As Congress begins (perhaps!) to hold up its end of the invitation to struggle over the Libyan adventure, Chris Preble, Gene Healy and I have prepared a video explaining what’s at stake in this latest American war.
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Government and Politics
Federal Jobs Programs Don’t Work
In a 1975 interview, Nobel prize-winning economist Milton Friedman said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”
In writing and editing essays on www.DownsizingGovernment.org, I see that mistake in department after department. It is an important reason why policymakers find it so hard to control their spending appetites. They want to believe that programs work, and so they internalize the bedtime stories sold to them by program advocates.
In Politico today, I examine federal employment and job training programs. From FDR to Obama, and from Reagan to Ryan, policymakers have wanted to “do something” to help labor markets. However, jobs programs are not a proper exercise of federal power under the Constitution, and they simply haven’t worked very well despite decades of renaming, retooling, and reinventing.
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CBO Report Reveals Spending Disaster
New projections from the Congressional Budget Office show that without reforms rising federal spending will fundamental reshape America’s economy, and not in a good way. Under the CBO’s “alternative fiscal scenario,” the federal government will consume an 86 percent greater share of the economy in 2035 than it did a decade ago (33.9 percent of GDP compared to 18.2 percent).
The CBO report and many centrist budget wonks focus more on the problem of rising federal debt than on rising spending. As a result, many wonks clamor for a “balanced” package of spending cuts and tax increases to solve our fiscal problems. But CBO projections show that the long-term debt problem is not a balanced one—it is caused by historic increases in spending, not shortages of revenues.
This chart shows CBO’s alternative scenario projections, which assume no major fiscal policy changes. All recent tax cuts are extended and entitlement programs are not reformed.
Let’s look at federal revenues first (blue bars). In President Clinton’s last year of 2001, revenues were abnormally high at 19.5 percent of GDP as a result of the booming economy. Over the last four decades, federal revenues as share of GDP have fluctuated around about 18 percent of GDP. The tech boom a decade ago helped generate large capital gains realizations. CBO data show that capital gains tax revenues were $100 billion in 2001, or 1 percent of GDP (see page 85). By contrast, the CBO expects capital gains taxes to be $48 billion in 2011, or just 0.3 percent of GDP (see page 93).
In 2011, revenues are way down because of the poor economy. Some people complain that the Bush tax cuts drained the Treasury, but note that revenues were 18.2 percent of GDP in 2006 and 18.5 percent in 2007, when the economy was growing and the Bush cuts were in place.
Looking ahead, the CBO projects that with all current tax cuts in place and AMT relief extended, revenues will rise to 18.4 percent of GDP by 2021, or a bit above the normal levels of recent decades. For 2035, the CBO assumes that revenues would be fixed at the same 18.4 percent, but their discussion reveals that “real bracket creep” would actually keep pushing up revenues as a share of the economy beyond 2021.
In sum, CBO projections reveal no shortage of revenues. The problem is on the spending side, as the red bars in the chart illustrate. As a result of the Bush/Obama spending boom, federal outlays soared from 18.2 under President Clinton to 24.1 percent this year. With no reforms to entitlement programs, outlays will be 33.9 percent of GDP by 2035, which is 86 percent higher than the Clinton level.
By the way, the CBO nets Medicare premiums out of outlays, which makes spending look a little smaller than it really is. Using gross Medicare spending, total federal outlays will be 35 percent of GDP by 2035.
Also note that CBO data (and other U.S. government data) low-ball government spending in other ways compared to OECD measurement standards. The OECD puts federal/state/local government spending in the United States at 41 percent of GDP in 2011. More than four out of ten dollars we earn are already being gobbled up by our governments.
If the federal government grows by 10 percentage points of GDP by 2035 per CBO, American governments will be consuming more than half of everything produced in the nation.
To fix the problem, see here.
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Andrew Sullivan Has No Idea What He’s Talking about, but I Agree with His Conclusion
Even though he’s become more partisan in recent years, I still enjoy an occasional visit to Andrew Sullivan’s blog. But I was disappointed last night when I read one of his posts, in which he discussed whether government spending helps or hurts economic performance. He took the view that a bigger public sector stimulates growth, and criticized those who want to reduce the burden of government spending, snarkily observing that, “The notion that Herbert Hoover was right has become quite a dogged meme on the reality-challenged right.”
Since I’m one of those “reality-challenged” people who prefer smaller government, I obviously disagree with his analysis. But his reference to Hoover set off alarm bells. As I have noted before, Hoover increased the burden of government during his time in office.
But maybe my memory was wrong. So I went to the Historical Tables of the Budget and looked up the annual spending data. As you can see from the chart (click for larger image), it turns out that Hoover increased government spending by 47 percent in just four years. (If you adjust for falling prices, as Russ Roberts did at Cafe Hayek, it turns out that Hoover increased real government spending by more than 50 percent.)
I suppose I could make my own snarky comment about being “reality-challenged,” but Sullivan’s mistake is understandable. The historical analysis and understanding of the Great Depression is woefully inadequate, and millions of people genuinely believe that Hoover was an early version of Ronald Reagan.
I will say, however, that I agree with Sullivan’s conclusion. He closed by saying it would be “bonkers” to replicate Hoover’s policies today. I might have picked a different word, but I fully subscribe to the notion that making government bigger was a mistake then, and it’s a mistake now.
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More from McCain on ‘Isolationism’
Over at World Politics Review, Justin Logan and I collaborated on an article about the supposed rise of “isolationism” within the GOP.
The charges come mainly from Sen. John McCain, though presidential candidate Tim Pawlenty copped that line yesterday, drawing praise from the editors of The Weekly Standard.
McCain directed his “isolationism” fire late yesterday at West Virginia Sen. Joe Manchin, one of 27 senators who signed a letter to the president calling for a substantial troop reduction in Afghanistan. On the floor of the Senate, Manchin explained his reasoning: “I believe it is time to for us to rebuild America, not Afghanistan.”
According to McCain, Manchin’s comments “characterize the isolationist withdrawal, lack of knowledge of history attitude that seems to be on the rise in America.”
But McCain needs to reconnect with recent history, and contemporary reality. Nation building is a fool’s errand: costly, counterproductive, and unnecessary. We could continue to hunt al Qaeda with far fewer troops in Afghanistan. A smaller presence would provide us with sufficient flexibility to deal with other challenges elsewhere — and help us to put our own house in order. McCain is OK with spending over $100 billion a year in a country with a GDP of around $16 billion, while our economy suffers.
Not surprisingly, most Americans, including many Republicans, reject McCain’s views. And they should. As Justin and I explain in the WPR article:
Foreign policy should not be conducted by polls and focus groups, but in this case the public is right, and the interventionist consensus in Washington is wrong. The threats facing us are not so urgent that we must maintain a vast military presence scattered across the globe and consistently make war in multiple theaters at once. The United States is the most secure great power in history, and if policymakers would act like it, the evidence suggests the public would support them.
In particular, given that our recent overseas military interventions have carried significant costs and delivered very few measurable benefits, it is hardly surprising that Americans are pushing back against the sorts of foreign adventures McCain favors. We don’t know whether the faint rumblings of common sense in the GOP presidential primaries indicate that Beltway elites are finally coming around to our view, but we hope they do. Should that happen, it would be prudence prevailing, not isolationism. (Full text here.)
Why any Republican aspiring to the presidency would follow the advice of a two-time loser like McCain (in 2000 to G.W. Bush, and in 2008 to Barack Obama) is beyond me. It makes even less sense for Democrats to listen to him.
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‘Marsupial Justice’ Is a Natural Product of Federal Overreach
Earlier this month I blogged about the U.S. Department of Education’s recent push to eliminate free speech and due process on campus. More and more people are starting to notice this attempt by the department’s Office of Civil Rights to force colleges — by threatening an investigation and loss of federal funds — to redefine sexual harrassment to include unwelcome flirting and sex jokes and then lower the burden of proof they use when determining whether students or staff are guilty of violating the new code of behavior.
And now we have a characteristically astute article by the Washington Examiner’s Michael Barone. Money quote:
Education Secretary Arne Duncan has shown an admirable openness to argument and intellectual debate. Perhaps someone will ask him whether he wants his department to be encouraging kangaroo courts and marsupial justice on campuses across the country.
Unfortunately, this sort of thing doesn’t just take care of itself. Greg Lukianoff and his team at the Foundation for Individual Rights in Education have been doing a workmanlike job protecting student and academic freedoms, but at base this policy exposes the sorts of pathologies that emerge from a federal government that has too many tentacles in too many places.
What is the Department of Education doing setting any sort of standards for speech, conduct, and adjudication of campus disputes — good or bad, strict or lax? Why do we even have a federal Department of Education in the first place?
Mr. President, This Is the Moment
Today’s Politico Arena question is about what President Obama should say in his speech tonight about Afghanistan. My response:
If the president indeed withdraws 30,000 troops by the end of 2012, then we will still have about 70,000 troops in Afghanistan more than 11 years after the war began, and twice as many as President Bush deployed. If we can’t do whatever we want to do in 10 years, when will we achieve our purposes? U.S. troops have overthrown the Taliban and dispatched Osama bin Laden, and it’s time to end this war.
Tonight, on June 22, the president should pick up some language from another June speech and tell the nation, “Generations from now, we will be able to look back and tell our children that this was the moment when we ended a war.”
NOTE: See graphic here of the “incredible expanding Afghan war.”