Picture of the Day

Thinking things through, it seems odd that Democrats are the ones fighting against entitlement reform and Republicans the only ones pushing it.  If you accept that tax receipts are limited as a percent of the economy, no matter what tax policy you adopt (see Hauser's Law chart), then our current entitlement structure will eventually crush the ability of the feds to spend on anything but entitlements.  Meanwhile, Republicans keep proposing reforms which might actually save the rest of the federal government.  Go figure.  The Heritage Foundation has another cool graphic to illustrate these ideas differently:

I don't believe this picture accurately portrays the acceleration of the net interest that will eventually occur, since artificially low interests are not indefinitely sustainable.   The real issue is that the federal government is going to quickly become unaffordable.

Math not Politics - Fixing Pensions in Rhode Island

Rhode Island has achieved a measure of pension reform, despite being a fairly blue state. From the WSJ:

The plan enacted in November cuts $3 billion of the state's $7 billion unfunded liability by raising the retirement age, suspending cost-of-living increases until the pension system is 80% funded, and even moving workers into a hybrid plan that has a smaller guaranteed annuity along with a 401(k)-style defined-contribution plan.

How did this succes come about? State Treasurer, Gina Raimondo, was able to present the facts to the voters of the state.

"No finger pointing" was her mantra, along with a corollary: "Math, not politics."

I like that last little bit. The state treasurer is a Democrat, but that didn't stop her from recognizing that the state's financial situation was untenable. Perhaps Republicans should de-emphasize blaming the unions, even if we believe they are to blame. The actuarial certainties of our entitlement programs, government pensions, medicare, medicaid and social security, are inexorable. Without change, they will eventually bankrupt us. Democrats can be left to demagogue these issues; but by proposing serious reform, it is actually Republicans, like Paul Ryan, who are doing the work necessary to save the social safety nets in this country.

Christie Taking Questions at Reagan Library

I saw a tweet from W.C. Varones that Chris Christie was speaking at the Reagan Library and that it was being live cast. I tuned in at the end of his prepare remarks to hear him say that we need straight talking leadership to solve our problems. He then took some questions.

He was asked his position on dealing with the problem of educating illegal immigrants. He called for secure borders. He also spoke against in state tuition for children of illegals. In a swipe at Perry he said its not heartless to not subsidize tuition at the in-state level for children of illegal immigrants.

The second question was about him running for President. He joked that the audience wasn't up to standards, since it took two questions to get there. He pointed out the Politico web site on running for President. It seems pretty clear he won't run. Dawn will be happy, W.C. not so much.

The third question was on how to fix federal entitlements; how to wean people off. He responded that in New Jersey, the equivalent are public sector pensions and health care, which were $122 billion under funded when he took office. "I put out a specific plan, not 'I propose to reduce these expenses and if I can come together with the other side, I'll let you know what my proposal is.'" He said that he provided specific details of making employees pay into these pensions and took away COLAs until the shortfall was made up. New Jersey firefighters were unhappy, and he went to their convention, with 4000 of them. "I didn't get the reception you all gave me tonight." There were lots of boos. Christie told the "I understand feel scared, angry and betrayed." Every governor before had made promises to increase their pensions, but had not funded the increases. "Why are you booing the first guy who came in here and told you the truth." His basic argument was that these promises were empty, but he is making good on them by facing the facts of the situation.

The truth is that medicare, medicaid and social security to a lesser extent, are draining the treasury. Christie said the common sense solution is to reduce benefits, means test, and get people who don't need it to stop taking it so that we can give to those who need it. To which I add, amen. The problem is that every time a candidate says anything real about the subject they get vilified, so they re-think their position. It will take real leadership on this issue to fix it. "Real leaders don't read polls they change polls." This is what draws me to Christie. He is telling the truth about the really big issues that we in the Tea Party have said is the crisis facing America, namely the deluge of debt due to the orgy of spending, including unsustainable entitlements.

Two people implored him to run for President. The second woman was particularly impassioned. "We can't wait until 2016." She literally pleaded for him to run for President, saying to Christie that you're country needs you to run for President. This got lots of applause.

His response, not verbatim, was, "I'm just a kid from Jersey who feels like I'm the luckiest guy in the world to be governor of my state. Anyone who has an ego enormous enough to say please stop asking me to be leader of the free world is incredible. So I am flattered at your request and it is not a problem for me. But your heartfelt request isn't reason enough for me to run. That has to come from inside, and that feeling is not inside of me. Even though I did not meet President Ronald Reagan, he must have felt that he was uniquely called to his moment in history. I don't have that feeling."

My final thought; only a man who feels like this should be President. All the guys with egos that outstrip their talent shouldn't be in the field. Unfortunately this is all mooted by the fact that he isn't running.

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.