While slow recoveries from major financial crises are common, employment would have increased considerably more rapidly, and unemployment would have fallen much faster, were it not for several factors special to this recovery. Scott Baker, Nicholas Bloom and Steven Davis have studied changes in economic policy uncertainty since 1985, and have constructed an index of the degree of economic policy uncertainty during the past 26 years (see their “Measuring Economic Policy Uncertainty”)…

[S]ome of the uncertainty during this financial crisis was avoidable if Congress and the president had not passed an ineffective stimulus package over a divided Congress, if they had resolved the budget deficit and debt ceiling issues (especially by trying to get entitlements under control), if agreement on tax policy toward broader and flatter taxes had been achieved, and if clearer policies were adopted about which companies would be allowed to go bankrupt and which would be bailed out.

*Originally seen in John C. Goodman’s Health Policy Blog

Image Credit: Wikimedia Commons

Will Rogers claimed to have never met a man that he didn’t like. I’m consistent too. I never read anything by Robert Reich that I liked. Dr. Reich, former Secretary of Labor under Bill Clinton and currently a named professor at UC Berkeley, is at it again. In writing for the U.K.’s The Guardian, April 23, 2012, Reich lays out a re-election economic game plan to enable President Obama to snatch victory from the jaws of defeat.

Reich identifies four villains: big banks, oil speculators, anyone attempting to cut government spending and, of course, income inequality. My own dislike of big banks raised a fear in me that I might lose my perfect score in disagreeing with Dr. Reich. Big banks have all the mismanagement problems of big corporations and big governments: wasteful activities that benefit the management at the expense of the owner-voters. But in reading Dr. Reich’s position on big banks, my fear dissolved. Dr. Reich is not opposed to big banks per se—only big banks that do not do his imperial biddings. President Obama, according to Reich, should threaten banks. If they do not “provide meaningful relief to homeowners,” he’ll break up the biggest ones and resurrect the Glass-Steagall Act to prevent commercial banks from engaging in investment banking activities. Presumably, if banks do Imperial Washington’s public policy activities, they can remain too-big-to-fail and continue to go their merry way taking outrageous financial risks under implicit and explicit federal guarantees. Oh, and big banks don’t forget to make your obligatory campaign contributions.

Read Reich’s imperial edicts

The Sign You Won't See Here....

By now, pretty much everybody knows that President Obama’s economic stimulus program, more formally known as the American Recovery and Reinvestment Act of 2009, has turned out to be an extremely expensive failure.

Instead of creating or saving millions of jobs, this massive economic stimulus program really represented the federal government’s wasteful spending at its worse, sending millions upon millions of dollars to no sustainable or productive end.

Our example today drives that point home and provides an almost perfect metaphor for the impotence of President Obama’s signature economic achievement. NBC’s Bay Area Investigative Unit reports:

The NBC Investigative Unit has raised questions about two grants totaling nearly $1.5 million dollars distributed to the University of California San Francisco. The money was part of the federal stimulus program and went to studies into the erectile dysfunction of overweight middle aged men and the accurate reporting of someone’s sexual history.

This is part of our ongoing series of investigations by the NBC Bay Area Investigative Unit into who got federal stimulus dollars, and why some projects did not break ground more than two years after receiving the grant.

We really can’t make this stuff up. Here’s the $726,805 grant the government issued for the research into the erectile dysfunction of overweight middle-age men, which created 1.61 jobs according to the government’s estimates and which, apparently, is now more than 50% completed.

As for the study into how to improve the surveys in which data about individual sexual histories are collected, here’s the $1,260,717 grant, which as of May 15, 2012 is reported by the federal government to have resulted in the creation of 0.78 jobs, which is down from the 0.85 jobs that the NBC Bay Area Investigative Team reported just a day earlier.

Yes, you read that right – this stimulus spending is becoming less and less stimulating! And even the people responsible for managing the federal government’s massive economic stimulus program don’t believe that this spending is creating or saving jobs, aka “stimulating the economy”, like it was supposed to do.

Stimulus money didn’t go to the states hardest hit by the recession. States with higher bankruptcy, foreclosure and poverty rates as well as lower incomes got significantly less money. And states that had higher unemployment rates received virtually exactly the same amount of money as states with lower rates.

But there was one group that significantly benefited: unions. The top 10 states receiving the most stimulus money got more than 70% more money per person than the 10 states that received the least money. At the same time those states had more than twice the share of their workers represented by unions.

John Lott and Grover Norquist editorial in Investors’ Business Daily.

*Post originally found in the National Center for Policy Analysis’ Health Policy Blog.

“The Life of Julia” is an interactive slideshow from Barack Obama’s reelection campaign that portrays a woman living her whole life reliant on government programs. In so doing, it inadvertently exposes the cyclical effect that government “help” can produce.

Meet Julia, a girl who is automatically put into the system by being placed in the Head Start program, which costs almost 10 billion dollars a year and a tragic waste of taxpayer money. We then see her educational integrity diminished due to the need for education reform. We follow Julia through some medical issues which are financially overbearing due to the lack of competition between health care providers. The story follows her to giving birth to a son, who has a difficult time thriving in a world that is weighed down by the debt burden left to him by his mother’s generation. What is interesting about this story is how Julia becomes truly indoctrinated by the system that has inadvertently hindered her. It gives her just enough to “help” yet still leaves her dependent.

View The Life of Julia here!

How can changing the rules by which welfare benefits are doled out save taxpayer dollars while making sure that only the people who are eligible for welfare benefits can receive them?

It’s a trick question, because the key to making it work is to make the bureaucrats who operate the federal government’s welfare dispensing programs make sure the people to whom they hand out these unearned benefits are eligible to receive them! Saving taxpayer dollars is just something that would result from imposing this kind of fiscal discipline on the people who are supposed to exercise fiscal discipline!

The Washington Examiner‘s Paul Bedard explains:

Rule changes under President Obama that have allowed for a huge “stealth expansion” of welfare benefits would be reversed under legislation taking center stage this week in the House.

As part of a package of legislation aimed at avoiding the year-ending threat of sequestration, a budget requirement that would crush the Pentagon and order across-the-board cuts, Speaker John Boehner and his GOP team is taking aim at several welfare-expanding moves pushed by the administration that could save a total of $77 billion over 10 years.

The proposed simple rule changes consist of four separate reforms, which are aimed at reducing welfare application fraud. Bedard continues:

First, it closes a loophole that allows states to give food stamps not just to those who need them but to anybody who hints they want them simply by asking for a food stamp brochure or calling the food stamp 1-800 hotline. That could save $11.7 billion over 10 years.

A second move would close the “heat and eat” loophole that lets states expand eligibility for food stamp by up to $130 a month for those who also receive home heating fuel assistance. The scam here: Some states send just $1 assistance checks, making families who apparently don’t need much fuel assistance eligible for bigger food stamp help. Savings: $14.3 billion over 10 years.

The third initiative would prevent abuse of the refundable child tax credit by those immigrants ineligible to work in the United States for a 10-years savings of $7.6 billion.

And the largest money saver would be requiring Americans to repay overpayments of their Obamacare subsidy to buy insurance. The issue: eligibility for aid is based on two-year-old employment info, meaning that those who recently got jobs and receiving aid are still registered as unemployed and will be provided with more support once the full law goes into effect. What’s more, there’s a cap of $250 for singles and $400 for families on overpayments that have to be returned to Uncle Sam. Projected 10-year savings: $43.9 billion.

We would suggest one additional reform: require the government agencies that administer welfare programs to issue 1099 forms for the full cash value of the benefits provided to the recipients, because the recipients really ought to have to report this kind of income to the IRS on their tax returns.

If it turns out that they’re not really eligible for the benefits they’re receiving, we’re pretty sure that the IRS has the means to recover the money that should never have been doled out in the first place.

As for how to pay for the IRS’ role in all this, whenever a misspent dollar is found by the IRS, the government agency that improperly transferred the money without correctly determining the eligibility of the welfare applicant should pick up the tab for the IRS’ compliance services from its employee recognition and bonus programs, which will help incentivize their employees to do a better job in screening welfare benefit applicants in the first place.

And that would have the additional benefit of getting the IRS to work for honest taxpayers for a change instead of against them!

What if the President of the United States was the driver of a car, and the speed at which he drove was the rate at which the U.S. national debt would increase while he was at the wheel? Would that be the kind of road trip you’d like to go on?

Courtesy of the data visualization talents of the anonymous mind at the Political Math blog, you can take the trip for yourself without ever leaving home!

Trumans watching President Johnson sign Medicare into law. @commons/wikimedia.org

SS and Medicare provide retirees with a substantial nest egg. A typical middle-income couple retiring at age 65 in 2011, for example, can expect over $900,000 in benefits from SS and Medicare during the course of their remaining years. Absent SS and Medicare, individuals would have had to save privately for their retirement and then, after retiring, to use their personal savings to pay expenses and high medical insurance costs. SS and Medicare allow the couple to save less, retire earlier, or just have much more financial security after retiring. Exactly how much less we saved as a result of these entitlement programs is subject to dispute, but the total amount is likely to be in the tens of trillions of dollars. Unfortunately, the taxes that workers paid into SS and Medicare were not saved. And here is where pay-as-you-go comes in. Instead of saving the taxes by investing in financial assets in behalf of workers, the government handed out the funds to millions of retirees who paid very little or next to nothing into the retirement plans. These individuals were the beneficiaries of trillions of dollars in undeserved and unwarranted government payouts that left the trust funds depleted. One famous case is that of Ida Fuller who retired in 1940 at age 65. Ida paid into Social Security only a total of twenty-two dollars, but her first monthly check from Social Security was for $22.54! Ida lived to be 100 and received tens of thousands of dollars in Social Security payments. This extraordinary payout to retirees made social Security extremely popular and widely hailed as a great success. But the true costs of the system are hidden: the government’s failure to save and invest social security taxes has de-capitalized the nation by trillions of dollars. Private-sector savings support investment in physical capital and create higher paying jobs. But pay-as-you-go exchanges government promises for private saving–promises of payments that come not from accumulated wealth but from taxes imposed on future workers. No savings means no capital accumulation and lower wages. Worse yet, the higher future taxes adversely affect work incentives and production.

The road to pay-as-you-go, like the road to hell, was paved with seemingly good intentions. Take Senator Arthur Vandenberg (R-MI) and his impassioned plea for pay-as you-go published in the Congressional Record on January 16, 1939. “A full reserve [for Social Security] is unnecessary…It is a colossal imposition…a monster…” Vandenberg reasoned that adopting pay-as-you-go would allow immediate payouts to persons nearing retirement (like Ida Fuller) and allow a delay in raising the necessary tax rate to make the program sustainable. Republicans particularly liked the delay in taxes, Democrats the immediate gifts to retirees. (Does any of this sound familiar?) Of course, delaying taxes and providing freebie benefits to oh-so grateful current voters was a vote-maximizing strategy for incumbents, but nothing short of inter-generational robbery.

Immediacs (see my earlier blog on Immediosis) in Washington won the day and pay-as-you-go became the law of the land. Immediate extraordinary benefits were paid out to persons who contributed very little to the fund and tax rates were temporarily held down. Politicians kicked the can down the road and a quarter century later in 1965, the popular pay-as-you-go Social Security program made pay-as-you-go a foregone conclusion for financing the new Medicare program. Bess and Harry Truman, who paid nothing into the system, received the first two Medicare cards. The bill for all the free lunches is now being delivered.

The Daily Caller’s Caroline May reports on the momentous occasion:

Thomas Jefferson is widely credited with coining an adage that makes fools of procrastinators: “Never put off until tomorrow what you can do today.” But where budgets are concerned, Congress has failed to execute the third U.S. president’s advice for three years.

April 29, 2009 was the last time the Senate passed a budget — three years ago today. Articulating a budget for the United States is among senators’ legally required duties.

Alabama Republican Sen. Jeff Sessions, the ranking member of the Senate Budget Committee, told The Daily Caller that Senate Democrats’ obfuscation is to blame.

“This is a deliberate plan that the Democratic majority has executed for three years to avoid the responsibility of laying out a financial plan for America,” he said in an interview.

[...]

In the three years since the Senate last passed a budget, the federal government has spent $10.4 trillion and accumulated $4.5 trillion in debt, an amount that equals $13,000 in new debt for every individual American and $34,000 per family.

While Republicans lodge their protests, Senate Democrats claim the blueprint for 2013 was decided upon with the August debt ceiling compromise.

“We do not need to bring a budget to the floor this year — it’s done, we don’t need to do it,” Majority Leader Harry Reid said of the 2013 federal budget in February.

Senate Budget Committee Chairman Kent Conrad has indicated that he likely will not mark up a budget until after the November election, canceling a planned budget markup and vote last week.

Sessions said such delays are par for the course with this Congress, whose modus operandi in recent years has been last-minute patch-up jobs.

At least we now know what to expect. As for when to expect it, the CBO projects the U.S. will have burned through the most recent debt ceiling increase by the end of this year, as reported by Talking Points Memo’s Brian Beutler:

New figures from the Congressional Budget Office indicate that the government will hit its debt limit before the end of the year — though exactly how long before is still unclear.

CBO predicts that at the end of fiscal year 2013, the debt subject to the overall limit will be just shy of $16.8 trillion. But the debt limit itself stands at $16.4 trillion. The Treasury Department can create some breathing space for itself using a series of extraordinary measures — but those only go so far. So it’s still an open question how far into 2013 the current debt limit will take us — if it gets us there at all.

“There is a risk that the treasury will hit its $16.4 trillion debt limit before the next presidential inauguration,” emails Moody’s chief economist Mark Zandi. “It will be close. I suspect the Treasury will have enough accounting wiggle room to get there, but much depends on whether the economy sticks close to script.”

And since the economy isn’t sticking close to the script, look for a crisis to begin right in the heat of the election season this year!

Last summer, as part of the agreement that resulted in raising the federal government’s debt limit, Congress passed the Budget Control Act, which set spending caps for future years. These spending caps represented “cuts” in the Washington sense; that is, spending was allowed to increase, but not as fast as might otherwise have been projected. When it has suited their purposes, the Democrats have been champions of the Budget Control Act. Thus when House Republicans adopted a budget that would have spent less than the maximums under the BCA, Democrats alleged that the budget “violated” the Act. They thus turned the Budget Control Act on its head, pretending that the maximum spending levels agreed on in the Act—caps—were actually minimums.

Now, with no fanfare and no press coverage, the Democrats are attempting to negate—effectively, to repeal—the Budget Control Act by adopting spending bills that exceed its limits. Harry Reid and his Senate confederates have offered a bill to increase spending on the Post Office, S. 1789. The bill has been scored by the Congressional Budget Office as increasing the federal deficit by $34 billion, and no provision has been made to recoup that money somewhere else in the budget. (Of course, we don’t have a budget because the Democrats in the Senate won’t pass one. But spending could still be cut somewhere else.)

Source: NASA

What makes this particular attempt to break last summer’s debt deal is particularly bad in that it is aimed at providing yet another taxpayer bailout—this time to the U.S. Post Office, which has a monopoly on the local delivery of mail in the United States.

Here, under the pretense of “saving” local post offices that the government-supported enterprise is mandated by the U.S. Congress to operate unprofitably, as the U.S. postal service must also adhere to the prices for its services that are also dictated by the wannabe tycoons of the U.S. Congress, it is being claimed that only American taxpayers can keep the postal monopoly in business.

We would suggest a simple solution—if it is really that important to “save” the post office, cut back on other, less-important spending to make it happen. Otherwise, following Germany’s example and privatizing the post office, along with breaking its government mandated monopoly, should be the U.S. Congress’ proper course of action.