While I respect John Roberts, in the end he is simply too much of an intellectual gadfly, flitting from this subject to that, but never digging in with any depth.
Harriet Miers, by contrast, found her great theme some years ago, and has been amplifying it ever since.
Some choice quotes from her in today's NY Times piece on her paperwork from out of Texas:
"You are the best governor ever - deserving of great respect."
"[You and Laura are] the greatest.”
"Texas has a very popular governor and first lady!" [A true writerly touch here, in her use of the exclamation point.]
"I was struck by the tremendous impact you have on the children whose lives you touch."
"Keep up all the great work. The state is in great hands. Thanks also for yours and your family's personal sacrifice." [I would have thought that “your and your family’s” is better grammatically. Shows how much I know.]
"Hopefully Jenna and Barbara recognize that their parents are 'cool' - as do the rest of us."
"Keep up the great work. Texas is blessed."
"All I hear is how great you and Laura are doing … Texas is blessed." [Another writerly touch in the repeated use of "blessed,” assuming these are indeed from different quotes. The latest Sunday Times Book Review notes Joan Didion's use of repetition in her latest book.]
Tuesday, October 11, 2005
Monday, October 10, 2005
U.N. Secretary General George W. Bush??
Yes, I know it sounds ludicrous. But he has always failed up before, since the earliest Harken Energy days, and it's hard to see where else he could go.
Thursday, October 06, 2005
Money laundering and the economic substance doctrine in tax
One of the emerging DeLay defenses under the money laundering indictment is that he followed the law banning corporate contributions in Texas, because there were no such contributions. Thus, if Texas corporations gave $190,000 to the Republican National Committee, which immediately gave $190,000 to DeLay's gerrymandering jihad, supposedly the law has been followed.
The notion that this is no less illlegal than direct forbidden contributions, and constitutes attempted evasion of the Texas rules via money laundering, is identical to the economic substance doctrine in the income tax, whereby pointless paper-shuffling transactions that have no significance or purpose are disregarded as shams. In both areas, the doctrine is needed to stop people from making a mockery of the laws. Also in both, it means that people just have to go to the effort of differentiating the offsetting transactions a bit, with line-drawing questions regarding whether one has added enough sand to get away with it.
In the DeLay case as set forth in the indictment, it's not even a close call. Clearcut money laundering, cruder and more obvious, even, than the typical KPMG tax shelter.
The notion that this is no less illlegal than direct forbidden contributions, and constitutes attempted evasion of the Texas rules via money laundering, is identical to the economic substance doctrine in the income tax, whereby pointless paper-shuffling transactions that have no significance or purpose are disregarded as shams. In both areas, the doctrine is needed to stop people from making a mockery of the laws. Also in both, it means that people just have to go to the effort of differentiating the offsetting transactions a bit, with line-drawing questions regarding whether one has added enough sand to get away with it.
In the DeLay case as set forth in the indictment, it's not even a close call. Clearcut money laundering, cruder and more obvious, even, than the typical KPMG tax shelter.
Sounds like a good tax policy to me
From today's New York Times:
"Proposals to use tax breaks for rebuilding areas devastated by the recent hurricanes may provide only limited help to people and businesses that suffered actual losses, according to many economists. The biggest beneficiaries could turn out to be companies from outside the devastated areas that have big federal contracts to carry out cleanup and reconstruction work."
"Proposals to use tax breaks for rebuilding areas devastated by the recent hurricanes may provide only limited help to people and businesses that suffered actual losses, according to many economists. The biggest beneficiaries could turn out to be companies from outside the devastated areas that have big federal contracts to carry out cleanup and reconstruction work."
Amazing
Bush has never vetoed a single pork barrel spending bill, but he is threatening to veto a bill that would bar the use of "cruel, inhuman or degrading treatment or punishment" against anyone in United States government custody.
One often hears discussion of torture's permissibility as a means (e.g., to head off a nuclear disaster). But for some people, possibly, torture is actually an end.
One often hears discussion of torture's permissibility as a means (e.g., to head off a nuclear disaster). But for some people, possibly, torture is actually an end.
Wednesday, October 05, 2005
An interesting empirical finding, but what we do with it is unclear
From Landry, Lange, List, Price, and Rupp, "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," National Bureau of Economic Research Working Paper 11611 (September 2005):
In measuring factors that affect charitable donation rates, "we find that a one standard deviation increase in female solicitor physical attractiveness ... is roughly equivalent" in its positive effect on participation to moving from the least favorable to the most favorable incentive approach that they tried. "This result is largely driven by increased participation rates among households where a male answered the door."
Still, my favorite NBER empirical paper of all time remains Joel Slemrod's justly infamous paper in which he found that death is tax-responsive (people die more when it is more tax-favorable to do so). Joel carefully noted that his data did not permit him to determine whether the tax-responsiveness pertained to actual times of death or merely to reported times of death.
In measuring factors that affect charitable donation rates, "we find that a one standard deviation increase in female solicitor physical attractiveness ... is roughly equivalent" in its positive effect on participation to moving from the least favorable to the most favorable incentive approach that they tried. "This result is largely driven by increased participation rates among households where a male answered the door."
Still, my favorite NBER empirical paper of all time remains Joel Slemrod's justly infamous paper in which he found that death is tax-responsive (people die more when it is more tax-favorable to do so). Joel carefully noted that his data did not permit him to determine whether the tax-responsiveness pertained to actual times of death or merely to reported times of death.
A good working definition of "compassionate conservatism"
From Robert Samuelson in the Washington Post:
"In practice, Bush has taken the most self-serving aspect of modern liberalism (its instinct to buy public support with massive government handouts) and fused it with the most self-serving aspect of modern conservatism (its instinct to buy support with massive tax cuts)....
"'Compassion' for Bush has consisted mostly of distributing new benefits to large constituencies in the hope of purchasing their gratitude and support....
"Spend more, tax less. That's a brazen political strategy, not a serious governing philosophy."
"In practice, Bush has taken the most self-serving aspect of modern liberalism (its instinct to buy public support with massive government handouts) and fused it with the most self-serving aspect of modern conservatism (its instinct to buy support with massive tax cuts)....
"'Compassion' for Bush has consisted mostly of distributing new benefits to large constituencies in the hope of purchasing their gratitude and support....
"Spend more, tax less. That's a brazen political strategy, not a serious governing philosophy."
Monday, October 03, 2005
Cronyism par excellence
For all I know, Miers might not be too terrible as a Justice. But Bush is starting to remind me of Caligula, who named his horse a consul.
Forthcoming NYU events, part 2
The schedule for this spring's Tax Policy Colloquium at NYU, which I will be running with Alan Auerbach, stands at this point as follows:
January 12 – Daniel Shaviro, NYU Law School, “Households and the Fiscal System.” Guest commentator Anne Alstott, Yale Law School.
January 19 – Alex Raskolnikov, Columbia Law School, “An Economic Analysis of Tax Enforcement and the Self-Adjusting Penalty.”
January 26 – Neil Buchanan, Rutgers Law School, [probably a piece on long-term budgeting issues].
February 2 – Jason Furman, NYU Wagner School, “Coping With Demographic Uncertainty.”
February 9 – Stacy Dickert-Conlin, Michigan State University Economics Department, "Love at What Price? Estimating the Value of Marriage."
February 16 – Lee Anne Fennell, NYU Law School (visiting), "Taxation Over Time" (with Kirk Stark, UCLA Law School).
February 23 – Alan Auerbach, Berkeley Economics Department, [paper to be determined.]
March 2 – Joseph Bankman, Stanford Law School, and David Weisbach, University of Chicago Law School, “The Superiority of an Ideal Consumption Tax Over an Ideal Income Tax.”
March 9 – Anne Alstott, Yale Law School, “Revisiting the Fiscal Politics of the 1920s.”
March 23 – Howell Jackson, Harvard Law School, [paper to be determined].
March 30 – Victor Fleischer, UCLA Law School, “Risky Compensation.”
April 6 – Ed McCaffery, USC Law School, “Shakedown at Gucci Gulch: A Tale of Death, Money, and Taxes.”
April 13 – Mitchell Kane, University of Virginia Law School, [paper to be determined].
April 20 – Jeffrey Liebman, Harvard University, Kennedy School of Government [paper to be determined].
January 12 – Daniel Shaviro, NYU Law School, “Households and the Fiscal System.” Guest commentator Anne Alstott, Yale Law School.
January 19 – Alex Raskolnikov, Columbia Law School, “An Economic Analysis of Tax Enforcement and the Self-Adjusting Penalty.”
January 26 – Neil Buchanan, Rutgers Law School, [probably a piece on long-term budgeting issues].
February 2 – Jason Furman, NYU Wagner School, “Coping With Demographic Uncertainty.”
February 9 – Stacy Dickert-Conlin, Michigan State University Economics Department, "Love at What Price? Estimating the Value of Marriage."
February 16 – Lee Anne Fennell, NYU Law School (visiting), "Taxation Over Time" (with Kirk Stark, UCLA Law School).
February 23 – Alan Auerbach, Berkeley Economics Department, [paper to be determined.]
March 2 – Joseph Bankman, Stanford Law School, and David Weisbach, University of Chicago Law School, “The Superiority of an Ideal Consumption Tax Over an Ideal Income Tax.”
March 9 – Anne Alstott, Yale Law School, “Revisiting the Fiscal Politics of the 1920s.”
March 23 – Howell Jackson, Harvard Law School, [paper to be determined].
March 30 – Victor Fleischer, UCLA Law School, “Risky Compensation.”
April 6 – Ed McCaffery, USC Law School, “Shakedown at Gucci Gulch: A Tale of Death, Money, and Taxes.”
April 13 – Mitchell Kane, University of Virginia Law School, [paper to be determined].
April 20 – Jeffrey Liebman, Harvard University, Kennedy School of Government [paper to be determined].
Forthcoming NYU Law School events, part 1
For those who are interested, I'm posting two schedules. The first concerns a conference to be held on May 4-5, 2006 at NYU (I should mention sponsorship by NYU, the American Enterprise Institute, the Burch Center for Tax Policy and Public Finance at Berkeley, and the Fund for Tax and Fiscal Research at Harvard Law School). Alan Auerbach and I are collaborating to do the heavy lifting in terms of setting it up.
Tentatively, and I admit not very interestingly, entitled "Key Issues in Public Finance," it is in fact a conference in honor of David Bradford, but one that is intended to be serious and substantive, looking primarily forward at issues that interested David.
The paper topics, each with an author and two discussants, are as follows
1) ISSUES OF BUDGET MEASUREMENT - author is Laurence Kotlikoff, Boston University; discussants are myself and Kent Smetters, University of Pennsylvania.
2) CONSUMPTION TAX IMPLEMENTATION - author is David Weisbach, University of Chicago; discussants are Edward McCaffrey, USC, and Joel Slemrod, University of Michigan.
3) ISSUES OF TRANSITION TO A CONSUMPTION TAX - author is Louis Kaplow, Harvard University; discussants are James Hines, University of Michigan, and Kyle Logue, University of Michigan.
4) THE NEW VIEW OF CORPORATE DIVIDENDS - author is Roger Gordon, UC San Diego; discussants are William Andrews, Harvard University, and George Zodrow, Rice University.
5) THE CHOICE BETWEEN INCOME TAXATION AND CONSUMPTION TAXATION - author is Alan Auerbach, UC Berkeley; discussants are Glenn Hubbard, Columbia University, and Alvin Warren, Harvard University.
6) FISCAL DECENTRALIZATION - author is Wallace Oates, University of Maryland; discussants are Harvey Rosen, Princeton University, and Charles McLure, Hoover Institution.
Conference volume tentatively set to be published by the Harvard University Press. I believe that interested people will generally be welcome to attend the conference.
Tentatively, and I admit not very interestingly, entitled "Key Issues in Public Finance," it is in fact a conference in honor of David Bradford, but one that is intended to be serious and substantive, looking primarily forward at issues that interested David.
The paper topics, each with an author and two discussants, are as follows
1) ISSUES OF BUDGET MEASUREMENT - author is Laurence Kotlikoff, Boston University; discussants are myself and Kent Smetters, University of Pennsylvania.
2) CONSUMPTION TAX IMPLEMENTATION - author is David Weisbach, University of Chicago; discussants are Edward McCaffrey, USC, and Joel Slemrod, University of Michigan.
3) ISSUES OF TRANSITION TO A CONSUMPTION TAX - author is Louis Kaplow, Harvard University; discussants are James Hines, University of Michigan, and Kyle Logue, University of Michigan.
4) THE NEW VIEW OF CORPORATE DIVIDENDS - author is Roger Gordon, UC San Diego; discussants are William Andrews, Harvard University, and George Zodrow, Rice University.
5) THE CHOICE BETWEEN INCOME TAXATION AND CONSUMPTION TAXATION - author is Alan Auerbach, UC Berkeley; discussants are Glenn Hubbard, Columbia University, and Alvin Warren, Harvard University.
6) FISCAL DECENTRALIZATION - author is Wallace Oates, University of Maryland; discussants are Harvey Rosen, Princeton University, and Charles McLure, Hoover Institution.
Conference volume tentatively set to be published by the Harvard University Press. I believe that interested people will generally be welcome to attend the conference.
Sunday, October 02, 2005
1 + 1 = unindicted co-conspirators??
Read this and this, and there would seem to be a definite chance that, under Fitzgerald's theory of the Plame case, there was a criminal conspiracy involving, not just Rove and Libby, but also Bush and Cheney. This suggests the possibility that Fitzgerald will go beyond indicting Rove and Libby to name Bush and Cheney as unindicted co-conspirators.
This presumably would be accompanied by a formal referral to the House Judiciary Committee, not that they would do anything with it.
Quite a turn of the screw if it happens.
This presumably would be accompanied by a formal referral to the House Judiciary Committee, not that they would do anything with it.
Quite a turn of the screw if it happens.
Thursday, September 29, 2005
Chief Justice Roberts
Despite being a law professor, I'm really not all that interested in the Supreme Court. Questions such as, "What do you think of Justice Kennedy's view of federalism, as set forth in his concurrence in the Blah Blah case?" strike me as distinctly less intellectually rewarding than [fill in the blank - Watching paint dry? Too cliched. Memorizing Ramones lyrics? At least they're funny sometimes. Reading airport fiction? At least it might be titillating.]
That being said, it's fine with me that Roberts was confirmed by a large vote. While presumably not the person I would have picked, he does at least appear to be highly qualified (a rarity in Bush appointees to anything), not to mention a thoughtful individual rather than a mad dog.
That being said, it's fine with me that Roberts was confirmed by a large vote. While presumably not the person I would have picked, he does at least appear to be highly qualified (a rarity in Bush appointees to anything), not to mention a thoughtful individual rather than a mad dog.
Partisanship
In today's New York Times, David Brooks, in keeping with his self-placement as a quasi-independent-minded Republican, issues a quasi-criticism of Tom DeLay. Although Tom is a lovely man, we are told, he is simply too partisan. But this is an endearing flaw in a way, because it shows selfless enthusiasm to help the team. Brooks notes that DeLay is charged with shenanigans to help his team win, not with stealing money for himself.
Let's leave aside all those lobbying junkets, which certainly had something in it for ol' Tom. This is not actually all that endearing. Would partisanship and the selfless desire to help the team be a satisfying defense of Bin Laden, Joseph Goebbels, or Communists around the world during the Stalin era? The U.S. political system cannot and will not survive if enough people take partisanship to the lengths that DeLay has.
Brooks quasi-acknowledges this, and ends with a quasi-dig at the Democrats suggesting that they will be as bad in their turn as DeLay. I suppose one can't rule this out, but it would take some doing.
Let's leave aside all those lobbying junkets, which certainly had something in it for ol' Tom. This is not actually all that endearing. Would partisanship and the selfless desire to help the team be a satisfying defense of Bin Laden, Joseph Goebbels, or Communists around the world during the Stalin era? The U.S. political system cannot and will not survive if enough people take partisanship to the lengths that DeLay has.
Brooks quasi-acknowledges this, and ends with a quasi-dig at the Democrats suggesting that they will be as bad in their turn as DeLay. I suppose one can't rule this out, but it would take some doing.
Just asking
Why does the New York Times keep saying that the recent Republican scandals include the arrest of a "former White House budget official" (David Safavian)? That makes it sound as if some person who once had been in the White House had later gotten into trouble. In fact, the guy resigned on a Friday and was indicted the folllowing Monday.
Wednesday, September 28, 2005
Every cloud has a silver lining (for someone)
From today's Washington Post:
[A relatively budget-conscious Republican Congressman], lunching with reporters at Charlie Palmer Steak, accepted that Congress would not find cuts to pay for the $62 billion spent so far on Katrina -- much less the $250 billion more that Louisiana wants from the feds. If "we find $20 billion in offsets, we'll probably declare victory," said the congressman, who spoke on the condition that he not be named.
As fiscal hawks surrendered, would-be government contractors were meeting in the Hart Senate Office Building to figure out how to get a share of the money. A "Katrina Reconstruction Summit," hosted by Sen. Mel Martinez (R-Fla.) and sponsored by Halliburton, among others, brought some 200 lobbyists, corporate representatives and government staffers to a room overlooking the Capitol for a five-hour conference that included time for a "networking break" and advice on "opportunities for private sector involvement."
Senate Majority Leader Bill Frist (R-Tenn.) sent his budget director, Bill Hoagland, who cautioned that federal Katrina spending might not exceed $100 billion. But John Clerici, from a law firm that helped sponsor the event, told the group that spending would "probably be larger" than $200 billion. "It's going to be spent in a fast and furious way," Clerici said.
Sipping coffee from china cups and munching on doughnuts, the corporate crowd heard Joe McInerney, president of the American Hotel and Lodging Association, predict: "I think we'll see Mardi Gras in New Orleans to some extent this year."
[A relatively budget-conscious Republican Congressman], lunching with reporters at Charlie Palmer Steak, accepted that Congress would not find cuts to pay for the $62 billion spent so far on Katrina -- much less the $250 billion more that Louisiana wants from the feds. If "we find $20 billion in offsets, we'll probably declare victory," said the congressman, who spoke on the condition that he not be named.
As fiscal hawks surrendered, would-be government contractors were meeting in the Hart Senate Office Building to figure out how to get a share of the money. A "Katrina Reconstruction Summit," hosted by Sen. Mel Martinez (R-Fla.) and sponsored by Halliburton, among others, brought some 200 lobbyists, corporate representatives and government staffers to a room overlooking the Capitol for a five-hour conference that included time for a "networking break" and advice on "opportunities for private sector involvement."
Senate Majority Leader Bill Frist (R-Tenn.) sent his budget director, Bill Hoagland, who cautioned that federal Katrina spending might not exceed $100 billion. But John Clerici, from a law firm that helped sponsor the event, told the group that spending would "probably be larger" than $200 billion. "It's going to be spent in a fast and furious way," Clerici said.
Sipping coffee from china cups and munching on doughnuts, the corporate crowd heard Joe McInerney, president of the American Hotel and Lodging Association, predict: "I think we'll see Mardi Gras in New Orleans to some extent this year."
Monday, September 26, 2005
Bruce Bartlett on the fiscal situation
Others, such as Brad DeLong, have posted this as well, but Bruce Bartlett's statement before the Senate Democratic Policy Committee on 9/23/05 deserves to be widely read. The solution to the U.S. fiscal problems can only be bipartisan, and that means two are needed to play. Until the Republicans come to their senses and throw out the current crew, there will be no way of knowing if the Democrats are willing to cooperate as well.
Statement by Bruce R. Bartlett
September 23, 2005
Thank you for the opportunity to testify before you this morning. As you know, I testify as a Republican—I have served in senior political positions in Ronald Reagan’s White House and George H.W. Bush’s Treasury Department, and as executive director of the Joint Economic Committee, a cosponsor of this hearing. However, I do not represent the Republican Party or any organization with which I may be associated. I am here speaking only for myself.
I testify as someone who is very disenchanted with his party’s fiscal policy since 2001. Unlike the other witnesses, I am less concerned about the deficit per se or about the size of the tax cuts enacted over the last five years. Rather, what really bothers me is the increase in spending and expansion of government that my party has been responsible for.
I used to believe that the Republican Party was the party of small government. That’s why I became a Republican. I don’t believe that the federal government has the right to one penny more than absolutely necessary to fulfill its essential functions as spelled out in the Constitution. I think government is over-intrusive and could do what it has to do far more efficiently and at lower cost, which means with lower taxes.
Therefore, it bothers me a great deal when Republicans initiate new entitlement programs, massively expand pork-barrel spending, and show the most callous disregard for fiscal integrity. Not too many years ago, Ronald Reagan vetoed a politically popular highway bill because it contained 157 pork-barrel projects. The latest bill contained at least 5,000. Yet President Bush signed this $295 billion bill into law, despite having promised repeatedly to veto a bill larger than $256 billion.
For the life of me, I cannot understand why President Bush seems so incapable of using his veto pen. His father knew how to veto bills. He vetoed 29 of them in his four years in office. But in his first four-plus years, this President Bush has vetoed nothing. He is the first president since John Quincy Adams to serve a full term without vetoing anything. Curiously, Adams is also the only other son of a former president to become president—and his father, John Adams, didn’t veto anything, either.
When I complain about this to the White House, they tell me that it is very hard to veto bills when your party controls both Congress and the White House. But this explanation is simply implausible. Franklin D. Roosevelt had huge Democratic majorities, yet vetoed a record 372 bills. John F. Kennedy, Lyndon Johnson and Jimmy Carter also had large majorities of Democrats, yet Kennedy vetoed 12 bills during his short presidency, Johnson vetoed 16, and Carter vetoed 13.
I won’t bore this committee with numbers. You know them as well as I do. Suffice it to say that our fiscal situation is dire and growing worse by the day. My principal concern, however, is not with today’s deficits—even if they are swollen by Katrina and Rita-related emergency spending. What worries me is the retirement of the baby boom, the first of which turns 62 in 2008. I’m not saying that we are close to driving off a fiscal cliff, but clearly the implications of this event have not impacted on policymakers in any way whatsoever.
I have struggled with a way to illustrate the consequences of an aging population and its effect on the budget. This is the best I have been able to do. Social Security’s unfunded liability comes to 1.2 percent of GDP in perpetuity (1.4 percent without the trust fund)—about what is raised by the corporate income tax—according to that program’s actuaries. The comparable number for Medicare is 7.1 percent of GDP—about what is raised by the individual income tax. And remember that these figures are for the unfunded portion of these programs, so they are over and above payroll taxes.
The chilling conclusion, therefore, is that virtually 100 percent of all federal taxes, on a present value basis, do nothing but pay for Social Security and Medicare. Unless there are plans to abolish the rest of the federal government, large tax increases are inevitable.
Let me be clear that I am no advocate of higher taxes. I’m the one who drafted the Kemp-Roth bill back in the 1970’s and I have spent most of my career looking for ways to cut tax levels and tax rates. But that was predicated on an assumption those supporting tax cuts also wanted to downsize government. I never saw tax cuts as a substitute for spending cuts, but more as sugar to make the medicine go down. My ultimate goal was to reduce both taxes and spending.
Unfortunately, few in my party seem to share this philosophy any longer. For many, tax cuts have become a substitute for spending cuts. It truly amazes me how often I hear people on my side talk about cutting taxes as if this is the only thing necessary to downsize government. They seem genuinely oblivious to the fact that the burden of government is largely determined by the level of spending, not taxes. Nor do they understand that in the long-run, all spending must be paid for one way or another. Increasing spending today, therefore, absolutely guarantees that taxes will have to be raised in the future.
I am often criticized by friends on my side of the aisle for implicitly endorsing tax increases. I do no such thing. I am simply adding two and two and getting four while my friends seem to think there is some way of only getting three.
They also criticize me for implicitly abandoning the fight to cut spending and downside government. Again, I plead innocent. It is not I who has abandoned the fight, but my party. I don’t need to remind anyone here that the biggest spending increases in recent years passed Congresses with Republican majorities largely without Democratic votes. Nor do I need to remind anyone here that during the Clinton years we not only went from budget deficits to budget surpluses, but did so to a large extent by cutting spending—something my conservative friends seldom acknowledge.
Here’s the basic accounting. Defense spending fell by 1.4 percent of GDP between 1993 and 2000, and domestic discretionary spending fell from 3.8 percent to 3.3 percent. Even spending on entitlements fell for temporary demographic reasons, from 10.2 percent of GDP to 9.8 percent. Finally, interest on the debt fell, largely because of falling interest rates, from three percent of GDP to 2.3 percent. The result was an overall decline in spending of three percent of GDP, from 21.4 percent to 18.4 percent, the lowest level since 1966, before the Great Society geared up.
On the revenue side, individual income taxes rose by 2.5 percent of GDP, mainly as the result of rising incomes that pushed people up into higher tax brackets and higher capital gains taxes from the booming stock market. Corporate income taxes and payroll taxes added another 0.8 percent, for a total revenue increase of 3.3 percent of GDP. Thus lower spending and higher revenues constituted a fiscal turnaround of 6.3 percent of GDP, which explains how a deficit of 3.9 percent of GDP in 1993 became a budget surplus of 2.4 percent by 2000.
I don’t give President Clinton full credit for this performance. I think most of the credit goes to gridlock. Mr. Clinton wouldn’t support the Republican Congress’s spending and it wouldn’t support his. So for a blessed six years, government effectively was on automatic pilot. Sadly, unified government has led to an utter lack of restraint by my party that is simply inexcusable. It is extremely dismaying for me to hear House Majority Leader Tom Delay say that there is no fat in the budget and that Republicans have cut it to the bone. This is, quite frankly, ludicrous. My real fear, however, is that he may actually believe it.
I remain convinced that given the total lack of fiscal responsibility demonstrated by the Republican Party that very large tax increases are inevitable. I believe that the fiscal hole is now so large that it is unrealistic to think that we can just tinker with the tax system, as we did so often in the 1980’s, and raise enough revenue to pay for spending commitments that have been made. And under the circumstances, I have no faith whatsoever that spending will be significantly restrained—at least not by my side. They would first have to admit error and beg for forgiveness from people like me, something I don’t expect to be forthcoming any time soon.
Therefore, like it or not, we must travel the same route taken by the Europeans, who long before us made peace with the welfare state and tried to figure out how to pay for it with the least negative impact on economic growth and incentives. They all imposed a broad-based consumption tax called the value-added tax as an add-on tax to all the others. I think it is only a matter of time before we are forced to do the same thing and the longer we wait the more painful it will be when it is finally done. Unfortunately, we are more than likely going to have to be forced into it by a financial crisis of some sort. It would be better to avoid that cost and deal with our fiscal situation rationally. But I see no leadership on either side that would allow that to happen.
I don’t know when, where or how a financial crisis will develop. I only know that trends that can’t continue don’t. Since it is unlikely that the vast fiscal imbalance will be resolved with a whimper, it becomes a certainty that it will end with a bang. Among the areas ripe for triggering a crisis are a popping of the housing bubble, a crash of the dollar, a mistake by some big hedge fund, excessive tightening by the Fed and others too numerous to mention. It will take extraordinary luck and skill to avoid every boulder in the stream and I have little confidence that this administration has the personnel to even give us a fighting chance. There are too many Michael Browns at senior levels of the government today and too few Bob Rubins or Alan Greenspans.
Contrary to popular belief, I don’t think the American people are a bunch of children who only want hand-outs from the government and will only reward the party that promises them something for nothing. Experience and academic research confirm that they are more likely to support the candidate who treats the public purse with prudence and trust and not as a piggy bank to be routinely broken on a whim. In short, I think there is a political market for the party and the candidate who speaks honestly about the nature of the fiscal crisis that is looming. The payoff may not be immediate and the public trust has to be earned by more than just rhetoric. But if, as I believe, some event will eventually change the political landscape, voters will remember who spoke the truth and who mouthed the platitudes.
It’s dirty work, but someone has to do it. Since my party won’t do it, yours is going to have to. If it’s done right, your party will gain at the expense of mine and you will deserve the benefits and my party will deserve the electorate’s disdain.
Statement by Bruce R. Bartlett
September 23, 2005
Thank you for the opportunity to testify before you this morning. As you know, I testify as a Republican—I have served in senior political positions in Ronald Reagan’s White House and George H.W. Bush’s Treasury Department, and as executive director of the Joint Economic Committee, a cosponsor of this hearing. However, I do not represent the Republican Party or any organization with which I may be associated. I am here speaking only for myself.
I testify as someone who is very disenchanted with his party’s fiscal policy since 2001. Unlike the other witnesses, I am less concerned about the deficit per se or about the size of the tax cuts enacted over the last five years. Rather, what really bothers me is the increase in spending and expansion of government that my party has been responsible for.
I used to believe that the Republican Party was the party of small government. That’s why I became a Republican. I don’t believe that the federal government has the right to one penny more than absolutely necessary to fulfill its essential functions as spelled out in the Constitution. I think government is over-intrusive and could do what it has to do far more efficiently and at lower cost, which means with lower taxes.
Therefore, it bothers me a great deal when Republicans initiate new entitlement programs, massively expand pork-barrel spending, and show the most callous disregard for fiscal integrity. Not too many years ago, Ronald Reagan vetoed a politically popular highway bill because it contained 157 pork-barrel projects. The latest bill contained at least 5,000. Yet President Bush signed this $295 billion bill into law, despite having promised repeatedly to veto a bill larger than $256 billion.
For the life of me, I cannot understand why President Bush seems so incapable of using his veto pen. His father knew how to veto bills. He vetoed 29 of them in his four years in office. But in his first four-plus years, this President Bush has vetoed nothing. He is the first president since John Quincy Adams to serve a full term without vetoing anything. Curiously, Adams is also the only other son of a former president to become president—and his father, John Adams, didn’t veto anything, either.
When I complain about this to the White House, they tell me that it is very hard to veto bills when your party controls both Congress and the White House. But this explanation is simply implausible. Franklin D. Roosevelt had huge Democratic majorities, yet vetoed a record 372 bills. John F. Kennedy, Lyndon Johnson and Jimmy Carter also had large majorities of Democrats, yet Kennedy vetoed 12 bills during his short presidency, Johnson vetoed 16, and Carter vetoed 13.
I won’t bore this committee with numbers. You know them as well as I do. Suffice it to say that our fiscal situation is dire and growing worse by the day. My principal concern, however, is not with today’s deficits—even if they are swollen by Katrina and Rita-related emergency spending. What worries me is the retirement of the baby boom, the first of which turns 62 in 2008. I’m not saying that we are close to driving off a fiscal cliff, but clearly the implications of this event have not impacted on policymakers in any way whatsoever.
I have struggled with a way to illustrate the consequences of an aging population and its effect on the budget. This is the best I have been able to do. Social Security’s unfunded liability comes to 1.2 percent of GDP in perpetuity (1.4 percent without the trust fund)—about what is raised by the corporate income tax—according to that program’s actuaries. The comparable number for Medicare is 7.1 percent of GDP—about what is raised by the individual income tax. And remember that these figures are for the unfunded portion of these programs, so they are over and above payroll taxes.
The chilling conclusion, therefore, is that virtually 100 percent of all federal taxes, on a present value basis, do nothing but pay for Social Security and Medicare. Unless there are plans to abolish the rest of the federal government, large tax increases are inevitable.
Let me be clear that I am no advocate of higher taxes. I’m the one who drafted the Kemp-Roth bill back in the 1970’s and I have spent most of my career looking for ways to cut tax levels and tax rates. But that was predicated on an assumption those supporting tax cuts also wanted to downsize government. I never saw tax cuts as a substitute for spending cuts, but more as sugar to make the medicine go down. My ultimate goal was to reduce both taxes and spending.
Unfortunately, few in my party seem to share this philosophy any longer. For many, tax cuts have become a substitute for spending cuts. It truly amazes me how often I hear people on my side talk about cutting taxes as if this is the only thing necessary to downsize government. They seem genuinely oblivious to the fact that the burden of government is largely determined by the level of spending, not taxes. Nor do they understand that in the long-run, all spending must be paid for one way or another. Increasing spending today, therefore, absolutely guarantees that taxes will have to be raised in the future.
I am often criticized by friends on my side of the aisle for implicitly endorsing tax increases. I do no such thing. I am simply adding two and two and getting four while my friends seem to think there is some way of only getting three.
They also criticize me for implicitly abandoning the fight to cut spending and downside government. Again, I plead innocent. It is not I who has abandoned the fight, but my party. I don’t need to remind anyone here that the biggest spending increases in recent years passed Congresses with Republican majorities largely without Democratic votes. Nor do I need to remind anyone here that during the Clinton years we not only went from budget deficits to budget surpluses, but did so to a large extent by cutting spending—something my conservative friends seldom acknowledge.
Here’s the basic accounting. Defense spending fell by 1.4 percent of GDP between 1993 and 2000, and domestic discretionary spending fell from 3.8 percent to 3.3 percent. Even spending on entitlements fell for temporary demographic reasons, from 10.2 percent of GDP to 9.8 percent. Finally, interest on the debt fell, largely because of falling interest rates, from three percent of GDP to 2.3 percent. The result was an overall decline in spending of three percent of GDP, from 21.4 percent to 18.4 percent, the lowest level since 1966, before the Great Society geared up.
On the revenue side, individual income taxes rose by 2.5 percent of GDP, mainly as the result of rising incomes that pushed people up into higher tax brackets and higher capital gains taxes from the booming stock market. Corporate income taxes and payroll taxes added another 0.8 percent, for a total revenue increase of 3.3 percent of GDP. Thus lower spending and higher revenues constituted a fiscal turnaround of 6.3 percent of GDP, which explains how a deficit of 3.9 percent of GDP in 1993 became a budget surplus of 2.4 percent by 2000.
I don’t give President Clinton full credit for this performance. I think most of the credit goes to gridlock. Mr. Clinton wouldn’t support the Republican Congress’s spending and it wouldn’t support his. So for a blessed six years, government effectively was on automatic pilot. Sadly, unified government has led to an utter lack of restraint by my party that is simply inexcusable. It is extremely dismaying for me to hear House Majority Leader Tom Delay say that there is no fat in the budget and that Republicans have cut it to the bone. This is, quite frankly, ludicrous. My real fear, however, is that he may actually believe it.
I remain convinced that given the total lack of fiscal responsibility demonstrated by the Republican Party that very large tax increases are inevitable. I believe that the fiscal hole is now so large that it is unrealistic to think that we can just tinker with the tax system, as we did so often in the 1980’s, and raise enough revenue to pay for spending commitments that have been made. And under the circumstances, I have no faith whatsoever that spending will be significantly restrained—at least not by my side. They would first have to admit error and beg for forgiveness from people like me, something I don’t expect to be forthcoming any time soon.
Therefore, like it or not, we must travel the same route taken by the Europeans, who long before us made peace with the welfare state and tried to figure out how to pay for it with the least negative impact on economic growth and incentives. They all imposed a broad-based consumption tax called the value-added tax as an add-on tax to all the others. I think it is only a matter of time before we are forced to do the same thing and the longer we wait the more painful it will be when it is finally done. Unfortunately, we are more than likely going to have to be forced into it by a financial crisis of some sort. It would be better to avoid that cost and deal with our fiscal situation rationally. But I see no leadership on either side that would allow that to happen.
I don’t know when, where or how a financial crisis will develop. I only know that trends that can’t continue don’t. Since it is unlikely that the vast fiscal imbalance will be resolved with a whimper, it becomes a certainty that it will end with a bang. Among the areas ripe for triggering a crisis are a popping of the housing bubble, a crash of the dollar, a mistake by some big hedge fund, excessive tightening by the Fed and others too numerous to mention. It will take extraordinary luck and skill to avoid every boulder in the stream and I have little confidence that this administration has the personnel to even give us a fighting chance. There are too many Michael Browns at senior levels of the government today and too few Bob Rubins or Alan Greenspans.
Contrary to popular belief, I don’t think the American people are a bunch of children who only want hand-outs from the government and will only reward the party that promises them something for nothing. Experience and academic research confirm that they are more likely to support the candidate who treats the public purse with prudence and trust and not as a piggy bank to be routinely broken on a whim. In short, I think there is a political market for the party and the candidate who speaks honestly about the nature of the fiscal crisis that is looming. The payoff may not be immediate and the public trust has to be earned by more than just rhetoric. But if, as I believe, some event will eventually change the political landscape, voters will remember who spoke the truth and who mouthed the platitudes.
It’s dirty work, but someone has to do it. Since my party won’t do it, yours is going to have to. If it’s done right, your party will gain at the expense of mine and you will deserve the benefits and my party will deserve the electorate’s disdain.
Friday, September 23, 2005
Budget politics then and now
From Fox News of all the unlikely places:
The Washington Post reports that in 1987, President Ronald Reagan vetoed a transportation bill passed by Congress because it had 157 "earmarks"— money set aside for Congress members' pet projects that would ostensibly be considered too wasteful to pass as laws on their own merit.
Reagan made a show of his veto. It was a symbolic stroke against government waste, against the Democrats’ tradition of, for example, diverting every federal highway through West Virginia, then naming it after Sen. Robert Byrd.
Fast-forward to 2005. Republicans control the White House and both houses of Congress. Early on a Saturday morning in August — the day of the week, and the month of the year, least likely to attract media attention — President Bush signed into law a highway bill passed by his own party with more than 6,000 earmarked projects.
Bush signed the bill after sternly telling his party he'd veto any highway bill that spent more than $256 billion. He promptly "adjusted" that figure to $284 billion after complaints from party leaders. The bill Bush ultimately signed came at a price of $286 billion, $295 billion if you count a few provisions disguised to make the bill look cheaper than it actually is. Not exactly holding the line.
The Washington Post reports that in 1987, President Ronald Reagan vetoed a transportation bill passed by Congress because it had 157 "earmarks"— money set aside for Congress members' pet projects that would ostensibly be considered too wasteful to pass as laws on their own merit.
Reagan made a show of his veto. It was a symbolic stroke against government waste, against the Democrats’ tradition of, for example, diverting every federal highway through West Virginia, then naming it after Sen. Robert Byrd.
Fast-forward to 2005. Republicans control the White House and both houses of Congress. Early on a Saturday morning in August — the day of the week, and the month of the year, least likely to attract media attention — President Bush signed into law a highway bill passed by his own party with more than 6,000 earmarked projects.
Bush signed the bill after sternly telling his party he'd veto any highway bill that spent more than $256 billion. He promptly "adjusted" that figure to $284 billion after complaints from party leaders. The bill Bush ultimately signed came at a price of $286 billion, $295 billion if you count a few provisions disguised to make the bill look cheaper than it actually is. Not exactly holding the line.
Thursday, September 22, 2005
Two musical recommendations out of left field for the likeminded
The first is John Cale, "The Island Years," a compilation of 3 early to mid-70s albums. Much more conventional rock'n'roll than Cale's work with the early Velvet Underground, but very good nonetheless.
The other is "The Psychedelic Sounds of the 13th Floor Elevators," from 1967 or so. Despite the well-earned album title, this is not a time capsule (except perhaps if you listen to the lyrics, which I mostly haven't made out). Tough rather than hippy-dippy, with r & b roots that make it more a cousin of the Rolling Stones than of the Grateful Dead, albeit original and very much its own thing.
Not to wallow too much in the older stuff, I would also rate the New Pornographers' just-released "Twin Cinema" as good clean fun.
The other is "The Psychedelic Sounds of the 13th Floor Elevators," from 1967 or so. Despite the well-earned album title, this is not a time capsule (except perhaps if you listen to the lyrics, which I mostly haven't made out). Tough rather than hippy-dippy, with r & b roots that make it more a cousin of the Rolling Stones than of the Grateful Dead, albeit original and very much its own thing.
Not to wallow too much in the older stuff, I would also rate the New Pornographers' just-released "Twin Cinema" as good clean fun.
Monday, September 19, 2005
Excessive senses of entitlement
Bush isn't the only one; Derek Jeter is another.
In yesterday's game, he came up in the 9th inning with 2 outs, tying run on second. On the 1 and 2 count, he was leaning out over the plate, well into the strike zone. The pitcher threw a pitch on the inside half, clearly over the plate by several inches. Jeter jackknifed back like it was a brushback pitch. Called strike three, game over.
Jeter, in the locker room afterwards: "It was a ball."
In yesterday's game, he came up in the 9th inning with 2 outs, tying run on second. On the 1 and 2 count, he was leaning out over the plate, well into the strike zone. The pitcher threw a pitch on the inside half, clearly over the plate by several inches. Jeter jackknifed back like it was a brushback pitch. Called strike three, game over.
Jeter, in the locker room afterwards: "It was a ball."
Sunday, September 18, 2005
Understatement of the day
From David Brooks in today's New York Times: Bush has "never resolved the contradiction between his compassionate spending policy and his small-government tax policy."
Subscribe to:
Posts (Atom)
