Federal Deficit For November Hits Record High Despite Tax Reform

Tax reform stands as the one major legislative accomplishment of the Trump Administration. The measure became law a year ago and, as forecasted, jumpstarted growth in an economy that had been largely stagnant since the Great Recession. Unfortunately, tax reform has so far not lived up to its promise of paying for itself with that increased growth. In fact, the deficit for the 2018 fiscal year, which ended in September, is the largest in six years despite increased growth and revenues.

Figures from November show that the budget deficit was the largest ever recorded for that month. The Treasury Department reported Thursday that federal spending increased by 18 percent to $411 billion for the first two months of FY 2019.

Despite the tax reform and the increased tariff taxes on trade, revenues were flat at $206 billion, about half of what the government spent. The deficit of $205 billion, 49.8 percent of spending, was almost twice as high as last November’s $139 billion deficit. Increased tariffs led to an 86 percent increase in customs duties received but still only accounted for $11.8 billion in revenues.

As Resurgent noted in October, the deficit problem is two-fold. Data from FY 2018 show that while individual tax receipts increased by one percent, overall tax revenues were flat because corporate tax receipts fell by 30 percent. Total federal receipts were $3.329 trillion in 2018 compared with $3.316 trillion in 2017.

The other side of the coin is that spending continues to increase while revenues are stagnant. Military spending increased by 27 percent over the same two months last year per the Wall Street Journal[DT1] . Interest payments on the ever-growing national debt increased by seven percent, partly due to higher interest rates.

The core problem is that the economy is growing but borrowing and spending are growing even faster. Over the past 12 months, spending increased by 5.1 percent while revenues only increased by 0.2 percent. The Trump Administration says that deficits will shrink in coming years as tax reform spurs growth and investment. In the meantime, the deficit is expected to reach the Obama-esque level of $1 trillion in the current fiscal year.

Other factors will drive increased spending that will compete with growth in coming years. Spending on Medicare and Social Security is projected to rise as more Baby Boomers retire. Interest payments on the debt will also increase as the Fed raises interest rates.

In the meantime, Trump Administration trade policy counteracts the economic benefits of tax reform. While businesses benefit from lower corporate tax rates and deregulation, tariffs and trade restrictions make it more expensive and difficult to import and export raw materials and finished products.

As the deficit rises, there is little reaction from either party in Congress. Where Republicans went to the mat to curb President Obama’s spending, most seem to have no qualms about the spending increases under President Trump. In fact, the big news on the budget lately is that Republicans are prepared to shut down the government if Democrats don’t agree to authorize even more taxpayer dollars for President Trump’s pet border wall project.

Originally published on The Resurgent

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Elmo Gets Fired in Liberal Video Attacking Trump Budget

A new parody video from WhatsTrending.com purports to show what might happen behind the scenes at PBS and the Children’s Television Workshop due to President Trump’s proposed budget. Most of the claims made by the video are off target. Nevertheless, the parody does expose the liberal mindset on the arts, jobs, healthcare and government funding.

In the sketch, Elmo is being laid off because, as his boss says, “the Trump Administration is cutting all arts and education funding from the new congressional budget.” There is truth to this statement. The Trump budget calls for elimination of the National Endowment for the Arts, the National Endowment for the Humanities, the Institute of Museum and Library Services, and the Corporation for Public Broadcasting.

Defunding the federal subsidies of the arts would not kill art, Sesame Street or PBS, however. PBS funding was an issue in the 2012 election when Mitt Romney said, “I love Big Bird… but I’m not going to keep on spending money on things that we have to borrow money from China to pay for.”

At the time, PBS CEO Paula Kerger discussed PBS funding on “The Fix.” “Communities treasure their public stations, and it’s individual philanthropy in those communities that actually makes public television work,” Kerger said. “We get about 15 percent — that’s one-five percent — of our funding, in aggregate, from the federal government. That actually goes to our stations, not to me, and that really enables public broadcasting to be seen in communities that may not have the economic means to sustain it. States like Alaska for example, where 50 percent of the funding to maintain that infrastructure comes from the federal government.”

That’s right. Eighty-five percent of PBS funding comes from sources other than the federal government. According to recent figures from Fortune, the federal government spends only $450 million on PBS and NPR combined. That amount could be easily made up by corporate donations, especially if corporations could improve their bottom lines in other ways, for instance a cut in the corporate tax rate.

The threat of firing Elmo was even too outlandish for the Huffington Post. The liberal site pointed out a recent tweet by Sesame Street that confirms that the show does not receive any funding from PBS or the Corporation for Public Broadcasting.

So how does Sesame Street get its funding? It is already funded by an (evil?) corporation. Since 2015, HBO has financed the classic children’s show. The partnership with HBO still allows PBS to broadcast Sesame Street episodes at no charge and even allows the show to produce more episodes than while it was funded by PBS. HBO’s partnership with Sesame Street is an example of free markets at work.

Elmo also worries about his insurance and pre-existing conditions in the video. This reflects the liberal belief that jobs are vehicles to provide workers with insurance, a core tenet of Obamacare.

In reality, jobs exist to provide economic benefits to the employer. If a job is not producing benefits for the person or company paying the worker’s salary, then the job is not sustainable. A company cannot pay more in salaries and benefits than it earns in revenues. Jobs that are not producing wealth (or aiding others in producing wealth) should probably be cut for the good of the company.

This is why Obamacare and increases in minimum wage adversely affect the job market. By making it more expensive to hire workers, the workers must produce more to justify their employment. All too often the result is fewer jobs, especially for unskilled, entry level workers.

“Elmo, you’re going to land on your feet,” the boss says. “Don’t worry.”

We know this is true. Elmo is a celebrity who could easily find a job on another children’s show. Elmo could make a lucrative deal licensing himself for toys and other merchandise. Who can forget the Tickle Me Elmo craze of 1996?

If PBS has a product that people want to buy, then it will survive. Elmo and Sesame Street will thrive in the private marketplace. It’s the shows that no one wants to watch -or pay for - that should be worried.

Originally published on The Resurgent

Trump and Pence plan 'big' infrastructure spending bill

There have been indications in the past that the Trump Administration is planning to start with another infrastructure stimulus package. Now Mike Pence, the incoming vice president, has said openly that one of the first items on the agenda of the Trump Administration will be a big infrastructure spending bill.

“I called [Trump] this afternoon to tell him I was coming by,” Pence told the annual U.S. Conference of Mayors in The Hill. “In addition to urging me to send along greetings, he said, ‘Tell them we’re going to do an infrastructure bill — and it’s going to be big.’”

But maybe not “yuge.” The Hill notes that Trump proposed a plan that would give $137 billion in tax credits to private companies that form public-private partnerships to build transportation infrastructure projects. At other times, Trump proposed doubling Hillary Clinton’s proposed $275 billion infrastructure stimulus. In either case, Trump’s spending would fall short of President Obama’s $787 billion stimulus package in 2009 that had negligible effects on the economy.

Trump may find that his stimulus is attacked from both sides. Democrats may argue that the smaller figure is not enough to properly address the country’s aging roads, bridges and airports while Republicans will be concerned about adding billions of dollars to the national debt.

Nevertheless, Trump’s infrastructure stimulus may present an opportunity for Trump to cobble together a bipartisan majority to pass the project. Democrats are proven supporters of debt-financed, infrastructure spending. While most Republicans normally resist the siren song of borrowing and spending on public works, many might be swayed if the bill is backed by Donald Trump. With conservative Trump supporters like Mike Huckabee and Mike Pence in favor of more infrastructure spending, many Republican congressmen may vote for the bill.

Originally published on The Resurgent

Trump wants to 'prime the pump' with infrastructure stimulus

Donald Trump has again embraced the idea of a stimulus spending bill to help jumpstart the economy. In his interview with Time Magazine for the Person of the Year issue, Trump said that it was necessary to “prime the pump” to increase economic growth.

During the campaign, Trump had advocated an economic stimulus plan that was larger than that proposed by Hillary Clinton. Last August, Trump discussed his ideas on stimulus on Fox Business (quoted in Bloomberg), saying, “Well, I would say at least double her [Hillary Clinton’s] numbers, and you're going to really need more than that. We have bridges that are falling down. I don't know if you've seen the warning charts, but we have many, many bridges that are in danger of falling.” Clinton’s plan had an estimated price tag of $275 billion.

To pay for his plan, Trump said, “We'll get a fund. We'll make a phenomenal deal with the low interest rates…. People would put money into the fund. The citizens would put money into the fund,” he said, adding that he'd use “infrastructure bonds from the country, from the United States.”

Trump’s comments in the Time interview, which was conducted on Nov. 28, appear to indicate that he is not moving away from his plans to spend large amounts of money on an infrastructure stimulus. Trump’s full comment on the stimulus during the interview was vague on details.

“Well sometimes you have to prime the pump. So sometimes in order to get the jobs going and the country going, because look, we’re at 1% growth,” Trump said. “I was taking to the head of a major country, because most of them have called me and I’ve talked to all of them. ‘Yes, we are doing not well, not well. Our GDP is only 4.5%.’ I said wow, if our GDP was 4.5% we’d be the happy – I mean our GDP is probably less than 1% if you think about it. And going in the wrong direction.” GDP growth in the third quarter was reported at 3.2 percent.

Other members of the incoming Trump Administration have signaled their support for government intervention in the economy as well. In a post-election interview with the Hollywood Reporter, Steven Bannon, who will be a Senior Advisor to President Trump, said, I'm the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it's the greatest opportunity to rebuild everything. Shipyards, ironworks, get them all jacked up. We're just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”

Wilbur Ross, the incoming Secretary of Commerce, and Peter Navarro, an economist and advisor to Trump criticized Obama’s stimulus in a policy paper during the campaign. “All we have gotten from tilting at Keynesian windmills,” they wrote, “is a doubling of our national debt from $10 trillion to $20 trillion under Obama-Clinton and the weakest economic recovery since World War II – combined with depleted infrastructure and a shrunken military.” Still, they don’t seem to have a problem with the idea of stimulus spending on infrastructure, just that the Obama spending was poorly targeted.

Steven Mnuchin, who will be President Trump’s Secretary of the Treasury, has said that “taxes, regulatory, trade, [and] infrastructure” will be among the new administration’s top priorities. According to Reuters, Mnuchin said that the Trump team is considering creation of an “infrastructure bank” to fund projects. Mnuchin is also considering issuing Treasury bonds with terms as long as 50 or 100 years, far beyond the 30-year term of current federal debt.

Infrastructure stimulus spending is not typically a strategy supported by conservative Republicans. When President Obama passed the American Recovery and Reinvestment Act of 2009, a $787 billion stimulus package, he did so with no Republican votes.

The support of stimulus spending by the Trump Administration may set up an early confrontation with Republicans in Congress. Many Republican congressmen are deficit hawks who campaigned on cutting federal spending and shrinking the government. Trump’s plans for more government spending will put these Republicans in a crossfire between Trump supporters and debt-conscious voters in their districts.

The conflict will provide a window into the character of the new Republican Party. Will conservative Republicans stand for the traditional Republican platform of less spending and smaller government or will they listen to the siren song of borrowing and spending from the incoming president?

Originally published on The Resurgent

Venezuelan Hyperinflation Means Money No Longer Fits Wallets

David Holt/Wikimedia

The crashing Venezuelan economy has put consumers between a rock and a hard place. Shortages have caused prices to increase dramatically while, at the same time, the value of the Venezuelan currency has plummeted. The result is that wallets are no longer large enough to contain the wad of banknotes that are necessary to buy even small, everyday items.

According to the Washington Post, the exchange rate is so bad that the largest Venezuelan banknote, a 100 bolivar bill, is worth only about 5 US cents on the black market, far less than the official exchange rate of 10 bolivars to the dollar. That means that common items are increasingly out of reach for Venezuelans. A pack of cigarettes currently sells for about 2,000 bolivars, the current equivalent of $1 US.  This transaction alone would require the exchange of 20 of the 100 bolivar bills.

The large number of banknotes required for a typical shopping trip makes it difficult to carry enough money in a wallet or purse. Many Venezuelans are increasingly turning to electronic transactions to avoid carrying large amounts of cash. For others, the large quantity of paper money means using larger plastic bags or backpacks to transport their bankroll.

  

Shortages have caused the price of food to skyrocket even as the money lost its value. As food riots rocked the country in August, CNN reported that staples such as flour, milk and pasta can cost a month’s pay… if you can find them at all.

In Venezuela, there are three ways to buy products. First, there are official government stores where the price is subsidized and kept low. Economic law dictates that artificially low prices cause abnormally high demand. The result is that people flock to the government stores and rapidly clear their shelves. Products disappear quickly even with rationing. Customers at government stores can only shop on certain days of the week. There are long lines and, when you get to the front, there are no guarantees that there will be anything left to buy.

Venezuela also has private stores. Since these stores are not subsidized by the government, prices are higher. Private stores still have to contend with the shortages as well.

“I've been waiting in line since 3 a.m. and have only managed to get two tubes of toothpaste, so, I guess I'm going to have to eat toothpaste tonight,” Monica Savaleta, a 19-year-old dancer, told CNN.

There is a third option, the black market. Buying and selling on the black market is illegal and can be dangerous. It is also very expensive compared to the legal stores.

“I make between 12,000 and 15,000 bolivars a month,” Savaleta said. “If I buy from the [black market] bachaqueros, my whole salary is blown on three kilos [6.6 pounds] of rice.”

Business Insider listed several black market prices for common grocery items. Fresh milk is impossible to find, so many used powdered milk which costs $700 US for a 2.2-pound box. A dozen eggs fetch $150 US. A box of pasta costs more than $300 US. Watermelons are $40 US each. A one-pound bag of coffee is $200 US. To put this in perspective, the Venezuelan minimum wage is about 15,000 bolivars per month, about $1,500 US. More than three-quarters of Venezuelans live in poverty according to the Wall Street Journal.

Venezuela’s situation is known as “hyperinflation,” a condition typically defined by economists as monthly inflation of greater than 50 percent. At that level, an item that costs $1 on January 1 would cost $130 a year later. The Venezuelan inflation rate has been estimated at between 720 percent and 2,200 percent.

There have been 55 other cases of hyperinflation, all of them since the onset of the 20^th century. The most famous was in the German Weimar Republic in the 1920s that eventually led to the rise of Adolf Hitler. As with many cases of hyperinflation, war and financial mismanagement led to the onset of the Weimar crisis. Germany had financed its war effort with debt, which was compounded after the war with reparations payments to the Allies. The Reichsbank began monetizing the debt, a process by which the central bank issued bonds to cover its debt which were then purchased by the same central bank. Using this process, the government could borrow money without having to repay it. The German government also began printing more marks to finance domestic spending.

In Venezuela, the economic crisis is primarily due to government policy and the oil slump. Former president, Hugo Chavez, a protégé of Fidel Castro, nationalized large swaths of Venezuela’s economy and funded much of the country’s consumption with foreign debt according to The Guardian. When the price of oil crashed, so did Venezuela’s revenues. As a result, Nicolas Maduro, Chavez’s successor, was forced to use the country’s gold reserves to service the national debt.

The Maduro government also printed more money, which contributed to the devaluation of the currency. Another basic economic law says that when there is more of something, it is valued less. More bolivars on the market made each individual bolivar less valuable.

Also contributing to the problem is corruption. Transparency International rates Venezuela as the ninth most corrupt country in the world. While ordinary Venezuelans suffer, Maduro and his cronies are doing well. The NY Post noted last spring that an estimated $2 billion has been exported from the country to private banks. The Maduro government is accused of bribery, money laundering, siphoning funds from the state-owned oil company and even drug smuggling.

In 1923, the Weimar hyperinflation ended when the German Reichsbank stopped monetizing the national debt and stopped printing new money. The Reichsbank pegged the value of the Papermark at 4.2 trillion to $1 US according to the Mises Institute. A new currency, the Rentenmark, was introduced with a value of 1 trillion Papermarks to 1 Rentenmark.

At this point, there is no end in sight to the Venezuelan crisis. A resolution will require a change in government policy and may require a change in the government itself. Dissatisfaction and food riots may eventually turn into a revolution or coup against the country’s ruling class. Until reforms are made, the best the government can do to deal with the crisis is to print money in ever larger denominations. 

Originally published on The Resurgent

Congress is the key to stopping Hillary

A major argument for Donald Trump has been that “He’s not a great candidate or a conservative, but we need him to prevent Hillary from picking Supreme Court justices who will gut the Second Amendment.” Given the numerous questionable characters that Trump has chosen to work on his campaign, the idea that he knows how to “hire the best people” is dubious at best. Now, as the “Trump train” goes off the rails three weeks before the election, it is becoming apparent that conservatives need to find an alternative strategy to save the Court and block Hillary. The key to stopping the liberal agenda for the next four years is Congress, specifically the Senate. 

Let’s face it. Depending on Trump to appoint strict constructionists to the Supreme Court was always a long shot. The possibility that Trump might appoint good judges outweighs the certainty that Hillary won’t, Trump supporters argue. If one ignores all the other arguments against Trump, it might even be convincing. Yet as Trump goes rogue on the campaign trail, even that slim possibility seems to be vanishing as a Clinton victory grows more and more likely.

The only certain way to stop Hillary’s agenda before it starts is to make sure that the Republican majority in the Senate is preserved. Many Trump supporters will say that the Republicans in Congress didn’t do much to stop Obama for the past six years. They are wrong. The truth is that Republicans in Congress were very successful at stopping Obama’s legislative agenda.

After the Tea Party wave election of 2010, the Democrats did not pass any major legislation for the next six years. Obama’s landmark laws, the stimulus, the Affordable Care Act and the Dodd-Frank financial reform bill, were passed with Democrat majorities in both houses. Not a single Republican voted for Obamacare or the stimulus.

The Republicans in Congress were remarkably successful at stopping President Obama’s legislative agenda. Obama tried to push through gun control in the wake of the Newtown massacre. Republicans stopped him. They actually cut spending in terms of real dollars in consecutive years for the first time since the administration of Dwight Eisenhower. After the death of Antonin Scalia, Republicans in the Senate tabled President Obama’s nomination of Merrick Garland to fill the vacant seat on the Supreme Court. How much credit did Republicans get for these victories? Approximately zero.

Much of the confusion over the Republican Congress “surrendering” to Obama, as many claim, is the difference between stopping Obama and passing legislation to roll back what Obama has already done. Congress is set up so that it is easier to prevent a bill from becoming a law than to enact a new law. This is particularly true in the Senate.

In the Senate, the first hurdle that a bill must pass to become a law is a cloture vote. Cloture is a gentleman’s filibuster. Rather than speaking for hours on end as they did in the old days, today’s Congressmen can block a bill from coming to a vote by rallying 41 opponents to vote against cloture, or ending the filibuster. Therefore, the 46 Democrats in the Senate could effectively block any Republican bill from ever coming to a vote and that is precisely what they did.

The cloture rule is not part of the Constitution. Senators could decide to eliminate it in favor of a straight majority vote. The problem is that there is an even greater hurdle. If a bill passes both houses of Congress, it still faces a presidential veto. To override a veto requires 67 votes in the Senate. Logically, if a bill can’t pass a cloture vote, the veto can’t be overridden.

When the Republicans blocked Obama legislatively, he began issuing expansive Executive Orders and having regulatory agencies issue rulings with the force of law. Because these tactics bypassed Congress, Republicans could not block them. Stopping these abuses would require passing new laws, but the 54 Republicans could not pass new laws without Democratic support. That reality doesn’t change even with a government shutdown. The situation has effectively been a stalemate with neither side willing to compromise on most issues.

Because of the number of Republican Senate seats up for reelection in swing states this year, it was generally assumed that the Republican majority would be smaller for the next Congress. As recently as a few weeks ago, it looked like Republicans would retain control of the Senate, even if they lost some seats. Then came Trump’s implosion.

Not only have the Trump scandals hurt down ballot Republicans, but Trump and his supporters have attacked his fellow GOP candidates. At this point, it seems increasingly likely that the Democrats will win control of the Senate. Even the large Republican majority in the House may be threatened.

While retaining the House would allow Republicans to block legislation such as gun control measures from becoming law, losing the Senate would mean that Democrats could easily appoint extremist liberal judges to the courts with a simple majority vote. There is no filibuster for most judicial appointees thanks to Sen. Harry Reid’s (D-Nev.) use of the “nuclear option” in 2013. With a Democrat Congress and a Democrat president, the filibuster might be eliminated entirely.

On the other hand, retaining control of the Senate would allow Republicans to stop Hillary’s agenda right out of the gate. Appointments to the Supreme Court could theoretically be blocked until after the 2020 elections, if necessary. The Senate has already shown its willingness to stop bad treaties and liberal legislation in its tracks.

There should be no illusions, however, that Republicans can roll back eight years of Obama under Hillary. Even if they retain a majority, they will almost certainly be weaker, at least until the midterm elections. Historically, the opposition party gains seats in the midterms, but even then there is almost no chance of a 67 vote Republican majority.

While it would be preferable to have a Republican president to help pass conservative reforms, Donald Trump is no conservative and has shown little inclination to work with his party. If Trump becomes president and Republicans lose Congress, he could not be trusted to nominate constructionist judges or veto gun control bills. He cannot be trusted to support religious liberty. There is a high probability that he would act with liberal Democrats like Bernie Sanders to scuttle free trade agreements and military alliances.

With Trump falling to the 30 percent range in many polls and trailing in most swing states, there is little chance of a recovery. Republican funds would be better spent on tossup congressional races to preserve the Republican majority than in attempting to shore up a candidate who is biting the hand that feeds him.

If the choice is between an unreliable President Trump and a Republican Senate that has shown its mettle, I’ll throw in my lot with the congressional Republicans.

Originally published on The Resurgent

GOP shoots self in foot with defund vote

The House Republicans collectively took careful aim at their feet and fired today with a vote to defund the Affordable Care Act, popularly known as “Obamacare.” The continuing budget resolution passed this morning, largely along party lines. One Republican, Scott Rigell of Virginia, voted against the measure and two Democrats, Jim Mathison (Utah) and Mike McIntyre (N.C.), voted for passage according to CNN.

The vote to defund comes amid a flurry of warnings from GOP strategists that defunding Obamacare is impossible and will likely backfire on the party. Sen. Marco Rubio (R-Fla.) told Newsmax on Sept. 18 that “the president appears now politically to be in favor of shutting down the government” in order to score a “political win.”

Two days earlier, Republican National Committee Chairman Reince Priebus said, “I think he wants this thing to happen, a shutdown of the government.” The comments, made on the Hugh Hewitt Show, were quoted in the Huffington Post.

If President Obama wants a government shutdown, the Republicans appear to be eager to give it to him. The budget resolution will now go to the Senate, where the Democratic majority will either do nothing or amend the bill to include funding for the health care and then send it back to the House. The showdown will continue until one side loses its nerve, which may well come after the government shuts down.

It is likely that Obama wants a government shutdown in order to distract from the economy and Syria, as well as to make Congress the obvious scapegoat for national problems. According to the Daily Caller, Obama’s campaign group, Organizing for America, is already running ads that attack Republicans for attempting to shutdown the government. The ad points out that Social Security and unemployment checks will be affected if the government shuts down.

On Sept. 18, pollster and strategist Dick Morris argued that the debt limit, not Obamacare is where the GOP should make a stand. In Morris’ view, there is a logical connection between spending and debt that is lacking in the movement to defund Obamacare. By focusing on spending and entitlements, which have expanded dramatically since 2008, Obama would be placed on the defensive.

Karl Rove also called the defunding strategy “self-defeating” in the Wall Street Journal on Sept. 19. Rove notes that independent voters increasingly resemble Republicans. With President Obama and the Democrats sinking in issue-based polls, the Republicans have a lot to gain in next year’s elections if they do not alienate the independent voters that they need to win.

Rove notes that the one issue in which independents disagree with Republicans is the issue of defunding Obamacare. Rove’s group, Crossroads GPS, polled independent voters and found that they oppose defunding Obamacare by 58 to 30 percent.

Rove also takes aim at claims that Republicans will be able to blame the shutdown on Barack Obama and the Democrats. Overall, independents reject the Republican argument that Obama is at fault by 57-35 percent. In battleground states, independent voters favored Obama’s claim that Republicans were to blame by 59 to 33 percent. Even in districts that lean Republican, voters accept Obama’s argument by56 to 39 percent. The 2014 Senate races currently favor the GOP according to Examiner’s analysis, but a government shutdown could change that.

On the contrary, Rove presents an alternative strategy of delaying the implementation of Obamacare, a strategy that has a precedent from President Obama himself. Rove’s poll found that independents favor delaying the individual mandate by 51 to 42 percent.

Rove also contradicts the Republican belief that the party did not suffer after the Clinton-era government shutdown. While acknowledging that the GOP won two Senate seats in 1996, he points out that the party “lost three House seats, seven of the 11 gubernatorial races that year, a net of 53 state legislative seats and the White House.”

It is certain that the Republicans will not be successful in defunding Obamacare. Simple math can establish that beyond a doubt. It would take five Senate Democrats to pass the budget resolution. When Obama vetoes the bill, as he is certain to do, 54 House Democrats and 21 Senate Democrats would be needed to override the veto. So far, the GOP has been joined by two Democrats.

What is not certain is what the ultimate outcome will be. Thus far, President Obama is refusing even to negotiate on the debt ceiling or the budget resolution according to the Washington Post, lending credence to the notion that he wants a government shutdown. In the end, the token concessions that the Republicans may win in the confrontation will be at the risk of losing of the 2014 elections, the only route to the full repeal of the Affordable Care Act.

Originally published on Atlanta Conservative Examiner.

Answering the religious left

The religious left, while still small, has grown somewhat over the last decade. While often perceived as hostile to religion, particularly Christianity, Democrats are somewhat tolerant of religious leftists. As an example, black voters are both heavily religious and heavily Democratic.

The signature issues of the religious left are war, the environment, and poverty. As the American involvement in Afghanistan and Iraq winds down and concerns about global warming abate, the major point of contention between the religious right and left concerns how to address poverty.

A passage frequently cited by religious leftists is Matthew 25:40, “The King will reply, ‘Truly I tell you, whatever you did for one of the least of these brothers and sisters of mine, you did for me.’” The theme of charity occurs throughout the Bible. Religious conservatives don’t dispute Jesus’ command to help the poor. The question is how best to do so.

Religious leftists advocate government anti-poverty programs. These programs are notoriously expensive, inefficient and prone to fraud. According to the Cato Institute, the state and federal governments spend more than $1 trillion annually on anti-poverty programs. This translates to $20,610 for every poor person in America, yet the poverty rate is still almost unchanged from 1964 when Lyndon Johnson declared war on poverty. As Ronald Reagan put it, “Some years ago the federal government declared war on poverty - and poverty won.”

The left is also fond of pointing to Matthew 22:21 where Jesus tells the Pharisees to “render therefore unto Caesar the things which are Caesar's….” Often the second part of the verse, “and unto God the things that are God's” is not quoted. Christians should pay taxes, but they are also commanded to support their local churches and charities. Ironically, statistics from the book “Who really cares?” by Arthur Brooks show that although liberals tend to earn more than conservatives, they give less in terms of money, time and even blood.

The fallacy with unquestioningly rendering to Caesar is that we do not (at least not yet) live under an authoritarian regime. As participants in a republican democracy, it is our duty to make sure that our tax money is spent wisely. In fact the Bible commands it. Since voters are responsible for their government in a republic, they must ensure that the government is a good steward of tax money.

According to Jesus in Luke 16:1-2, a good steward is not wasteful. A good steward works diligently for his money (Proverbs 28:20, Colossians 3:23-24). A good steward invests wisely and diversifies (Ecclesiastes 11:2). Good stewards provide for their own families (1 Timothy 5:8). Even though a good steward pays taxes (Romans 13:6-7), that does not alleviate the responsibility of personally helping the poor and doing so cheerfully (2 Corinthians 9:6-8, Acts 20:35).

Government-enforced charity runs afoul of Biblical doctrines in several areas. First and most obvious, the Bible calls for voluntary and cheerful giving. This is not consistent with mandates and taxes that are enforced by the government at the point of a gun.

Second, the Bible clearly values honest work. People who are legitimately in need should be helped, but those who are capable of working should support themselves and their families. In 2 Thessalonians 3:10 Paul wrote, “For even when we were with you, we gave you this rule: ‘The one who is unwilling to work shall not eat.’” Charity should not go to people who could be working to support themselves. Many government programs actually encourage people not to work because they lose their benefits if they do.

Third, government is wasteful. No one seriously doubts that much of the money that the government confiscates to help the needy is wasted. The waste is two-fold. First, the money flows through bureaucracies at both the state and federal levels. These bureaucracies have high overhead due to expensive buildings and pay and benefits for employees that are substantially higher than their private sector counterparts according to the Congressional Budget Office.

Second, fraud is rampant in government entitlement programs. Untold billions of dollars are lost to fraud every year. Bureaucratic caseworkers with scant contact with their charges are often unable to tell when they are being duped. As entitlement programs grow, the propensity for fraud becomes more likely due to the sheer numbers of people involved.

Finally, government programs ignore the Bible’s warnings against incurring debt. Proverbs 22:7 warns that “The rich rule over the poor, and the borrower is slave to the lender.” Psalm 37:21 says, “The wicked borrow and do not repay, but the righteous give generously.” Paul writes in Romans 13:8, “Let no debt remain outstanding, except the continuing debt to love one another….” and admonishes “You were bought at a price; do not become slaves of human beings” (1 Corinthians 7:23).
What, then, would God think about borrowing 40 cents on the dollar and confiscating money from workers trying to feed their families to pay for a wasteful and inefficient system that encourages the poor not to work? It is hard to imagine that he would be pleased.

The religious left also lacks Biblical support for two other prominent issues. First, with respect to abortion, it is clear from numerous Bible passages such as Matthew 19:14 that Jesus loved little children. In Matthew 18:6, Jesus said that it would be better for a person to have a “great millstone fastened around his neck and to be drowned in the depth of the sea” than to cause a child to sin. How much worse would it be to physically harm a child than to cause one to sin?

The Old Testament was even more specific saying, “Cursed be anyone who takes a bribe to shed innocent blood” (Deuteronomy 27:25). In Exodus 21:22-23, there was something akin to a personhood law: “When men strive together and hit a pregnant woman, so that her children come out, but there is no harm, the one who hit her shall surely be fined, as the woman's husband shall impose on him, and he shall pay as the judges determine. But if there is harm, then you shall pay life for life…. ” Jeremiah 1:5 indicates that a baby in the womb is already a person known to God.

The Bible is also clear on same-sex marriage. Most people are familiar with the Old Testament laws concerning homosexuality in Leviticus 18:22 and 20:13. There are also hints that homosexuality was one of the sins that led to the destruction of Sodom (from which we get the word “sodomy”) and Gomorrah in Genesis 19. Christians are not bound by Old Testament law (Galatians 5:18). Neither is the United States a theocracy (nor should it be). Old Testament laws do provide clues to right and wrong however.

Less commonly known is the New Testament’s condemnation of homosexuality. In Romans 1:24-27, homosexuality is described as God’s judgment on people who “exchanged the truth about God for a lie and worshiped and served the creature rather than the Creator….” In 1 Timothy 1:9-11, homosexuals are listed with other sinners including the sexually immoral, slave traders, liars and perjurers. Jude 7 confirms that homosexuality was one of the sins for which Sodom and Gomorrah were destroyed.

Nowhere does God command Christians to hate homosexuals, but it is clear that God considers homosexuality to be a sinful act that should not be encouraged. Especially when the welfare of children and God’s prohibition against leading children astray (Matthew 18:6) are considered, it becomes clear that same-sex marriage should not be considered for societal as well as religious reasons. The New Family Structures Study by Mark Regnerus, associate professor of sociology at the University of Texas at Austin, offers compelling evidence that children of same-sex couples do not fare nearly as well as children of traditional families.

Members of the religious left are free to vote for whoever they choose and upon whatever basis they choose. If they believe that their political views are aligned with their religious views, however, they should seek to learn what Jesus and the Bible say about the issues at hand.

 

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Debt limit and federal default: What they are and what they mean to you

As the deadline for an agreement on raising the debt ceiling approaches on August 2, it remains to be seen whether the Democrats and Republicans in Congress can reach a compromise that will allow the federal government to continue to meet its obligations. Many Americans do not understand the background of the debt limit debate. Many others don’t believe that it will have an impact on them.

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The debt limit is the congressionally imposed limit on borrowing. According to Factcheck.org, the federal government is currently borrowing thirty-six cents for every dollar that it spends. Part of the problem is that tax revenues have fallen since the onset of the recession in 2008, while federal spending has increased. When the federal government reaches the limit of what Congress allows it to borrow, it will have to begin choosing what bills to pay and which ones to default on.

The situation is similar to that of many families in Atlanta, around Georgia and throughout the country that were financing a plush lifestyle with mortgages and credit cards before the recession started. The breadwinners in the family took pay cuts, like many others in the country, but imagine that in this case, rather than cutting back on spending when they realized that they were bringing home less money, they started borrowing more in an attempt to preserve their old lifestyle. In fact, with the huge increases in federal spending, it is like the family took a pay cut and then went out and bought a new luxury car on credit. Everything that they used to pay cash for, the family now charges to their credit cards. The hope is that if they can borrow until more money starts coming in and avoid making painful spending cuts entirely.

The problem is that there are consequences to excessive borrowing. The federal debt limit is analogous to the family’s credit limit. The family, like the federal government, cannot borrow indefinitely. Sooner or later, the overspending family will max out their credit cards. As their debt increases, it will get harder to find places to borrow more money and the interest rate for their borrowing will increase because loans to this family will be considered more and more risky for the lender. Eventually they will be forced to stop borrowing and make cuts to their spending when they are not able to borrow any more money.

At this point, the federal government has refused to make meaningful spending cuts and is seeking to raise the credit limit on its old credit card and apply for new ones. One price that the government might pay for running up the balance on its credit cards even higher is a downgrade to the United State bond ratings.

U.S. treasury bonds are currently rated AAA and are considered the safest investment in the world, but massive increases in federal debt and spending have led rating agencies to warn that they may have to downgrade the rating on U.S. bonds. This is akin to the hypothetical family’s credit score being downgraded from 700 to 600. It means that interest rates will be higher for future bond sales which will increase the cost of government borrowing. It also means that unless changes are made, further downgrades could come soon.

It is likely that the federal debt limit will be raised, but that won’t solve the federal government’s problem. The fundamental problem is that the government spends much more than it receives in taxes. Like a family with a pay cut, the federal government faces two options. First, it can cut spending and live within its means. The problem with this option is that federal spending is made up of popular but expensive programs. Any attempt to cut any federal program meets with resistance from voters and activists. It is like facing opposition from mother for cuts to the grocery budget. Brother doesn’t want to spend less on video games while sister needs her clothing allowance. Father doesn’t want to eliminate cable television from the family budget.

A second option is find a way to increase the money coming in. For the family, that means finding a job that pays more or working a second job. For Congress, it would mean raising taxes. The problem with this option is that, just as most Americans can’t find a higher-paying job, they also can’t afford to pay higher taxes without further damaging the economy.

Ironically, the Laffer Curve, an economic principle, shows that beyond a certain point even an increase in taxes won’t generate more tax revenues. As tax rates increase, so much money is leaving the private economy and going to the government that it discourages investment and production. Consequently, tax revenues fall and the government collects less money. Even if the government can generate some additional tax revenue by raising taxes, the government’s spending problem is so large that it cannot be solved without spending cuts.

If Congress fails to raise the debt limit, the government will not be broke because some tax money will be coming in; it just won’t be enough to pay everything. The government will have to choose which bills to pay and which ones to defer until it has more money, just as many families have to choose which bills to pay. Theoretically, the government could pay important bills, like Social Security payments and military salaries, while delaying payment on less important things like Senator Harry Reid’s cowboy poetry festival and the thousands of other wasteful items in the federal budget. In the final analysis, practically everything the government spends money on, especially the big-ticket items like Medicaid, Medicare, Social Security, and defense, will have to be reconsidered and restructured, but that is a long-term problem.

In the short term, the effect of a default would depend on what Treasury Secretary Tim Geithner and President Obama decide to stop paying. They could choose to stop making Social Security payments to increase pressure on Republicans. They could divert money from defense and other federal departments to keep social spending active. Many government employees might be laid off.

Companies that do business with the federal government would likely not receive payments. That might mean that workers at these companies would be laid off or go unpaid. The uncertainty in the economy could cause the stock market to crash.

Georgia and other states might not receive federal grants and subsidies which would mean tighter states budgets and more layoffs for state employees. Many of these states, like Georgia, have already made painful cuts to state government budgets and experienced rounds of layoffs rather than financing their spending with more debt. Unlike the federal government, thirty-seven states have balanced budget laws that do not allow a deficit to be carried forward according to the National Conference of State Legislatures. Georgia does not have such a law.

If the U.S. bond rating is downgraded, interest rates will likely rise on treasury bonds. The increase in interest rates will ripple through the economy. Interest rates will rise on everything from mortgages to credit cards. Borrowing will be more expensive for American companies and consumers as well as the government.

The ultimate outcome of the battles over spending, taxes and the federal debt remain to be seen. What is obvious is that the U.S. is on an unsustainable course. The failures of national economies such as Greece are a warning to Americans that reckless spending cannot be financed with borrowing indefinitely without doing serious damage to the nation.

Social Security and the debt limit

Ida May Fuller (Public Domain)

President Obama’s warning that a failure to increase the debt limit may mean that there is not enough money in the federal treasury to send out Social Security checks should put a stake through the heart of the myth that there is a Social Security trust fund. In an interview with CBS News, President Obama said, “I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it.”

For decades now, Social Security has been sold to the American public as a retirement plan. Many Americans believe that their Social Security taxes go into an account that is held for them until they retire. In reality, Social Security is a pay-as-you-go program in which current tax receipts are used to pay the benefits for current retirees.







Social Security was enacted into law in 1935. According to the Social Security Administration, the first Social Security beneficiary was Ida May Fuller of Ludlow, Vt. Fuller began collecting benefits in 1939 after paying into Social Security for less than three years. Her contributions (taxes) totaled $24.75. Fuller lived until 1975 and collected a total of $22,888.92 in Social Security benefits. This is equivalent to a return on her “investment” of over 900 percent. Current Social Security returns are approximately two percent.







If Social Security were a true retirement plan, Fuller’s benefits would never have lasted for 36 years. Fuller’s benefits were being paid by the Social Security taxes of current workers rather than Fuller’s own contributions and interest.







According to the Social Security Administration’s website, the 1935 Social Security Act established a trust fund for Social Security benefits. On one part of its website, the SSA calls it a myth that the Social Security funds have been placed into the general fund of the federal government. However, on another page, the SSA admits that Social Security taxes are invested in securities and that “the cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.”




In other words, money in the Social Security Trust Fund is given to the general fund of the federal government in exchange for “special-issue” securities. The trust fund is filled only with s to repay the funds borrowed by the federal government. Thus far, the federal government has always repaid the funds with interest, but if the federal government is in default then it might not be able to do so.







The AARP notes that fourteen percent of Georgians, primarily seniors, receive Social Security benefits. For more than thirty percent of these seniors, Social Security is the only source of income.







If the Social Security Trust Fund were a true retirement plan in the form of a privately administered investment plan, it would be required to maintain a certain ratio of liquidity to invested assets. Instead, Social Security relies on current tax receipts and the repayment of funds borrowed from the trust fund by the federal government. Since current taxes cannot pay current benefits, if the government cannot repay its borrowed funds (with more borrowing), then it might well not be able to pay benefits to current retirees.







It is likely that Congress and the president will come to an agreement that will continue to fund the federal government, but taxpayers should remember the summer of 2011 as the time when the myth of the financial security of Social Security was deflated.







Continue reading on Examiner.com Social Security and the Debt Limit - Atlanta Conservative
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Meet the candidates: Newt Gingrich

Newt Gingrich (Gage Skidmore)

Newt Gingrich is a transplanted Georgian who was born and grew up in Pennsylvania.  Born in 1943, his birth name was Newton Leroy McPherson.  His mother and father divorced after a marriage of only a few days.  Newt’s mother remarried to a career army officer, Robert Gingrich, in 1946.  Gingrich adopted Newt and the couple had three daughters.

The family moved frequently as the senior Gingrich received new assignments.  Newt graduated from high school in Columbus, Ga. in 1961.  He graduated from Emory University with a B.A. in history in 1965.  He earned a Master’s and Ph.D. in modern European history from Tulane, graduating in 1971.  After earning his doctorate, Gingrich returned to Georgia, where he taught at West Georgia College in Carrollton from 1970 to 1978. 

Gingrich’s political career began with campaigns for congress in Georgia’s sixth district in 1974 and 1976.  He narrowly lost those races to Democrat Jack Flynt, but won in 1978 when Flynt decided not to seek re-election.  Gingrich served in the House of Representatives until 1998.  He was elected Minority Whip in 1989 to succeed Dick Cheney, who resigned to become Secretary of Defense.  In 1994, in the wake of the Republican landslide, Gingrich was elected Speaker of the House when Minority Leader Bob Michel (R-Il.) did not seek re-election to congress.

Gingrich was largely responsible for the Contract with America that led to the 1994 Republican landslide.  During his tenure as speaker, Gingrich oversaw the passage of welfare reform, tax cuts (including the largest capital gains tax cut in U.S. history), and pushed for a balanced budget under President Clinton.  The budget was balanced in 1999 for the first time since 1969.  Gingrich’s reform agenda is a major reason for the economic boom of the 1990s.

Gingrich was also involved in the government shutdowns of 1995 and 1996.  In a situation similar to the one faced today, the Republicans refused to raise the debt limit when Democrats balked at budget cuts.  Ultimately, the shutdowns resulted in the deal to balance the budget, but Gingrich suffered politically from comments that made it seem that he shut down the government in response to a snub from President Clinton.  After Republicans lost the presidential election and eight house seats in 1996, Gingrich resigned from Congress. 

Since leaving Congress, he has served on the Defense Policy Board for President George W. Bush and the United States Commission on National Security/21^st Century.  He also teaches the Joint Warfighting Course to Major Generals at the Air University and is a Distinguished Visiting Scholar and Professor at the National Defense University.  In 2003, he founded the Center for Health Transformation to create free market health care reforms.  In 2007, he founded American Solutions, a conservative think-tank and action group.  Gingrich has also written a number of books on topics ranging from history to government policy to fictional alternate history.  After leaving Congress, he moved from Georgia to McLean, Va. where he currently resides.

There are several skeletons in Newt Gingrich’s closet.  In 1992, Gingrich was one of more than 450 congressmen who bounced checks written on the house bank.  The house bank covered the overdrafts, but many congressmen had thousands of dollars that were overdue for months.  Gingrich was not singled out by the Ethics Committee and was one of the Republican congressmen who decided to go public with the scandal, realizing that more Democrats would be affected than Republicans.

While he was in Congress, Gingrich also taught a course at Kennesaw State College in Kennesaw, Ga., an Atlanta suburb.  The course, titled “Renewing American Civilization,” led to an ethics charge and an investigation by the IRS.  The House Ethics Committee found no wrongdoing, but Gingrich did pay a fine for conflicting statements filed by his attorneys.  The Kennesaw State Foundation’s tax-exempt status was threatened after accepting $200,000 to televise Gingrich’s course across the country.  The foundation was exonerated after Gingrich resigned.

In 2008, Gingrich teamed up with Nancy Pelosi, another now former house speaker, to make a commercial advocating green energy to halt climate change.  In the past three years, Gingrich seems to have retreated somewhat on the issue.  A video on the New Hampshire Primary blog shows Gingrich saying “a topic large enough to change the behavior of the entire human race is a topic that is more than science and deserves public hearings with very tough minded public questions and we’ve had almost none of that on either side.”

Newt’s personal life may also be a problem for many prospective voters.  He married for the first time at nineteen to his former geometry teacher who was twenty-six at the time.  Six months after the 1980 divorce, Gingrich remarried.  Gingrich admitted to having an affair with Callista Bisek, a house staffer, during his second marriage.  He divorced for the second time in 2000 and married Bisek shortly after. 

In a 2011 interview with the Christian Broadcasting Network, Gingrich admitted that his actions were wrong:  “There’s no question at times of my life, partially driven by how passionately I felt about this country, that I worked far too hard and things happened in my life that were not appropriate. And what I can tell you is that when I did things that were wrong, I wasn’t trapped in situation ethics, I was doing things that were wrong, and yet, I was doing them. I found that I felt compelled to seek God’s forgiveness. Not God’s understanding, but God’s forgiveness.”

Gingrich has also run into two problems since announcing his candidacy this year.  In the first, he angered conservatives when he referred to Paul Ryan’s Medicare plan as “right-wing social engineering.”  Gingrich apologized to Ryan and tried to repair the damage, but his comments probably did not endear him to Tea Partiers or deficit hawks.

Secondly, in early June, Gingrich’s entire senior campaign staff resigned.  The resignations came in the wake of Gingrich’s two-week cruise in the Greek isles.  The staff members reportedly were concerned that Gingrich did not take the campaign seriously.  The departure of his staff will likely affect Gingrich’s ability to raise campaign funds, since many potential donors will seriously question his ability to win if he isn’t supported by his own employees.

The most recent Real Clear Politics index of polls shows Gingrich in statistical tie for fifth place with Ron Paul.  He currently trails Mitt Romney, Sarah Palin, Rudolf Giuliani, and fellow Georgian Herman Cain.  Most of the current polls do not reflect the public reaction to the resignation of Gingrich’s staff.  An Insider Advantage/WSB-TV poll of Georgia voters in early June showed Gingrich in third place behind Herman Cain and Michelle Bachmann.

Very few doubt Newt Gingrich’s intelligence and ability to make policy, but if he is to survive the primary season he has major obstacles to overcome, not the least of which is to replace his entire staff in the middle of the campaign.  Gingrich’s missteps and gaffes make it unlikely that he will win the contest to face Barack Obama in 2012, but he would be a valuable advisor and strategist to the eventual Republican nominee.

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