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Runaway Domestic Spending Makes Democrats’ Hearts Quicken

January 16, 2013 By: Scott Spiegel Category: Economy

love-money-valentines-day-spending-68652560036_xlargeDemocrats beat Republicans in the fiscal cliff standoff by pressuring them to agree to raise taxes on high-income earners with no accompanying spending cuts.  They argued, persuasively to the American people, that the revenue shortfall the federal government faced required such a move to make up the difference.

Raising taxes on the upper 2% of income earners isn’t nearly enough to plug our budget deficit, to say nothing of our long-term debt.  The only way to do so is to immediately enact drastic, painful, across-the-board entitlement spending cuts that slap us with the reality of our historically dire situation.

Naturally Democrats prefer to keep spending levels right where they are and raise more taxes.

Naïve political observers assumed that, once House Republicans had caved on the fiscal cliff, they would have some leverage in getting Democrats to agree to spending cuts in the upcoming battle over raising the federal debt limit.  Republicans, the thinking went, could insist that, since they had agreed to raise $620 billion in revenue from taxes, Democrats would have to give in and accept cuts in exchange for raising the debt limit.  House Speaker John Boehner in particular seeks a dollar-for-dollar spending cut-to-borrowing limit ratio.

But no—Democrats continue to display their congenital intransigence to cutting a single dollar from a single program anywhere, anyhow, anytime, except for the military.

We’ve come to the point in the evolution of the Democratic Party where there’s truly, fundamentally, literally nothing they’re willing to consider cutting.  Nothing.  Nada.  Zilch.  Zip.  Niente.

Don’t believe me?  I’ll prove it to you.

Former House Speaker Democrat Nancy Pelosi, when recently asked whether her party would consider enacting spending cuts on Social Security, Medicaid, and Medicare, responded that we had already done so… by passing Obamacare.

As CBS News reports: “Asked if Democrats are ready to significantly reform entitlement programs to address the deficit, Pelosi said, ‘We already have,’ pointing to the Affordable Care Act’s $716 billion in Medicare provider cuts.’”

Everyone, including Pelosi, knows these cuts are fake, in that they: (1) limit Medicare’s growth rather than shrinking Medicare, (2) target insurance companies and hospitals, who will simply pass the costs on to consumers, and (3) won’t ever take place, because they’re slated to unfold over the next 10 years, and will be demolished by subsequent Congresses, as such future-situated cuts always are.

If Democrats are unwilling to shrink entitlement programs, how about altering the age at which people are eligible for them?  Off the table.  Pelosi “replied with a quick ‘no’ when asked whether she supports raising the Medicare eligibility age…  She also seemed disinclined to consider any cost of living adjustment that could reduce Social Security benefit payments, saying, ‘I do not think we should do anything to Social Security that reduces benefits to the beneficiaries…’”

So no cuts, no alterations, no adjustments.  Nothing that “reduces benefits to the beneficiaries,” which means nothing.

How about other non-military domestic spending programs?  Nope.  As the L.A. Times reports, “The president said he was open to seeking spending cuts generally as part of an effort to reduce the country’s deficit, but he stressed that such reductions can be made ‘without shortchanging things like education, job training, research and technology, all of which are critical to our prosperity in a 21st century economy.’”

So no cuts to “education, job training, research and technology,” or anything that is “critical to our prosperity in a 21st century economy,” which Democrats will argue is everything.

And on and on: Senate Budget Committee Chair Patty Murray wants to preserve every penny of Head Start.  Mother Jones wants to maintain federal funding for food stamps, Supplemental Security Income, extended unemployment benefits, education grants and college loans, housing assistance, community health centers, heating bill payments, and milk for babies.  Senate Majority Whip Dick Durbin and White House spokesman Jay Carney cheerfully agree that Social Security does not contribute to our federal deficit, because apparently it’s free.

It’s finally starting to dawn on Republicans that Democrats have no intention of ever cutting spending.  As the Wall Street Journal notes in an interview with the Speaker on the fiscal cliff talks, “What stunned House Speaker John Boehner more than anything else during his prolonged closed-door budget negotiations with Barack Obama was this revelation: ‘At one point several weeks ago,’ Mr. Boehner says, ‘the president said to me, “We don’t have a spending problem…”’  Mr. Boehner says that after he recovered from his astonishment… he replied… ‘Mr. President, we have a very serious spending problem.’ He repeated this message so often, he says, that toward the end of the negotiations, the president became irritated and said: ‘I’m getting tired of hearing you say that…’”

(Meanwhile, the shaggy, autistic homeless man named Paul Krugman argues that we could end the recession, if only we just wildly increased federal spending over the next two years to levels that would make Obama blush.)

Want to know how dire Democrats’ spending addiction has become?  It has even overpowered their abiding compulsion for raising taxes.

When Democrats agreed to the sequestration deal in 2011, they calculated that Republicans’ aversion to the deep military cuts that were to accompany the deal’s domestic cuts would give them a strong leverage point later on.  But inside sources suggest that Democrats now actually fear sequestration more than the GOP.  Democrats appear willing to forego tax increases for the sake of not having a single dollar cut from their beloved domestic programs.

Democrats love weakening the military and adore raising taxes, but both flirtations are now trumped by their giddy, rosy-cheeked infatuation with runaway domestic spending.

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Liberalism Is a Terrible Idea; It’s Just Been Implemented Properly

February 22, 2012 By: Scott Spiegel Category: Economy

Poor Greece is on the verge of defaulting on its bills and declaring bankruptcy.  Credit rating agencies S&P, Moody’s, and Fitch long ago downgraded Portugal, Italy, Greece, and Spain (the PIGS) and gave them negative outlooks, with Greece getting Cs across the board.  (Cuba, Pakistan, and Burkina Faso are a few of the nations with better ratings than Greece.)  If Greece runs out of money and fails to pay €14.5 billion to service its debt on March 20, European markets could be badly shaken.

Greece’s financial woes are the result of its unsustainable social welfare entitlement state, whereby working adults are promised generous pensions and early retirements, and younger generations must cough up the money to pay for these, though they won’t receive similar benefits when they retire.  (Sound familiar?)  The government has been borrowing to subsidize these pensions, but it’s not enough—partly because Greece has one of the lowest birthrates in the world, and partly because swaths of young educated Greeks are fleeing the country and emigrating elsewhere to find work.

The European Union—the ill-advised, 27-member collective of largely Western European nations—adopted a common currency among 17 of its members to facilitate trade.  Greater economic stability was supposed to result from the fact that if certain members were in trouble, other members would better be able to bail them out until they got back on their feet.  But the PIGS’ problems are long-term, structural flaws that will lead to greater financial ruin with each passing year.

The wealthier, larger, more financially secure countries—especially Germany—resent perpetually having to rescue these flailing nations.  They’re suspicious that bailing the PIGS out will be temporary fixes, that these nations won’t enact reforms needed to right their economies.  Given that parties to the left of Greek Prime Minister Lucas Papademos’ Socialist Party have been dominating the polls ahead of April’s early national elections, who can blame Germany for mistrusting Greece?

For a while, it seemed German Chancellor Angela Merkel would decline Greece’s request for a bailout—their second since 2010—and let the country declare bankruptcy.  Merkel relented, on the condition that Greece enact widespread austerity measures, subject its spending to greater EU scrutiny, and reduce its public debt to “only” 120% of its GDP by 2020.  Austerity measures would include cutting government agencies, jobs, and wages; pensions; higher education subsidies; and health care benefits.  In return, private holders of Greek bonds would take a 70% cut in the value of their holdings.

Meanwhile Germany is drafting backup plans, whereby Greece would leave the euro if it fails to reduce its debt and implement austerity cuts and privatization of state functions.  German Finance Minister Wolfgang Schäuble and nations such as Austria and Finland openly question Greece’s potential to rebound.

Everyday Greeks, steeped in the European entitlement mentality that promises them a comfortable living their entire lives, are livid.  For weeks, thousands of citizens have protested, rioted, and looted in a display of spoiled petulance that makes Occupy Wall Street look like the Tea Party.  They have fomented violent clashes with police, instigated mayhem and injury, and caused millions of euros of damage to public and private buildings.  Protestors came out en masse on Sunday before decisive talks among the Eurogroup in Brussels over whether to implement the Grecian bailout.

In Greece as in the U.S., everyday folks blame the government for not collecting enough taxes from the rich—which would only stifle job creation and do little to alleviate Greece’s debt crisis.  They scapegoat banks for mismanagement, and lament the government’s failure to prosecute financial executives—as though throwing a few bankers in jail would solve their problems.

The mainstream media have conspired in the protestors’ mission by labeling the austerity cuts “punishing,” as though not getting as much as you want for free is an intolerable deprivation.  Prodigality appeasers insist we rescue Greece and blindly trust their commitment to reform.

One New York Times commentator concluded a lengthy profile of struggling Greek citizens thusly: “Greece’s traditional infrastructure may not be the ultimate answer to its problems… but it may make difficult times less painful.”  Yes, and Greece’s traditional infrastructure is what brought about those difficult times in the first place.

Just as Paul Krugman and other leftists repeatedly, recklessly exhort the U.S. government to spend even more money it doesn’t have on stimulus, lest the country slip further into recession, EU bailout critics warn that austerity cuts will further hobble Greece’s economy.  The Guardian’s Fabian Lindner declares, “Europe is in dire need of lazy spendthrifts” to whom countries like Germany can export goods.  Lindner predictably argues that because Greece has instituted five sets of minor austerity cuts that haven’t yet worked, it should reverse course and ramp up government spending again.

Defenders of statism praise communism, and its relative socialism, by gushing, “It’s a great idea in theory; it’s just never been implemented properly.”  In fact, communism and socialism are terrible ideas, and have been implemented squarely in line with their supporters’ intentions, minus any desperate freedom defenders’ last-ditch efforts to fight off government’s encroachment on citizens’ lives.  What we’re seeing in Greece is exactly what we could have expected after a half-century of full-fledged implementation of the modern welfare state.

If the U.S. continues down its current path—Social Security, Medicare, and Medicaid going broke, new entitlement programs like the prescription drug plan and ObamaCare being piled on, and Democrats and many Republicans unwilling to consider reforms—then we’re going the way of Greece.  The major credit rating agencies have already downgraded the U.S. and threatened to devalue us again if we don’t address our debt.  But when the U.S. defaults, there’ll be no one to bail us out.

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Social Security: Too Shady To Be Called a Ponzi Scheme

September 14, 2011 By: Scott Spiegel Category: Economy

Social Security Poster: old man

Image via Wikipedia

Recently Republican presidential candidate Mitt Romney criticized fellow contender Rick Perry for labeling Social Security a Ponzi scheme.  Romney extolled the virtues of the soon-to-be-bankrupt program and vowed to support its continuance unconditionally if elected.

A Ponzi scheme, so named after white-collar criminal Charles Ponzi, involves a huckster collecting money from numerous investors who are promised a high or reliable return on their investment, with payments being made by future investors lured in by similar promises of financial gain.  The scheme is unsustainable, because dividends received are not actually invested, and are not equaled by the dividends promised to investors.  Earlier investors fare better than later investors, who lose their money once the scheme collapses.

Sound familiar?

Social Security, signed into law by white-collar criminal Franklin Delano Roosevelt, involves the federal government collecting money from all working citizens, who are promised a reliable pension when they retire, with payments being made by subsequent generations who are dragged into the program.  The system is unsustainable because, due to slowing population increases and politicians raiding the Social Security Trust Fund, most payroll taxes received are not actually invested, and are not equaled by the payments promised to retirees.  Earlier generations fare better than later generations, who will not receive benefits once the system collapses.

The history of Social Security’s establishment and implementation reveal that Governor Perry is wrong about the program’s being a Ponzi scheme.  It is much worse.

Social Security is bigger, by many orders of magnitude, than any Ponzi scheme ever enacted in human history.  It is the largest government program in the world, and the biggest component of U.S. federal expenditures.  Social Security is to the average Ponzi scheme what the Great Pyramid of Giza is to a traffic cone.

Social Security is involuntary, whereas Ponzi schemes are at least voluntary.  Though applying for a Social Security number is not technically mandatory to live and work in the U.S., the Internal Revenue Service and other agencies require it, which forces everyone to participate in the program, or makes their lives very difficult if they don’t.

Social Security is better disguised than a Ponzi scheme, and thus more insidious.  Unlike a Ponzi scheme, the true nature of Social Security is hidden in broad daylight, which lulls ordinary citizens into thinking it couldn’t possibly be as fraudulent or unsustainable as it is.

Social Security is longer-lasting than any real-life Ponzi scheme.  Whereas most Ponzi schemes are lucky to survive a few months, Social Security has continued for over 75 years.

Social Security’s insolvency won’t affect young, naïve, retrainable investors, but rather elderly people at the potentially neediest and most vulnerable stage of their lives.

All of the above negative consequences of Social Security are a direct result of its being administered by the federal government.

Government has access to billions of participants, trillions of dollars in capital, and decades of time to continue the ruse.

Government forces all citizens to participate, even if they’d rather keep their money, invest as they choose, and take their chances later in life.

Government gives Social Security its imprimatur—whatever that’s worth these days.  Most members of both major political parties approve of continuing Social Security more or less as is.  The program is referred to as the “third rail” of politics, meaning that if you touch it, you die politically.  It is as though Bernard Madoff were a major donor to both parties, and Congress refused to question his investment strategies because Madoff were considered the “third rail” of politics.

Government designed Social Security to increase its ability to control the populace, by forcing them to pay in when they’re young and healthy and then meting out or scaling back benefits when they’re old and infirm.  (By “government,” of course, I mean Democrats.)  The Supreme Court actually ruled, in Flemming v. Nestor (1960), that the Social Security Administration is not legally required to pay benefits to retirees who have contributed to the system their whole lives, if it finds itself in a pinch: “To engraft upon the Social Security System a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands…”  Would that everyday businesses were afforded the same “flexibility” and “boldness” to decide not to honor their contracts in order to better adjust to “ever-changing conditions.”

Supporters of Social Security only wish it had the air of respectability of a garden-variety Ponzi scheme.  Then we could send the fraudulent originators to jail, cut our losses, and start over.

Instead, we’re saddled for eternity with the mother of all entitlement programs, the granddaddy of confidence games, the oldest relic of the Seven Entitlement Wonders of the Modern World.  Even supposedly conservative presidential candidates—including, sadly, Rick Perry—are now duking it out to show how badly they want to preserve this fraud.

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First Rule of Good Governance: Never Negotiate with Democrats

April 06, 2011 By: Scott Spiegel Category: Economy

Tug Of War - Colour Edit

Image by tj.blackwell via Flickr

On Saturday President Obama magnanimously announced that he was willing to support cutting $33 billion from 2010 federal spending levels for 2011—which, for the mathematically challenged, is about 1% of infinity.

Congressional Democrats screamed that these cuts were way too large.  Republicans countered that the cuts didn’t go far enough and should be extended to $61 billion, which amounts to about 2% of infinity.

With current spending set to run out this week, the federal government faces a shutdown on Friday night unless Congress can agree on which of these piddly sums to cut from the budget.

Tea party supporters have been rightly insulted by these farcical negotiating positions, arguing that hundreds of billions could be saved just by, for example, eliminating redundant programs.

As Rasmussen reports, a majority of Americans haven’t been snookered into thinking these microscopic doses of fiscal austerity will do a thing to address our long-term budget crisis.

Meanwhile, the only Congressman clear-eyed enough to appreciate the extent of the crisis, knowledgeable enough to propose a plan to resolve it, and brave enough to stand up for his proposal in the face of Republican wishy-washiness—namely, House Budget Chairman Paul Ryan—and also not crazily isolationist on foreign policy (Ron and Rand Paul) has offered a blueprint called “A Path to Prosperity,” modeled after his 2008 “Roadmap for America’s Future.”

Ryan’s plan proposes phasing out Medicare by replacing it with vouchers and turning it over to the states, making major changes to Medicaid, and taking similar action with Social Security after these two behemoths have been wrestled to the ground.

The central irony of Ryan’s stance is that, as he claims, his is the only proposal that will help “save” these programs, whereas current entitlement obligations will, if continued at their present levels, lead to eventual insolvency.

While Medicare/Medicaid and Social Security are unsustainable, unconstitutional Ponzi schemes, and while our country somehow managed to survive 189 and 159 years respectively without them, I suppose we need to start somewhere.  I guess a Budget Chairman who wants to drastically reform these albatrosses in order to save them is as good a start as we’re going to get nowadays from a political standpoint.

Ryan’s plan proposes cutting $5 trillion from the national debt over the next decade, and eventually eliminating the national debt, all without raising taxes.

On Tuesday, Obama rejected a third stopgap offer from House Majority Leader John Boehner to keep the government open another week while budget negotiations continue.

Obama’s right—we shouldn’t settle for on-the-fly, seat-of-our-pants, week-by-week spending plans.  Republicans should hold their ground and not be afraid to shut the government down on Friday.

Some who claim to favor entitlement reform have counseled House Republicans to compromise with Democrats on this week’s negotiations, so that Democrats will work with them later on more substantial cuts like Ryan’s.  The Chicago Tribune counsels, “Better to declare victory at $33 billion, or whatever more Republicans can wrest from Democrats, and move on to the bigger picture.  Because sanity in federal spending isn’t going to be restored by dealing in billions.  It’s going to be restored by dealing in trillions…  A deal today on discretionary spending could lay the foundation for bipartisan agreement on the far more impactful issue of entitlements.”

So giving in to Democrats will create goodwill and set the stage for larger-scale cuts, whereas shutting down the government will cause Democrats to dig in further and resist compromise later on.

One question: Since when did Democrats respond to Republican compromise with magnanimous, reciprocal behavior?

Sensing that they’re about to win on the shutdown, dyed-in-the-wool leftists like E. J. Dionne are already crying, “The Ryan budget’s central purpose will not be deficit reduction but the gradual dismantling of key parts of government…  Americans are about to learn… how radical the new conservatives in Washington are, and the extent to which some politicians would transfer even more resources from the have-nots and have-a-littles to the have-a-lots.”  Ezra Klein whines that Ryan’s plan will mean “leaving the old and the poor without health care.”  These are the people who are going to be placated by giving in on minute cuts now into accepting huge cuts several months from now?

Republicans’ negotiation strategy, from Bush I to Bush II to Boehner, has always been: The other side asks for an inch; Republicans give a mile.  Democrats’ strategy is: The other side asks for an inch; Democrats take a mile.  See how fair and evenhanded things are!

To take just one recent example, Congressional Republicans begged Democrats to consider including medical malpractice tort reform, legalizing health insurance sales across state lines, and offering greater tax deductions for health care costs in their ObamaCare bill.  Democrats responded by ignoring all these ideas and muscling through their bill inappropriately using the budget reconciliation procedure after the enraged residents of Massachusetts denied them their 60th Senate vote.

Battling Democrats legislatively is like fighting terrorists militarily—you don’t show them how weak and spineless you are; you show them how ruthless and merciless you can be.  They don’t respond to anything else.

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How About Tackling Obesity in the Federal Budget?

February 16, 2011 By: Scott Spiegel Category: Economy

carrot

Call Monday’s 2012 budget release the St. Valentine’s Day Non-massacre.

President Obama’s budget director Jacob Lew announced on Monday that he was presenting Congress with a budget that would compel the nation to “live within our means, but also invest in the future.”

Can we leave out “but also invest in the future”?

Why does Obama always append damaging clauses to seemingly responsible proposals?  Is it so that when he fails to do what he should—have us live within our means—and merely does what he wants—spend, spend, spend—he can say he at least kept half his promise?

In a press conference defending his proposal, Obama scolded Republicans about the need to have an “adult conversation” with him on the budget and stop being “impatient” about his failure to deal with entitlement reform.

Obama is enormously proud of the fact that he has pledged to freeze domestic spending for the next five years.  Since that means freezing spending at 2010 levels, which were 22% higher than bloated 2008 levels, Obama has done the equivalent of freezing the national diet at Michael Moore’s instead of Alec Baldwin’s.

Even Obama’s spending freeze applies only to non-defense discretionary spending, which makes up just 15% of the federal budget.  His proposal does nothing to address reform of Medicare, Medicaid, or Social Security.

Everyone knew that the bipartisan deficit reduction commission Obama sanctioned last year to “study” the federal debt and make recommendations was window dressing.  Obama never had any intention of following suggestions that were unpalatable for his base, such as raising the retirement age for Social Security or means-testing Medicare.

But the $3.73 trillion 2012 budget, and projected $1.65 trillion 2011 deficit, Obama unveiled on Monday set staggering, all-time records that shocked even his supporters.

Obama’s 2012 budget will cause our federal debt to jump from $14.2 trillion to $15.5 trillion, which will render the federal debt greater than the size of the entire U.S. economy for the first time in history.

By 2013, the federal debt will equal 106% of the U.S. economy.  That rosy scenario, by the way, will happen only if the next two years see the U.S. economy roaring back to life and demonstrating much higher growth than in recent years—which the Obama administration, with complete, non-self-serving objectivity, is absolutely certain will happen.

By 2016 the federal debt will swell to $21 trillion.

Obama claims his administration’s proposed 10-year budget outline makes “tough choices and sacrifices.”  What, specifically, does his budget sacrifice?  The expectation that he will ever get serious about our national debt?

Perhaps one sacrifice is Obama’s pledge to reduce funding to lower-income people to pay their heating bills.  How many of you realized there was a federal program in place to help poor people pay their heating bills?  I propose that if the average American didn’t even realize he was subsidizing a federal program, then trimming it doesn’t count as a sacrifice.

In defending their budget, Obama and Lew have displayed the air of surly teenagers who want to show their parents just how much they’ve suffered under the repressive rules of the house, rather than responsible adults who want to solve a problem.  Lew whined on Monday, “It’s important to note that we’re beyond the easy, low-hanging fruit.  We’re reducing programs that are important programs that we care about.”  (“But Mom, I made my bed—why do I have to clean my whole room?”)

Obama’s budget is so elephantine—no pun intended—even liberals are embarrassed by its sheer cowardice and unresponsiveness to financial conditions.  Obama’s deficit commission chairman, Democrat Erskine Bowles, complained that the budget is “nowhere near where they will have to go to resolve our fiscal nightmare.”

To the extent Democrats care at all about cutting spending, of course they want to slash defense appropriations.  Fine—but defense spending makes up only 20% of the federal budget, even with two ongoing wars.  Medicare, Medicaid, Social Security, and other “mandatory” programs make up more than 50%, and “discretionary” programs like the Department of Education and the Environmental Protection Agency make up another 20%.  If we agree to cut defense spending 10%, could we get Democrats on record favoring a piddly 5% cut in entitlement spending?

During the third 2008 presidential debate, when moderator Bob Schieffer asked the candidates what they would cut from the federal budget, Senator John McCain declared that he would use a “hatchet,” then get out a “scalpel” to finish the job—a response Senator Barack Obama ridiculed as too radical.

How about a hatchet, then a machete to catch everything we missed with the hatchet, then a 60-ton M1 Abrams tank over anything left standing?  Will Democrats finally get the message about the crisis we face after that?

As Indiana Governor Mitch Daniels put it in his speech at CPAC last weekend, “Our morbidly obese federal government needs, not just behavior modification, but bariatric surgery.”

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A Tale of Two Pauls

August 11, 2010 By: Scott Spiegel Category: Economy

Paul Ryan, official portrait, 111th Congress
Image via Wikipedia

Liberals have generously treated us to a motley assortment of apologia for President Obama’s economy-wrecking fiscal policies over the past 19 months:

(1) The economy is doing fine (Ezra Klein)!  We should have expected the recovery to be agonizingly slow, and it is—hence, Obama’s policies worked.

(2) The economy isn’t doing well, but it would have been doing even worse without the stimulus bill (e.g., Mark Zandi, chief economist of Moody’s and bona fide boob).  Without a Keynesian spending orgy—or as Obama puts it, “moving the economy forward”—unemployment wouldn’t have stopped at 10% and might have risen to 12 or 13 or 15%.

(3) The economy is doing poorly, and it’s because the Democrats didn’t do enough (the ever-certifiable Paul Krugman).  The stimulus should have been much bigger, and financial regulations should have been much harsher.  To compensate we need “a second big stimulus, plus much more aggressive Fed policy.”

In contrast, conservatives have suggested the following interpretations of events:

(1) The economy is going to improve soon (Larry Kudlow).  We won’t experience a double-dip recession and growth is resuming, so we should be more optimistic.  Obama’s policies aren’t helping, but American ingenuity and entrepreneurial spirit are strong enough that we can recover anyway.

(2) The economy isn’t doing well, and Obama’s policies have made it worse (every other conservative on the planet).  Wasteful spending caused our debt to skyrocket and increased the chances of inflation; government takeover of private industries and burdensome financial regulations created an uncertain climate for investing and hiring that has prolonged the recession.

(3) The economy is doing poorly, and now is the time to discuss not only repealing Obama’s policies and ensuring that the likes of them never pass again, but undoing the policies liberals have inflicted on the nation since FDR under the pretense that once they were in place future generations would be too sheepish to touch them (Paul Ryan).  The impetus from the Tea Party movement should be used to revive talks about privatizing Social Security, Medicare, and Medicaid.

So liberals and conservatives are at a bit of a standoff over the fundamental economic principles behind their political strategies.  Who’s right?

Let’s see: economists have demonstrated, time and again, using common-sense reasoning, econometric modeling, and historical data, that increasing government spending yields less economic output than if government had left that money in the private sector to be spent, invested, or saved as those who generated it saw fit.

Economists have shown that increasing marginal tax rates counterintuitively decreases the gross domestic product, especially in the years immediately following tax increases.  Obama’s chief economic advisor, Christina Romer—who just retired over a conflict between her views and the administration’s—documented the effect of this negative tax “multiplier” using empirical data in a recently published economics article.

It doesn’t matter whether we accept Klein’s view that the economy is peachy, Zandi’s view that it’s doing badly but could be worse, or Krugman’s view that it’s doing badly and needs more Obamanomics.  All are based on the false premise that more government spending, taxation, and regulation are better for the economy than less.  (Hey—don’t Keynesians believe that spending lots of money on wars is a good way to revive the economy?  I guess Krugman will be admitting he was wrong about the Iraq and Afghanistan conflicts after all!)

People like Klein bemoan the fact that corporate profits are back up to 2006 levels while hiring remains slow.  Liberals present the question of our tepid recovery as an intractable metaphysical mystery incapable of being penetrated by mere humans; as Klein puts it: “That is the catch-22 of the recovery: Businesses will start hiring when the economy recovers. And the economy will start to recover when businesses start hiring.”  Answer: And both will improve when the government gets out of the way!

As for the varying conservative perspectives, which are the only ones remotely connected to reality and thus worth considering, Kudlow is right that the American economy is resilient.  Perhaps he’s slyly making the point that more optimism on the public’s part not only better reflects the state of our economy but may improve it via increased investment and hiring.  Kudlow’s perspective is largely predictive, rather than focusing on how lawmakers should bring about a faster and more permanent recovery (though he often discusses those issues as well).

Every other conservative in the world who believes that we shouldn’t stand for the “new normal” of high unemployment and unexceptional growth is correct that Democrats’ policies are making the recession worse.  Repealing ObamaCare, preventing cap-and-trade legislation, and stopping or reversing the scores of other nasty things Obama and Pelosi have planned for our economy are mandatory undertakings over the next six years.

But Paul Ryan hits the bullseye when he notes that it is desirable, necessary, and possible to go further.  Train wreck legislation like ObamaCare is worth repealing, but if Medicare and Medicaid are quickly running out of money, and Social Security is already in the red, why shouldn’t we go after every entitlement shibboleth?

What principle, applied consistently, would nudge us to nullify ObamaCare but leave Social Security, Medicare, and Medicaid shiny and intact?  Did our country survive and prosper before these programs were enacted?  Would we survive and prosper if we phased them out?  Might we prosper even more in their absence?

Ryan’s proposal is far from perfect—his main argument for the Roadmap to recovery is that it will keep our entitlement system solvent, and he doesn’t discuss eradicating entitlements once and for all.  Perhaps Ryan believes that talking about eliminating entitlements is too politically risky now, when even his Roadmap is audacious by today’s standards.  But Ryan deserves credit for having gone further than anyone else in Congress in working out the details of a plan that will help the country avoid a fatal insolvency.

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