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Government Spending

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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H.R. 3638, Act for the 99% in The Taxpayer's Tab
Posted By:  - 01/13/12

Did you miss this week's issue of NTUF's Taxpayer's Tab?  If so, you missed quite a bit.  Here's a quick recap.

This week, NTUF highlighted its analysis of H.R. 3638, Act for the 99%.

 

Sponsor:  
Congressman Raul Grijalva (D-AZ)

Annualized Cost: $81.7 billion ($408.6 billion over five years)

Number of Cosponsors: 19 Congressmen

The goal of the 264-page Act for the 99% is to help American workers keep their jobs or find new jobs if they are currently unemployed. The bill would increase domestic spending on a number of new jobs programs while making cuts in defense spending.  H.R. 3638 also increases tax rates for some taxpayers, extends tax credits for certain individuals, and eliminates tax incentives for certain corporations.

Here are just a few of the bill's proposals:

  • Department of Defense spending would be reduced to and frozen at 2008 levels.

  • The Public Land Corps and Civilian Conservation Corps would be charged with hiring new workers to improve and construct new public works on government lands.

  • A Teachers Corps would be established to ensure the jobs of currently serving instructors and education-related personnel. It would also hire new teachers as needed.
  • The bill would raise the cap on wages and incomes subject to Social Security taxes from $110,000 to $250,000.
  • Create a new transaction tax on stock market security transactions.

NTUF estimates the Act for the 99% would result in $408.6 billion in new spending over the next five years -- a net of $456.3 billion in proposed spending and $47.7 billion in savings.

For more details, read the entire Taxpayer's Tab online.

You can receive your own copy of The Taxpayer's Tab each week via email by signing up here.

Remember, you can support NTUF and its ongoing work by making a tax-deductible contribution here.

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(AUDIO) Pete Sepp joins the Small Business Advocate Jim Blasingame to discuss U.S. Debt
Posted By: Douglas Kellogg - 01/11/12

Listen to NTU Executive Vice President Pete Sepp on the Small Business Advocate with host Jim Blasingame as he answers the question "How can we avoid becoming Greece?"

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The Payroll Tax Deal
Posted By: Andrew Moylan - 12/22/11

So, good news/bad news. The good news is it sounds like we have a deal to extend the lower payroll tax in order to prevent a substantial tax increase from hitting folks in the midst of a very difficult economy. The bad news is it's only good for two months (for now). The House will pass a two-month extension of the payroll tax (with one language tweak to fix the glitch I blogged about recently) and Democratic Leadership will name conferees for the year-long version in order to negotiate a final bill. In essence, the two-month patch gives some breathing room for negotiators to hammer out a bill fcovering the rest of 2012.

Lots of liberal media-types are protraying it as a big "cave" by House Republicans, which is a bit puzzling to me. Yes, House Republicans are now agreeing to pass a two-month extension that they (rightly!) pointed out was not good long-term tax policy, but Senate and House Democrats are pledging to stop their obstruction of the conference committee process for the year-long extension at the same time. So really, both sides are giving some ground here. The result is a two-month reprieve and, hopefully, a speedy resolution on a year-long product that maintains lower payroll taxes, trims spending, and maintains job-creating provisions like expediting the Keystone XL pipeline.

For taxpayers, the real test will be when Congress returns in the new year and begins work on the longer-term bill. Nobody can really call this deal "victory" until we have secured a legitimate year-long extension of lower payroll taxes coupled with spending reductions. I hope that Harry Reid, Nancy Pelosi, and their appointments are going to be productive participants in the conference process so that they can join House Republicans as the only Members of Congress to pass a full-year payroll tax extension early next year.

 

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Who's Right on Payroll Tax Fight? The House is Closer
Posted By: Andrew Moylan - 12/21/11

In the ongoing saga of the payroll tax, there's now a fight between the House and Senate approaches to the problem. The House passed a year-long extension of the reduced payroll tax and coupled it with several other good things (expediting a decision to approve the Keystone XL energy pipeline, full expensing of certain assets for businesses) and, unfortunately, some not-so-great things as well (a further extension of extraordinarily long-term unemployment benefits, though in transitioning from a 99-week to a 59-week duration the bill did return substantially closer to the 26 weeks that prevailed pre-recession).

Of even more concern to us was the fact that bill text was available for little more than a day before voting occurred, in direct contravention to House Republicans' pledge to give 72 hours to review all legislation. All told, it wasn't the greatest piece of legislation ever drafted, but it was enough to garner NTU's qualified support because it would have prevented a substantial tax increase in the middle of a difficult economic recovery while advancing the cause of job-creating efforts like Keystone XL.

As is its custom these days, the Senate did not take up and pass the House bill. Instead, they crafted their own two-month extension of the bill thus ensuring another battle over the payroll tax early in the new year. It passed Saturday morning, and right away Speaker Boehner and other House Republicans began saying they could not support this short-term patch. To compound the issue, payroll experts have said that the Senate bill is unworkable anyway. In short, a tweak in the Senate version would essentially create a two-bracket payroll tax (as opposed to the single, flat rate that exists today) which payroll processors claim that their systems cannot accommodate.

NTU's preferred solution to the problem would be to pass a single piece of legislation that extends the reduced payroll tax rate and pairs it with substantial spending reductions to ensure that there is no deficit impact. Heck, we even gave Congress a trillion-dollar head start on identifying the low-hanging fruit of wasteful spending. Neither bill adhered to our preference, but who got closer? Which approach is better for taxpayers?

The answer is the House version. Congress' recent practice of passing short-term extensions on just about everything (the "doc fix," the AMT, the yearly package of "tax extenders," continuing resolutions to fund the government, etc) is quickly becoming more than just tiresome and unfortunate. It's becoming a real threat to taxpayers. Everyone in Washington has known for the entirety of 2011 that the reduced payroll tax rate would expire at the end of the year. We had an entire year to craft a bill that would prevent a tax increase and reduce spending, but only now, a few days before Christmas and just ten days before the end of the year, is Congress even dealing with the issue. The time has come to stop budgeting in fits and starts.

Taxpayers deserve better than this, and businesses and employers all across the country deserve to know what tax system they'll have to comply with in a week and a half. Both chambers of Congress should return to Washington and hammer out a solution, whether through a conference committee or a negotiated solution that prevents a tax hike, cuts spending, and moves the ball forward on job creation.

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Nanny State Program Faces the Ax
Posted By: Andrew Moylan - 12/15/11

An impossibly ridiculous program that has wasted millions of your tax dollars funding nanny state campaigns to pester you about health might finally be at death's door. The "Prevention and Public Health Fund" (which I warned about more than a year and a half ago when it had a different name and piles of cash from the "stimulus" bill) looks to finally face the ax at the hands of the House of Representatives when it votes tomorrow on the massive $1 trillion "megabus" appropriations bill.

H.R. 3671, the Consolidated Appropriations Act, takes aim at the PPHF and its funding of state- and local-level campaigns for higher taxes and stricter regulation on everything from soda to tobacco products. Though they are of course justified in the name of "public health," the PPHF-funded efforts have spent millions of hard-earned taxpayer dollars in support of a host of policies that raise costs and restrict availability for perfectly legal products while nagging people to exercise more and eat their Brussels sprouts. Kudos to House appropriators (you won't hear me saying that very often) for seeing fit to include language in the megabus to put an end to this insanity.

The "slippery slope" argument that is so frequently deployed in Washington isn't always accurate, but the PPHF is perhaps the best example that it not only exists but is even steeper and more slippery than we could have imagined. Decades ago when the anti-tobacco crusade really began in earnest, many limited-government advocates warned that it would only be a matter of time before government began trying to tax into extinction and restrict other products with which they were displeased. Those warnings are proving prescient now that many states and localities are fighting battles not just against so-called "sin" products like tobacco or alcohol, but on fatty foods, sugar-sweetened drinks, even SALT for God's sake! But the PPHF really takes the cake (as long as cake is still legal, that is) because in many cases, those dollars are handed out to lobbyists and PR firms to run glitzy ad campaigns to snuff out whatever products or behaviors Big Brother doesn't like. Tax dollars funding lobbyists who fight to raise your taxes! It's a spiral of stupidity.

Thankfully, House Leadership has seen that insanity for what it is and targeted it in the appropriations bill. Here's hoping that, whatever happens with the end-of-the-year appropriations fight, common sense prevails and the PPHF gets what it deserves: elimination. After all, if Congress can't cut a program this egregious, what can they cut?

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Taxpayers Still Paying For Blago's Policy Disasters
Posted By: Kristina Rasmussen - 12/07/11

Former Illinois Gov. Rod Blagojevich was sentenced today to 14 years in prison, but the real sentence is the one taxpayers will serve many years after. He mastered the art of pairing populist rhetoric with expensive new programs directed toward his core constituencies. That mastery, however, was confounded by incredible lapses of judgment and public grandstanding that baffled both voters and politicians alike.

Perhaps worst of all, as CEO of Illinois, Blagojevich institutionalized a culture of deficit spending. He accomplished this so effectively that Blagojevich’s successor, Gov. Pat Quinn, and other lawmakers feel comfortable perpetuating the ruinous habits of spending and borrowing more than the state can afford. Fiscal ineptitude is the new norm.

The Illinois Policy Institute details Blagojevich's lasting effect on Illinois' fiscal condition in a new report. Read it at www.illinoispolicy.org/blago.

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