Monday, March 27, 2017

"The President's Budget and Other People's Money"

Sydney M. Williams

Thought of the Day
“The President’s Budget and Other People’s Money”
March 27, 2017

The proof of liberal virtue is generosity with other people’s money.”
                                                                                                            George Will (1941-)
                                                                                                            Political Commentator

Spending other people’s money dates back centuries. It was Aristotle who allegedly said, “Three groups spend other people’s money: children, thieves and politicians. All need supervision.” John Randolph, a Virginian planter and Congressman between 1799 and 1833, once wrote: “…that most delicious of all privileges – spending other people’s money.”

This attitude is common to both political parties, but more so for Democrats, the party of ‘big’ government, than Republicans. In his 2007 book “Who Really Cares: The Surprising Truth About Compassionate Conservativism,” Arthur Brooks noted that liberals are less likely to give to charity than conservatives, despite average incomes 6% higher. They claim to be generous, but with tax payers’ money – not their own.

Nobody denies the right of government’s need to spend. A nation must defend itself. It must ease commerce through roads, bridges, tunnels and ports. It educates its youth. It has a moral obligation to ensure the well-being of its poor, elderly and those unable to care for themselves. Citizens understand, so pay taxes…willingly in most cases. But politicians should keep in mind the enormity of the responsibility that is theirs, and remember they are servants to the people. They must acknowledge the labor that went into taxes paid, to treat the money they spend with respect. (Total government spending, including federal, state and local, represents about 36% of GDP.) In the modern welfare state, the line between capitalism and socialism has become blurred, reminding us of Margaret Thatcher’s wisdom: “The problem with socialism is that eventually you run out of other people’s money.”

The President’s recently submitted $1.065 trillion budget is a blueprint of where he would like the country to go. The 2018 budget proposed by Mr. Trump was limited to “discretionary” items. He did not address the 70% of the budget represented by mandatory spending, which includes Social Security, Medicare, Medicaid, unemployment compensation, earned income and child tax credits, SNAP and certain expenses in Defense, Agriculture, Education and Veterans Affairs – safety nets mislabeled “entitlements.” To place Mr. Trump’s 2018 proposal in perspective, President Obama’s 2016 budget totaled $4.1 trillion, of which $1.15 trillion (28%) was discretionary. If one included, as one should, interest expense of $283 billion as a mandatory item, then “true” discretionary spending represented just 21% of the 2016 budget – not a lot of wriggle room, when the goal is to increase defense spending (a discretionary expense) by ten percent.

To listen to howls coming from Democrats over Trump’s budget one would have thought he was the Grinch determined to starve and make homeless the poor and the elderly. President Trump’s proposal, as stated above, does not touch entitlements. It neither raises taxes nor increases the deficit. It keeps spending at the same level, diverting funds from the EPA, the State Department (USAID and Treasury International Programs), Agriculture, Labor and Commerce to Defense and Veteran’s Affairs.

As expected, reactions were hyperbolic.  Nancy Pelosi: “…President Trump has shown he does not value the future of children and working families.”  Senate Minority Leader Chuck Schumer: “Once again, the Trump Administration is showing its true colors: talk like a populist, but govern like a special interest zealot.”  Representative Jim Hines (D-CT): “…all kinds of pain will be felt around the country…”

On January 20, 2009, federal debt was $10.6 trillion. Eight years later, it was $19.9 trillion. In other words, Mr. Obama, during an eight-year stretch without a recession and with a stock market up 148%, almost doubled the national debt. The cost of this borrowing has been masked by eight years of artificially low interest rates, a situation that is only now changing. Higher interest rates will add to costs, pressuring deficits and debt. In the fiscal year ending last September, the deficit rose to $587 billion, the highest in five years. Despite favorable economic tail winds, Mr. Obama did not leave the nation in good fiscal shape.

These deficits, of course, do not include the unfunded liabilities of welfare programs, for which we, as taxpayers, have responsibility. Determining the absolute level is not easy; but estimates range, from an “official” $55 trillion up to $222 trillion. Whatever number is right, it is crushingly large.

Over the past eight years, we saw an increase in spending on social welfare programs, including the Affordable Care Act, yet poverty increased. During those years and keeping in mind that a nation’s first responsibility is to protect its citizens, we saw defense spending, as a percent of GDP, decline from 5.5% to 4.4%. And global tensions rose. Consider: Chinese aggression and Russian belligerence increased. Islamic extremism persists, and the Korean Peninsula gets more dangerous by the day. Iran has become more truculent. Ukraine has been invaded. Democracies in South Korea, Japan and Israel are vulnerable, as are the Baltic States and those within the reach of China. Time moves forward, but human nature remains unchanged.

You may dislike Trump the man. You may believe the cartoon caricature that the media has created. But you cannot deny the dilemma we face – that we are living beyond our means in a dangerous and fractious world. We need to increase spending on defense. And we must rein in the administrative state, and the unprecedented powers it has given to agencies like the EPA. Unnecessary regulations have sapped the vitality of our economy, the engine that allows us to live well, securely, and to do the good we want.

The President’s budget speaks to his desire to beef-up defense and provide better for veterans, but without raising taxes or incurring higher deficits. It addresses fraud and waste in agencies where funds have been cut. It does not touch entitlements. Despite the fear-mongering, it is, in fact, modest and perhaps a bit timid given the forces we face. We cannot dismiss the spreading of violence abroad as not being our problem, nor is it compassionate to provide false expectations as to benefits that we may never be able to afford. There are consequences to living beyond our means – increased deficits and higher taxes. The first will bring higher interest rates and, ultimately, a declining currency; the second will result in decreased liberties and impediments to economic growth.

If you think the howling is loud now, wait ‘til we tackle – as at some point we must – entitlements. However, there are things we can do now to ease the burden that will become our children’s: We can raise the age of eligibility for Social Security and Medicare. We can means-test. We can encourage savings for retirement and health care by granting larger exemptions. What we need are serious conversations and debates, not the Ostrich-like behavior of politicians who place their childish partisan bickering above needs of the nation; nor does it help when a sycophantic media puts loyalty to favored causes and friends above real news.

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