Wednesday, December 21, 2011

Obama is right

In a post on PowerLine, John Hinderaker started a firestorm on conservative blogs this morning by pointing to (and dismantling) Obama's claim that he "would put our legislative and foreign policy accomplishments in our first two years against any president — with the possible exceptions of Johnson, F.D.R., and Lincoln".

I must say, Obama is right. The standard consistently used to judge Presidents in rankings is something along the lines of how much lasting change they have made to the structure of the Union. This is completely consistent with Obama's worldview (which you would expect, because those rankings are put together by progressive intellectuals). So the economy may have been much worse when Reagan took office and much better at this point in his Presidency, but that's immaterial. Harding took a deflationary depression and turned it completely around within 3 years but consistently appears in the bottom of Presidential rankings. FDR managed to keep the Great Depression going for a decade, but always appears at the top. If you listen to a progressive academic, and Obama has spent his life listening to progressive academics, Presidents aren't measured by how well the economy does.

Friday, October 7, 2011

A much bigger deal than is being reported

Last night, in order to avoid voting on Obama's jobs bill, Harry Ried changed the rules of the Senate to disallow the introduction of amendments after cloture is invoked. This is an arcane bit of Senate procedure, but the important point to take away from this is that the rules have been changed by a simple majority to prevent the minority from exercising a power they usually possess. This is exactly what I urged the Republican senate to do to allow votes on circuit court judges to pass with a majority, but they were unwilling to do because once Pandora's box is opened the procedure could be used by Democrats in a future Senate. I argued at the time, we now know correctly, that this was irrelevant and Democrats would change the rules as soon as it became convenient.

In light of this, I'd like to propose two changes to the Senate rules for the new Republican majority in 2012:

1) Allow appointments to pass by simple majority. First off, this is extremely politically advantageous, because Republicans tend to accept any judge who is qualified as a matter of training and experience, even if they dislike the positions they take, while Democrats reject any judge whose philosophy they disagree with, so Republican presidents have much more difficulty getting their nominees through the Senate. But secondly, I think the current position is unconstitutional. The Senate can do whatever it wants to its procedures for introducing new legislation, but appointments are an executive power that merely requires Senate "consent". The Senate should not allow itself to withhold consent if the majority of its members agree.

2) Allow any repeal bill to pass with a simple majority. As I stated on my post on Heinlein, giving a power to the government necessarily entails a restriction on personal freedom, and we shouldn't need a super majority to give that freedom back. (This also has convenient side effect that it makes repeal of Obamacare almost guaranteed)

Thursday, September 8, 2011

Social Security IS a Ponzi Scheme

Ponzi Scheme (n): an investment swindle in which early investors are paid with sums obtained from later ones in order to create the illusion of profitability (Merriam-Websters Dictionary of Law, 1996)

Rick Perry is taking a lot of heat not only from the liberal media but also from conservative media for "doubling down" in the debate and calling Social Security a Ponzi Scheme. I understand the mainstream media saying this, they're practically cheerleaders for the Democratic Party and they're very much invested in the lies that have been told about Social Security for half a century. I don't understand the conservatives, though. Yes, sometimes it's politically dangerous to call a spade a spade, but Social Security _is_ a Ponzi Scheme. That it has ever been anything else is one of the great political lies of the 20th Century (maybe THE great political lie of the 20th century) and conservatives should be eager to discredit it (while proposing solutions to the problem that don't pull the rug out from under seniors who are depending on it).

The reason this is so important is that huge portions of otherwise well informed Americans have actually fallen for the statements they get from the Social Security Administration on their paystubs and in the mail that list their "contributions" and "account balance". These are outright lies. No one has ever made a "contribution" to Social Security in the entire history of the program, and no one has ever had an "account balance". Social Security "accounts" don't exist in any meaningful way and the sooner people come to grips with that the sooner we can fix the system.

For those of you who don't know, this is how Social Security really works.

  1. You pay a payroll tax. This payroll tax, as a matter of statute and case law is not earmarked in any way and can be spent at the whim of the Federal Government. (See Helvering v. Davis)
  2. The Social Security Administration uses part of the income from this tax to fund the benefits to current recipients and "invests" part of it in Treasury instruments, which the Treasury promises to pay back if the Social Security Administration asks for it. The money that was invested in the Treasury is then spent as part of the general US budget for farm subsidies and road building and international aid and whatever else the Fed does.
  3. When one of several things happens (death of a spouse, disability, retirement) the Social Security Administration uses some complex formula based on how much you put in and how long you worked to cut you checks from current payroll tax revenue (plus the trust fund, though that rarely happens). This formula is defined by law and subject to change at any time. (i.e. When the Social Security Administration sends you glossy material in the mail saying that you are guaranteed to get X when you retire they mean "pursuant to current law". If Congress changes the law tomorrow to say you get 10 percent of that then tomorrow you will be guaranteed 10 percent of that.)
So lets compare and contrast this with a classic Ponzi scheme. Social Security uses the money from later investors to pay the benefit of early ones so it's clearly at least partially inline with the dictionary definition.

You could argue that the trust fund means that even though in practice it pretty much always pays benefits entirely out of contributions, it's not dependent on them, so that's different from a Ponzi scheme. But you would be wrong. At the end of 2010 Social Security had $2.5 trillion in the trust fund and in 2010 they paid out $584 billion in disbursements (2011 Trustees report, table III.A1) and disbursements are expected to increase rapidly and forever, so we would expect the trust fund to run out of money in less that 5 years if we stopped contributing. And that's not the worst of it. As I've said elsewhere, I don't believe in the trust fund. There are commentators that say the Treasury would never default on the Trust Fund notes because it would cause US bonds to collapse. But they don't have to. The Social Security Administration is a creature of statute law and Congress could vote tomorrow to forgive the trust fund debt to itself and there would be no bond implications (I would actually argue that bonds would become stronger because we don't have the huge unfunded social security liability stressing them). If we suddenly needed to increase expenditures by half a trillion per year to cover Social Security expenses I suspect changes would happen in short order.

You could also argue that Social Security isn't doing this "in order to create the illusion of profitability" because everything I've just stated is a matter of plain statute law, so it's not like Bernie Madoff who was claiming he invested in X and Y. Everybody knows how Social Security works so nobody is fooled into thinking it's a profitable investment. But that's not true, either. I'll demonstrate this by asking what the Social Security would do if they wanted to convince gullible masses that their "contributions" in Social Security "accounts" would yield particular "guaranteed returns". Exactly what they've been doing for years, marking your payroll tax as a "contribution" on your pay stubs and sending you stuff in the mail about your "account". And it's working. In the past week alone I have encountered two people who honestly believed that they have made contributions to Social Security accounts that exist as actual assets somewhere and were somewhat hurt and felt they had been lied to when I told them what I expressed above. I agree they have been lied to, but if the government has been lying to people and telling them that they have money in accounts somewhere, then they are clearly "creating the illusion of profitability".

The only other argument I've seen for why Social Security isn't really a Ponzi Scheme is precisely that it is a government program so whereas a Ponzi Scheme depends on getting more and more investors in order to meet its promises to past investors and inevitably fizzles when not enough gullible people can be found, the government can threaten to put you in prison unless you pay more and more money to support the program for prior investors. I'll admit, this is somewhat different from a classic ponzi scheme (though I'll argue it's worse) but it's not going to prevent a fizzle. The number of investors per recipient is declining and at some point people are going to say "enough" and cancel the program. Social Security started by charging 2% limited to $60. Currently it is sapping around 12% of our income (limited to $12,000) but according to official estimates it's going to require more than twice that by 2025 (including funds to the "general fund" in order to offset repayment of the trust fund) and it grows every year.

Social Security IS a Ponzi Scheme and it's critically important that we as conservatives explain this to people. Until people understand that the underpinnings of the program are a lie we can't have a responsible discussion of the program. If Social Security is like a 401(k) then I would be criminal (or at least progressive) to suggest that Warren Buffet shouldn't be able to get his money out of his account when he retired. If, on the other hand, Social Security is more like welfare it seems insane to think that wealthy retirees should be receiving it at all. One of the most powerful complaints about Paul Ryan's budget is that it reduces Medicare (he doesn't actually deal with Social Security at all) payments for those under 55. This is so powerful because people feel like he's stealing money from the accounts where they have been making contributions all these years, but those contributions were taxes, and they've been spent. And the government is unlikely to be able to raise the money to repay them under the current program in 15 years anyway.

We need to drastically reshape Social Security. I'm fine with the Ryan plan and I'm likely to be fine with the Perry plan, but if I were writing a plan I would go much farther. I understand, particularly politically, the desire not to affect seniors who have already retired under the presumption that they would get what Social Security promised them, but I would prefer if we as a country got to the point where we understood it is essentially a welfare program and if you managed to retire with a hundred million in the bank maybe you shouldn't get the full amount of welfare the SSA said you were going to get (even though you believed them when they lied to you and said you were contributing it to an account and would get a substantial return). After all, many of the investors who believed Madoff and Ponzi when they lied to them didn't get anything back, and even I'm not suggesting that.

Tuesday, July 12, 2011

Democrats and Democracy

In a Press Conference this morning, Obama said that the average American shouldn't worry about stuff like the Debt limit, that's what professional politicians are for:

This brings up a couple of questions:

First, why does your party call themselves "Democrats"? When Jackson split off from the Democratic-Republicans he called his party the "Democrats" because they were populists who more directly reflected the will of the people. On the two major issues of your Presidency (three if you include your action in Libya) you have explicitly rejected the will of the people because you thought you knew better than they do. I actually think that's sound governance in a Republic, but then I've also explicitly stated that I don't believe in Democracy, I reject the direct election of Senators, I think we should raise the voting age, and I think we ought to restrict voting to those who are informed (and preferably pay taxes). All positions absolutely anathema to a Democrat.

Second, and more important, why are you pulling the American people into a debate on how a deal to raise the debt limit is structured? You have held something like 4 press conferences in the last couple weeks all of which are intended to point to to an American people who are too busy cooking dinner to have an informed opinion on whether or not a debt limit raise is good policy that we should raise taxes with the debt limit instead of only cutting spending. In your opinion, isn't that something professional politicians should take care of for us behind closed doors? If you can't be bothered to explain why we should raise the debt limit, why explain how the deal should be look?

This is particularly important since these speeches have been utterly insincere. Several Republicans (and to my knowledge not a single Democrat) have asked for the actual negotiations to be open to the public. Despite working to put food on my table, I've actually tried to follow this pretty closely, but there's no way anyone (including the people in the media who have written columns on what a great deal somebody is rejecting) have any actual insight into what's going on in these negotiations. But, despite the fact that I can't find what is actually being debated, I do know enough to know that you are lying to us. I know this because the revenue increases you talk about aren't even a percent of the spending you claim to be offsetting, you have noted in these remarks the drastic cuts you're willing to take while simultaneously asking for increases in spending on pet projects that would be at the top of the Republican list to cut, and most importantly you continually say you want a "long term" fix when the only budget your party has produced in nearly 3 years (your 2010 budget) increased the debt every year in its scope (and was rejected by every member of your party).

If you don't believe the people have enough time to understand the big picture, can you please stop the demagoguery over the details?

PS. I should probably note, I support a debt limit increase, but I would rather have no increase than a bad deal. There's no point in having a debt limit if it's just going to get increased every time the government maxes out our credit card again. I disagree with the assertion that we will default if we don't get a debt increase. We can cover debt repayment with only 10% of receipts at current revenue levels and I would argue the 14th Amendment states that the President must use 10% to do that (which leaves about half of current government functions funded). I'll admit that Obama is probably going to cut the most irresponsible programs he can to show how important our limitless debt is, so we'll have closed National Parks and no FBI while ethanol subsidies and free breakfast in schools continue, but that's still not as bad as an actual default.

Friday, July 1, 2011

Can we please cancel them?

During a speech earlier this week Obama threatened that if we didn't change the depreciation schedule on private jets,
then the kinds of cuts that would be required might compromise the National Weather Service. It means that we would not be funding critical medical research. It means that food inspection might be compromised. And I’ve said to some of the Republican leaders, you go talk to your constituents, the Republican constituents, and ask them are they willing to compromise their kids’ safety so that some corporate jet owner continues to get a tax break. And I’m pretty sure what the answer would be.
This was, in fact, an important theme of the conference, having been repeated almost verbatim in two parts of the speech. Lots of people are making much of the fact that a change in the depreciation of private jets isn't going to yield a billion dollars, let alone the hundreds of billions those programs eat up. There's also the issue that we somehow managed to give kids scholarships, pay for medical research, and fund the National Weather Service and the FDA on the $2.9 trillion Bush spent in 2008 ($240 billion deficit) instead of the $3.55 trillion Obama spent in 2010 ($1420 billion deficit). I don't think it is generally realized that the "stimulus" wasn't a one time expense, it was a permanent, massive increase in the federal budget, from which Obama now claims we can't possible retreat. But that's not the point of this post.

Also, I happen to agree with Obama that the special depreciation scale Obama proposed and the Democrat Congress passed in 2009 as part of that stimulus for private jets was a bad idea and should be scaled back. Unlike Grover Norquist, I only care about tax rates, not breaks. Special credits are fiscally indistinguishable from spending programs. But that's not the point of this post either.

The point of this post is that not one of the programs the President mentioned is within the Constitutionally defined role of the Federal Government. If it takes keeping an awful airplane depreciation scale to defund the NWS (excepting those areas where it is important for defense, which can be rolled into the defense department), the FDA, Federal funding of medical research, federal interference in education, and things having to do with kids' safety, then I'll keep the depreciation.

Tuesday, March 1, 2011

Collective bargaining rights

There's a lot of confusion, even on reputable sites, about what exactly "collective bargaining rights" entail.

Under the National Labor Relations Act of 1935, pretty much all private employees in the United States have the "right" to hold a vote where if half of the employees accept union representation, the employer must negotiate with the union on behalf of all of the employees. In a non-right-to-work state they can also force all employees to pay dues. That is to say that the "right" to collective bargaining is the "right" to prevent an employer and an employee from entering into a private contract (and in some cases the "right" to force an employee to pay for representation they don't want). Or, to put this another way, one of the great examples of the need for unions, the United Mine Workers strikes of the late nineteenth century, was orchestrated by people who did not have collective bargaining rights. The striking mine workers each decided strike, there was no law preventing the mines from hiring someone else if they could find someone.

Additionally, what is being proposed in Wisconsin isn't removing collective bargaining rights from public employees (a step that Walker could legally take if he wanted to). Half of the teachers could still force the other half to accept union contracts, but they couldn't force them to pay dues and they would have to vote to recertify (keep the union as their representative) every year.

Thursday, February 24, 2011

In Defense of Obama

He has less than two years left, so this may be the last time, but I must come to the defense of the Obama administration. I've heard several times in the last two days that Obama is stepping all over separation of powers by deciding the Defense of Marriage Act is unconstitutional without an edict from the court and refusing to press the case. This is as daft as the observers on the left who mocked incoming congressmen last year for saying that they would care about the constitutionality of pending legislation. The Constitution does not say that the Courts are the ultimate arbiter of Constitutionality. If Congress passes a law and the President believes it unconstitutional, he shouldn't defend it. There is even a provision that the Senate and House can appoint their own counsel to defend their laws before the Courts if this happens.

I'll note that I fully expect them to do so, and I fully expect Obama to come out and say that it's a distraction that they're taking up defense of a law he refused to defend in a time of budget constraints. That will be unacceptable politicking, but his decision not to fight for a law he thinks is unconstitutional is perfectly reasonable. I'll also note that I wouldn't be surprised to find a Republican administration in 2013 refusing to defend Obamacare because they believe it Unconstitutional. When that happens the mainstream press will go berserk claiming (as some on the right do now) that the administration is shirking their duty and it's up to the Courts to decide if it is unconstitutional. The mainstream press will be wrong just as the right wingers are now.

Thursday, February 17, 2011

Note to Gov. Walker: take a page from Reagan.

It's all over the news that there are protests at the State Capitol and the Governor's private residence in Wisconsin. What might also be in the news, but I haven't seen as much, is that the teachers and students present are there illegally. They're taking advantage of sick time to join in a political rally and based on video I've seen they're encouraging students to be truant as well.

I'm not going to advise Walker to arrest the teachers for contributing to the delinquency of a minor (though it is appealing to me). I will, however, advise him to take a page from Reagan when he had a group striking illegally: fire them all. I have no tolerance for people who don't show up to work and I doubt the majority of Wisconsin citizens do either.

Wednesday, February 16, 2011

Balancing the budget

I happen to agree with Sessions, which I'm sure colors my judgement, but I don't see how any thinking person who has looked at the facts can not think that Mr. Lew and the President are being extremely disingenuous in their statements. In 2008 we had a deficit of $460 billion on a total outlay of $2.97 trillion (roughly 19% of GDP). I think this is way too high, but that's irrelevant to this discussion. In 2010 we had a deficit of $1.29 trillion on outlays of $3.46 trillion (roughly 25% of GDP). Obama is increasing that to $3.8 trillion (25% of GDP) in his proposal and never bringing it down from there. He also never gets back below 20% of GDP in spending. He balances the budget by assuming away entitlement spending, stating that there will be reductions he doesn't specify, ignoring interest on the debt, and assuming he can get receipts (taxes) up to 20% of GDP.

This is like my saying that I make $50,000 and I started this year $50,000 in debt and spent $52,000. I'm looking at bankruptcy, so I come up with a plan for the bankruptcy judge: I'm going to get out of the hole by making loans against my retirement and spending $55,000 this year (and increase from there every year in the future) and by ten years from now I'll be making $100,000 and only spending $100,000 (if we ignore debt repayment) so then, when my budget is balanced, we can start to worry about how to pay back those loans and catch up on retirement.

This would be horrifically misleading even if I had a good plan for increasing my income, but the budget assumes receipts at 20% of the GDP, which is a record level. No matter how high taxes go, we have never taken in more than 20.9% of GDP (1946) or sustained more than 19%. (see here) The OMB uses static scoring, so they just assume that if they charge more in taxes that they will get proportionally more in receipts, but reality doesn't work that way.

Friday, February 11, 2011

It's not that hard

With common-sense exceptions for seniors, veterans, and our troops, we will roll back government spending to prestimulus, pre-bailout levels, saving us at least $100 billion in the first year alone

That's what the Republicans promised when they were elected. The $100 billion is the effect of their promise, not the promise itself. The promise is a good one (except maybe that seniors, veterans, and defense are common-sense exceptions). Before the failed spend-a-palooza "stimulus" we had a budget that was too high. Allowing that to become the new baseline and whining about how the government is going to shut down if we don't keep the unprecedented, temporary, emergency levels of spending we went to in a vain attempt to recover the economy is one of the biggest crimes of the last congress. So going back to pre-stimulus, pre-TARP 2008 spending levels should be the starting place for any conversation about spending. I think we should go much, much further, but I'm not willing to even talk about it until we get the trillion dollar barrel of pork injected into the baseline in 2010 out of the discussion.

So, when Hal Rogers talks about cutting $100 billion from Obama's massively inflated FY2011 budget proposal, he's dissembling. The incoming Republicans didn't promise to take whatever Obama proposes and cut $100 billion (and certainly not less than $100 billion), they promised a return to 2008 spending levels. And to hear even Paul Ryan, who I like (unlike Hal Rogers, who is a first class appropriator), talk around the issue makes me mad. Here's how you keep the promise the Republicans made:
  1. Ask the Congressional Records Office for a copy of the 2008 budget
  2. (optional) Submit that to the floor with a rule that any amendment offered must not increase the size of the budget.
  3. Send it to the Senate
Was that really that hard?