Insanity in Our Back Yard - Filner Must Go

There is plenty of coverage of the allegations regarding Filner's sexual harassment.  Leslie Eastman at College Insurrection has a nice summary and sdrostra.com is chock full of articles on the subject. But Filner has demonstrated plenty of other out-of-control behavior that together paints a portrait of a man teetering on the edge of sanity.

• Most disturbing to me, because it is such an affront to civil behavior, his ex-fiancee said that  she made the "gut-wrenching decision" to break up with Filner after she said he recently started text messaging other women sexually explicit messages and set up dates in front of her.  Bronwym Ingram, the ex, said that he had lost the ability to treat anyone with civility.
• His ongoing feud with Jan Goldsmith that is harming the city.  His aggressive take-over of a Goldsmith news conference prompted me to predict he wouldn't finish the term.
• The Sunroad Centrum pay-to-play investigation is still ongoing, with the FBI involved.  Citybeat has more details.
• Jerry Navarra of Jerome's Furniture donated free furniture to the mayor's office while he has two properties in East Village that cannot be developed unless an historical designation is lifted.

Here is that Goldsmith presser video.

He has clearly shredded the norms of civil behavior.  Here is the an article about conduct disorders, including DSM-IV diagnostic criteria.  Check out these symptoms and ask how much of Filner's behavior fits:

Four types of symptoms of conduct disorder are recognized: 

(1) Aggression or serious threats of harm to people or animals;
(2) Deliberate property damage or destruction (e.g., fire setting, vandalism);
(3) Repeated violation of household or school rules, laws, or both; and
(4) Persistent lying to avoid consequences or to obtain tangible goods or privileges.

Should someone who has the symptoms of a conduct disorder be our mayor?

What You Should Be Reading:

• The Daily Caller has a sneak peak at testimony in the IRS targeting of tea party groups.  It ain't pretty and true to expectation, the trail leads to Washington.
• DooDoo Econ on exposing accounting fraud at Treasury to avoid breaching the debt limit.  He also makes a compelling case, with pictures, of why Filner will stay in office until after Comic-Con.

News Round Up

Republicans appear to be bowing to the inevitable and are moving towards a debt limit increase.  But at least it appears they will be requiring that the Senate pass a budget as part of the deal.  This is as much as could be hoped for, I guess.  I have posted about this twice and am feeling a little prescient.

The Algerian hostage deaths, horrific as they seem, could have been much worse; and the jihadists did little to advance their cause and are dead.  Almost 800 hostages were freed prior to the final bloodbath.

Relatedly, the WSJ has a great article by Max Boot on myths we believe about guerillas and terrorists.  A few tidbits:
1. Most guerilla movements end in failure.
2. Few movements are successful by using terrorism abroad.
The whole thing is worth a read as all the world's armed conflict has entered an era of guerilla warfare.

I missed "Gun Appreciation Day" today.  Of course, the media focused on the five injuries that occurred at gun shows today, even though none were life threatening. Relatedly, former NY Police Chief, Willie Bratton, no friend of gun rights, is quoted in the WSJ about preventing gun violence:

But the gun reform that truly gets Mr. Bratton fired up is one you don't hear much about these days. It is what he calls "certainty of punishment," or stricter gun-crime sentences. 

"People are out on the streets who should be in jail. Jail is appropriate for anyone who uses a gun in the commission of an act of violence. Some cities have a deplorable lack of attention to this issue," he says, citing Philadelphia.

Indeed, I don't have the statistics, but am willing to bet that most gun violence is committed by persons with a prior criminal record.  However, it turns out that 60% of criminals were legally permitted to own a gun at the time they committed their crime (see page 4 of the link).  This is because many felonies get plea-bargained to misdemeanors, allowing violent criminals to retain their rights.  We need a policy on such plea deals and certain jail time for crimes committed with guns.  Meanwhile, the NRA's membership is soaring.

GOP Strategy on the Debt Ceiling

Based on past experience and Obama's better political position, it is clear that the Republicans are ultimately going to pass some debt ceiling rise.  Since this is foregone, they should get something out of it.  Going for something small but symbolic, like gutting a death panel, or some cost saving measure as part of the package where Obama would be hard pressed to explain a veto seems best.  Maybe something arcane, like directing a change to the way that CPI is calculated, but which will help reduce the growth of entitlements.

Second, they should pass the law at the last possible minute, to give the Senate and Obama little chance to deal with the result.  By making small progress, they can claim some victory while forcing Obama's hand and preventing a public relations disaster.

Obama's posturing about the debt ceiling is a hint that he knows he is in a weak position with respect to the timing that GOP House could use.

However, given their track record, I expect bellicose threats and promises by the Republicans followed by a humiliating collapse with little accomplished.  Somebody needs to remind me why I registered Republican in 2008.

October Surprise?

Well not a surprise, maybe, but certainly this could impact the election. According to Senator Rob Portman (R-OH), pictured, the current debt ceiling may be breached right before the election.

According to Table 6-2 in the President’s Budget’s “Analytical Perspectives” volume, the President estimates the total debt subject to the statutory limit – growing by $132 billion per month – will reach $16.334 trillion at the end of FY 2012 (September 30, 2012). This is just $60 billion below the current debt limit. Thus, without a change in the debt trajectory, the debt ceiling will be eclipsed by October 15, 2012 unless the Department of Treasury again uses emergency protocols to shift that date past Election Day 2012.

You can bet big bucks that Timmy the Tax Cheat will be pulling out ALL the stops to make sure that the debt crisis rolls past election day.

Portman makes another good point.

. . .his [Obama's] new budget increases spending and projects that Washington will be hitting the debt ceiling again in mid-October – burning through a $2.1 trillion debt limit increase in just over 14 months. This is an unfortunate but clear signal to the American people that Washington is spending too much, borrowing too much, and putting our nation’s fiscal stability at risk.
. . . President Obama’s budget increases the debt by $11 trillion over ten years, falling woefully short of addressing this pending fiscal crisis. Chock-full of gimmicks and stimulus spending, this is a political document . . .

Well said.

By the way, I told you so.

Another Trillion in Debt

The President notified the Congress that he needed some more pocket change to keep the federal government running, to the tune of $1.2 trillion. Under the terms of the misbegotten deal that was struck last August, the President is authorized this last raising of the debt ceiling unless Congress can override a veto that would certainly come if they disapprove.

The deal turned out badly, for many reasons. The Super-Committee failed, and automatic cuts are supposed to kick in, but not until October 2012. Elections are going to intervene before any real change is effected, hence the failure. In hindsight, enabling a super-committee was a bad move tactically and constitutionally. I am sorry I thought it might work to reduce the debt. Deals to continue the payroll tax holiday only make another debt ceiling crisis right before the election more likely.

Speaking of elections, here is the most interesting question. Did the administration miscalculate? Might the debt ceiling actually come into play prior to the November elections, rather than in 2013, as previously predicted? The current limit is $15.194 trillion, which was reached rather quickly, it seems. If the debt ceiling becomes a problem prior to the election, what will the administration do? Here is a hint.

A Treasury Department document shared on Tuesday said that if the limit is reached before the elections, the government could take “extraordinary measures to extend borrowing authority beyond the next elections.” But the department offered no detail.

Because, as Dean often states, Constitutional Republics, are like, hard. I think the political fall out from the Treasury taking such action would be bad for Obama, so he might be forced to grandstand on the issue and take this to the Congress. It would give him an opportunity to run against Congress, instead of the Republican nominee. I hope Boehner is thinking this one through, but I am worried.

The winners of next November's elections will face very tough decisions; we are running out of room to maneuver. That makes these elections the most important in our lifetime.

Debt Downgrade - Blaming the Tea Party - San Diego Responds

All of the usual suspects have decided to blame the Tea Party for the recent S&P downgrade of U.S. government debt to AA+. This should be in the category of dog bites man news, of course, but it somehow makes the papers. First of all, the downgrade is long overdue. Second, unless spending is curbed, the debt will grow; tax revenues will not increase until the economy is growing, and there are upper limits on how much tax revenue the federal government can squeeze out of the economy. Hint, it's less than the current rate of spending. Even though I supported Boehner on this deal, as the best we could get under the circumstances, the deal itself stinks because Democrats blocked any serious spending cuts.

Many of your local tea party bloggers have reaction to the stupidity of lefty talking points about "the Tea Party" downgrade.

Temple of Mut sets the stage:

No one here in San Diego, across the country, or elsewhere in the world, who has been closely following the news, is surprised that S&P downgraded this nation’s credit rating from AAA to AA+. The simple, bitter truth is that the United States of America spends money it doesn’t have. And S&P formally stated what the taxpayers of this nation have been saying loudly these past three years — you can’t spend us back to solvency.
. . .
Republican and Democrat establishment politicians, and their elite media supporters, own the downgrade. They fought Tea Party representatives at every turn, while using derogatory terms such as “terrorists” and “hobbits”. They were the ones who forced a deal which was insufficient, essentially kicking the can of fiscal responsibility down the road and off the cliff.

The same article also quotes local SCTRC leader Sarah Bond.

It’s time for real spending cuts. Time for “shared responsibility” to mean something more than tax hikes for everyone. Time for redundant regulation to be slashed so that the businesses of this once great nation can roar back to life. It’s time for the rule of law to mean something. And time for government to STOP bailing out every bank, home owner, and union dominated industry that fails.

W.C. Varones reminds us Geithner's reassurances last April.

Tonight, Timmy the Tax Cheat Geithner joins Bernanke in the Idiots or Liars Club. As recently as April, Timmy said there was "no risk" the U.S. would lose its AAA credit rating. How's that working out for you now, Timmy?

Beers with Demo takes on the new leftist meme that the downgrade is somehow the Tea Party's fault. Responding to algore's call for an "American Spring" Dean had this to say:

After reading this, it struck us: What it is algore desires is a call to arms to.... protect the status quo. Imagine that: a revolution to keep things just as they are!

Record debt and deficits? Apparently, they're all for it. Unsustainable entitlement programs? More, please. Increased government power? Right on, man. Power to the people? Hell, no.

It shouldn't surprise anybody then that it would be Al Gore at the intellectual spear tip of the most counter-intuitive democratic uprising in history. No change!

And the award for snarkiest comment goes to K.T. Cat of The Scratching Post:

Personally, I blame the terrorist lunatic Taliban extremist Tea Partiers for blocking our path into Europaradise.

K.T. also predicts more inflationary policies from the Fed (and I agree in the short term):

In Quantitative Easing (QE) I, the Fed printed hundreds of billions of meaningless dollars and used them to buy government debt. In QE II, the Fed printed hundreds of billions more and bought still more government debt. Now that S&P has downgraded the US for the first time in history*, expect QE III.

Les Carpenter at Left Coast Rebel nails the real reason for the downgrade.

It is clear that Standard and Poors recognizes the most desirable path to fiscal sanity, and thus stability rests in further spending cuts. There is a reason for this.

This nation has been living beyond its means for a long while, going back to the seventies. Deficit spending has somehow crept into the American economic lexicon as an acceptable way of doing the government's business.

Finally, and somewhat gloomily, Richard Rider reminds us that the federal debt isn't even the total debt we owe through various levels of government.

But according to an April 2011 USA TODAY article, the TOTAL per U.S. household debt owed to governments is now $531,472 – the household’s piece of the estimated $61.7 trillion U.S. federal, state and local government debt/liability obligation. At 5% interest, the household bill is $26,573.60. EVERY year. . .

And yet still I persist in my optimism, because Americans are capable of meeting great challenges.

The following video, taken in February 2010 is a reminder that the energy with which the tea party movement was launched has had a salutary effect on the politics of the nation. For those of us involved and those who support our goal of small and limited government, it's a healthy reminder of how far we have come.

Debt Deal Passes, Dow Tanks, Moody's Warns

Hallelujah, a debt deal passed and the economy is saved, because the President said that's what would happen if we passed a bipartisan deal. Look how happy he is about it all. Here is the official statement from whitehouse.gov.

This afternoon, Congress approved a compromise to reduce the deficit and avert a default that would have devastated the economy. Speaking from the Rose Garden, President Obama thanked the American people for reaching out to their elected officials during the debate, and stressed that this compromise guarantees more than $2 trillion in deficit reduction, and will ensure that as a nation we live within our means, while still making key investments in things that lead to new jobs, like education and research.

So how did the markets react?

The Dow Jones Industrial Average nose-dived 265.87 points, or 2.2%, to end at 11,866.62, its worst one-day loss since June 1. The eight-day losing stretch was it's longest since October 2008.

To be fair, it's not known whether this was a case of the market focusing on the sucky fundamentals of the economy (consumer spending and income are statistically at zero growth) or the fact that this deal does little to deal with the debt. Who cares, it just shows the failure of the current deficit spending to revive the economy. This is because this has been a balance sheet recession, and we know from the Japanese experience that massive government stimulus does not result in a recovery of the economy.

How about the ratings agencies? First of all, let me say that I have little respect for them as they continued to rate mortgage backed securities as highly safe right up to the point of collapse. They are creatures of political habit. However, given all that, even Moody's threatened a downgrade after the debt bill passed, reinforcing the fact that very little was accomplished. Zerohedge rips Moody's here.

So, some of you might be saying, B-Daddy, you hypocrite, you supported this bill. I did indeed, knowing it was not enough, but it was what we could get this week. We just keep fighting this fight over and over again, until we grind down the opposition. The left is running scared, knowing that we have seized momentum. But just like in basketball, momentum can be an elusive thing. Our only hope is to keep pressing the attack, and keep the left on defense. Let's see how many sugar coated Satan sandwiches they can consume.

Image of red velvet whoopie pie (aka sugar coated satan sandwich) from justsocakey blog.

This Execrable Budget Deal is Only the Another Skirmish in a Long War

Debt ceiling fan, spinning in the wrong direction.

It's warm at my house, (I was going to say hot, but we live in San Diego, CA not San Diego, TX). My son's room seemed especially warm, so I turned on his overhead fan. A while later, I went back in his room and it was still uncomfortable. The fan was spinning fast, but in the wrong direction, sucking air up from the floor and blowing it towards the ceiling. This fan has a remote control, with way too many buttons; but I managed to hit the button to reverse the flow. (I know I am probably not supposed to do that, but quit interrupting.) As soon as I hit the button, nothing seemed to happen, the fan was still sucking air from the floor. But after a while, I noticed that it had started to slow. Sure enough, it continued to slow and slow, eventually coming to a complete stop and reversing direction.

So here is the deal with this execrable debt ceiling deal; we've got a fan spinning at high speed in the wrong direction and threatening to fly apart. But the only reasonable thing to do is apply a countervailing torque that will eventually reverse the flow. Sticking a pitchfork between the blades to get it stop instantly isn't going to be good for the fan or the pitchfork. But that means that we have to keep the torque constantly applied, because this fan has a lot of mass and momentum built up over decades.

This particular skirmish is yet another inconclusive battle in a long war on the growth of government. More fighting will come when the gang of 12 proposes further spending cuts, or perhaps tax increases. This gives another chance to light up this issue, because there the fundamental political calculus remains unchanged. Politico says this about Obama's calculus.

But the president appears to be betting that time is on his side as voters come to grips with the Republicans’ spending-cuts-only approach to the deficit. And the next six months could be a giant civics class in the consequences of the anti-government backlash that fueled the GOP’s gains in the 2010 elections.

I think that Obama doesn't get why this turned so ugly in the first place. He is amazingly tone deaf to actual politics, thinking Obamacare would be more popular after it passed, for instance.
The more the public understands how the growth of debt was only reduced a smidgen, and in fact continues to rise, there will be a backlash against the failure to do more. This is in our interests. This is part of the reason I supported the deal, exactly because it doesn't go far enough, and assures us of more such fights.

There are other reasons to think that the issue will continue to trend in our direction. First, with the economy not recovering, we might not make it past the 2012 election with this deal, especially if we tip into another recession. Second, there are still more cuts to be voted upon, so we need to gird up for the next fight. Keeping the issue of rising debt in the public's mind up until the 2012 elections will only work in our favor. The Democrats are loathed by ordinary voters over this issue, please see liberal pollster Stanley B. Greenberg's article Why Voters Tune Out the Democrats.

This distrust of government and politicians is unfolding as a full-blown crisis of legitimacy sidelines Democrats and liberalism. Just a quarter of the country is optimistic about our system of government — the lowest since polls by ABC and others began asking this question in 1974. But a crisis of government legitimacy is a crisis of liberalism. It doesn’t hurt Republicans. If government is seen as useless, what is the point of electing Democrats who aim to use government to advance some public end?
. . .
The deficit matters to people and has real meaning and consequences. A government that spends and borrows without the kind of limits that would govern an ordinary family is going to have big troubles. Voters I’ve studied say things like, if “we keep spending like this, we’re going to be bankrupt and there won’t be anything for anybody,” especially “our children.” The final straw is the government’s decision to continue spending and to put the country deeper into debt and more dependent on China.

Please keep in mind, this is a self identified left of center pollster saying this. So take heart, we have a lot of work to do. Making out of control government spending the central issue puts the left on perpetual defense. We need the voters to make the tough call in 2012, to elect tea party aligned candidates to tackle this issue once and for all.

John Stossel's Chainsaw Budget

Before I get to an interesting take on the budget, I wanted to briefly comment on the state of play on the debt ceiling. Looking at what little information that is available on the debt ceiling deal proposed by McConnell, I am pretty certain that no one will be happy. Failing to make structural reforms to medicare and social security will be a long term disaster, along with back loading the budget cuts. From the AP:

Big cuts in government spending would be phased in over a decade. Thousands of programs — the Park Service, Internal Revenue Service and Labor Department accounts among them — could be trimmed to levels last seen years ago.

No Social Security or Medicare benefits would be cut, but the programs could be scoured for other savings. Taxes would be unlikely to rise.

Meanwhile John Stossel says that he can balance the budget next year. His proposals are too radical to pass, but I think they form a decent starting point to allow the tea party movement to point to specific things we would support. Here are some highlights from his web site along with specifics.

• Reduce Social Security outlays as follows ($85.7 billion per year)

- Price index initial benefits (the current CPI overstates inflation, increasing pay outs unnecessarily)
- Raise the normal retirement age
- Cut Social Security disability program by 10%

• Means test social security $170 billion per year
• Eliminate Department of Education $106 billion per year.
• Medicare/Medicaid reform $441 billion annually

- Increase deductibles for medicare services and increase Part B premiums
- Make medicaid a matching block grant program that caps the amount a state receives.

• Eliminate Dept of Transportation - $84.8 billion
• Cut defense spending by 2/3 - $475 billion (Yes, I am opposed to such a deep cut in defense, but in fairness, we should acknowledge that it is a big part of the budget.)
• Cut federal civilian compensation costs by 10% - $29.6 billion
• Eliminate Fannie/Freddie Subsidies - $14 billion

Stossel has many more cuts that would actually result in a surplus, but there is no way this would pass as a package. Still this is a worthwhile exercise to show that cutting spending will solve the deficit problem without tax increases. It doesn't mean that simplifying the tax code wouldn't produce more growth, just that we can actually manage this problem if we get the votes to rip out huge swaths of the federal government, especially those that are constitutionally suspect, like the Dept of Education.

Conservatism and the Debt Ceiling Debate

Two traditional conservative columnists have some decent quotes about why Boehner's approach to the debt limit was the correct one. But I think we need to tease out hidden assumptions about what the tea party supporters are thinking about the problem. Specifically, I don't think that we have thought through the consequences of failing to raise the debt ceiling. Those consequences are neither as severe as Democrats predict, nor as mild as some Republicans would state. I think the key issue is that we have collectively built a large part of the economy around the government re-distribution of income through social security, medicare, and other payments. These payments, along with interest on the debt, take up almost all of the current revenue of the federal government. While I intensely dislike this situation, one cannot deny that huge economic dislocation would occur if such transfers were to suddenly stop. Further, because they would affect so many voters, a ground swell of anger would cause enough of them to inundate the Congress with their outrage, that an increase in the debt ceiling with no spending cuts seems the most likely outcome. Further, such economic dislocation would be bad for the country's economy in the short term, even if salutary in the long run. In the long run, we'll all be dead, meaning we might not get there. Given this likely scenario, the Republicans are forcing the issue admirably well and defining the terms of the debate. But just as Obama was seriously wounded by his "victory" with Obamacare, so too will the tea party be hurt if we shut down the federal government over the debt ceiling debate. This is why I thought that all Republicans should get behind Boehner, to give him the maximum flexibility to deal with the Democrats and achieve what is possible.

On to the quotes. First, Peggy Noonan:

The [Republican] establishment was being conservative in the Burkean sense: acknowledge reality, respect it, and make the most progress possible within it. This has not always been true of them. They spent the first decade of this century backing things a truly conservative party would not have dreamed of—careless wars, huge spending and, most scandalously, a dreamy and unconservative assumption that it would all work out because life is sweet and the best thing always happens. They were mostly led by men and women who had never been foreclosed on and who assumed good luck, especially unearned good luck, would continue. They were fools, and they lost control of their party when the tea party rose up, rebuking and embarrassing them. Then the tea party saved them by not going third party in 2009-10. And now the establishment has come forward to save the tea party, by inching it away from the cliff and reminding it the true battles are in 2012, and after.

Charles Krauthammer.

We’re only at the midpoint. Obama won a great victory in 2008 that he took as a mandate to transform America toward European-style social democracy. The subsequent counterrevolution delivered to that project a staggering rebuke in November 2010. Under our incremental system, however, a rebuke delivered is not a mandate conferred. That awaits definitive resolution, the rubber match of November 2012.

I have every sympathy with the conservative counterrevolutionaries. Their containment of the Obama experiment has been remarkable. But reversal — rollback, in Cold War parlance — is simply not achievable until conservatives receive a mandate to govern from the White House.

While we have made great strides and indeed are changing not just America, but the entire world's view of the role of government, we simply cannot overplay our hands without more elections. It is the nature of our republic to prevent radical change without sufficient election cycles to allow a party or cause to consolidate power. Unfortunately, the current leftist version of the Democratic party did just that in 2006 and 2008. To undo that harm, we need to win more victories in 2012. In my view, shutting down the government does not advance that cause. What will advance the cause is a compromise that continues to move us in the right direction, but keeps the issue alive for the next election cycle and forces the President to held accountable for his lack of leadership.

Root Causes of the Ballooning Debt Crisis

Robert J. Samuelson, who I respect, but do not always agree with, reminded me of the fact that the political leaders refuse to talk openly about the real source of the debt problem. In an article partly titled "It's the Elderly, Stupid" he makes the case that source of the trouble is that over the last half century the changing social contract has made

". . .the federal government’s main task into transferring income from workers to retirees. In 1960, national defense was the government’s main job; it constituted 52 percent of federal outlays. In 2011 — even with two wars — it is 20 percent and falling. Meanwhile, Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.

These transfers have become so huge that, unless checked, they will sabotage America’s future."

Unfortunately, right now, there are no votes and zero leadership to start cuts to medicare and social security right now. If we are to stop borrowing, that would have to happen. I need to ask my fellow tea partyers whether we want to explicitly state that we have a goal of cutting social security payments immediately and whether we think that works politically. Samuelson goes on to state:

What he [Obama] hasn’t done is to ask — in language that is clear and comprehensible to ordinary people — whether many healthy, reasonably well-off seniors deserve all the subsidies they receive. That would be leadership. Obama is having none of it. But the shunning is bipartisan. Tea Party advocates broadly deplore government spending without acknowledging that most of it goes for popular Social Security and Medicare.

Is the critique correct? If so, what do we want to do about it? My answer is that entitlements must be means tested, if there costs are to be brought under control. The other part of the equation is the percentage of the population that is over 65, which is set to double by 2035. This has been taken as a given, but I think that if we set out to massively increase immigration of skilled younger workers, we can overcome that issue as well. Right now, I know of no one else advocating this position.

So how about it, fellow SLOBs and fellow tea partyers? What do you want to do about social security and medicare?

Why I Like Boehner's Plan - My Tea Party Perspective

Hero of the Republic?

John Boehner's plan to cut the deficit by $915 billion while raising the debt ceiling is going to underwhelm many tea party types. But I like it a lot. Here's why; Obama won't dare veto it, because that would be irresponsible, and more importantly, he would appear irresponsible. However, it will keep the issue alive into 2012 and continue to make the growing debt a campaign issue. As I have said before, the public needs to make a decision on our fiscal direction through elections.

The issue is sure loser for Obama. If he backs big tax increases to close the gap, he plays into the narrative that he is just a tax and spend liberal. However, if he gets serious about entitlement reform, he further alienates his base, whose energy he needs to overcome the younger and unaffiliated voters who are deserting him. Ending his Presidency has got to be a big priority. I am not advocating doing anything irresponsible to do so. Indeed an incremental approach to curtailing deficit spending is the only responsible thing to do, because in a republic, these issues deserve a full airing.

Further, Boehner's plan calls the Senate's bluff. HotAir is reporting that Senate Democrats have objected to his plan as "too short term." My response, tough, your party spent us into this mess, albeit with Republican help, are you really going to vote to shut down the government? The people of the United States will see who the irresponsible party really is.

Back to my original point. It has become clear that a second term for Barack Obama is the chief threat to the liberty and prosperity of our nation. He has shown no compunction about trampling the rights of citizens, expanding the reach of the federal government, and seeking ever more spending as a means of re-distributing wealth. Only his defeat for re-election will allow us to repeal the excesses of his term in office. His re-election will cement them.

We are engaged in a historic struggle over conflicting visions of the nature of our nation. On the left is the view that we are a mature country that needs an ever expanding social safety net as we slowly fade into oblivion as a great power. The opposite view, including most in the tea party movement, is that America is likely to be the greatest nation on earth for a long time, if we just get government out of the way and let people go to work solving our nation's economic and technical problems and that the social safety net's costs must be reduced.

Ignoring This Morning's Headlines on Debt Talks

Both the WSJ and the UT had headlines on the collapse of the debt ceiling talks. I'm glad that I have learned not to accept the headlines as the real news anymore. Temple of Mut has a great summary of how it has been Obama who sabotaged the talks by suddenly demanding more revenue out of the deal. HotAir provides similar analysis.

Bottom line, Obama is posturing because he is nervous that his base will be deeply disillusioned with the direction he was taking, and he needed an excuse to ask for more. In the end, both sides are still talking. Obama has more to lose than Boehner, because even if something disastrous happened, both sides will get blamed, even if the blame tilts more to Republicans. Boehner has a far better chance to still be Speaker in 2o13 than Obama is of being President that year, if a deal isn't reached. That Obama is pulling childish maneuvers is a sign that he is actually negotiating poorly. The joker in the deck is Reid. He is unlikely to be Senate Majority leader under any scenario. However, what gives him the best shot, might be a deal that takes a way Republican ability to nationalize Senate races next year. This is why I am pretty sure something will get done.

I think that we should take a moment to bask in the media blame of the tea party for this crisis. Two years ago, their seemed to be a consensus of Keynesian business as usual, just pile on more debt and spending to get out of the recession. In just two years our movement has completely changed the nature of the dialog about government. The size of spending cuts, not the amount of government growth are now the topic of debate. Reforming government pensions is on the table from sea to shining sea. (Sign the San Diego pension reform petition today at 10675 Scripps Poway Pkwy from 11-3.) Pretty good work for a movement with no official leaders, no official organizations, no political party, and not even an official ideologist.

Why We Are Bound to be Disappointed

I was listening to Rush Limbaugh this morning and he made a great point about the debt ceiling negotiations. He said that any ten year deal can be undone by next year's Congress. That should be obvious to all of us following the debate. Examining the data in my previous post, it is obvious that we are not going to balance the budget this year. This is going to disappoint many tea partyers, but we have to face the facts about the situation.

On what basis should we judge any deal? I think only two criteria need be applied:

1. Does the plan cut current spending significantly? By which I mean cuts measured in hundreds of billions in discretionary spending.

2. Does the plan change the structure of an entitlement to reduce its cost. For example, if medicare is cut by proposing reductions in reimbursement rates to doctors, an Obamacare tactical lie, then the structure of the entitlement is not changed, because the benefit is unchanged. But if the age at which individuals become eligible for medicare is raised to 67 from 65, then that is real structural reform, because it reduces the entitlement itself.

It would be a side benefit to get tax code simplification out of the deal, but that is really icing, not the main goal of cutting the size of government.

We Don't Need More Taxes, We Need More Taxpayers One Tea Party Plan for the Deficit

No one can deny that growth of the federal debt is exploding under Obama's Presidency, and indeed started to climb after Democrats took control of Congress in 2006. The question before us, with the debt limit about to be reached, is what spending could be cut as part of a deal to increase the debt limit. Michele Bachmann, who is well like by many tea partyers, has said that she would vote against increasing the debt ceiling no matter what deal was cut.

I have to respectfully state that her position is folly, because there is not enough current spending cuts available to balance the budget instantaneously without vast cuts to social security, medicare, unemployment and defense spending. One might desire such cuts, but immediate and massive cuts in these areas are such political suicide as to be beyond reasonable expectation. This is why most tea partyers are going to be disappointed with whatever deal gets cut. A little about the numbers. Total federal receipts are estimated at $2,170 billion for fiscal year 2011. Medicare, Social Security (including their costs of operations) and income security account for $1,870 billion. Income security includes civil service retirement and disability, railroad retirement, unemployment insurance, food stamps, and other public assistance programs. Defense is the next big ticket items at $770 billion, which does not include another $180 billion or so for the ongoing costs of war. The current budget deficit is about $1,500 billion, with total outlays projected at $3,800 billion. Defense and entitlements more than eat up all current spending. This information comes from my analysis of spreadsheets at the government's budget website. A graph that shows this from 2010 follows, the pattern is not very different in 2011.


This hole is too deep to get out of with short term gimmicks. But long term solutions need teeth to ensure that future politicians can't easily revert to form. Spending must be cut, and that is a long term problem that absolutely must be addressed. But what about revenue? It seems clear to me from these facts, heresy that it may be, that federal revenue needs to increase. How do we increase revenue without damaging economic growth?

The first and most important observation is that any policy change must be permanent and stable to be effective. For example, the temporary reduction of social security withholding rates has been a disaster. It was intended to provide a hiring incentive, but because it was not permanent, businesses discounted the future social security tax into their current plans and haven't hired. Further, it has deprived the federal treasury of much needed revenue.

The secret to increasing revenue was discovered by Ronald Reagan in the 1980s, lower tax rates with fewer deductions, and hence a simpler tax code. This concept applies to both individual income taxes and corporate income taxes. This is where the money really comes from to fund the federal government. I created this chart from the same federal budget site:





Unless you increase the payroll tax for social security and medicare, individual and corporate income taxes are where the money comes from. But increasing the tax rate for zillionaires doesn't really raise more revenue, despite the President's rhetoric. Nor will taxing corporate jets. The public knows this. The problem with both the corporate and individual tax codes is the complexity results in huge disparities. Most large companies pay nowhere near the published 35% tax rate. The tax attorneys at these large companies are considered a "profit center," seeking ways to legally game the system and allow companies to retain more profits through tax avoidance strategies. Individuals are also affected. The tax advantage of owning a home provides an additional incentive that leads people in to home ownership who perhaps shouldn't make such a decision. Wouldn't we all be better off the tax code were simple and didn't distort economic decisions. Simplifying the tax code would increase revenue by stimulating the economy. Further, lower marginal tax rates would encourage more people to enter the work force. Here is one example, a married couple where the husband earns enough to be in 33% bracket, but the wife stayed home as the kids grew up. Re-entering the work force, she can not initially earn a big salary. But her marginal tax rate will include the 33% income tax, California tax of 9.55%, FICA tax of 7.65%, SDI of 1.2% for a grand total of 51.4%. If she went to work full time at a relatively low wage of $15 an hour working full time, she might increase the family take home by only 10%. Why bother?

But what about those Social Security taxes? Can we increase that revenue item without harming the economy? Of course we can. Any number of Obama's policies, from Obamacare to the NLRB suing Boeing to prevent the hiring workers in South Carolina are damaging businesses' ability to hire workers. Additionally, the tax code is in continuous flux, with Bush era tax cuts only temporarily extended. How can business gauge the profitability of investments when future tax rates are unknown? Growing the economy will grow social security revenue.

But wait, there's more. The other way in which we can both grow the economy and increase the number paying social security taxes is through legal immigration of a skilled workforce. I have discussed this before, but doesn't our fiscal crisis deserve fresh thinking. Look at these demographic curves, because I consider India a possible source of large numbers of skilled immigrants:

Note the U.S. baby boomer bulge moving into retirement causing strain on the economy. India, by contrast has a large, young population, facing no such challenge.

So here is what is needed to increase revenue, and what I meant by the title.

• Simplify the individual tax code, eliminate deductions and lower marginal rates. This will increase the number of taxpayers in the three ways. More people will enter the work force. Rising economic conditions will bring taxpayers who do not pay income taxes now to levels of income where they do. As the unemployed enter the workforce, they will pay FICA taxes.
• Simplify the corporate tax code by lower marginal rates to and eliminating loopholes. This will increase the number of corporations paying taxes and actually bring in more revenue as corporations change behavior. Profits will increase, even if tax attorneys are laid off, which will also generate revenue.
• Vastly increase legal immigration of skilled workers and professionals. This will grow the economy, while at the same time add new taxpayers to the rolls, increasing revenue from social security and income taxes. It is important that they be skilled workers, because there is a question as to whether unskilled workers don't consume more in public services than they pay in taxes.
  

Spending cuts are still needed, because these supply side reforms aren't going to solve all of the problems, and if we don't cut spending, politicians will just find new ways to devour the revenue we might get from these reforms. Here are some quick hitters of both a short and long term nature that I find attractive. Many of these have been discussed by Boehner, the President or others.

• Repeal Obamacare, the cost estimate of which, just keeps rising. Ok, so that's a non-starter until 2013.
• Across the board cuts to all federal agency budgets back to 2008 levels.
• Cut farm subsidies.
• Cut medicaid.
  
• Increase eligibility ages for Medicare and Social Security.
• Means test social security and medicare.
• End Libyan operations.

That is one tea party proposal to deal with the deficit. I hope some of this catches on.

Use of the Debt Ceiling to Force Debate

I have seen some commentary questioning the temerity of Republicans in holding out for spending cuts through the debt limit ceiling debate. The argument goes like this, the Congress passed the entitlement laws, budgets and tax code that led to this mess, how dare they withhold funding for these items. The obvious problem with this argument is that the debt limit acts as a constitutional prerogative of the Congress to limit the cumulative effects of such budget decisions on the balance of the Treasury of the United States. One might question the constitutionality of the "debt limit ceiling" as the means of the Congress expressing its will regarding the debt, but the fact of its authority is clear. Article 2, Section 8 grants to Congress these powers:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

So that seems fairly clear.

The other objection is that Republicans are "hostage takers," and that entitlements are somehow solemn obligations that cannot be changed. Again, this is not so, in Fleming vs. Nestor, the Supremes ruled that

"To engraft upon the Social Security system a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands." The Court went on to say, "It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments."

Since increasing the debt ceiling is a piece of legislation, then that same legislation can cut entitlements or any other spending, with the possible exception of interest on the national debt, by amending entitlement law. The real problem today is that these entitlements are sacrosanct monuments in the Democratic party's pantheon of heroes, primarily FDR. Reforming them undermines the very meaning of the party in the eyes of most of its core supporters and office holders.

However, in the din of the news on the negotiations, what is being cut has not been specified in the news. For the life of me, I can' t find a decent summary of where the cuts are coming from. This is why it looks like kabuki to me as well as W.C and Leslie.

In the meantime, what's to be done? Obama himself called for means testing Medicare, which his lefty base opposes. That's why I have been warming to the idea of means testing all entitlement programs. Jared Bernstein (H/T DailyKos), left side pundit, makes my case:

I understand the appeal and it certainly makes sense to ask for more for a program facing a tight budget from those who can afford it. But the history of social policy leads me to worry about this: once you shift a program from universal coverage to means testing, it’s increasingly vulnerable to deeper means testing until it eventually becomes a poverty program which everyone wants to get rid of.

Thank you for the clarity, except, that medicare and social security as currently enacted are actually poverty programs in stealth mode when one dives into the actual details. Conservatives oppose these changes because means testing will initially harm the elderly of the middle class, and it isn't a very conservative idea. But we need to get creative, think long term, because as entitlements grow out of control pretty much the world over, they have the power to destabilize the national government, much like Greece. (Joke I heard: What's a Grecian Urn? I didn't know they worked.) Since these programs are already poverty programs, conservatives and libertarians should get behind making that explicit.

By the way, search for this: what are republican "specific budget cuts" debt ceiling debate and see if you get results like this in a news search.

Presidential Temperament?

Yes.

No.

The big headline on the Drudgereport is that the President walked out of a meeting with Eric Cantor regarding debt limit negotiations. The President is wrapping himself in the flag, claiming that the Republicans are refusing to compromise. Nothing could be further from the truth. Republicans are willing to increase the debt limit by the exact amount of spending cuts that the President and the Democrats are willing to cut spending by. Seems reasonable to me. From Politico:

Obama told Cantor that he would either have to agree to tax increases or give up on his demand that the debt hike be matched dollar-to-dollar to the cuts — that is, $2.5 trillion in deficit-reduction over 10 years in exchange for a $2.5 trillion hike in the debt ceiling.

Problem is, the GOP’s vowed not to raise the debt ceiling by more than the amount in total cuts and a $1.5 trillion debt-ceiling hike won’t get us past the election next year. That makes The Perpetual Campaigner unhappy, so either the GOP will have to step back from its vow or O will have to agree to deal with the debt ceiling again — just a few months before election day, when the incentives on both sides to hold out will be even greater than they are now.

So despite the President's rhetoric that he will sacrifice his presidency over this, one can only hope, the real issue is that he doesn't want this as a campaign issue in 2012, so he won't go for any deal that doesn't push the next debt ceiling debate beyond November, 2012, with cushion to spare. It has been widely reported that Obama said that "Ronald Reagan wouldn't sit here and take this." How true; in the 1980s, Reagan reached out to Dan Rostenkowski to cut deals on tax code simplification and rate reductions that led to real growth in the economy. He didn't sit back and wait to the eleventh hour to jump into the fray with politically charged rhetoric designed to deflect criticism. William Daley, an old Chicago pol, who probably knew Rosty, should get Obama to refrain from comparing himself to Reagan, its too easy a target.

Obama was elected in no small part because of his supposed bipartisan tone suggested a willingness to independents that he would work in good faith with Republicans on pressing issues in trying times. He has certainly lost whatever good will he may have had by his consistently nasty tone, whether towards the opposition or the "fat cats with corporate jets." As Lexington points out in The Economist:

Why is bashing the rich such an unpopular form of populism in America? The normal answer falls back on culture. Bill Galston of the Brookings Institution notes that Americans are repelled by the notion of inequality in worth or status. That men are created equal is, after all, “self-evident”. They are, however, far less perturbed by unequal wealth, a form of inequality that is the inevitable product of the free-market system in which most still profess an abiding faith.

Obama has shown himself to be a captive to his left wing base on issues where it was most important for him to be open to negotiation. How a man could ignore the base and his campaign promises regarding overseas wars, but never cross them on anything domestic, at first boggles the imagination. But then consider this, Obama never actually does anything which reduces the size of the government, not even something like cutting military spending.

Programming note. Sorry for the dearth of posts lately, continued health problems are slowing me down.

The Debt Limit and the Constitution

In order to stampede a deal on the debt ceiling, various Democrats have cited the constitution (at their convenience) regarding the debt of the United States. Here is the specific language, from the 14th Amendment, section 4.

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

The language was intended to ensure that the victorious side, the Union did not repudiate its debt and reward its creditors and punish creditors who supported the rebellious South. So if the Congress fails to raise the debt ceiling, aren't they violating the constitution? Of course not. First, tax receipts are still flowing into the federal treasury. And there is plenty of revenue to cover the interest on the debt that has already been issued. In fact, tax receipts stand at 55 percent of expenditures. It would be up to the President to halt expenditures that required the issuing of fresh debt and ensure that interest on the debt is paid. The real question would be what would be cut. Obama could play with fire and cut social security payments for example, and blame the Republicans for not passing a tax on corporate jets. I would love to see how his re-election chances would fare then.

Further, the federal government holds considerable assets it could sell to pay down the debt. This is similar to an idea I saw floated for the Greek situation. In that scenario, the Greeks would issue bonds backed by real assets, islands, their airline, that bondholders could seize if the Greeks defaulted. Eventually, the United States is probably going to have to deal with its debts by selling off assets as well. The federal government sits on vast mineral deposits, national parks and other assets that will eventually be needed to deal with our own overhang of debt, just the way a family going through hard times might hold garage sales and auctions on eBay.

The federal government owns about 800 million acres of land. Could that yield $1000 per acre? Maybe, so there is an asset that might be worth $800 billion. Some of the land might fetch considerably more. The submarine base in Point Loma comes to mind as particularly pricey. The 1981 value of mineral rights held by the feds was once estimated at $800 billion in a 1986 research paper. Using the U.S. inflation calculator, that would be almost $2 trillion in today's dollars. The point is that the feds hold assets that might have to be sold to get the debt reduced.

Of course, the smart money will bet that we will inflate our way out of the debt, which help the well connected and harms the average American, but spreads the pain over time.

Leveraging the Debt Ceiling - Medicare

Fellow SLOB W.C. Varones is predicting the Republicans will fold on the debt limit talks and backload any meaningful cuts, making them mostly symbolic. Politicians, being who they are, might disappoint me yet, so I'm not going to argue with a veteran observer like W.C.

But it might all be worthwhile if Democrats would means test Medicare and/or Social Security. Reportedly, Dick Durbin is saying that making the wealthy pay more for Medicare premiums should be on the table. Here is why this makes me smile. It will make it clear that Medicare is a wealth transfer vehicle. It always has been, but it's been hard to make the case, which would be on stark display. Dismantling Medicare as a pure government subsidy of health care spending is vitally important, but politically tricky. This might be the necessary opening.

On the tax side, the Republicans are in a tough position on the so-called oil subsidies, which are nothing more than treating the oil in the ground as an asset that depreciates like any other. Regardless, the Democrats have successfully demagogued this issue, so it might be hard to keep of the table. Since Obama won't allow drilling anyway, it hardly seems like it will matter one way or the other.

This is the main story the Tea Party should be following. So far, Boehner has done his best to reward the Tea Party for its support of Republicans. I know there are those who are upset, but politics is a messy business. But if we don't get some strategic initiative out of the debt ceiling talks, then I will add my voice of criticism.

Finally, I want to thank DooDoo Economics blogger Charles, for putting together a SLOB aggregator. Well done on both having a great idea and taking action.