Tuesday, July 15th, 2014 and is filed under Blog, Debt, Economy
Earlier today, the Congressional Budget Office released its updated long-term budget projection, and there is not a lot of black ink in that report. CBO estimates that, despite receiving record revenue gobbled up from the private economy, the Treasury will continue to run enormous deficits over the next 25 years. By 2039, the public share of the debt is projected to rise from 74% of GDP to 106%.
In light of this new report, it’s worthwhile to go back a tally Obama’s debt tab from the past 5 years and explore what it means for our future.
At present, the gross federal debt stands at $17.589 trillion, which is more than 103% of our GDP. That is an increase of almost $7 trillion since President Obama was inaugurated five and a half years ago. To put that in perspective, it took from the presidency of George Washington until 2004 to accumulate $7 trillion in debt. Concurrently, Obama accumulated roughly $2.9 trillion in foreign-held debt over a little more than 5 years – from $3.071 trillion to $5.96 trillion.
More importantly, roughly 90%, or $6.2 trillion, of that $7 trillion increase is comprised of the public debt, not the so-called intra-governmental debt from Social Security (the money we ‘owe ourselves’). It took from 1789 until the final months of the Bush administration for us to accumulate $6.2 trillion in public debt, which now stands at $12.6 trillion, roughly 74% of the economy. It is this number that is projected to rise to 106% over the next 25 years, according to the CBO. And remember, this president still has another two and half years to radically transform America.
So what does all of this mean? Who cares about some banal numbers on a federal balance sheet?
Contrary to the perception of many policy-makers, the national debt is not some abstract problem that will only affect future generations once investors no longer trust the security of federal treasures. As CBO explains (page 10), this is an immediate and near-term problem:
The large amount of federal borrowing would draw money away from private investment in productive capital in the long term, because the portion of people’s savings used to buy government securities would not be available to finance private investment. The result would be a smaller stock of capital and lower output and income than would otherwise be the case, all else being equal. (Despite those reductions, the continued growth of productivity would make output and income per person, adjusted for inflation, higher in the future than they are now.)
Federal spending on interest payments would rise, thus requiring higher taxes, lower spending for benefits and services, or both to achieve any chosen targets for budget deficits and debt.
The large amount of debt would restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges, such as economic downturns or financial crises. As a result, those challenges would tend to have larger negative effects on the economy and on people’s well-being than they would otherwise. The large amount of debt could also compromise national security by constraining defense spending in times of international crisis or by limiting the country’s ability to prepare for such a crisis.
Much like over-burdensome regulations, high levels of debt serve as a hidden tax on the economy by sucking out private investments through an inefficient allocation of capital diverted towards growing dependency and perpetuating political careers. Also, the relatively-low annual payments for interest on the debt, hovering around $230 billion a year, are only a temporary reprieve due to historically low interest rates. According to Investors’ Business Daily, “if Washington had to pay the average interest now that it paid in 2000 (6.4%), it would be paying $500 billion more each year to stay afloat.”
Sadly, Americans are used to navigating opportunities and challenges based upon instant gratification or imminent danger. Warning voters about the threat of our national debt to the future of their grandchildren is not enough. Conservatives need to make the case that the current level of debt is a mitigating factor to current economic growth and that it will continue to diminish their wages and job opportunities.
Friday, May 9th, 2014 and is filed under Blog, Debt
Evidently, the fact that Republicans “only” control the House necessitates that they pass bills with Democrats support. Once again, House leaders passed a bill through the House with only a majority of Democrat support.
As we noted yesterday, the Overseas Private Investment Corporation is a corporate welfare bank to subsidize foreign investment. 106 Republicans voted for it while 116 voted against it. This is yet another violation of the precedent to pass bills only with majority Republican support. After all, Republicans control the House for a reason. House leadership has passed bills with Democrat support on a number of other occasions:
- “Fiscal Cliff” tax hikes and stimulus pork (HR 8 1/1/13)- This was the McConnell-Biden tax hike coupled $230 billion in new stimulus spending, including $40 billion in green energy pork. It passed with only 85 Republican votes.
- Sandy Pork Bill (HR 152, 1/15/13) – This bill contained $60 billion in extraneous pork spending, of which the majority would be appropriated long after the recovery from the Hurricane is over. It passed with just 38 Republican votes.
- “Violence Against Women Act (S. 47 2/28/13) – This was the Senate version of VAWA that dramatically expanded the unconstitutional program to include a number of social engineering provisions and violations of due process. It passed with only 87 GOP votes.
- Battlefield preservation pork (HR 1033 4/9/13) – This was a random Democrat suspension bill to give money to states for the purpose of buying up more land. It passed with less than half of Republican members.
- Obamacare pre-existing conditions program (HR 1549 4/25/13) – to pump $4 billion into Obamacare’s federally managed and manipulated high-risk pool for those with pre-existing conditions. The bill was pulled from the floor at the last minute due to a mass revolt within the conference.
- October CR Funding Obamacare and Raising Debt Ceiling RC#550, 10/16/13) – Passed with only 87 Republicans supporting it.
- February 2014 Debt ceiling increase RC# 61 (2/11/14) – Passed under suspension with just 29 GOP votes
- Doc Fix extension with phony spending offsets (3/28/14). Passed by voice vote despite conservative opposition.
This end-run around the majority was perpetrated by all leaders. This includes Cantor and McCarthy. Cantor is openly flaunting his disenfranchisement of conservative voters. Any effort to elect the same leadership slate for next Congress will only serve to disenfranchise the conservative voters who elected a GOP majority. It’s time we get commitments from all members and candidates as to whether they will join the effort to replace the current leadership.
Ask yourselves this question: with hundreds of millions of dollars behind the effort to pass amnesty and comprehensive open borders legislation, will these leaders think twice about passing amnesty with Democrat support?
That’s why primaries are so important. #PrimariesMatter
Cross-posted at RedState.com
Wednesday, March 19th, 2014 and is filed under Blog, Debt, Economy
Earlier this year, we were entreated to a vivid example of how neither party is committed to shrinking the federal government and bolstering private enterprise when they passed a five-year Farm/Food Stamp bill. CBO pegged the 10-year cost of the bill at $965 billion, up from $604 billion in 2008. Yet, the politicians sold it as an $8 billion cut because it fell short of the notional $973 billion baseline.
Aside for the raw cost of the bill, the structural changes on the agriculture side and the lack of reforms on the food stamp side actually made the bill even worse: At the time, we noted the following:
Moreover, any projected score on food stamp spending is meaningless. The food stamp program is part of mandatory spending, and given the fact that this bill fails to structurally reform the program on a large scale, the 10-year cost will continue to rise as more people are encouraged to join.
On the agriculture side, this bill is an even bigger joke. Drafters of the bill are boasting how they are abolishing $5 billion in direct subsidies. The problem is that this bill creates new subsidy programs, which will be even more expensive and market-distorting – and they will be permanent law, not subject to reauthorization.
The Agricultural Risk Coverage (ARC) would guarantee shallow loss off of record revenue farmers have been enjoying over the past few years. The shallow loss program would kick in when revenue dips below 86% of recent year amounts The Price Loss Coverage (PLC) would trigger subsidies when prices for certain commodities dip below target prices. For many crops, prices are already beginning to drop towards the cusp of those trigger levels. Hence, the cost of these programs will probably spike much higher than originally projected when CBO scored the bill with the higher prices.
Less than two months later, both predictions have come true. With regards to food stamp spending, the lack of structural reforms is precluding the actualization of even the notional baseline savings. Here is a report from NPR explaining why the “savings” from food stamp “reforms” never got off the ground:
The cuts were related to a program known as “heat and eat.” In the past, it had allowed the participating states to give low-income households as little as $1 a year in home heating aid so they’d qualify for more food stamps.
States said it made the program and got help to those who needed it. But the maneuver was called a loophole by both Republicans and Democrats. So last month, Congress agreed to raise the amount of utility assistance states would have to pay to trigger the provision — to more than $20 a year.
The idea was that many of the states that use “heat and eat” would decide it wasn’t worth their while. The expected result? Some 850,000 food stamp recipients would have their benefits cut an average $90 a month, which is where the savings would come in.
Turns out, Congress was wrong.
The “heat and eat” program covers 16 states, plus the District of Columbia. Six states — Pennsylvania, New York, Connecticut, Rhode Island, Oregon and Montana — have already declared that they will boost home energy benefits to avoid the food stamp cuts. Two other participants — Vermont and D.C. — are actively working to do the same thing.
With regards to the farm subsidies, Heritage Action has cited a new analysis from the University of Missouri’s Food and Agricultural Policy Research Institute confirming our worst suspicions – the new subsidy programs will cost more than the direct payments and more than CBO originally projected:
Despite the elimination of direct payments, the new farm bill is going to pay off better than the 2008 law for many growers and could be more costly to taxpayers than the Congressional Budget Office estimated, according to an analysis released Thursday that provides the first up-to-date look at the bill’s impact.
According to economists with the University of Missouri’s Food and Agricultural Policy Research Institute, the cost of the farm bill’s new Price Loss Coverage program will start at $2.1 billion for this year’s crops and increase to $3.4 billion by 2018.
CBO had estimated the PLC would cost roughly $1.6 billion to $1.7 billion a year through 2019. The CBO analysis was based off a forecast issued last year when market prices were higher. PLC will trigger payments when prices fall below fixed levels, or reference prices.
Every Republican running as a conservative this year must take notice. This is just one example of how the GOP establishment has no intention of fighting for limited government, and to the extent that they entice rank-and-file members into supporting shiny objects, there is always a catch.
Thursday, March 13th, 2014 and is filed under Blog, Elections, Press
Fort Worth, TX – The Madison Project PAC released the following statement in response to Congressman Mike Simpson’s (R-ID) appallingly dishonest TV ad:
“Simpson acts as if tossing around the vacuous stereotype of ‘personal injury lawyer’ against his opponent affords him the license to obfuscate his voting record and misleads the voters in Idaho,” said Daniel Horowitz of the Madison Project. “There aren’t enough shyster consultants in Washington who can produce honest ads to rehabilitate his liberal record. He dishonestly uses ceremonial votes that he knew would never be signed into law to obscure the consequential liberal votes he cast that were actually signed into law.”
Here are the facts:
Wall Street Bailout: Simpson has the unbridled temerity to suggest that he voted to repeal the Wall Street Bailout, while refusing to mention the fact that he voted for it in the first place [RC #681, Oct 3, 2008]. Although Simpson declines to cite the roll call vote to ‘repeal’ TARP, there was never a full repeal bill and it was never signed into law.
Balanced Budget: Simpson touts his vote for a Balanced Budget Amendment. That is lovely, but it is meaningless for him to support something that never had a chance to become law while supporting endless debt ceiling increases, which ensured that our budget would never balance. The examples of votes he’s taken to bust the budget are too numerous to list. A partial list can be viewed at SackSimpson.com.
Cut Spending: Simpson claims to have cut trillions in spending, but as a chief appropriator he has never met a spending bill he didn’t like. He even voted against the $100 billion in spending cuts promised by the GOP Pledge to America in 2011 [RC #103, Feb 18, 2011]. Mike Simpson was one of just three Republicans to vote against cutting off taxpayer funding for the radical liberal and corrupt ACORN [RC #397, June 2, 2011].
Obamacare: Simpson has the nerve to suggest that he voted to defund Obamacare, but he has always opposed the only consequential means of actually defunding the law, which is by objecting to any budget that contains funding. [RC# 550, Oct. 16, 2013]
The Madison Project endorsed Bryan Smith (R-ID) against Rep. Mike Simpson. To view our endorsement click here.
The Madison Project supports and raises money for conservative candidates that have demonstrated a commitment to full-spectrum conservatism. The Madison Project website can be found at http://madisonproject.com/
Monday, January 6th, 2014 and is filed under Blog, News
Later today, when the Senate votes on the nomination of Janet Yellen to replace Ben Bernanke as Chairman of the Federal Reserve, Republicans will have an opportunity to shed the image of stubborn allies of Wall Street and stand with the free market. Republicans should oppose the confirmation of Janet Yellen, who has been known to support Bernanke’s aggressive stimulus policies at the Federal Open Market Committee (FOMC), unless Democrats agree to some critical reforms of this powerful institution.
There is something fundamentally wrong when the Chairman of the Federal Reserve can serve as essentially an unelected fourth branch of government, wielding power over our purchases, savings, and national debt. During her confirmation hearing, Yellen declined to say how long she plans to keep interest rates so artificially low. She also failed to answer how and when she plans to sell off the Fed’s huge balance sheet, which has quadrupled since 2008. Most disturbingly, she obdurately rejected any plan to inject congressional oversight into this unaccountable and unelected creation of Congress. This is simply irresponsible.
We have a prime opportunity to hold the Fed and their special interests’ feet to the fire over their manipulation and dangerous economic game of distorting our economy.
It’s never good to make abrupt and drastic changes in monetary policy, but we must not be dissuaded from proposing reforms just because the stock market will have a tantrum – the same repetitive threat that is used to force Congress to raise the debt ceiling. Republicans need to begin advocating for the repeal of Humphrey-Hawkins, which charges the Fed with a dual mandate to achieve maximum sustainable employment and keep prices stable. The Fed should focus solely on price stability. Once they lack the ability to administer to Wall Street what the Dallas Fed Chair Richard Fisher refers to as “monetary morphine,” there won’t be any wild swings in the stock market in anticipation of such harmful meddling.
After three rounds of ‘quantitative easing’ and two rounds of ‘operation twist,’ the Fed has a balance sheet of almost $4 trillion — purchasing $40 billion in treasuries and $45 billion in mortgage-backed securities per month. The governing body of the Fed has not offered any comprehensive plan to sell off these assets without incurring a loss. The endless bond buying is distorting the housing market, yet Washington politicians seem to have forgotten the tough lessons learned from the previous housing bubble and continue to allow it to happen.
Additionally, the perennial policy of keeping interest rates near zero is hurting retirees all for the purpose of putting a short-term band-aid on the ailing economy. It’s almost impossible for seniors to find low-risk investments that will allow their savings to keep up with the rate of inflation. A new report from the McKinsey Global Institute shows that households lost $360 billion in net interest income from the monetary manipulation, with seniors losing roughly $2700 per year. Also, record-low interest rates have incentivized banks to sit on their money and not offer loans to startup businesses, exacerbating the existing tightness in the credit market due to Dodd-Frank.
The artificially low interest rates have done nothing to spawn organic growth in the economy, except for juicing up the stock market in the short-run, benefiting the special interest corporatists at the expense of the people.
To make matters worse, the ability of the Federal Reserve to service the national debt with artificially low interest rates on treasuries has allowed the Obama administration to grow harmful government programs like Obamacare. If government expenditures would be limited to the amount of tax revenue, it would be much harder for liberals to expand the role of government in private enterprise. Each increase in spending would require a commensurate increase in taxes.
Wednesday, October 9th, 2013 and is filed under Blog, Debt
Earlier today, the ever melodramatic president suggested that it is unprecedented for an opposing party in Congress to deny a request for a clean debt ceiling increase. He asserted that “nobody in the past has ever seriously threatened to breach the debt ceiling until the last two years. and this is the credit worthiness of the united states we’re talking about.”
Actually, as Sean Davis noted, there have been a number of epic budget battles over the debt ceiling dating back to President Eisenhower. Many of them resulted in some serious concessions by the sitting president. But what is more important is Obama’s amnesia from his own days in the Senate.
The President had few accomplishments in his brief time in the Senate, but one of his most public moments was when he spoke out against President Bush’s request to raise the debt ceiling from $8.184 trillion to $8.965 trillion. He sounded like a tea partier. Here are some of the highlights:
“It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies. Over the past five years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is ‘‘trillion’’ with a ‘‘T.’’ That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers.” […]
“Our debt also matters internationally. My friend, the ranking member of the Senate Budget Committee, likes to remind us that it took 42 presidents 224 years to run up only $1 trillion of foreign-held debt. This administration did more than that in just five years.”[…]
“Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”
Ultimately, Obama not only “threatened to breach” the debt ceiling, he voted against the increase.
Let’s put this in perspective. Obama opposed a debt limit increase from $8.2 to roughly $9 trillion because President Bush increased the debt by $3.5 trillion in 5 years. Well, President Obama increased the debt from $10.6 trillion to $16.7 trillion in less than five years. If increasing the debt from $8.2 trillion “weakens us domestically and internationally,” increasing it from $16.7 trillion would be cataclysmic.
Monday, April 15th, 2013 and is filed under Blog, Debt, News
The gross federal debt stands at $16.8 trillion, up from $10.6 trillion when Obama took office. The total public debt is almost $12 trillion, double what it was when Obama was inaugurated. The most destructive part of the public debt is the share of foreign owned treasuries. According to the Treasury Department, the share of foreign holdings in U.S. treasuries has reached a record high – $5.66 trillion.
The Treasury Department said Monday that foreign holdings of U.S. Treasury securities increased 0.3 percent in February from January to a record $5.66 trillion. It was the 14th straight monthly increase.
China, the top foreign owner of Treasury debt, increased its holdings 0.7 percent to $1.22 trillion. Japan, the second-larger holder, trimmed its holdings 0.6 percent to $1.1 trillion.
Overall demand kept rising despite sharp disagreements between Congress and President Barack Obama over tax and spending issues. Still, Congress approved a measure to temporarily suspend the borrowing limit until May 19. That has allowed the government to take on more debt while the debate continues.
The increase left total holdings 10.8 percent higher than a year ago. Out of the total foreign holdings, 72 percent is owned by foreign governments including foreign central banks.
Tuesday, February 26th, 2013 and is filed under Blog, Debt
This week, Federal Reserve Chairman Ben Bernanke will deliver his semiannual testimony before Congress defending his reckless monetary stimulus. He will testify before the Senate Banking, Housing and Urban Affairs Committee today and the House Financial Services Committee on Wednesday. Now is a good time for Republicans to demand more accountability from the fourth branch of government – the one not mentioned in the Constitution.
It is amazing to watch how many Republicans will speak with such conviction against Keynesian fiscal stimulus policies, yet they will fervently promote monetary stimulus policies by the unaccountable Federal Reserve. Their support for near-zero interest rates, quantitative easing, bailouts, and intervention in the housing sector has muddled our message against Obama’s anti-free-market policies. Moreover, in this time of record commodity prices, pro-(monetary) stimulus Republicans preclude us from showing how government intervention on behalf of special interests distorts the markets, depletes savings, and devalues the currency – a winning political argument if there ever was one.
However, even those who place unflinching trust in Ben Bernanke’s economic acumen must agree that there is something fundamentally wrong when one unelected man has so much power without any oversight. How could anyone who respects a representative republic blithely ignore the unlimited power of one unelected individual to grow the Fed balance sheet to over $3 trillion, placing the fate of the entire economy in Bernanke’s ability to prudently unload that balance sheet? Shouldn’t there be some congressional oversight?
Congressman Jim Jordan (R-OH), the Chairman of the Oversight Subcommittee on economic growth, believes this to be a fair question. Jordan has sent a letter to Fed Chairman Ben Bernanke requesting him to turn over documents detailing how he plans to unload the $3 trillion Fed balance sheet. With the Fed purchasing $40 billion in treasuries and $45 billion in mortgage-backed securities per month, they will need to explain how to unwind without selling these bonds at a loss, contends Jordan.
Congressman Jordan also points out the often forgotten aspect of the monetary stimulus:
Most strikingly, by maintaining low interest rates, the Federal Reserve has distorted the real cost of the national debt, effectively “incentiviz[ing] the U.S. government to borrow and overspend.”
The debacle we face concerning the dependency created by monetary stimulus is eerily similar to the problems with interventionist fiscal policy. Just take a look at the panic over the sequester. When government crowds out the private sector and distorts the market with interventions and subsidies, we are then faced with the “calamity” that would ensue from disengaging from those policies. This is how the statists have successfully dissuaded us from ever limiting government. “You really plan to pull the rug out from under….such and such industry,” bemoans the forces of special interests. There is no reason we should allow the Fed to use monetary stimulus in such an officious manner that the entire economy would collapse without the monetary morphine, yet we incur so many problems from the intervention in the first place.
There is nothing that exemplifies the vices of big-government doctrine and the virtues of free market doctrine than the rising cost and depleting savings of the American people. Republicans need to seize the mantle of free market populism both in the realm of monetary and fiscal policy.
The reason why the statists are so successful is because their policies, which engender the problems they purport to solve in the first place, have the ability to self-perpetuate. They create market distortions and dependency and warn of financial collapse without them. We already tolerate this tyranny from our elected officials; there’s no reason we should put up with it from the unelected politburo at the Federal Reserve.
Monday, January 21st, 2013 and is filed under Blog, News
Well, Obama’s first term has come to an end, and now is the time to add up the tab. I was going to offer a roundup of Obama’s empire of debt, but it looks like Terrence Jeffrey of CNS News has already done so:
During Barack Obama’s first term as president of the United States, the debt of the federal government increased by $5.8 trillion, which exceeds the combined debt accumulated under all presidents from George Washington through Bill Clinton.
The new federal debt accumulated in Obama’s first term equaled approximately $50,521 for each of household in the country.
On Jan. 20, 2009, when Obama was first inaugurated, the total debt of the federal government was $10,626,877,048,913.08, according to the U.S. Treasury. As of the close of business on Jan. 17, the last day reported by the Treasury before Obama’s second inauguration, the total debt of the federal government was $16,432,631,489,854.70.
Thus, from Obama’s first inauguration to his second, the federal government’s debt grew by $5,805,754,440,941.62.
I would add that $5.26 trillion of the debt increase came from the public share of the debt, not the share we owe ourselves. In other words, 91% of the debt increase under Obama is owned by foreign entities. That’s some accomplishment for four years. One can only wonder what the next four years will portend.
Thursday, January 17th, 2013 and is filed under Blog, Debt
In a matter of three weeks, we have seen GOP leaders, writers, and pundits go from advocating that we punt on the tax fight in favor of fighting the debt ceiling fight to punting on the debt ceiling fight in favor of fighting over the CR a month later. To illustrate the absurdity of this line of thought, I thought it would be useful to pull up an article I wrote at Red State almost two years ago, after Boehner caved on the first budget fight of 2011: