Hushbeck: Question 2, Reply 2 – The Budget

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http://www.dreamstime.com/-image29189594The question.

I must have hit a cord with my answer, as Watts initial reaction was to launch into an ad hominem attack claiming I was “unable to see the better times for the dour.” He claimed “all right numbers are in place. Layoffs are decreasing, job numbers are increasing, and even Wall Street is reaching record highs.”  But then there is the minor fact that GDP has been dismal, and was actually negative last quarter.  If it is negative this quarter we will officially be back in recession.

Watts also questioned my claim that the Senate is in violation of the law because they have not done a budget.  Yet the article cited by Watts said, ”While the Senate is legally required to pass a budget, there is no penalty for not doing so.”  Absent of a penalty does not change the law.

The law in question is the 1974 Budget Control Act  section 300 which specifies the budget calendar.  It is from the budget that the appropriation bills are then written. Democrats claim they can ignore this schedule. Even if true, is at best only a partial answer, though the 1974 Budget Act remains the law.

The article also said that “Appropriations bills are where spending is allocated.”  True, but the Senate has failed here as well. The House has been doing its part of the job, passing a budget and most of the appropriation bills each year and sending them to the Senate.  The Senate has not, and last year not a single appropriation bill even made it to the floor of the Senate much less passed and was sent to the House.  Instead, it would seem the Senate counts on the need for continuing resolutions, after continuing resolution, after continuing resolution.  After all, why follow the law, when you can have a budget crisis to blame on the other party?

Another point made in the article was that the Senate has not passed a budget, because the “Democrats don’t want the blame.”  And once you get pass all the rhetoric and excuses, this may be the real reason.  It is always easier to criticize those who put forth solutions than to come up with solutions of your own.

Watts goes on to claim “such a budget from the Senate would not be welcomed in the House.”  So what? It is very clear that the House budgets and appropriation bills are not welcome in the Senate, but at least they follow the law and do them. Normally the first part of a negotiation is for each side lays out what it wants, and then the discussion is over how the differences can be reconciled.

As for implying that this was the President’s fault, I didn’t because that is not my view. Obama has plenty of faults of his own without having to bear those of the Democratic Senate. But this is a problem for the left which continually gives the Senate a pass for failing to do its job, as Watts has done.

As for relying on one source, that is at best silly. After all does Watts really believe that there is only one economist that holds such views? Space does not permit an analysis of all of Watts’ sources (One of the reason I do not give multiple sources in this type of discussion) but I will consider his first one.

Chad Stone claims “Tax Increases to Reduce Deficit Will Help, Not Hurt, Growth” by citing growth in the 1990s compared to 2000s. Unfortunately Stone neglects a number of key factors. The first couple of years following the tax increase were marked by a lackluster economy. When the Republicans won the house in 1994 they did pass tax cuts, in particular in capital gains taxes.

In addition, and probably more importantly, the late 1990s was unique in that it was marked by the internet boom, which was driven by changes in technology rather than government policy. Thus Stone, by putting the dividing line in 2000, puts the growth from the Internet Bubble as part of his growth in the 1990s but the resulting crash and recession gets counted against the 2000s.  On the other hand there are numerous examples of tax increases depressing the economy and bringing in less money, some of which I cite in my book, Preserving Democracy.(e,g., pg 39,40)

As for my second “single” source, Gilder’s book can only be a single source if you ignore all of the numerous sources and studies cited in his book.

Watts says the budget “must be set with priorities given education and the good of the people, requiring those with much to give more than those who have little.”  Ok, as to the latter, that is already the case, as I document in Preserving Democracy, the top 1% pay 37% of all Federal Income taxes,  while the those at the lowest income brackets, because of credits, receive more back in refunds than they even paid in taxes. Nor is anyone I know against “those with much” having more taken from them, but as Ross Perot said, the devil is in the details.

And in the details there is a moral issue. If I want some money for a noble purpose, I do not have the right to take it from someone else by force. That is theft.  Getting more people to help me forcibly take the money does not change the nature of the act, regardless of how many I get to help me.

We tend to ignore this problem when it comes to government and taxes, but the problem does not really go away.  It is one thing for the people in a democracy to choose to impose upon themselves taxes so as to pay for the government they want.  Those who take money by force, can then at least justify it by claiming that it is a burden shared by all. It is quite another thing when it ceases to be a shared burden and is just imposed on others.  Morally this is much closer to theft than it is to a shared burden. There are other problems, but this reply is already long.

So for my budget priorities, the bottom line for me is that Government is causing far more problems than it is solving.  Thus, except for defense (and to some extent even in defense, as a lot of thing in the defense budget are not really defense) the federal government should be massively transformed. Departments like Education should be abolished, areas like the EPA radically transformed.

This is going to happen. The only question is will we do now when we can plan it out over many years and thus minimize the pain, or will we wait for us to become like Greece and have those changes forced on us by economic reality thereby maximizing the pain.  I prefer the former, but I suspect we will get the latter.