Voice For Liberty

Tag: Government spending

  • Goyle’s social security protection pledge is a tax increase pledge

    Raj Goyle, candidate for Congress, has pledged to protect social security. He doesn’t mention the tax increase that will be required to fulfill this pledge.

    Goyle’s opponents in the campaign for United States Congress from the fourth district of Kansas are Reform party candidate Susan Ducey, Libertarian David Moffett, and Republican Mike Pompeo.

    In his pledge, Goyle promises to “work for real solutions that strengthen Social Security for the long term.” Specifically, he pledges to oppose all efforts at privatization and raising the retirement age to 70.

    The problem is that after ruling out reforms like these, there’s not much left to do except to raise taxes. Evidence of this can be found in today’s Wichita Eagle, which carries an editorial from the Los Angeles Times. Titled Ignore fearmongering on Social Security, it mostly looks back at opposition to the formation of the Social Security system 75 years ago.

    But the article recognizes that the system needs “minor adjustments” to remain solvent. The authors write: “Economists say that raising the income ceiling on the payroll tax, applying the Social Security tax to nonwage income or adding a modest increase to the payroll tax could add decades to the health of the Social Security trust fund.”

    Each of these policy changes is a tax increase. The article lists no other solutions than these.

    These recommendations are not Goyle’s. He hasn’t said what he would do to place the system on a sound financial footing.

    But there’s not much that we can do except raise taxes if we want to keep the current system.

    We need to do something quickly. Social Security will pay out more in benefits this year than it receives in contributions from payroll taxes. It had been thought that this milestone would not be reached until 2017 or later.

    There are those who cite the Social Security trust fund and its large balance of over $2 trillion as evidence that the system is doing well. But as Thomas Sowell explains, the trust fund is merely an illusion. The money in the fund has already been spent by government agencies. The only way they can pay back the fund is through tax revenues.

    It’s not as though Republicans are confronting the problem head-on. One of the few officeholders willing to do so is Wisconsin Congressman Paul Ryan, who is ranking member of the House Budget Committee. His Roadmap for America’s future is a plan that recognizes the seriousness of the current situation, not only with Social Security, but in other areas of the federal budget.

    His recommendations, specific as they are, cause consternation among some Republicans who would rather talk about problems in general terms rather than specifics. A recent Washington Post profile of Ryan referred to “… many Republican colleagues, who, even as they praise Ryan for his doggedness, privately consider the Roadmap a path to electoral disaster. Unlike most politicians of either party, he doesn’t speak generically about reducing spending, but he does acknowledge the very real cuts in popular programs that will be required to bring down the debt.”

    Also: “House Minority Leader John A. Boehner (R-Ohio) has alternately praised Ryan and emphasized that his ideas are not those of the party.”

    The fact that frank talk about the budget and government spending might be an electoral disaster is a bad sign for America.

  • Stimulus Pushers

    If we needed more evidence of President Barack Obama‘s inclination to shower public treasure on public sector unions, here it is. The Wall Street Journal details some of the ways that last week’s mini-stimulus bill is a gift to public sector unions at the cost of everyone else.

    For example, the portion of the spending dedicated to public schools comes with the requirement that the funds be used to increase school spending. The funds can’t be used by states to replace their own spending.

    The claim that teacher jobs will be lost is false, too. The editorial notes the rapid growth of teacher employment, far more than the growth in student enrollment: “While Mr. Obama quotes the union figure of 160,000 potential lost teacher jobs, those don’t have to come out of the classroom. According to research by Eric Hanushek of Stanford University, student enrollment grew by 22% from 1990 to 2007, but teacher employment grew by 41%. Since 2000, enrollment has grown by 5% but teacher employment by 10%.”

    The editorial also notes that teacher layoffs in Milwaukee could have been avoided if teachers had accepted a less expensive health care plan. The district proposed cutting per-teacher health plan costs from $23,000 per year (!) to $17,000. What happened? “The unions chose the layoffs, betting (correctly) that Democrats in Washington would come to their rescue.”

    Finally, the article estimates that teachers unions and other unions will receive an estimated $100 million in additional union dues because of this bill, and much of that will be used for political purposes.

    Any guesses as to what type of candidates this money will be used to support?

    Stimulus Pushers

    The latest bailout for public unions and spendthrift states.

    To treat Washington’s spending addiction, the November elections are the taxpayer’s best chance to stage an intervention. But until then, President Obama and the Democratic Congress are determined to keep pushing strung-out state governments to take one more fix.

    Witness yesterday’s 247-161 largely party-line House vote to approve a Senate bill shovelling another $26.1 billion out to state education and Medicaid programs. The White House has promoted the bill as emergency assistance for strained state budgets. But this unique brand of therapy drives states to spend more, not less. The “assistance” is so expensive that several governors were begging for relief even before Mr. Obama signed it into law.

    Continue reading at the Wall Street Journal

  • Kansas county spending benchmarks

    In Kansas, revenue flowing to the state has declined. How can our state cope with a loss in revenue?

    One way would have been to set aside money in good times, the so-called “rainy day fund” idea that some groups have promoted. But Kansas didn’t do that. We spent all the revenue that flowed in during the recent prosperous years of the mid 2000s.

    Governments can also cut spending by cutting services. They can also raise taxes.

    Operating more efficiently is another option. In order to gauge how efficiently Kansas counties are operating in different areas of operation, the Kansas Policy Institute has gathered information from all Kansas counties.

    Some interesting differences have been found. For Sedgwick and Johnson counties, the state’s two largest in terms of population, KPI found a huge difference in spending on county commissioners: $1.50 (on a per-person basis) in Sedgwick County, but $4.42 for Johnson County.

    KPI estimates that if outlier counties (those that spend a lot, again on a per-person bases) reduced their spending to that of the median for counties with similar population, the savings could be in the range of several hundred million dollars per year.

    From working on this project, KPI has several recommendations for counties regarding budget reporting. First, we should have a uniform chart of accounts for Kansas counties. Budgets and financial statements should be published in a standardized and easily understood format. Documents should be published online, retained for several years, and available in machine-readable format.

    Kansas County Budget Analysis — In Search of Efficient Government

    By Dave Trabert, Kansas Policy Institute.

    It’s quite possible that twenty years from now we’ll look back on some of the decisions made during the current recession as either being responsible for catapulting Kansas into a much more competitive position for job growth and economic prosperity or causing the state to fall farther behind. Recessions certainly cause economic havoc as they unfold but they also create opportunities.

    There are numerous examples of businesses that reinvented themselves and emerged from the recession in a much stronger and more competitive position, while competitors who tried to ‘ride out the storm’ were worse off than before the recession. Recessions naturally make customers much more open to change as they seek better value for their dollar. Imagine how a business would fare that tried to make up for reduced revenue by raising prices during a recession. Unless the business had a monopoly on an essential product it would likely lose even more customers, but that is exactly how many governments react in a recession — they raise prices on their customers.

    There is ample evidence that higher taxes prompt customers (taxpayers) to leave. One example of such evidence can be found in a comparison of domestic migration data1 with the Tax Foundation’s most recent ranking of state and local tax burdens expressed as a percentage of income. The ten states with the highest combined state / local tax burden had a combined average 3.3% net loss from domestic migration (more U.S residents moving out of the state than moving in), whereas the ten states with the lowest tax burden had a combined average 3.8% net gain. The low-burden grouping includes one outlier, Louisiana, which suffered significant population loss following Hurricane Katrina; the average net gain of the other nine low-burden states is 5.0%.

    Kansas has a domestic migration net loss of 2.5% over the same period and is ranked #38 among the states (#1 being the best). Kansas also has the worst performance in the region; Nebraska is the only other state with a net loss (2.3%) and other states have all gained population from domestic migration (Colorado 4.2%, Texas 3.4%, Oklahoma 1.1% and Missouri 0.7%).

    Continue reading at Kansas County Budget Analysis — In Search of Efficient Government

  • Avoiding bad decisions in good times

    By Dave Trabert, Kansas Policy Institute.

    An associate of mine once said, “Some of the worst decisions are made in the best of times.” His observation pertained to negotiating agreements with labor unions but I was reminded of it by a news report saying local governments may eliminate 500,000 jobs across the country if Congress doesn’t pony up more federal tax dollars. The story was based on a survey released by the National League of Cities, the National Association of Counties and United States Conference of Mayors.

    Here’s the taxpayer perspective.

    According to the US Census Bureau and the Bureau of Economic Analysis, the country’s population grew 34.4% between 1980 and 2008 but local government employment jumped 51.3%. If local government employment had simply kept pace with population gains, there would be 1.6 million fewer local government jobs today. Instead, we’ve seen runaway property taxes (93% over the last twelve years in Kansas) and higher local sales taxes. Governments chose to add extra employees when revenues were flowing (instead of reducing taxes and improving the economy), and now face the painful task of backing off some of their excess employment.

    Local government job growth outpaced population growth in most states but some were extreme, including Kansas, which had 65% local government job growth but only an 18% population increase. In 2008 Kansas had 65.7 local government employees for every thousand residents; that’s 39% above the national average and the second-worst state ratio in the country.

    No one wants to see someone lose their job, but using tax dollars to subsidize employment is bad policy to begin with and spending federal dollars on local government employment destroys the Constitutional protections of state sovereignty. Governments have no money of their own; they simply take money from taxpayers and redistribute it. Raising federal taxes to maintain a bloated local government workforce will only make an already weak economy even worse.

  • Why Bell, Calif. matters

    The city manager of Bell, Calif., a town of some 38,000, earned $787,637 per year. He quit in the face of citizen uproar when this became public, but he’ll retire with a pension of about $600,000 annually.

    Beka Romm, executive director for American Majority Kansas, explains why citizen activists need to keep focused on local governments.

    Focus Local: 10 Reasons Why Bell, CA Matters

    By Beka Romm

    But when I start talking about the importance of focusing locally (holding your own city council, school district and county commission accountable for their actions), most people do zone off. I get it. It’s not sexy. On the federal level, even in state government, there is glitz, glamour, power, intrigue, sometimes even scandal. On the local level, not so much, right? Wrong. To prove my point, here are the top 10 reasons why Bell, CA matters:

    Continue reading at Focus Local: 10 Reasons Why Bell, CA Matters.

  • The ‘tax expenditure’ solution for our national debt

    While most critics of government spending focus on entitlements, regular appropriations, and earmarks, there is a category of spending that not many pay much attention to. The spending is called “tax expenditures.”

    It’s a big issue. As economist Martin Feldstein writes in the Wall Street Journal, tax expenditures will increase the federal budget deficit by $1 trillion this year.

    Tax expenditures are implemented through the tax system. It’s usually the income tax system, especially at the federal level. Taxpayers may receive tax credits, which reduce the tax that must be paid dollar for dollar. Many credits are refundable, meaning that if the taxpayer has no tax liability, the government will send the recipient a check. Examples cited by Feldstein include “$500 million annual subsidy for the rehabilitation of historic structures and a $4 billion annual subsidy of employer-paid transportation benefits.”

    While supporters of many of these programs portray them as not costing the government anything, Feldstein writes that they do: “These tax rules — because they result in the loss of revenue that would otherwise be collected by the government — are equivalent to direct government expenditures.”

    I argued this in testimony I presented to a committee in the Kansas Legislature this year, when it was considering restoring and expanding the Kansas historic preservation tax credit program. I told committee members: “We must recognize that a tax credit is an appropriation of Kansans’ money made through the tax system. If the legislature is not comfortable with writing a developer a check for over $1,000,000 — as in the case with one Wichita developer — it should not make a roundabout contribution through the tax system that has the same economic impact on the state’s finances.”

    In that committee, not one member voted against this program, even though the committee has some members who consider themselves very fiscally conservative and hawks on spending.

    Here in Wichita, the city council regularly steers spending to certain companies through the tax system by granting property tax exemptions and tax increment financing.

    Feldstein describes problems with spending implemented through the tax system:

    • Politicians use tax expenditures to grow the welfare state. While proposing a freeze on discretionary spending, President Obama at the same time proposed an expansion of a tax credit program for child or elderly care.
    • Once enshrined in the tax law, these appropriations don’t have to be reauthorized each year. They’re on auto-pilot, so to speak.
    • Eliminating tax expenditures is looked on by Republicans as a tax increase, so they are reluctant to support their elimination. Felstein counters: “But eliminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking.”
    • Tax expenditures distort the economy in harmful ways: “[Eliminating tax expenditures] would also increase overall economic efficiency by removing incentives that distort private spending decisions.”

    Feldstein concludes: “Cutting tax expenditures is really the best way to reduce government spending. And to be politically acceptable, the cuts in tax expenditures must be widespread, requiring most taxpayers to give up something so that the fiscal deficits can decline.”

    The ‘Tax Expenditure’ Solution for Our National Debt

    The credits and subsidies that make the tax code so complicated cost big bucks. Reduce them by third and the debt will be 72% of GDP in 2020 instead of 90%.

    By Martin Feldstein

    When it comes to spending cuts, Congress is looking in the wrong place. Most federal nondefense spending, other than Social Security and Medicare, is now done through special tax rules rather than by direct cash outlays. The rules are used to subsidize a wide range of spending including education, child care, health insurance, and a myriad of other congressional favorites.

    These tax rules — because they result in the loss of revenue that would otherwise be collected by the government — are equivalent to direct government expenditures. That’s why tax and budget experts refer to them as “tax expenditures.” This year tax expenditures will raise the federal deficit by about $1 trillion, according to estimates by the congressional Joint Committee on Taxation. If Congress is serious about cutting government spending, it has to go after many of them.

    Continue reading at the Wall Street Journal (subscription required)

  • Kansas fourth district candidates on spending and deficit reduction

    In a June 22nd forum of candidates for the Republican Party nomination for United States Congress from the fourth district of Kansas sponsored by the Wichita Metro Chamber of Commerce, candidates were asked about their plans to reduce the federal deficit and national debt.

    The candidates and their campaign websites are Wichita businessman Jim Anderson, Wichita businessman Wink Hartman, Wichita businessman Mike Pompeo, Latham engineer Paij Rutschman, and Kansas Senator Jean Schodorf.

    A question by moderator Steve McIntosh recited the current large debt and deficit figures, noted that Medicare and Social Security are headed down an unsustainable path, and said that Americans are worried about the negative effects of letting the Bush tax cuts expire. What is your plan for reducing the deficit and debt, while keeping taxes low enough to allow for economic growth?

    Answering first, Rutschman said we need to look at our government agencies and make sure they are operating effectively and efficiently. She said we should start balancing the federal budget. She told the audience that we should look at Social Security and Medicare to see where we can start reducing these programs, and develop a long-term plan for handling the upcoming retiring generation.

    Next, Schodorf said she had a plan for national economic development and growth, saying first that we need a balanced budget amendment. She said that the bipartisan commission on deficit reduction is really just a paper tiger, and what we really need are experts in different fields to work together to recommend how to reduce the deficit. She said the federal government needs to reduce its spending, recommending a 5% across-the-board cut if possible. She said we need to keep the Bush tax cuts in place.

    Anderson told the audience that we need to reduce the size of government, starting with an overhaul of the tax system by replacing their current income tax with the FairTax. The fair tax, he said, is the best way to generate revenue for limited government, noting that the current tax code is the source of many of our problems. States should take care of their own needs, he added, and we should eliminate the system of earmark spending. He also said we need to look at each federal program, and if it is not constitutional, it should be eliminated.

    Hartman said we need to get control of our government, and that one way to get started immediately would be a balanced budget amendment. He also believes in the FairTax. He said that 41 cents of every dollar government spends is borrowed and must be repaid at some time. The Bush tax cuts should be continued, he said, as they worked well once. He said he is also concerned about estate taxes, especially their impact on family farms. He said that a larger federal government has never — and will never — create jobs.

    Pompeo said that growing the economy, creating a tax base that is broader and larger, is the first way that we can reduce the deficit. The second way is to reduce spending. He told the audience he supports eliminating earmarks, but noted that earmarks are a relatively small part of the budget. Entitlements, he said, are the real problem, and that we should start by repealing the recently enacted healthcare entitlement. On Social Security, Pompeo said he supports a plan developed by Wisconsin Congressman Paul Ryan. For people 55 years of age and over, there would be no impact, he said, but benefits for younger people would be reduced, adding that the promised benefits may really be a false promise. On the federal Department of Education, Pompeo said it is incomprehensible to him that send a dollar to Washington, only to get $.64 back along with instructions on how to run our schools. He also said we should reduce capital gains taxes by at least 50%, to create an incentive for capital.

    Analysis

    Schodorf’s concern for spending and taxes must be balanced against her record in the Kansas Senate, which is a very liberal voting record. She voted for the big-spending budget this year, and voted to raise the statewide sales tax by one cent per dollar.

    The FairTax, which many of these candidates support, is probably a better tax system than the system currently in place, but it does not address the issue of spending. According to FairTax.org, “Bottom line is that the 23% rate works it replaces the revenue generated by the repealed taxes, and maintains the real value of federal spending.” In other words, the FairTax is calibrated to provide the same revenue to government. For those looking to reduce the amount government takes in taxes — no matter what form — and to reduce government spending, the FairTax is not the solution.

    The idea of eliminating federal programs that are not constitutional is also appealing to limited government advocates. The reality, however, is that every spending program that’s in place — with the exception of newly-passed legislation that hasn’t yet been challenged in the courts — has passed constitutional muster. The Constitution means what the Supreme Court says it means, after all.

    Hartman’s concern for federal estate taxes is well-placed, especially, as he noted, in Kansas, where many families’ assets are in the form of land and other agriculture assets.

    Pompeo, as he has in other forums, said he supports the Paul Ryan plan, known as the Roadmap for America’s Future. This is a specific set of proposals promoted by Ryan, the ranking member of the House Budget Committee and a rising star among conservatives. The plan goes farther than Pompeo did regarding taxes on capital gains, recommending eliminating the tax on capital gains entirely.

  • Kansas Legislator offers more rebuttal of Kansas Senate President Morris

    Recently Kansas Senate President Stephen Morris wrote an op-ed in which he explained the legislature’s reasons for passing a one cent per dollar increase in the statewide sales tax. That tax started on July 1. His piece may be read at State of the State KS.

    Not everyone agrees with Morris. Derrick Sontag of the Kansas Chapter of Americans for Prosperity weighed in at For Kansas Senate President Stephen Morris, raising taxes is responsible.

    Now Kansas House of Representatives member Steve Brunk, a Republican from Bel Aire, offers another rebuttal of Morris in his article Tax increase was neither necessary nor responsible.

    Brunk mentions two sources of revenue that could have been tapped to help the state make it through a shortfall: utilizing unused fund balances and selling a small portion of state-owned assets. Advocates of government spending opposed both proposals.

    Tax increase was neither necessary nor responsible

    By Steve Brunk

    In a recent editorial, “Legislature took responsible path,” State Senator Stephen Morris from Hugoton wanted to set the record straight regarding the final budget and tax increase enacted by the legislature for next year. He concluded that after listening to Kansans in every corner of the state the only responsible way to move forward was with a tax increase. He also stated that some lawmakers chose not to be part of the solution and are spreading false information to frighten Kansans.

    I would like to offer a different viewpoint.

    It’s true that during this recession the state faced revenue shortfalls from the proposed budgets approved by the Governor. But that doesn’t tell the whole story.

    Continue reading at Kansas Liberty

  • In Kansas, government spending is intertwined

    While conservative political candidates talk of reducing spending, the reality is that federal government spending is so intertwined in our lives that spending reductions — much less actual cuts — are almost impossible to fathom.

    Today’s Wichita Eagle carries a column by Wichita State University professor H. Edward Flentje that spotlights the “huge disconnect [that] exists between the reality of federal spending and the campaign rhetoric” of candidates seeking the Republican party nominations for United States Congress from the first district of Kansas and the fourth district of Kansas.

    Flentje explains the impact of federal spending in Kansas: “In other words, nearly one in every four dollars in the Kansas economy came from federal spending — big-ticket items such as Social Security, Medicare, Medicaid, agricultural supports and roads, plus an array of smaller tickets.”

    Consider farm spending. According to my research, in 2009 the first district in Kansas received $350 million in agricultural subsidies (about $540 per person in the district), ranking third among all Congressional districts. From 1995 to 2009, that district received $8.847 billion in subsidies, ranking second among all Congressional districts and only a scant $3 million behind the top-ranking district.

    Will any candidate in the first district pledge to cut farm subsidies?

    Social Security and Medicare are two federal programs that have grown rapidly and represent a large portion of federal spending. From the table below, we can see that some Kansas Congressional districts have much higher proportions of their population in the age group that depends on — or at least benefits from — these federal programs.

                         Population age    Percent age
District  Population   65 and over     65 and over
First      648,286      106,283          16.4%
Second     695,593       91,427          13.1%
Third      745,132       75,290          10.1%
Fourth     689,588       87,957          12.8%

    In some districts — particularly the largely rural first district — targeting cuts in spending aimed at benefiting older populations is a tough sell. Yet some candidates and activists want to cut this spending. It reminds me of the common criticism of tea party activists, where protestors obviously old enough to be on Medicare carry signs saying “Keep government out of my health care” or something similar.

    As Flentje writes in his editorial, candidates propose to cut spending, but give few specific details. Once candidates propose spending cuts in detail, constituencies benefiting from that spending mobilize to oppose the cuts and the candidates.

    Although I don’t like to concede this, perhaps a more reasonable goal that might be achievable in the near term is to stop the explosive growth in federal spending. If we can achieve that, we can then look at cuts.

    Should Kansas bite hand that feeds it?

    By H. Edward Flentje

    To spend or not to spend? That is the question today nationally and globally. It is also the issue before members of Congress as they consider whether to extend unemployment benefits, continue higher Medicaid reimbursements or make other adjustments in federal spending.

    The instinctive response of most Kansans likely would be an emphatic “Cut spending!” And most candidates on the campaign trail would give a hearty salute.

    Such reactions, however, may not reflect an appreciation of the impact of governmental spending on the Kansas economy and, most important, its disproportionate impact on the rural economy of Kansas.

    Continue reading at the Wichita Eagle