Agriculture Department consul at the U.S. Embassy in Beijing. “It’s the growing population of middle-income consumers who are changing their food preferences and moving more and more to a meat diet.”

Total U.S. exports in 2011 came to $2.1 trillion.  During the same year, Ex-Im approved $32.7 billion in loans.  Though these are both HUGE numbers, when you do the math, Ex-Im rates just over one and a half percent of those exports and its impact is negligible.  What is making an impact, however, are free markets – simply people with more money with the ability to buy more new things.  The markets could always be freer of course, but it’s hard to see how a government entity here is responsible for more consumers in another country.

NTU sent an open letter to Congress last week urging legislators not to reauthorize more wasteful spending on Ex-Im.  And for more, excellent, information, I urge you to read Cato’s Sallie James on the Ex-Im Bank here.

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NTU Rates Congress and Presidential Candidates
Posted By: Andrew Moylan - 02/24/12

*Important note: NTU has not endorsed and will not be endorsing any Presidential candidate, nor is this post intended to suggest support or opposition for any Presidential candidate.*

There's been a lot of attention paid to NTU's annual Rating of Congress recently with regard to the Republican Presidential candidates. Since 1979, NTU has performed an annual Rating of Congress where we look at every vote on tax and fiscal policy, weight it from 1 to 100 based on importance, and calculate a percentage score indicating a Member's support for limited government (We did ratings before 1979 too but used a "key vote" system that's not directly comparable to our modern Rating). You can look at the entire record post-1992 (the year we began issuing letter grades) on our website, and our 2011 analysis will be available in a few weeks.

To clarify the record given the recent coverage, we released this statement yesterday where we published the entire Rating history for Rick Santorum, Ron Paul, and Newt Gingrich going back to 1979.

In last night's debate, Rick Santorum cited NTU in an exchange with Ron Paul...

"Ron, The Weekly Standard just did a review, looking at the National Taxpayers Union, I think, Citizens Against Government Waste, and they measured me up against the other 50 senators who were serving when I did and they said that I was the most fiscally conservative senator in the Congress in the -- in the 12 years that I was there.

My -- my ratings with the National Taxpayers Union were As or Bs."

The analysis to which Santorum is referring was performed by Jeffrey Anderson, a writer for the conservative Weekly Standard. Anderson did a couple of interesting things with the data, some of which I think are insightful and some of which I think are misguided. I'll try to lay my thoughts out in detail here, but it would really behoove you to go read his piece first for reference.

The first thing Anderson did was to confine his comparison of Santorum only to other Senators that served the entirety of his twelve year tenure in the Senate (from 1995 to 2006). While I suppose he would say he was trying to compare apples to apples, I think the end result is a bit of data cherry-picking which paints Santorum in a more positive light than would otherwise be the case. This restriction necessarily compares Santorum only to long-serving Senators, many of whom (like Robert Byrd or Daniel Akaka) had decidedly poor records based on NTU's metrics.

Anderson also converted each Senator's letter grade to a "grade point average," not unlike that which terrified you during your high school days. Anderson's conversion yielded a GPA of 3.66 on a 4-point scale for Santorum, a result which sounds quite good to anyone who remembers college applications. The problem with this is that it converts a short-hand measurement intended to give readers a general sense of a Senator's voting record to a precise number when our analysis already has precise numbers that do a better job. For example, Santorum's lifetime average score out of a maximum of 100% was 75.2%, including his House and Senate years. His Senate-only average was about 77.7%.

Another very instructive metric that doesn't garner quite enough attention, in my view, is the average rank. In addition to letter grades and percentage scores, we indicate how a Member compared to his or her peers by including their rank within the Chamber. To illustrate how useful it can be, look at Santorum's last year in the Senate, 2006. He received a grade of B+ and a score of 80%, but how did that compare with his peers? Well, it yielded a rank of 27th out of 100 Senators, meaning that 26 Senators had more conservative voting records that year and 72 had less conservative voting records. Santorum's average rank in the Senate was 19.5, which reflects a decent record (after all, he never received a grade worse than a B) but also one with a fair amount of variance (he ranked as high as 3rd overall in 2002 and as low as 33rd overall in 1999). Perhaps I'm biased because I work on the Rating, but I think these numbers are more instructive than the converted short-hand GPA from Anderson's analysis.

Beyond these quirks, Anderson actually did something quite interesting in comparing Santorum's voting record to how conservative (or not conservative, in this case) his state was...

"Based on how each state voted in the three presidential elections over that period (1996, 2000, and 2004), nearly two-thirds of senators represented states that were to the right of Pennsylvania.  In those three presidential elections, Pennsylvania was, on average, 3 points to the left of the nation as a whole.  Pennsylvanians backed the Democratic presidential nominee each time, while the nation as a whole chose the Republican in two out of three contests.

Among the roughly one-third of senators (18 out of 50) who represented states that — based on this measure — were at least as far to the left as Pennsylvania, Santorum was the most fiscally conservative.  Even more telling was the canyon between him and the rest.  After Santorum’s overall 3.66 GPA, the runner-up GPA among this group was 2.07, registered by Olympia Snowe (R., Maine).  Arlen Specter, Santorum’s fellow Pennsylvania Republican, was next, with a GPA of 1.98.  The average GPA among senators who represented states at least as far left as Pennsylvania was 0.52 — or barely a D-.

But Santorum also crushed the senators in the other states.  Those 32 senators, representing states that on average were 16 points to the right of Pennsylvania in the presidential elections, had an average GPA of 2.35 — a C+."

This is a rather novel way to look at things, and one I'd admit hadn't really occurred to me before. It is, of course, true that a Republican Senator from Utah can "afford" to vote in a much more conservative manner than a Republican Senator from Massachusetts and still keep his or her job. The cynic in me decries the fact that politicians test the winds before casting votes, but it is an undeniable fact of life and it manifests itself time and again in Congress.

While I've spent most of this post talking about Rick Santorum, I'd be remiss if I didn't mention Ron Paul, with whom Santorum had the debate exchange. On our Congressional Rating, Ron Paul is almost without peer. His lifetime average is over 90%, he has snagged the top spot four times, ranked 2nd overall seven times and has never ranked lower than 10th overall in the House. In other words, in his "worst" year on our Rating, he still had a more fiscally conservative voting record than 425 out of 435 Representatives. I haven't done any in-depth analysis on this question, but the only Members I can think of that could claim to equal his performance would be Jeff Flake (92.4% lifetime average, 1st overall eight years in a row, never lower than 2nd overall) and Jim Sensenbrenner (85.9% lifetime average, 1st overall twice, 2nd overall four times, never lower than 13th overall).

The only issues I can think of on which Ron Paul might have harmed (obviously only by a very small amount) his Rating would be free trade agreements (which he generally votes against and NTU supports) and the myriad earmark elimination amendments that Jeff Flake carried from 2006-2009 (which NTU supported and he generally voted against). But on the whole, his record is exemplary.

Hopefully this is helpful in adding to the debate, and stay tuned for our 2011 Congressional Rating release in a few weeks.

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Tax Hikes Go Back to the Future
Posted By: Andrew Moylan - 02/07/12

Today, the Senate Finance Committee is marking up their transportation bill with an eye toward adding billions in tax increases to cover the overspending in the bill. More spending, more tax hikes to pay for it. Stop me if you've heard this before. But there are two proposals in particular that gave me a little bit of policy deja vu.

First, the so-called "Chairman's mark" includes a $3 billion retroactive tax increase targeting the "carrying forward" of credits claimed back in 2009. You might remember 2009 as the year before the year before this year. The halcyon days when we passed a "stimulus" bill that was going to help our economy boom by 2012. The optimistic times when we could totally afford a trillion-dollar government-run health care program and our debt was "only" $10-11 trillion (as opposed to $15 trillion and counting today). Some on the Senate Finance Committee apparently would like to relitigate tax policy from that wonderful era in American history and enact a retroactive tax hike.

Now, it should be noted that the two credits they're targeting (the alternative fuel mixture credit and the cellulosic biofuel producer credit) are not ideal tax policies by any stretch of the imagination. Particularly the alternative fuel credit, given that it's "refundable" and thus acts like government spending rather than simple tax reduction. A smart tax code wouldn't include either of these policies but would levy low, consistent taxes across the board for all types of fuels and producers. But enacting retroactive tax increases is a much more egregious violation of principles of sound tax policy than either of those dumb credits.

The second effort, a proposed amendment to the Chairman's mark from Senator Robert Menendez (D-NJ), would target the oil and gas industry for punitive tax treatment by eliminating provisions like the Section 199 manufacturer's deduction or the "dual capacity" credit for them alone. If we've written it once, we've written it a hundred times: singling out oil and gas companies for higher taxes is bad tax policy and it's bad energy policy. Thankfully, the Congress has thus far largely agreed with us as the dozens of attempts in recent years to impose Menendez-like tax increases have all failed at one point in the process or another.

The Senate Finance Committee will be taking up these issues this afternoon and we hope they focus their efforts on reducing wasteful spending and not on retroactive tax hikes or tired attempts to punish an unloved industry.

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FAA Conference Report: Positive Steps, Missed Opportunities
Posted By:  - 02/06/12

Later today the Senate will vote on the Conference Report on the Federal Aviation Administration (FAA) Reauthorization Act. Although the bill takes many positive steps forward, it ultimately missed several opportunities for savings and reforms that fiscal conservatives had sought.

Since 2007 the FAA has been lurching from short-term extension to short-term extension (23 in all), which has become a serious logistical impediment for the aviation sector’s attempt to modernize and grow. The Conference Report would reauthorize FAA operations and programs for four years, thus creating a more stable funding path for the agency and predictability for the aviation sector. Moreover, it does so without worsening the already onerous tax burden on air travel. Given that consumers can often face a higher effective tax rate on their airline tickets than they do on their 1040 tax returns, it’s too bad Congress couldn’t go one step further and actually provide relief from this heavy tax load.

The bill makes incremental (and in some cases solid) progress on a number of other issues. Although funding for the wasteful Essential Air Service has not been eliminated, the modest eligibility restrictions in the legislation could provide a starting point for deeper reforms. Language was also included to increase airports’ ability to hire private security screeners in place of Transportation Security Administration (TSA) workers. Furthermore, the package would make improvements to a National Mediation Board rule so as to better balance labor organizations’ attempts to unionize a workplace with the rights of workers to not participate in union activity.

Despite this progress, the Conference Report’s elevated authorization levels remain a major concern. NTU has previously expressed its support for the House-passed FAA Reauthorization Bill, which would have funded the FAA at 2008 levels. By contrast the Conference Report would extend FAA funding at inflated 2011 levels – a $3.8 billion increase. At a time when taxpayers are expecting government agencies to do more with less, the Conference Report could have been more aggressive at restraining expenditures and reinforcing a private sector-driven model that allows our aviation industry to more effectively innovate and evolve. Bottom line: even as lawmakers line up to vote for this compromise legislation, Congress could have done – and in the near future will need to do – more to ensure aviation policy is on a fiscally and economically desirable flight path.  

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What Wasn't in the State of the Union?
Posted By: Andrew Moylan - 01/25/12

So President Obama's 2012 State of the Union is over now and everybody's analyzing the details of what he said (including our NTU Foundation, where researchers are working on figuring out exactly how much his proposals would cost for taxpayers). For someone who claims to be laser-focused on economic growth and job creation, we couldn't help but notice that he left a few things out that SHOULD have been in the speech. For example...

The Keystone XL pipeline

The President conveniently neglected to mention that his Administration just last week denied a permit to build the Keystone XL pipeline, a project to safely deliver Canadian energy resources to the American market. Construction of Keystone XL could have generated as many as 20,000 jobs while bringing much-needed energy to a hungry domestic market that has faced obstacle after obstacle from this Administration. We've been calling for its approval since last summer, but unfortunately for taxpayers and consumers, the President ignored those calls and put the kibosh on the project.

Unlocking valuable spectrum

Cost-free to taxpayers, beneficial in reducing our staggering deficit, and absolutely vital to the continued growth and innovation of technology and the internet. What no-brainer policy am I talking about? Competitive spectrum auctions. Did the President talk about it last night? Of course not! There have been rumblings from both sides of Capitol Hill and both sides of the aisle about spectrum for some time, but some Presidential leadership could work wonders in ushering a win-win policy to completion.

Allowing businesses to...you know, conduct their business

This one's sort of a personal pet-peeve, but of course the President failed to mention the meddling in which his Administration has engaged/will engage in private business operations. Things like the AT&T - T-Mobile merger (which NTU supported) that his Justice Department and FCC squashed last month. Or the ongoing FTC antitrust investigation into Google, a company which charges its users exactly $0 to access its search engine and other services. Or the ongoing process of the Express Scripts - Medco Health Solutions merger. Keeping the federal government out of the way, by and large, is the best way to foster economic growth, but this Administration has time and again shown a tendency towards populist intervention that is unhelpful to say the least.

An energy strategy not centered on subsidies

The President did talk about energy last night, and some of it was commendable. He talked about opening up some more areas under federal control to energy exploration, though I'll await further details before judging. But most of what he said focues on how we should be showering even MORE subsidies on energy technologies that are to the liking of Barack Obama (namely: solar, wind, anything vaguely "green" or "renewable"). And of course he did it while taking swipes at the "Big Evil Oil Companies" he so frequently derides. Funny side note: the biggest of the oil companies that are the focus on Obama's vitriol was just passed as the most valuable company in the U.S. by Apple. The wife of the late Steve Jobs sat beside the First Lady during the speech and got a specific shout-out (a positive one!). I guess he doesn't mind that they're "the 1%" of companies and that they're sitting on tens of billions in largely idle cash reserves, another practice he has criticized elsewhere.

Any serious discussion of bipartisan spending reductions

The President made some vague remarks about "working together" in a bipartisan fashion, along with some passing comments about reducing waste in the federal budget. But he didn't come anywhere close to making it a serious and substantive part of his speech. Too bad. We already worked with the liberal U.S. Public Interest Research Group to give him a $1 trillion head start on spending cuts that left and right could agree upon and stand ready to assist him. Let's just say I'm not eagerly awaiting his call.

What else should the President have covered if he were serious about economic growth and job creation?

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Laudable Goals but Lack of Facts Hamper Obama's State of the Union
Posted By:  - 01/24/12

“A country that leads the world in educating its people. An America that attracts a new generation of high-tech manufacturing and high-paying jobs. A future where we're in control of our own energy, and our security and prosperity aren't so tied to unstable parts of the world. An economy built to last, where hard work pays off, and responsibility is rewarded.”

 

That’s the vision that President Obama laid out in his State of the Union speech. What he didn’t was any path to achieve those goals.

 

When it comes to education, the Department of Education’s spending is at an all-time high. Since fiscal year 2000 it has grown from $29.4 billion to $64.1 billion in 2010. But our enormous investment has seen little return. Academic achievement levels have stayed flat. What we need is not more spending, not more programs, but smarter spending and careful reforms.

 

Similarly, in manufacturing and energy the answer is not more government spending, but instead, finding clearing the way for private sector investment.

 

We’ve already seen that Washington makes a terrible investor. Projects like Solyndra, Fisker Automotive, and countless other green initiatives were taxpayer-funded gambles that came up snake eyes. Rather than throw good money after bad chasing some campaign promise, Washington should lower corporate tax rates (which will soon become the highest in the world), pass legislation to remove the red-tape preventing entrepreneurs from accessing the capital necessary to get their ideas off the ground, and clear out the underbrush of regulations that is stifling private sector growth.

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State of the Union - States' Perspective
Posted By: Brent Mead - 01/24/12

 

On Education

President Obama's remarks on education are how shall I put it...disappointing.

 

At a time when other countries are doubling down on education, tight budgets have forced States to lay off thousands of teachers.  We know a good teacher can increase the lifetime income of a classroom by over $250,000.  A great teacher can offer an escape from poverty to the child who dreams beyond his circumstance.   Every person in this chamber can point to a teacher who changed the trajectory of their lives.  Most teachers work tirelessly, with modest pay, sometimes digging into their own pocket for school supplies – just to make a difference.

Teachers matter.  So instead of bashing them, or defending the status quo, let’s offer schools a deal.  Give them the resources to keep good teachers on the job, and reward the best ones.  In return, grant schools flexibility:  To teach with creativity and passion; to stop teaching to the test; and to replace teachers who just aren’t helping kids learn.

We also know that when students aren’t allowed to walk away from their education, more of them walk the stage to get their diploma.  So tonight, I call on every State to require that all students stay in high school until they graduate or turn eighteen.

...

Of course, it’s not enough for us to increase student aid.  We can’t just keep subsidizing skyrocketing tuition; we’ll run out of money.  States also need to do their part, by making higher education a higher priority in their budgets.

First and foremost, K-12 education should be left to the states and local governments. Any solution in the United States becoming globally competitive will not come from overly expensive programs like "Race to the Top." Most of the President's proposal focusing on increasing taxpayer committments to education, while reducing the few accountability controls on public education.

On a broad point, states make education a priority, contrary to the President's insinuations. According to the liberal, Centers for Budget and Policy Priorities, K-12 and higher education funding constitutes upwards of 40% of state spending. Compared to our foreign counterparts, the $91,700 we spend per pupil is the 2nd highest in the industrial world, behind only Switzerland. Despite the massive treasure we pour into public education we have recieved stagnant returns. More students enter college needing remedial courses than ever before. Simply put, and poignant during school choice week, the continued devotion to a public education monopoly is not the solution.

Moreover, while potentially laudable, the requirement that the state school all children up until 18 is simply not realistic, either fiscally or administratively.

Finally, it is courteous of the President to acknowledge that increased federal tuition aid in higher education has not made college any more affordable. Unfortunately, his solution is for states to bankrupt themselves propping up the higher education bubble.

On Milk

I’m confident a farmer can contain a milk spill without a federal agency looking over his shoulder. 

Crying over spilled milk jokes aside, milk control remains a persistant abuse of government authority. Milk control boards have long engaged in price setting and artificially hold consumer costs high.

On Health Care

I’m a Democrat.  But I believe what Republican Abraham Lincoln believed:  That Government should do for people only what they cannot do better by themselves, and no more.  That’s why my education reform offers more competition, and more control for schools and States.  That’s why we’re getting rid of regulations that don’t work.  That’s why our health care law relies on a reformed private market, not a Government program.

So ends the discussion on the far-reaching law set to go into place two years from now. From a state budget point of view, the primary problem with Obamacare is that it is a Government program. Most of the claimed benefits of reducing the uninsured are only accomplished by massive expansions of Medicaid.

I was somewhate disappointed the President did not expound upon the growing problems with the law's implementation. Politico had a decent summary of states who have thus far resisted efforts to stand up insurance exchanges. Another good resource is the Heritage Foundation study detailing some of the financial implications for states. Needless to say, they are not pretty, even when most of the negative effects are masked by an enhanced federal match. Make no mistake, the Government program that is health care reform will bankrupt the states. 

The long-term budget pressures related to Medicaid, and the enhanced costs associated with Obamacare, are one of the most pressing concerns for state's budgets. A majority of state's attorney generals have filed suit agains the federal government due in part to these concerns. This is a serious for the states and deserves more than one sentence in this speech.

On Infrastructure

So much of America needs to be rebuilt.  We’ve got crumbling roads and bridges.  A power grid that wastes too much energy.  An incomplete high-speed broadband network that prevents a small business owner in rural America from selling her products all over the world.

Investment in legitimate public goods is a necessary and proper role of government. However, as is currently being debated in California, the infrastructure programs being debated are not necessities they are expensive frivalities.

California's high speed rail project has ballooned in costs to close to $100 billion. The only reason the project is still be considered rather than sent back to planning is that unless ground is broken soon, the state will forfeit a multi-billion loan from the federal government. Worse, the initial portion of the line will be built in a sparsely populated region, which all experts agree will not generate ridership numbers sufficient to justify construction. It is a boondoggle in every sense of the word.

A similar project in Connecticut drew NTU's attention and ire last year. Too often, when the federal government attempts to spur infrastructure development it leads to wasteful spending on the state level.

Finally, a brief note on broadband. The stimulus bill dedicated $7.2 billion towards rural broadband networks. The Government Accountability Office found high levels of waste, primarily resulting from duplicative over-builds. For instance, $100 million was spent in Western Kansas to build a broadband network in an area already served by multiple private providers. Therein lies the problem. President Obama is not identifying an infrastructure deficiency, he is trying to make the argument that the government can do a better job than the private sector. As economic studies have shown, this is simply not true.

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Rep. Jordan: "We Have to Stop the Crazy Spending"
Posted By:  - 01/18/12

Today the House voted its disapproval of President Obama’s decision to raise the debt limit by another $1.2 million. Obama's debt limit request comes less than six months after a $900 billion boost. And there is little indication that the trajectory of America’s debt and deficits will improve in the near future.

The longer Washington waits the more difficult it will get to put the nation on a sustainable fiscal path. One of the primary reasons is that as the debt goes up, so do our interest payments, a fact that Representative Jim Jordan (R-OH) made clear today on the House floor.

“Interest payments on the national debt will cost more this year than the entire federal budget did in 1972, and that’s with interest rates at historic lows,” Jordan noted. “We have to stop the crazy spending if we’re going to stop borrowing. Fiddling around the edges won’t get the job done”

According to the CBO the federal government will spend $238 billion on interest this year. And that’s with interest rates around 2.5 percent. To compare, the average rate the federal government paid over the last 20 years was 5.7 percent. As former Federal Reserve governor Lawrence Lindsey explains in the Wall Street Journal, a reversion to those “normalized” rates would have a devastating effect on our budget.

“Should we ramp up to the higher number, annual interest expenses would be roughly $420 billion higher in 2014 and $700 billion higher in 2020.

The 10-year rise in interest expense would be $4.9 trillion higher under “normalized” rates than under the current cost of borrowing. Compare that to the $2 trillion estimate of what the current talks about long-term deficit reduction may produce, and it becomes obvious that the gains from the current deficit-reduction efforts could be wiped out by normalization in the bond market.”

Sadly, even those numbers may be conservative. As our national debt soars and Washington continues to show no signs of changing its spending habits, bond markets will demand ever higher interest rates to reflect the risk of buying our debt. It’s an issue we need to get a handle on now before it’s too late. And although a resolution of disapproval will do little to alter our fiscal course, it sends a signal that things must change in spend-happy Washington. Now if only the Senate would pass it as well…

 

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