There are useful lessons we can learn from the criticism of Kansas Governor Sam Brownback, including how easy it is to ignore inconvenient lessons of history.
It’s been three years since the tax cuts in Kansas took effect; tax cuts said by Governor Brownback to be a “shot in the arm” for the Kansas economy. Opponents of the governor and the tax cuts take great delight in reporting the generally anemic growth of the Kansas economy since then. Month after month, the tax cuts are condemned by Kansas newspaper editorial writers and the governor’s detractors.
I don’t think it’s a particularly strong form of argument to defend someone by showing how someone else is equally as bad — or worse. Similarly, criticizing someone for their fixation on A while they ignore the equally bad B: We need to know why they ignore B. Have they forgotten B? Do they not have time to write about B? Or do they ignore B because the fact of B is inconvenient to their ideology or their criticism of A? But I see that not everyone shares these ideals, and even so, perhaps we can learn something.
Many people remember that President Barack Obama promised that the unemployment rate would not top eight percent if the stimulus was passed. In January 2009 two Obama administration officials, including Christina Romer (who would become chair of the Council of Economic Advisers) wrote a paper estimating what the national unemployment rate would be with, and without, the American Recovery and Reinvestment Plan, commonly known as the stimulus. That plan passed.
The Romer paper included a graph of projected unemployment rates. The nearby chart from e21 took the Romer chart and added
actual unemployment rates. (The accompanying article is Revisiting unemployment projections. That chart and article were created in 2011. I’ve updated the chart to show the actual unemployment rate since then, as black dots. The data shows that the actual unemployment rate was above the Obama administration projections — with or without the stimulus plan — for the entire period of projections.
The purpose of this is not to defend Brownback by showing how Obama is even worse. (Disclosure: Although I am a Republican, I didn’t vote for Brownback for governor.) Instead, we ought to take away two lessons: First, let’s learn to place an appropriately low value on the promises and boasts made by politicians. Then, let’s recognize the weak power government has to manage the economy for positive effect. Indeed, the lesson of the Obama stimulus is that it made the unemployment rate worse than if there had been no stimulus — at least according to the administration projections.
And, there is one more lesson to learn about our state’s newspaper reporters and editorial writers, but I think you’ve discovered that already.
In this episode of WichitaLiberty.TV: Congressman Mike Pompeo talks about the Middle East, politics in Washington, and domestic issues. View below, or click here to view in high definition at YouTube. Episode 101, broadcast November 29, 2015.
Does Kansas have its own version of Solyndra, the politically-connected firm that failed and cost taxpayers some $535 million? We don’t know. But the Abengoa cellulosic ethanol plant near Hugoton received a $132.4 million loan guarantee under the same program that benefited Solyndra.
In January I requested documents regarding the Abengoa loan guarantee and risk assessment from the United States Department of Energy. I had several conversations and emails with a records clerk. We came to agreement as to what I would receive, or at least what I am requesting to receive. But I’ve received nothing so far. I don’t know if the document will be made available to me at no charge, or will I have to pay thousands of dollars. The Department of Energy is working on my request, they say. But after nine months: nothing. Following, from October 2011, more information about this plant.
At this moment, we can’t say that Kansas has its own version of Solyndra, the subsidized and politically-connected solar energy firm that recently shut down its operations and declared bankruptcy. But as far as absorbing the important lessons from Solyndra, we may have another chance to learn them in Kansas.
Solyndra is a failure in several ways. Much money was lost. It may be that corrupt or criminal activity was involved; we don’t know that yet. It appears that Solyndra will be a useful political scandal for Republicans to exploit, especially in the upcoming election campaign against the president. We can be sure that Republicans will keep us informed on this.
But the largest and most important lesson from Solyndra is one that many politicians — Democrats and Republicans both — don’t want to recognize: Government intervention in the economy is wrong for the health of the country.
The problem is that when government intervenes in the economy, it almost always gets it wrong. It’s not that Obama and other politicians aren’t smart. It’s the problems inherent in government interventionism: There will be both routine and spectacular examples of waste, as people — politicians and bureaucrats, especially — are not spending their own money. Decisions will be made to benefit the well-connected and for political, not market-based reasons. Cronyism and corruption flourish, as many will find it easier to compete in the marketplace for politicians rather than in the free market where fickle consumers rule with their fleeting tastes and preferences.
But politicians and bureaucrats love to intervene. For bureaucrats, intervention — government programs, that is — provides jobs, and well-paid jobs, too. Since much government intervention in the economy is in the form of subsidies, it allows politicians to dispense other peoples’ money and take credit for having “created” jobs or having built a bridge, probably to be named for them later on.
Other government intervention is in the form of creating unneeded regulations or tax loopholes that favor politicians’ friends or harm their competition.
All of this means that economic activity is directed according to political, not economic, considerations. It’s wasteful. It’s harmful. It diminishes market-based investment, that is, investment made according to what people really want and need. It reduces the freedom, liberty, and prosperity of everyone.
Back to Kansas: Last week the Department of Energy announced the award of a $132.4 million loan guarantee to Abengoa Bioenergy Biomass of Kansas, LLC. This is the same federal agency and the same loan guarantee program involved in the Solyndra matter. The difference is that it’s an even newer so-called green energy technology involved: cellulosic ethanol production.
The plant in Kansas is to be at Hugoton, in southwest Kansas. The press release from DOE promotes the number of jobs that will be created.
Cellulosic ethanol is produced from plant material that is usually considered waste, such as corn stalks or wheat straw. That’s different from the usual input to ethanol production in America, which is corn that would otherwise be used as animal or human food. Because of this, cellulosic ethanol is thought of by many as the “silver bullet” that will dramatically improve the path of America’s energy future. That may be the case, or it may not be. Because of the reasons listed above, government is particularly unsuited to make that decision and to participate in the scientific and entrepreneurial experimentation that will produce the answer.
At one time President George W. Bush praised the potential of this fuel. A Reuters analysis from July opens with: “The great promise of a car fuel made from cheap, clean-burning prairie grass or wood chips — and not from expensive corn that feeds the world — is more mirage than reality. Despite years of research, testing and some hype, the next-generation ethanol industry is far from the commercial success envisioned by President George W. Bush in 2006, when he pledged so-called cellulosic biofuels would be ‘practical and competitive’ by 2012.”
That hints at the problem: despite much effort, scientists haven’t been able to demonstrate cellulosic ethanol production on a commercially-successful scale. According to the Wall Street Journal, as of this summer, no commercial cellulosic ethanol has been produced.
The loan guarantee is not the only form of government subsidy and boost ethanol producers received. There is a tax credit for each gallon produced and a tariff that protects producers from cheaper imported ethanol.
Despite these very large measures of government intervention, cellulosic ethanol backers blame the government for lack of progress in the industry, citing the government’s failure to mandate production levels and provide assurances that the industry would receive subsidies. And the loan guarantees are not made fast enough, they add to the list of complaints. An analysis by ClimateWire that appeared in the New York Times in January had industry boosters blaming the federal Department of Energy for its slow pace in issuing loan guarantees.
We won’t know the success or failure of the Abengoa plant in Kansas for some time, and now we taxpayers are placed in the position of hoping that it succeeds. But it has the pedigree of a government plan to correct a perceived market failure, and that’s a danger sign.
Both Kansas Senators Pat Roberts and Jerry Moran have spoken approvingly of this plant despite the government intervention involved; Moran in a statement after the announcement, and Roberts in previous years as plans were being made. U.S. Representative Tim Huelskamp, who represents the district where the plant is located, has not commented on this plant, and offered no comment for this story.
For those of us who are elected officials, few votes will be more consequential than whether to approve or disapprove the nuclear agreement President Obama has reached with Iran. Yet the president expects Congress to cast this vote without the administration’s fully disclosing the contents of the deal to the American people, write Representative Mike Pompeo and Senator Tom Cotton.
Release the Secret Iran Deals
By Tom Cotton and Mike Pompeo
As printed in the Wall Street Journal
For those of us who are elected officials, few votes will be more consequential than whether to approve or disapprove the nuclear agreement President Obama has reached with Iran. Yet the president expects Congress to cast this vote without the administration’s fully disclosing the contents of the deal to the American people. This is unacceptable and plainly violates the Iran Nuclear Agreement Review Act — a law the president signed only weeks ago.
During a recent trip to Vienna to meet with the International Atomic Energy Agency, the organization charged with verifying Iran’s compliance, we learned that certain elements of this deal are — and will remain — secret. According to the IAEA, those involved with the negotiations, including the Obama administration, agreed to allow Iran to forge the secret side deals with the IAEA on two issues.
The first governs the IAEA’s inspection of the Parchin military complex, the facility long suspected as the site of Iran’s long-range ballistic-missile and nuclear-weapons development. The second addresses what — if anything — Iran will be required to disclose about the past military dimensions of its nuclear program.
Yet the Iran Nuclear Agreement Review Act specifically says that Congress must receive all nuclear agreement documents, including any related to agreements “entered into or made between Iran and any other parties.” It expressly includes “side agreements.” This requirement is not strictly limited to agreements to which the U.S. is a signatory. This law passed in May, well before the nuclear negotiations ended. The Obama administration should have held firm in negotiations to obtain what was necessary for Congress to review the agreement. Iran, not the U.S., should have conceded on this point.
Weaponization lies at the heart of our dispute with Iran and is central to determining whether this deal is acceptable. Inspections of Parchin are necessary to ensure that Iran is adhering to its end of the agreement. Without knowing this baseline, inspectors cannot properly evaluate Iran’s compliance. It’s like beginning a diet without knowing your starting weight. That the administration would accept side agreements on these critical issues — and ask the U.S. Congress to do the same — is irresponsible.
The response from the administration to questions about the side deals has brought little reassurance. At first the administration refrained from acknowledging their existence. Unable to sustain that position, National Security Adviser Susan Rice said on July 22 during a White House press briefing that the administration “knows” the “content” of the arrangements and would brief Congress on it.
Yet the same day Secretary of State John Kerry, in a closed-door briefing with members of Congress, said he had not read the side deals. And on July 29 when pressed in a Senate hearing, Mr. Kerry admitted that a member of his negotiating team “may” have read the arrangements but he was not sure.
That person, Undersecretary of State and lead negotiator Wendy Sherman, on July 30 said in an interview on MSNBC, “I saw the pieces of paper but wasn’t allowed to keep them. All of the members of the P5+1 did in Vienna, and so did some of my experts who certainly understand this even better than I do.”
A game of nuclear telephone and hearsay is simply not good enough, not for a decision as grave as this one. The Iran Nuclear Agreement Review Act says Congress must have full access to all nuclear — agreement documents — not unverifiable accounts from Ms. Sherman or others of what may or may not be in the secret side deals. How else can Congress, in good conscience, vote on the overall deal?
On July 30 we sent a letter to the Obama administration asking for a “complete and thorough assessment of the separate arrangements” and the names of anyone who has reviewed them. Iran’s ayatollahs have access to the side agreements. The American people’s representatives in the U.S. Congress should too.
When he announced his nuclear deal with Iran on July 14, President Obama said, “This deal is not built on trust, it is built on verification.” Those words are hollow unless Congress receives the full text of all documents related to the nuclear agreement.
Mr. Cotton, a Republican from Arkansas, is a member of the Senate Select Committee on Intelligence. Mr. Pompeo, a Republican from Kansas, is a member of the House Permanent Select Committee on Intelligence.
U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district and Arkansas Senator Tom Cotton recently traveled to Vienna to meet with officials of the International Atomic Energy Agency (IAEA). They have revealed the existence of two side deals between Iran and IDEA that are important and relevant to the deal negotiated by Secretary of State John Kerry and promoted by President Barack Obama. According to a Pompeo spokesperson, the existence of these side deals was not a secret, having been mentioned in an IDEA press release from July 14. But the content of the agreements is secret, and their significance unknown.
Following, two press releases from July 21 and 22 from Pompeo’s office.
July 21, 2015
Pompeo, Cotton Urge Disclosure of Complete Iran Nuclear Deal
IAEA tells the lawmakers that two inspections arrangements regarding Iran’s past military work will remain secret
WASHINGTON, D.C. — Congressman Mike Pompeo (KS-04) and Senator Tom Cotton (R-Arkansas) on Friday had a meeting in Vienna with the International Atomic Energy Agency (IAEA), during which the agency conveyed to the lawmakers that two side deals made between the Islamic Republic of Iran and the IAEA as part of the Joint Comprehensive Plan of Action (JCPOA) will remain secret and will not be shared with other nations, with Congress, or with the public. One agreement covers the inspection of the Parchin military complex, and the second details how the IAEA and Iran will resolve outstanding issues on possible military dimensions of Iran’s nuclear program.
According to the IAEA, the Iran agreement negotiators, including the Obama administration, agreed that the IAEA and Iran would forge separate arrangements to govern the inspection of the Parchin military complex — one of the most secretive military facilities in Iran — and how Iran would satisfy the IAEA’s outstanding questions regarding past weaponization work. Both arrangements will not be vetted by any organization other than Iran and the IAEA, and will not be released even to the nations that negotiated the JCPOA. This means that the secret arrangements have not been released for public scrutiny and have not been submitted to Congress as part of its legislatively mandated review of the Iran deal.
Parchin is a critical linchpin in the Iranian nuclear program that has long-been suspected of both long-range ballistic missile and nuclear weapons development. In 2011, the IAEA suspected that the facility was used to conduct high-explosive experiments as part of an effort to build nuclear weapons.
Even under the woefully inadequate Iran Nuclear Agreement Review Act, the Obama administration is required to provide the U.S. Congress with all nuclear agreement documents, including all “annexes, appendices, codicils, side agreements, implementing materials, documents, and guidance, technical or other understandings and any related agreements, whether entered into or implemented prior to the agreement or to be entered into or implemented in the future.”
Pompeo said: “This agreement is the worst of backroom deals. In addition to allowing Iran to keep its nuclear program, missile program, American hostages, and terrorist network, the Obama administration has failed to make public separate side deals that have been struck for the ‘inspection’ of one of the most important nuclear sites—the Parchin military complex. Not only does this violate the Iran Nuclear Agreement Review Act, it is asking Congress to agree to a deal that it cannot review.
“The failure to disclose the content of these side agreements begs the question, ‘What is the Obama administration hiding?’ Even members of Congress who are sympathetic to this deal cannot and must not accept a deal we aren’t even aware of. I urge my colleagues on both sides of the aisle to stand up and demand to see the complete deal.”
Cotton said: “In failing to secure the disclosure of these secret side deals, the Obama administration is asking Congress and the American people to trust, but not verify. What we cannot do is trust the terror-sponsoring, anti-American, outlaw regime that governs Iran and that has been deceiving the world on its nuclear weapons work for years. Congress’s evaluation of this deal must be based on hard facts and full information. That we are only now discovering that parts of this dangerous agreement are being kept secret begs the question of what other elements may also be secret and entirely free from public scrutiny.”
July 22, 2015
Pompeo, Cotton, Boehner and McConnell Request President Obama Disclose Secret Side Agreements to Iran Nuclear Deal
Washington, D.C. — Congressman Mike Pompeo (R-KS) and Senator Tom Cotton (R-AR) today joined House Speaker John Boehner and Senate Majority Leader Mitch McConnell in sending a letter to President Obama requesting two side agreements between the IAEA and Iran be provided to Congress.
The letter reads, in part:
The purpose of the Iran Nuclear Agreement review Act is to ensure Congress has a fully informed understanding of the JCPOA. Failure to produce these two side agreements leaves Congress blind on critical information regarding Iran’s potential path to being a nuclear power and will have detrimental consequences for the ability of members to assess the JCPOA. We request you transmit these two side agreements to Congress immediately so we may perform our duty to assess the many important questions related to the JCPOA.
The Iran Nuclear Agreement Review Act was passed before the end of negotiations and the Obama Administration was well aware of its responsibility to submit all related agreements and documents to Congress. It is therefore incumbent on the Administration to secure those side agreements and submit them to Congress for review.
The letter comes after a recent meeting between Congressman Mike Pompeo and Senator Tom Cotton and the International Atomic Energy Agency (IAEA) in Vienna, during which the agency conveyed that two side deals made between the Islamic Republic of Iran and the IAEA as part of the Joint Comprehensive Plan of Action (JCPOA) will remain secret and will not be shared with other nations, with Congress, or with the public. The first agreement covers the inspection of the Parchin military complex, and the second details how the IAEA and Iran will resolve outstanding issues on possible military dimensions of Iran’s nuclear program.
Cato Institute scholars Alex Nowrasteh, Aaron Ross Powell, Neal McCluskey, Mark Calabria, Bill Watson, Chris Edwards, Gene Healy, Chris Preble, Julian Sanchez, Pat Michaels and Trevor Burrus respond to President Obama’s 2015 State of the Union Address. View below, or click here to view in high definition at YouTube.
Video produced by Caleb O. Brown, Austin Bragg and Tess Terrible.
When the Obama Administration needed additional funds for the Cash for Clunkers program, Todd Tiahrt was agreeable to funding this wasteful program.
As summarized by the Congressional Research Service: “Makes emergency supplemental appropriations of $2 billion for FY2009 and FY2010 to the National Highway Traffic Safety Administration (NHTSA) of the Department of Transportation (DOT) for the Consumer Assistance to Recycle and Save Program (Cash for Clunkers Program).”
This bill passed the House of Representatives by a vote of 316 to 109. Among House Republicans, the vote was 78 to 95 in favor of passage. Todd Tiahrt was one of the minority of Republicans that voted for Cash for Clunkers.
(When this bill was voted on in the Senate, then-Senator and present Kansas Governor Sam Brownback voted in favor, and Pat Roberts voted against.)
You may remember the Cash for Clunkers program from 2009. An initiative of President Barack Obama, it paid subsidies to those who traded in their “clunker” for a new fuel-efficient car. The clunkers were destroyed and recycled. This is an example of a program that seems like a benefit for everyone. Take old fuel-wasting cars off the road and replace them with new cars. Save the environment and stimulate the economy, all at the same time. Some writers advocate programs like this as a way to reduce inequality of incomes.
But the Cash for Clunkers program has been widely and roundly criticized. Did it work as advertised? It all depends on the meaning of the word “work,” I suppose. To evaluate the program, we need to look at the marginal activity that was induced by the program. When we do, we find that the cost of moving the additional cars is astonishingly high.
An Edmunds.com article calculated the cost per car for the clunkers program in a different way than the government, and found this:
Nearly 690,000 vehicles were sold during the Cash for Clunkers program, officially known as the Car Allowance Rebate System (CARS), but Edmunds.com analysts indicate that only 125,000 of the sales were incremental. The rest of the sales would have happened anyway. Analysts divided three billion dollars by 125,000 vehicles to arrive at the average $24,000 per vehicle sold. The average transaction price in August was $26,915 minus an average cash rebate of $1,667.
This is just the latest evidence that the clunkers program didn’t really increase the well-being of our country. Writing at the Foundation for Economic Education, Bruce Yandle doubts the glowing assessment of effectiveness of the program:
The doubt arises for at least three reasons. First, the program was supported politically primarily for its much touted environmental benefits. Carbon emissions would be reduced. But the reduction costs are at least ten times higher than alternate ways of removing carbon. Second, there is Bastiat’s parable of the broken window to consider. And third, there is a serious matter of eroding social norms for conserving wealth. A crushed clunker with a frozen engine is lost capital. … The cost per ton of carbon reduced could reach $500 under a set of normal values for critical variables. The cost estimate was $237 per ton under best case conditions. The much celebrated Waxman-Markey cap-and-trade carbon-emission control legislation estimates the cost of reducing a ton of carbon to be $28 when done across U.S. industries. Yes, we are getting carbon-emission reductions by way of clunker reduction, but we are paying a pretty penny for it. … Before touting the total benefits of clunkers, we must take account of the destroyed vehicles and engines that represented part of the wealth of the nation. As Tony Liller, vice president for Goodwill, put it: “They’re crushing these cars, and they’re perfectly good. These are cars the poor need to buy.”
It’s very difficult for the government to intervene in the economy and produce a net positive result. Even if it could, the harmful effects of taking one person’s money and giving it to another so they can get a discount on a new car far outweigh the small economic benefit that might be realized.
A large portion of his presentation was on energy and its important role in the economy, and how radical environmentalists — the “green” movement — are harming our economy and people. An irony, he said, is that while President Barack Obama is in the “hip pocket” of radical environmentalists, he is presiding over the greatest oil and gas boom in American history. This boom is proceeding in spite of government, not because of it.
Moore emphasized the importance of energy costs to low-income people. Rising energy costs are like taxes on them, he said, while the wealthy can more easily absorb higher energy costs. “To be green is to be against capitalism, against progress, against poor people, against jobs.”
The boom in oil and gas production in America, made possible by horizontal drilling and fracking, is ahead of the rest of the world. While European countries have in the past embraced green energy technologies, these policies have failed, and the countries are retreating from them. Now, European countries want to use American drilling technologies, he said.
The lower electricity prices in America are a competitive advantage over Europe and China. German auto manufacturers are shutting plants in Europe and moving them to the United States, he said.
Of radical environmentalist groups. Moore said: “They don’t even care about global warming. If they really cared about global warming, they would be cheerleading fracking. Because fracking is making natural gas the new fuel for America. And guess what? Natural gas emits less carbon. It’s a great antidote to global warming.”
(According to the U.S. Energy information Administration, when generating electricity, coal emits from 2.08 to 2.18 pounds of carbon dioxide per kilowatt-hour electricity generated. Natural gas emits 1.22 pounds, or about 43 percent less carbon dioxide.)
Moore went on to tell the attendees that it is the United States that has reduced its carbon emissions the greatest amount in the last five years. He said this is remarkable in light of the fact that the U.S. didn’t sign the Kyoto Treaty, the U.S. didn’t implement cap-and-trade, and didn’t implement a carbon tax. “You would think these environmental groups would be applauding natural gas. Now these environmentalist groups have a new campaign called ‘beyond natural gas,'” he said.
Moore explained that at first, environmentalists said they could accept natural gas as a “bridge fuel” to solar power and wind. They were in favor of natural gas, he said, up until the time it became cheap and plentiful. Now, they are against gas. “My point is, the left and environmentalists are against any energy source that works.”
Over the past six years the U.S. has spent $100 billion promoting wind and solar power, but these two sources together account for just 2.2 percent of electricity generation. Even if the country were to quadruple the portion of electricity generated by these two renewable sources over the next 10 to 20 years, the nation would still need to get 90 percent of its electricity from other sources. Moore was doubtful that the country could quadruple the output from wind and solar.
Trends in carbon emissions
To further investigate the topics Moore raised, I gathered data from Global Carbon Atlas and prepared interactive visualizations using Tableau Public. You may access and use the visualizations by clicking here. Following are static excerpts from the visualizations. Click on each image for a larger version.
Looking at the amount of total carbon emissions, we see two important facts. First, after rising slowly, carbon emissions by the United States have declined in recent years. Second, carbon emissions by China are soaring. China surpassed the U.S. around 2005, and the gap between the two countries is increasing.
Note also that carbon emissions in India are rising. Emissions in most advanced economies are steady or falling. These trends are emphasized in the chart that shows carbon emissions for each country indexed from a common starting point. Emissions from China and India are rapidly rising, while emissions from countries with advanced economies have risen slowly or have declined.
A chart that shows the carbon emissions efficiency of countries, that is, the carbon emitted per unit of GDP, shows that in general, countries are becoming more efficient. Advanced economies such as the U.S., Japan, and Germany have an advantage in this metric. These countries emit about one-fourth as much carbon per unit GDP as does China.
The chart of carbon emissions per person in each country show that the United States leads in this measure. In 2011, the U.S. emitted about 17 tons of carbon dioxide per person. China was at 6.6, and India at 1.7. But, the trend in the U.S. is downward, that is, less carbon emitted per person. In China and India, the trend is up, and rising rapidly in China.
Earlier this week we saw that candidates for Kansas governor have released statements on recent job figures in Kansas. The news releases from Sam Brownback and Paul Davis appear to contain conflicting views of Kansas employment.
But we saw that the Bureau of Labor Statistics has two monthly surveys that measure employment levels and trends. There’s the Current Population Survey (CPS), also known as the household survey, and there is also the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. BLS explains: “These estimates differ because the surveys have distinct definitions of employment and distinct survey and estimation methods.”
Both the Davis and Brownback campaign appear to cite the data correctly. So which is the better measure to use? Which gives the best indication of the performance of the Kansas economy in creating jobs?
Here’s something to consider. On the national level, a widely-watched number each month is the count of new jobs created. This number, which is universally considered to be important, comes from the CES survey. That’s the number that shows quite a bit of job growth in Kansas. But in order to belittle the Brownback effort, the Davis campaign cites the other data series.
So let’s be fair. The next time Davis and Democrats praise good job creation figures at the national level as evidence of the goodness of Barack Obama, let’s ask them to give the same credit to Sam Brownback.
In this first episode of WichitaLiberty Podcasts: A Kansas City Star editorial makes a case for higher school spending in Kansas, but is based on a premise that doesn’t exist in fact. There’s a new episode of WichitaLiberty.TV. Eureka! Tea partiers know science. The John J. Ingalls Spirit of Freedom Award. Cronyism and other problems in Wichita. Is the City of Wichita concerned that its contracts contain language that seems to be violated even before the contract is signed? Obama’s debt speech, not really a speech. Episode 1, October 20, 2013.
In 2006, then-Senator Barack Obama was critical of raising the debt ceiling in order to allow the U.S. to borrow additional funds, a contentious issue that we are facing again. I present his full remarks here, and they are often excerpted thusly:
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
So where can we go to view the future president’s speech on this topic?
The answer is: Nowhere.
Senator Obama never spoke these words on the floor of the United States Senate. Instead, he just mailed it in, submitting his text to be inserted in the Congressional Record.
In the printed Congressional Record, the next item is Obama starting his “speech” with “Mr. President, I rise today to talk about America’s debt problem.”
But in the video from the C-SPAN video library (see below), Obama doesn’t appear. That’s because he never spoke these words on the Senate floor.
The Senate’s explanation of the Congressional Record states: “The Congressional Record is a substantially verbatim account of the remarks made by senators and representatives while they are on the floor of the Senate and the House of Representatives.”
While members may insert written material in the record — that’s what Obama did — it would be nice if there was a way to distinguish between actual floor proceedings and written material submitted for inclusion.
By the way, Snopes gets this wrong. It explains: “In 2006, then a freshman senator from Illinois, Barack Obama made the remarks attributed to him above during discussion in the U.S. Senate prior to the call for votes on raising the debt limit. … The shortened quote now attributed to him is a verbatim capture of the opening and closing paragraphs of his remarks of 16 March 2006.”
Snopes bills itself as “The definitive Internet reference source for urban legends, folklore, myths, rumors, and misinformation.”
Republicans of the Joint Economic Committee of the U.S. Congress have released an update of a chart to help us navigate ObamaCare. (Click on it for a larger version.) From the July 2010 press release accompanying the original chart: “Four months after U.S. House Speaker Nancy Pelosi famously declared ‘We have to pass the bill so you can find out what’s in it,’ a congressional panel has released the first chart illustrating the 2,801 page health care law President Obama signed into law in March. Developed by the Joint Economic Committee minority, led by U.S Senator Sam Brownback of Kansas and Rep. Kevin Brady of Texas, the detailed organization chart displays a bewildering array of new government agencies, regulations and mandates.”
Scheduled to take effect on January 1, the employer mandate portion of the Affordable Care Act (ObamaCare) has been delayed for one year.
Curiously, this announcement was made on an obscure Treasury Department blog, along with articles titled “Meeting, and Exceeding, Our Small Business Procurement Goals in FY 2012” and “In Case You Missed It: Top Executives Say U.S. Is #1 for Foreign Direct Investment.”
The employer mandate requires those who employ more than 50 full time-equivalent employees to provide insurance or pay a penalty. Cato Institute’s Michael D. Tanner notes the general problem, and a specific problem based on the decision to delay the employer mandate:
In postponing the implementation of the Affordable Care Act’s employer mandate until after the 2014 mid-term elections, the Obama administration has tacitly admitted what critics of the law have long contended: that Obamacare is unworkable and would be a significant burden for American business and the economy at large. Stay tuned for further dominoes falling.
Actually, the Administration’s decision to postpone the employer mandate may make a bad situation worse. Because the individual mandate remains in place, workers may now face a situation where they must purchase their own insurance or pay a penalty because their employers don’t provide coverage. In effect, the administration’s decision shifts the cost from employers to workers. This hardly seems fair, and may force the administration to rethink the individual mandate as well. (And So the Obamacare Train Wreck Begins … )
Will the implementation of other parts of ObamaCare be delayed? I think it seems likely. But: Section 1513 AVC states, regarding the employer mandate: “The amendments made by this section shall apply to months beginning after December 31, 2013.” So does the administration have the legal authority to make changes like this?
Also: For all the wrenching debate and changes, there will still be many uninsured people. Here’s a chart based on the Congressional Budget Office May 2013 estimate of the effects of the Affordable Care Act on health insurance coverage.
The employer mandate actually consists of two different penalties, based on two different categories of employer behavior. These originate from Section 4980H of the Affordable Care Act. Subsection (a) requires steep penalties for employers who offer no coverage at all. Subection (b) requires modest penalties for employers who offer “minimum essential coverage under an eligible employer-sponsored plan.” This difference — between the strong penalty in 4980H(a) and the weak penalty in 4980H(b) — is crucial to understanding how things will play out in the future.
Under the strong penalty, in which an employer “fails to offer to its full-time employees…the opportunity to enroll in minimum essential coverage,” and “at least one full-time employee” enrolls in an exchange, the employer has to pay a fine of $2,000 times the total number of full-time-equivalent employees at the firm, minus 30. (The employer mandate only applies to firms with 50 or more full-time-equivalent workers.) So if you employ 50 workers, that’s a fine of 20 * $2,000 = $40,000. And the fine isn’t tax-deductible, adding to the pain.
Under the weak penalty, in which an employer does offer “the opportunity to enroll in minimum essential coverage,” but that coverage doesn’t meet Obamacare’s requirements for affordability or actuarial value, and at least one worker enrolls on an exchange instead, the fine is $3,000 times the number of workers who enroll on the exchanges. So, if you employ 50 workers, and three of them get coverage on the exchange instead, the fine is a much lower 3 * $3,000, or $9,000. (Technically, in subsection (b), employers pay the lesser of the weak penalty or the strong penalty, but this in most cases should be the weak penalty.)
So: Employers avoid the strong penalty and gain eligibility for the weak penalty by offering “minimum essential coverage.”
Roy goes on to explain that “minimum essential coverage” means coverage my any insurance plan that can legally be sod in a state, including plans that provide limited coverage or services. Roy writes that companies may offer these bare-bones plans to their employees and escape the penalties.
This behavior, which federal officials have confirmed is allowed, evidently wasn’t considered by officials, writes Roy: “Nonetheless, Obamacare’s designers expressed surprise that employers would do such a thing. ‘Our expectation was that employers would offer high quality insurance,’ said Robert Kocher, a former Obama health care adviser. It wouldn’t be the first time that the law’s authors didn’t recognize how economic incentives actually work.”
Economic incentives are what makes the world work. They’re based on human behavior, and that isn’t easily changed, even to suit Barack Obama’s desires.
In the summer of 2010 President Barack Obama and his allies warned of conservative groups with “harmless-sounding names like Americans for Prosperity.” At the time, supporters of AFP like myself were concerned, but AFP saw the president’s attacks as evidence of the group’s influence.
This week Kim Strassel of the Wall Street Journal looks back at the summer three years ago in light of what we’re just starting to learn about the Internal Revenue Service under the Obama Administration. Strassel writes: “We know that it was August 2010 when the IRS issued its first ‘Be On the Lookout’ list, flagging applications containing key conservative words and issues.”
Strassel presents a timeline of events from that time. Here’s an entry that should concern everyone:
Aug. 27: White House economist Austan Goolsbee, in a background briefing with reporters, accuses Koch industries of being a pass-through entity that does “not pay corporate income tax.” The Treasury inspector general investigates how it is that Mr. Goolsbee might have confidential tax information. The report has never been released.
This same week, the Democratic Party files a complaint with the IRS claiming the Americans for Prosperity Foundation is violating its tax-exempt status.
In conclusion, Strassel ties it all together and links the current IRS scandal to Washington:
These were not off-the-cuff remarks. They were repeated by the White House and echoed by its allies in campaign events, emails, social media and TV ads. The president of the United States spent months warning the country that “shadowy,” conservative “front” groups — “posing” as tax-exempt entities and illegally controlled by “foreign” players — were engaged in “unsupervised” spending that posed a “threat” to democracy. Yet we are to believe that a few rogue IRS employees just happened during that time to begin systematically targeting conservative groups? A mere coincidence that among the things the IRS demanded of these groups were “copies of any contracts with and training materials provided by Americans for Prosperity”?
This newspaper reported Thursday that Cincinnati IRS employees are now telling investigators that they took their orders from Washington. For anyone with a memory of 2010 politics, that was obvious from the start.
It’s evident that we’re just starting to uncover what’s been happening to freedom and liberty under the Obama Administration (and past presidents, too). We don’t know where this will lead, but we need to be thankful for organizations like Americans for Prosperity and others that haven’t backed down.
An IRS Political Timeline
President Obama spent months in 2010 warning Americans about the ‘threat’ to democracy posed by conservative groups, right at the time the IRS began targeting these groups.
By Kimberly A. Strassel
Perhaps the only useful part of the inspector general’s audit of the IRS was its timeline. We know that it was August 2010 when the IRS issued its first “Be On the Lookout” list, flagging applications containing key conservative words and issues. The criteria would expand in the months to come.
What else was happening in the summer and fall of 2010? The Obama administration and its allies continue to suggest the IRS was working in some political vacuum. What they’d rather everyone forget is that the IRS’s first BOLO list coincided with their own attack against “shadowy” or “front” conservative groups that they claimed were rigging the electoral system.
Below is a more relevant timeline, a political one, which seeks to remind readers of the context in which the IRS targeting happened.
It’s worse than President Obama saying “You didn’t build that.” Wichita Mayor Carl Brewer tells us you can’t build that — not without government guidance and intervention, anyway.
When President Barack Obama told business owners “You didn’t build that,” it set off a bit of a revolt. Those who worked hard to build businesses didn’t like to hear the president dismiss their efforts.
Underlying this episode is a serious question: What should be the role of government in the economy? Should government’s role be strictly limited, according to the Constitution? Or should government take an activist role in managing, regulating, subsidizing, and penalizing in order to get the results politicians and bureaucrats desire?
Historian Burton W. Folsom has concluded that it is the private sector — free people, not government — that drives innovation: “Time and again, experience has shown that while private enterprise, carried on in an environment of open competition, delivers the best products and services at the best price, government intervention stifles initiative, subsidizes inefficiency, and raises costs.”
But some don’t agree. They promote government management and intervention into the economy. Whatever their motivation might be, however it was they formed their belief, they believe that without government oversight of the economy, things won’t happen.
But in Wichita, it’s even worse. Without government, it is claimed that not only would we stop growing, economic progress would revert to a previous century.
In his remarks (transcript and video below), Brewer said “if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.”
When I heard him say that, I thought he’s just using rhetorical flair to emphasize a point. But later on he said this about those who advocate for economic freedom instead of government planning and control: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”
Brewer’s remarks are worse than “You didn’t build that.” The mayor of Wichita is telling us you can’t build that — not without government guidance and intervention, anyway.
Many people in Wichita, including the mayor and most on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.
We don’t have long before the entrepreneurial spirit in Wichita is totally subservient to government. What can we do to return power to the people instead of surrendering it to government?
Wichita Mayor Carl Brewer, August 12, 2008:
“You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.
“I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.
“Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.
“Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.
“But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.
“This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.
“But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.
“But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.
“So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.
“So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.
“And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.
“So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.”
In order to increase jobs and prosperity in Kansas, we should seek to reduce state spending as much as possible, thereby leaving more resources in the productive private sector.
In the debate over reducing and eventually eliminating the income tax in Kansas, those who oppose income tax reduction say it will simply shift the burden of taxation to others, in the form of sales and property taxes. This is true only if we decide to keep spending at the same level. We could cut spending in response to reduced revenue, but it is argued that state spending is a good thing, a source of wealth that Kansas should continue to rely on.
The idea that government spending is a generator of wealth and prosperity is true only beyond a certain minimal level of spending. We benefit from government provision of things like national defense, public safety, and a court system. (There are those who believe that even these could be provided by the private sector rather than markets.) But once government grows beyond these minimal core functions, it is virtually certain that markets — that is, free people trading in the private sector — can produce a wider variety of better goods and services at lower cost.
We also have to realize that government spending has a cost that must be paid. Advocates of government spending point to the salary paid to a government worker and how that money gets spent in the economy, producing jobs. These advocates, however, do not recognize the source of the worker’s salary, which is money taken from someone through taxation (or through borrowing and inflation at the federal government level). The loss of that money to government has a cost in the form of the reduced economic activity of those who paid the taxes.
If this loss was economically equivalent to the gain, we might be unconcerned. But there is a huge cost in taxation and government inefficiency that makes government spending a negative-sum proposition.
Another fundamental problem with government taxation and spending is that it is not voluntary. In markets, people voluntarily trade with each other because they feel it will make them better off. That’s not the case with government. I do not pay my taxes because I feel doing so makes me better off, other than for that small part that goes to the basic core functions. Instead, I pay my taxes so that I can stay out of jail. This fundamentally coercive nature of government spending gets it off to a bad start.
Then, ask how that money is spent: Who decides, and how? Jeffrey A. Miron explains: “The political process, alas, does not lend itself to objective balancing of costs and benefits. Most programs benefit well-defined interest groups (the elderly, teachers unions, environmentalists, defense contractors) while imposing relatively small costs per person on everyone else. Thus the winners from excess spending fight harder than the losers, and spending far exceeds the level suggested by cost-benefit considerations.” (Slash Expenditure to Balance the Budget)
An example in Kansas is the special interest group that benefits from highway construction. They formed a group called Economic Lifelines. The group says it was formed to “provide the grassroots support for Comprehensive Transportation Programs in Kansas.” Its motto is “Stimulating economic vitality through leadership in infrastructure development.”
A look at the membership role, however, lets us know whose economic roots are being stimulated. Membership is stocked with names like AFL-CIO, Foley Equipment Company, Heavy Constructors Association of Greater Kansas City, Kansas Aggregate & Concrete Associations, Kansas Asphalt Pavement Association, Kansas Contractors Association, Kansas Society of Professional Engineers, and PCA South Central Cement Promotion Association. Groups and companies like these have an economic interest in building more roads and highways, whether or not the state actually needs them. They would happily build a highway to nowhere.
As Miron explained, groups like this will spend almost unlimited money in order to receive appropriations from the government. It’s easier than competing in markets, and that’s a big problem with government spending — decision are made by the centralized few, not the many dispersed actors in markets.
Some argue that without government spending, certain types of goods and services will not be provided. A commonly cited example is education, which accounts for about half of Kansas general fund spending. Would there be schools if not for government? Of course there would be. There are many non-government schools now, even though those who patronize them must first pay for the government schools before paying for their own schools. And there were many schools and educated, literate Americans before government decided it need to monopolize education.
Still, it is argued that government spending on education is needed because everyone benefits from an educated citizenry. Tom G. Palmer explains: “Thus, widespread education generates public benefits beyond the benefits to the persons who are educated, allegedly justifying state provision and financing through general tax revenues. But despite the benefits to others, which may be great or small, the benefits to the persons educated are so great for them that they induce sufficient investment in education. Public benefits don’t always generate the defection of free-riders.”
Those who still argue that government spending in education is for the good of everyone will also need to defend the sagging and declining performance of public schools, persuading us that government schools are producing an educated citizenry. They also need to defend the capture of Kansas spending on schools by special interest groups that benefit from this spending.
Back to the basics: Government spending as economic booster is the theory of the Keynesians, including the administration of Barack Obama. Miron, from the same article cited above, explains the problems with this:
That brings us to the second argument for higher spending: the Keynesian claim that spending stimulates the economy. If this is accurate, it might seem the U.S. should continue its high-spending ways until the recession is over.
But the Keynesian argument for spending is also problematic. To begin with, the Keynesian view implies that any spending — whether for vital infrastructure or bridges to nowhere — is equally good at stimulating the economy. This might be true in the short term (emphasis on might), but it cannot be true over the long haul, and many “temporary” programs last for decades. So stimulus spending should be for good projects, not “digging ditches,” yet the number of good projects is small given how much is already being spent.
More broadly, the Keynesian model of the economy relies on strong assumptions, so we should not embrace it without empirical confirmation. In fact, economists find weak or contradictory evidence that higher government spending spurs the economy.
Substantial research, however, does find that tax cuts stimulate the economy and that fiscal adjustments — attempts to reduce deficits by raising taxes or lowering expenditure — work better when they focus on tax cuts. This does not fit the Keynesian view, but it makes perfect sense given that high taxes and ill-justified spending make the economy less productive.
The implication is that the U.S. may not face a tradeoff between shrinking the deficit and fighting the recession: it can do both by cutting wasteful spending (Medicare, Social Security, and the wars in Iraq and Afghanistan, for starters) and by cutting taxes.
The reduced spending will make the economy more productive by scaling government back to appropriate levels. Lower tax rates will stimulate in the short run by improving consumer and firm liquidity, and they will enhance economic growth in the long run by improving the incentives to work, save, and invest.
Deficits will therefore shrink and the economy will boom. The rest of the world will gladly hold our debt. The U.S. will re-emerge as a beacon of small government and robust capitalism, so foreign investment (and talented people, if immigration policy allows) will come flooding in.
In Kansas, we need to scale back government to appropriate levels, as Miron recommends. That means cutting spending, as that is the measure of the size of government. That will allow us to cut tax rates, starting with the income tax. Then we in Kansas can start to correct the long record of sub-par economic performance compared to other states and bring prosperity and jobs here.
To pay for the Obama taxing and spending agenda, the country will need much more economic growth. Unfortunately, the rate of growth is slowing just when we need greater rates of growth.
It’s commonly thought that annual real (after-inflation) growth of three percent is required just to keep up with population. More than that is needed to restore the loss in middle-class income during Obama’s first term. But here’s what has happened to the rate of growth.
The direction of change in economic growth is moving in the wrong direction, and it’s far below what is needed. Darkening the horizon are the planned increases in spending, in particular ObamaCare, will be a further drag on the economy. Other Obama policies are distinctly anti-growth. It’s difficult to have an optimistic outlook.
Stephen Moore and Arthur Laffer told the story last summer in the Wall Street Journal:
The first is how much government spending fell during President Bill Clinton’s eight years in office and how low it was when he left office. When he became president in 1992, government spending was 23.5% of GDP, and when he left in 2001 it was 19.5% of GDP. President Clinton, in conjunction with a solid Republican Congress, cut government spending by more than any other president in modern times, and oversaw one of the greatest periods of economic growth and prosperity in U.S. history.
Sadly for fiscal conservatives, the biggest surge in government spending came during the last two years of President George W. Bush’s eight years in office (2007-2008). A weakened Republican president dealing with a strident Democratic Congress, led by then-House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, resulted in an orgy of spending.
Mr. Bush and Republicans in Congress capitulated to and even promoted each and every government bailout and populist redistribution canard put before them. It’s a long list, starting with the 2003 trillion-dollar Medicare prescription drug benefit and culminating with the actions taken to stem the 2008 financial meltdown — the $700 billion Troubled Asset Relief Program, the bailout of insurance giant AIG and government-sponsored lenders Fannie Mae and Freddie Mac, the ill-advised 2008 $600-per-person tax rebate, the stimulus add-ons to 2007’s housing and farm bills, etc. The script had it that greedy right-wingers were the cause of our collapse, and deficit spending and easy money the answer.
The numbers are mind boggling. From the second quarter of 2007, i.e., the first full quarter of a Pelosi-Reid dominated Congress and a politically weakened President Bush, to the second quarter of 2009 when President Obama assumed office, government spending skyrocketed to 27.3% of GDP from 21.4%. It was the largest peacetime expansion of government spending in U.S. history.
Following is an interactive visualization of federal revenues, expenditures, and the deficit as a percentage of gross domestic product that illustrates these trends. Use the visualization below, or click here to open it in a new window.