Chris Edwards and I have repeatedly called for policymakers to get specific when it comes to spending cuts. Policymakers who want to cut spending should at least pick an agency or program and work to have it eliminated. Rep. Mike Pompeo (R‑KS) has done this by introducing legislation to terminate the Department of Commerce’s Economic Development Administration.

What I really like about Pompeo’s justification for eliminating the EDA is his recognition that the federal government should not be subsidizing local affairs:

I believe investing should be done by private citizens with their own money, not by federal agencies. I have spent my time in Congress working to create an environment that encourages such investment and risk-taking behavior. The Economic Development Administration is a White House earmark machine and, for the past 45 years, has redistributed wealth for purely local projects. In light of the nation’s $14.8 trillion debt, the federal government simply must focus on its core constitutional responsibilities.

No area of the country has been left out. In fact, there have been a number of projects in the Fourth Congressional District of Kansas that have received EDA grants. I do not fault the grant recipients—the money was available, the grant requirements were met and these applicants were simply responding to a federally created incentive system. The problem is that nearly all of these projects would have gone forward without EDA funds as the source for a tiny fraction of total project funding. With state, local and, most importantly, private sector sources of funding, economic development projects can—and should—move forward without utilizing the EDA as a crutch.

Kansas taxpayers should not be funding local projects all across the country, just as citizens in the other 49 states need not be funding our local projects. Imagine the Kansas projects that would have created jobs in our state had the EDA not drained billions of dollars from taxpayer pockets over the decades of EDA’s existence. That is the real job-destroying legacy of EDA.

See this Cato essay for more on why the Economic Development Administration should be terminated.

The budget fights this year began with the “shutdown” battle, followed by the Ryan budget and then the debt limit. These fights have mostly led to uninspiring kiss-your-sister outcomes, which is hardly surprising given divided government.

Now the crowd in DC is squabbling over Obama’s latest stimulus/tax-the-rich scheme, though that’s really more of a test run by the White House to determine whether class warfare will be an effective theme for the 2012 campaign.

The real budget fight, the one we should be closely monitoring, is what will happen with the so-called Supercommittee.

To refresh your memory, this is the 12-member entity created as part of the debt limit legislation. Split evenly between Democrats and Republicans, the Supercommittee is supposed to recommend $1.2 trillion-$1.5 trillion of deficit reduction over the next 10 years. Assuming, of course, that 7 out of the 12 members can agree on anything.

There are two critical things to understand about the Supercommittee.

• The Democrats have openly stated that their top political goal is to seduce Republicans into capitulating to a tax hike.
• Harry Reid and Nancy Pelosi appointed hard-core leftists to the Supercommittee.

With these points in mind, it doesn’t take a genius to realize that the Supercommittee is designed — at least from the perspective of the left — to seduce gullible Republicans into going along with a tax hike.

In other words, the likelihood that the Supercommittee will produce a good plan is about the same as seeing me in the outfield during the World Series (the real World Series, not this one).

Fortunately, there is a way to win this fight. All Republicans have to do is…(drum roll, please)…nothing.

To be more specific, if the Supercommittee can’t get a majority for a plan, then automatic budget cuts (a process known as sequestration) will go into effect. But don’t get too excited. We’re mostly talking about the DC version of spending cuts, which simply means that spending won’t rise as fast as previously planned.

But compared to an inside-the-beltway tax-hike deal, a sequester would be a great result.

You’re probably wondering if there’s a catch. After all, if Republicans can win a huge victory for taxpayers by simply rejecting the siren song of higher taxes, then isn’t victory a foregone conclusion?

It should be, but Republicans didn’t get the reputation of being the “Stupid Party” for nothing, and they are perfectly capable of snatching defeat from the jaws of victory.

There are three reasons why Republicans may fumble away victory, even though they have a first down on the opponent’s one-yard line.

• Republicans are gullible fools — as demonstrated by the cartoon in this post — and they will be tricked by Democrats.
• Republicans haven’t expunged the philosophical corruption of the Bush years and they still think big government is good even though they are telling voters they learned their lesson.
• Republicans are worried that a sequester will mean too little money for the defense budget.

If GOPers sell out for either of the first two reasons, then there’s really no hope. America will become Greece and we may as well stock up on canned goods, bottled water, and ammo.

The defense issue, though, is more challenging. Republicans instinctively want more defense spending, so Democrats are trying to exploit this vulnerability. They are saying — for all intents and purposes — that the defense budget will be cut unless GOPers agree to a tax hike.

Republicans should not give in to this budgetary blackmail.

I could make a conservative case for less defense spending, by arguing that the GOP should take a more skeptical view of nation building (the approach they had in the 1990s) and that they should reconsider the value of spending huge sums of money on an outdated NATO alliance.

But I’m going to make two other points instead, in hopes of demonstrating that a sequester is acceptable from the perspective of those who favor a strong national defense.

• First, the sequester does not take place until January 2013, so defense hawks will have ample opportunity to undo the defense cuts — either through supplemental spending bills or because the political situation changes after the 2012 elections.
• Second, the sequester is based on dishonest Washington budget math, so the defense budget would still grow, but not as fast as previously planned.

This chart shows what will happen to the defense budget over the next 10 years, based on Congressional Budget Office data comparing “baseline” outlays to spending under a sequester.

As you can see, even with a sequester, the defense budget climbs over the 10-year period by about $100 billion. And, as noted above, that doesn’t even factor in supplemental spending bills.

In other words, America’s national defense will not be eviscerated if there is a sequester.

Here’s the bottom line. The Supercommittee battle should be a no-brainer for the GOP.

They can capitulate on taxes, causing themselves political damage, undermining the economy, and enabling bigger government.

Or they can stick to their no-tax promise, generating significant budgetary savings with a sequester, and boosting economic performance by restraining the burden of government.

The Washington Post reports that the financial projections for a government-funded arts center, Artisphere, in Arlington, Virginia, don’t seem to have panned out. Do they ever? The Post story sounds like all the previous stories about what happened after influential interest groups persuaded the taxpayers’ representatives to give them money on the basis of reams of economic projections:

The Arlington County-funded arts center, which opened Oct. 10 last year in the Newseum’s former space, projected it would have 300,000 visitors in its first year. As of the end of last month, it had hosted about 90,000. And the venue for art, theater, film, music and more, whose build-out cost $6.7 million, had to request an additional $800,000 to supplement the $3 million appropriated for its first annual operating budget.

“Our original business plan had very aggressive projections,” says Executive Director Jose Ortiz.…“In terms of those expectations, no, we didn’t make those.”

“One of the projections was that every performance was going to be at capacity,” he says. “For a brand-new facility, that’s impossible.”

Deja vu for sure. These economic projections for subsidized stadiums are always vastly overstated. And the Cato Institute has published a number of studies over the years looking at the issue, mostly with respect to athletic stadiums. Dennis Coates and Brad Humphreys wrote in a 2004 Cato study criticizing the proposed subsidy for Nationals Park in the District of Columbia, “The wonder is that anyone finds such figures credible.”

In “Sports Pork: The Costly Relationship between Major League Sports and Government,” Raymond Keating finds:

The lone beneficiaries of sports subsidies are team owners and players. The existence of what economists call the “substitution effect” (in terms of the stadium game, leisure dollars will be spent one way or another whether a stadium exists or not), the dubiousness of the Keynesian multiplier, the offsetting impact of a negative multiplier, the inefficiency of government, and the negatives of higher taxes all argue against government sports subsidies. Indeed, the results of studies on changes in the economy resulting from the presence of stadiums, arenas, and sports teams show no positive economic impact from professional sports — or a possible negative effect.

In Regulation magazine, (.pdf) Dennis Coates and Brad Humphreys found that the economic literature on stadium subsidies comes to consistent conclusions:

The evidence suggests that attracting a professional sports franchise to a city and building that franchise a new stadium or arena will have no effect on the growth rate of real per capita income and may reduce the level of real per capita income in that city.

And in that 2004 study, “Caught Stealing: Debunking the Economic Case for D.C. Baseball,” Coates and Humphreys looked specifically at the economics of the new baseball stadium in Washington, D.C., and found similar results:

Our conclusion, and that of nearly all academic economists studying this issue, is that professional sports generally have little, if any, positive effect on a city’s economy. The net economic impact of professional sports in Washington, D.C., and the 36 other cities that hosted professional sports teams over nearly 30 years, was a reduction in real per capita income over the entire metropolitan area.

And yet millionaire owners and mayors with Edifice Complexes keep commissioning these studies, and council members and editorial boards keep falling for them. The Artisphere project was approved by the Arlington County Board in July of 2009. Was the county flush with money at the time? Well, not surprisingly, county officials were wringing their hands about the need to make cuts in late 2008, including “A detailed review of every service to determine what is mandated, what is essential to the community and what is discretionary.” In February 2009 the Post reported budget cuts, including police positions. Maybe the next time Arlington County — or any other state or municipality — needs to cut its budget, it might think about cutting subsidies for money-losing venues before going after police officers, firefighters, and math teachers.

Over at Downsizing the Federal Government, we focused on the following issues this past week:

• When it comes to such things as infrastructure, education, and investing in “industries of the future,” the government should get out of the way and let entrepreneurs and markets drive America’s prosperity in the global economy.
• Entitlements versus Liberty.
• It seems that the more the government intervenes in society, the more it will work against both the people and itself.
• It’s Congress that needs to be doing the “page by page, line by line” review of the federal budget.
• We can spur growth by encouraging a culture of entrepreneurship, repealing barriers to entry, reducing taxes on risky investments, and simply getting out of the way of the next generation of Steve Jobses.

Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

Over at PolicyMic Cato senior fellow and Harvard economist Jeffrey Miron discusses how America should tackle its massive debt. Miron argues the Obama-Buffett solution of taxing the rich is little more than political posturing, failing to achieve any real impact on curbing out-of-control spending and massive long-term entitlement liabilities.

President Obama’s solution to America’s deficit woes is to make the rich pay higher taxes. Using Warren Buffet as his prop, the President has repeatedly asserted that we must not balance the budget on the backs of the neediest, but instead make the rich pay their “fair” share. The President’s perspective is misguided at every level.… In contrast to Buffet’s view that the rich pay less in federal taxes than the middle class, the facts show otherwise. According to the Tax Policy Center, the top 1% of the income distribution pays 30.4% of its income in federal taxes while the middle fifth pays 14.1%. That may be less redistribution than Obama and Buffet would like, but it is hardly the perverse pattern that Buffet asserts.

Leave a comment on his post at PolicyMic in the next 2 days, and Professor Miron will reply personally to the most up-voted and thoughtful responses. Click here to go there.

The all-too-early death of Steve Jobs was reported on the day that President Obama made another defense of his so-called jobs bill. Which one actually benefited (or would benefit) Americans and the American economy? Lots of people have talked about the way Steve Jobs changed technology, changed business, changed the world. And I trust there’ll be no more churlish complaints about his alleged lack of philanthropy. As Dan Pallotta definitively pointed out,

What a loss to humanity it would have been if Jobs had dedicated the last 25 years of his life to figuring out how to give his billions away, instead of doing what he does best.… [T]he world has no greater philanthropist than Steve Jobs. If ever a man contributed to humanity, here he is.

Two years ago Portfolio magazine did a great graphic on “The Steve Jobs Economy,” trying to assess just how much value he himself had created for the economy. The conclusion: Jobs’s personal wealth at the time was estimated at $5.7 billion. But he was generating $30 billion a year in revenue for Apple, its partners, and its competitors (who were spurred to get better). Here’s the analysis (sorry for the imperfect tear sheet):

Click image to enlarge. And for text but not graphics at Portfolio, click here.

According to Portfolio and the experts it consulted, Jobs was producing $30 billion a year in value for various companies. And of course that means that consumers believed they were getting at least that much value themselves, or they wouldn’t buy the products. That’s a wealth creator. And that number pales in comparison to this one: After returning to Apple in 1997, Jobs took the total value of the company from about $2 billion to $350 billion.

How much value is the Post Office creating this year? Or Amtrak? Or Solyndra? And if you point out that the Post Office does create value for its customers even though it loses money every year, I would ask, how much more value might its competitors create, if it allowed competition?

Instead of another bag of taxpayers’ money for state and local governments and politically favored businesses, a real jobs program would encourage the next Steve Jobs to create value. What would that involve? Keep taxes on investment and creativity low. Reduce the national debt and its threat of huge tax hikes to come. Ease the burdens of regulation, especially regulations that make it difficult to open a business, hire and keep the best employees, and develop new ideas. Open the huge, stagnant postal and schooling businesses to competition, innovation, and entrepreneurship. Repeal some of the licensing laws that now afflict 1,100 occupations. Renew progress toward free trade. Make it smart for businesses to invest their time, money, and brainpower in productive activity, not lobbying.

The House Committee on Energy and Commerce’s Subcommittee on Oversight and Investigations held a hearing yesterday on President Obama’s pledge to go “page by page, line by line” through the federal budget to eliminate programs “we don’t need.” I testified with an ideologically diverse group of budget experts.

My testimony can be read here, but the following are the key points:

• Assuming that OMB did conduct a line-by-line review of the federal budget, the president’s first budget proposal implied that he believed that 99.53 percent of the federal government was definitely needed. Subsequent recommendations for savings released with the president’s annual budget proposals in 2010 and 2011 have offered a similarly insignificant offering of spending cuts.

• The president’s list of savings created an aura of thoroughness because it targeted some obscure programs. For example, the proposed savings included terminating tiny programs like the Christopher Columbus Fellowship Foundation ($1 million) and the Javits Gifted and Talented Education Program ($7 million).

• My experiences as an Indiana state budget official taught me that political leaders are good at generating sound bites designed to make taxpayers believe that their interests come first. In reality, taxpayer interests usually end up taking a back seat to the interests of select individuals or groups.

• Cato has conducted its own page-by-page, line-by-line review of the federal budget and posted the results on our website, www​.Down​siz​ing​Gov​ern​ment​.org.

• Policymakers need to do more than simply pledge to “eliminate waste, fraud, and abuse” in government programs. It’s time to cut “meat,” not just “fat.” If President Obama isn’t serious about terminating unneeded federal programs, then it’s up to Congress to do the job for him.

Had I to do over, I would have put more emphasis on that last sentence in my oral testimony. The “liberal” representative, Scott Lilly from the Center for American Progress, and “centrist” budget guru, Stan Collender, did the best job of pointing out that it’s Congress that needs to be doing the “page-by-page, line-by-line” review of the federal budget.

Much of the hearing consisted of Republicans and Democrats trying to score political points on each other. That’s just the way it is and it’ll never change, which is another reason why the American people should reconsider placing so much power and control over our lives in the hands of a select group of fallible human beings.