WSJ - Henninger

A Debt-Limit Election

What began as a technicality has become a metaphor for the stakes in 2012.

• By DANIEL HENNINGER

Democrats say they won't vote to raise the debt limit unless they get someone in the private sector to pay higher taxes. Republicans say they won't raise the debt limit unless they get reductions in public-sector spending without raising taxes. Shall we put this to a vote?
Not a vote of Congress, but of the American people—the 130 million or so who will vote for president in November 2012.
The debt-limit fight is being depicted as mostly a green-eyeshades funding technicality, dating back, not surprisingly, to 1939. It's bigger than that. When Congressman Paul Ryan says we have arrived at a "defining moment," this is what he means. The issues that have surfaced in the debt-limit struggle will—or should—define how this country's people see themselves for at least a generation.

What began as a technicality has become a metaphor for the stakes in 2012.

Podcast: Listen to the audio of Wonder Land here.

The nation's total debt, now $14.29 trillion, is the cumulative result of budget deficits extending back at least 30 years. Republicans blame all this on "out-of-control spending." No, that debt is the product of our politics—of open elections and successive Congresses and presidencies, some of them Republican, sifting through all sorts of public wants, such as subsidized medical care for the elderly. Running alongside, the American people went to work every day and produced the tax revenue that enabled these wants to become history's biggest public budget.

This isn't just numbers. It's who we are and what we've become. Politics R Us. Now, after all these decades of politicking, the two parties have arrived at a $14 trillion debt limit. We are going to decide right here who we will be in the future.
Some part of the American people manifestly does not want to go further into what this debt represents. Some do want to go further. As always, we will work this out, not with tear gas in the streets, but through the two political parties. Independent voters, that great swath of Hamlets who never quite know what they want, will have to cast a vote in 2012 that matters beyond the next election cycle.
The way we watch these fights through the media suggests four guys named Obama, Boehner, Biden and McConnell will work something out, and the ship of state will groan forward. That's not quite true. This intractable debt fight is the result of opposed forces in the body politic more powerful than this foursome.

In November 2010, an anxious American public, stunned by the wreckage caused by the 2008 financial crisis, swept Republicans into power. Absent those political forces, it's likely a debt-limit increase, with Mickey Mouse taxes, already would have passed a status quo Congress with the Republicans waving some matador defense at the onrushing trillions. So far, that hasn't happened.
As to the Democrats, given the huge scale of the spending numbers beneath the debt-reduction talks, how to explain the mismatch of their piddling cats-and-dogs tax proposals, such as taxing private jets? For them, the negotiation's numbers are irrelevant. What matters is protecting the principle of raising taxes to pay for public spending in the future.

In the universe inhabited by this generation's Democrats, public spending is life and taxes are their oxygen. The party's base—progressives, unionists, liberal politicians, comedians—is furious over the Obama decision in December to extend the Bush tax rates. Now they're engulfed in the math of this spending-reduction nightmare with the safety valve of big taxes shut. 

The debt-limit debate has made explicit that the Democrats will address whatever debt and deficit concerns are agitating the public by matching an upward spending curve with a steadily rising stream of tax revenue. The Obama budgets have pushed spending to 24% of the nation's total output. The party's economists argue this is "normal" given the entitlement commitments to retiring baby boomers. This is what America wanted, they say. We gotta pay for it. A proposal this week by Sens. Joe Lieberman and Tom Coburn to cut Medicare spending by $600 billion—over 10 years—was virtually laughed out of the room by Harry Reid and Nancy Pelosi. What's ultimately at stake here may be found in the dry pages of the Congressional Budget Office's Long-Term Budget Outlook released this month. From 2022 through 2085, CBO projects annual GDP growth of 2.2%, and growth in real earnings per worker of 1.4%. For 63 years! In short: We become Europe.

To seal the Faustian entitlement bargain, we eventually cave and consent to higher taxes to "pay for" what we said we wanted through the politics of past decades. We concede the economic and eventually the military future to Asia. We entertain ourselves, like any slow-growth nation, by watching unemployed youth riot in the streets. Or we vote not to do it.


Given the stakes, any GOP presidential candidate who tries to pocket the nomination with no more argument than that the economy is all Obama's fault should be defeated. People are looking for a path forward, not some Republican version of hope and change.

The $14.2 trillion debt limit began as a Treasury technicality. It is now a metaphor for the 2012 election.

Write to henninger@wsj.com

Obama's Real Revenue Problem (Economic GROWTH)

Obama's Real Revenue Problem

Tax receipts are low because of the mediocre economic recovery.

 

President Obama was right about his audacity, if not always the hope. Six months after he agreed to a bipartisan extension of current tax rates, he is now insisting on tax increases as part of the debt-ceiling talks. At his press conference yesterday he repeated this demand, as well as his recent talking point that taxes are lower than they've been in generations. Let's examine that claim because it explains Washington's real revenue problem—slow economic growth.

Mr. Obama has a point that tax receipts are near historic lows, but 

the cause isn't tax rates that are too low. As the nearby table shows, as recently as 2007 the current tax structure raised 18.5% of GDP in revenue, which is slightly above the modern historical average. Even in 2008, when the economy grew not at all, federal tax receipts still came in at 17.5% of the economy.

Today's revenue problem is the result of the mediocre economic recovery. Tax collections in 2009 fell below 15% of GDP, the lowest level since 1950. But remarkably, tax receipts stayed that low even in the recovery year of 2010. So far this fiscal year tax receipts are growing at a healthy 10% clip, so the Congressional Budget Office (CBO) January estimate of 14.8% of GDP is probably low. We suspect revenues will be closer to 16%, but even that would be the weakest revenue rebound from any recession in 50 years, and far below the average tax take since 1970 of 18.2%.

But what about the liberal claim, repeated constantly, that the Bush tax cuts of 2001 and 2003 caused today's deficits? CBO has shown this to be demonstrably false. On May 12, the budget arm of Congress examined the changes in its baseline projections from 2001 through 2011. In 2001, it had predicted a surplus in 2011 of $889 billion. Instead, it expects a deficit of $1.4 trillion.

What explains that $2.29 trillion budget reversal? Well, the direct revenue loss from the combination of the 2001 and 2003 Bush tax cuts contributed roughly $216 billion, or only about 9.5% of the $2.29 trillion. And keep in mind that even this low figure is based on a static revenue model that assumes almost no gains from faster economic growth.

After the Bush investment tax cuts of 2003, tax revenues were $786 billion higher in 2007 ($2.568 trillion) than they were in 2003 ($1.782 trillion), the biggest four-year increase in U.S. history.
 
So as flawed as it is, the current tax code with a top personal income tax rate of 35% is clearly capable of generating big revenue gains.

CBO's data show that by far the biggest change in its deficit forecast is the spending bonanza, with outlays in 2011 that are $1.135 trillion higher than the budget office estimated a decade ago. One-third of that is higher interest payments on the national debt, notwithstanding record low interest rates. But $523 billion is due to domestic spending increases, including defense, education, Medicaid and the Obama stimulus. Mr. Bush's Medicare drug plan accounts for $53 billion of this unanticipated spending in 2011.
The other big revenue reductions come from the "temporary" tax changes of the Obama stimulus and 2010 bipartisan tax deal. CBO says the December tax deal—which includes the one-year payroll tax cut and the annual fix on the alternative minimum tax—will reduce revenues by $196 billion this year. The temporary speedup in business expensing will cost another $55 billion.

Getty Images/Stock Illustration

The payroll tax cut was sold in the name of stimulating growth and hiring, yet the economy has grown more slowly this year than in last year's fourth quarter. As we've long argued, the "temporary, targeted and timely" tax cuts favored by Keynesians and the White House don't do much for growth because they don't permanently change incentives to save and invest. Mr. Obama was hawking more of those yesterday, even as he wants to raise taxes overall.

Republicans—notably George W. Bush in 2001 and 2008—have sometimes fallen for this same tax cut gimmickry. But perhaps they're learning their lesson. Republicans have reacted with little enthusiasm to the White House trial balloon to extend the payroll tax cuts for another year. The lesson is that when it comes to growth, not all tax cuts are created equal. The tax cuts with the biggest bang for the buck are permanent, take effect immediately, and hit at the next dollar of marginal income.

All of which makes the White House debt-ceiling strategy a policy contradiction.
On the one hand, Mr. Obama is saying Republicans must agree to raise taxes on business and high incomes, though he knows even many Democrats won't vote for that. On the other hand, Mr. Obama says he wants another payroll tax cut because he is worried about slow growth.

Even orthodox Keynesian policy doesn't recommend a tax increase with growth under 2% and the jobless rate at 9.1%. The White House game here can only be an attempt to see if he can use the prospect of a debt-limit financial panic to scare Republicans into voting to raise taxes. We doubt the GOP is this dumb.

Republicans should stick to their plan of insisting on spending cuts in return for a debt-ceiling vote. Every dollar in lower spending means one less dollar taken from the private economy in borrowing or future tax increases. As for revenues, they will increase when the economy shakes its lethargy caused by Mr. Obama's policies. A tax increase won't help growth—or revenues.

Let's Rip Michelle Bachman (the left)

Levin: Stephanopoulos Is Foolish in Lecturing Bachmann

By Jeffrey Lord on 6.28.11 @ 1:38PM

Sigh.
You'd think liberals would learn.
Of course not.

George Stephanopoulos made the mistake of going after Michele Bachmann on history -- and promptly proceeded to get his history foolishly wrong. Said George:

For example earlier this year you said that the Founding Fathers who wrote the Constitution and the Declaration of Independence worked tirelessly to end slavery. Now with respect Congresswoman, that's just not true.

Actually, George, it is true.

And before we get to Levin's views, allow me.
In 1785, James Madison (as noted by his biographer, Ralph Ketcham in James Madison) took to the floor of the Virginia Assembly, where he was a delegate, and

spoke…favoring a bill Jefferson had proposed for the gradual abolition of slavery (it was rejected), and helped defeat a bill designed to outlaw the manumission of individual slaves. Of this effort a French observer wrote that Madison, "a young man (who)….astonishes…by his eloquence, his wisdom, and his genius, has had the humanity and courage (for such a proposition requires no small share of courage) to propose a general emancipation of the slaves."

Madison was not alone in taking action on the subject. There was another Founding Father, along with Madison a co-author of The Federalist Papers. That would be Alexander Hamilton.
In Alexander Hamilton: A Life, biographer Willard Sterne Randall notes that this Founding Father helped "to found…the Society for Promoting the Manumission of Slaves in New York." Randall on goes to say that:

….never forgetting the slave markets of his St. Croix childhood, Hamilton became a prime mover in the early abolitionist group. He pressured the (New York) state legislature and helped to raise money to buy and free slaves. The society's founders…elected Hamilton chairman to draw up recommendations for "a line of conduct" for any "members who still possessed slaves." He also established a registry for manumitted slaves, listing their names and ages, "to detect attempts to deprive such manumitted persons of their liberty." 

There's more with Hamilton, who also demanded (writing and signing a 1786 petition on the subject) the legislature ban the importation of slaves, calling slavery " a commerce so repugnant to humanity."
There is a difference between opposing something and being unable to change the practice in the day -- and doing nothing. But it is just flatly false to say, as Stephanopoulos says, that the Founding Fathers did not work to end slavery. The historical record, if one looks, is crystal clear. Madison did. Hamilton did. Jefferson did. They did not succeed, they were personally flawed, some owning slaves themselves. (Wasn't it George who wrote a book on a flawed president he knew called All Too Human?) But these Founding Fathers started the United States of America down the right historical path, personally "working" to end slavery.

There was a reason for the Three-Fifths Compromise in the Constitution.

That reason: there were delegates to the Constitutional Convention (and they would be called Founding Fathers ) who supported abolition -- as well as those who opposed it. Hence -- the compromise. Which was not about declaring a black man three-fifths of a person as, for example, Al Gore and many liberals erroneously say. (Where was George then?) It was about reducing the power of slavery as an institution in the new United States Congress. If, as slave owners insisted, slaves were property -- then the obvious: they should not be counted as whole persons, which would increase the proportional power of the slave states in the House of Representatives, where representation was based on population size. The slave owners wanted it both ways -- to treat slaves as property but count them as persons, effectively increasing the slave owning power in Congress. The abolitionist delegates said no -- hence the compromise.

So Levin is quite correct here -- adding another Founding Father to this list: George Mason of Virginia.
Mark Levin caught you out, George, and his details are here.
But Michele Bachmann was right. There were Founding Fathers who worked to end slavery.
Is challenging Michele Bachmann on fundamental history and getting it wrong embarrassing for somebody in the liberal media who criticizes others on the subject? Yes. Will George be concerned enough to retract and correct the record?
Uh-huh. Sure.
Which is short hand for just why millions of Americans roll their eyes at liberals. And watch Fox.
And listen to Levin.

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Jeffrey Lord is a former Reagan White House political director and author. He writes from Pennsylvania at jlpa1@aol.com.

US Debt - Greater than US Economy

James Pethokoukis

 

U.S. federal debt now bigger than entire U.S. economy

A scary chart from the Bank for International Settlements looking at the rise in government debt around the world since Lehman exploded:
And here is a breakout of those numbers:

$th of July - Thomas Sowell

July 4th

By Thomas Sowell

6/28/2011

 

The Fourth of July may be just a holiday for fireworks to some people. But it was a momentous day for the history of this country and the history of the world.
Not only did July 4, 1776 mark American independence from England, it marked a radically different kind of government from the governments that prevailed around the world at the time -- and the kinds of governments that had prevailed for thousands of years before.
The American Revolution was not simply a rebellion against the King of England, it was a rebellion against being ruled by kings in general. That is why the opening salvo of the American Revolution was called "the shot heard round the world."
Autocratic rulers and their subjects heard that shot -- and things that had not been questioned for millennia were now open to challenge. As the generations went by, more and more autocratic governments around the world proved unable to meet that challenge.
Some clever people today ask whether the United States has really been "exceptional." You couldn't be more exceptional in the 18th century than to create your fundamental document -- the Constitution of the United States -- by opening with the momentous words, "We the people..."
Those three words were a slap in the face to those who thought themselves entitled to rule, and who regarded the people as if they were simply human livestock, destined to be herded and shepherded by their betters. Indeed, to this very day, elites who think that way -- and that includes many among the intelligentsia, as well as political messiahs -- find the Constitution of the United States a real pain because it stands in the way of their imposing their will and their presumptions on the rest of us.

More than a hundred years ago, so-called "Progressives" began a campaign to undermine the Constitution's strict limitations on government, which stood in the way of self-anointed political crusaders imposing their grand schemes on all the rest of us. That effort to discredit the Constitution continues to this day, and the arguments haven't really changed much in a hundred years.

The cover story in the July 4th issue of Time magazine is a classic example of this arrogance. It asks of the Constitution: "Does it still matter?"
A long and rambling essay by Time magazine's managing editor, Richard Stengel, manages to create a toxic blend of the irrelevant and the erroneous.

The irrelevant comes first, pointing out in big letters that those who wrote the Constitution "did not know about" all sorts of things in the world today, including airplanes, television, computers and DNA.
This may seem like a clever new gambit but, like many clever new gambits, it is a rehash of arguments made long ago. Back in 1908, Woodrow Wilson said, "When the Constitution was framed there were no railways, there was no telegraph, there was no telephone,"
In Mr. Stengel's rehash of this argument, he declares: "People on the right and left constantly ask what the framers would say about some event that is happening today."
Maybe that kind of talk goes on where he hangs out. But most people have enough common sense to know that a constitution does not exist to micro-manage particular "events" or express opinions about the passing scene.
A constitution exists to create a framework for government -- and the Constitution of the United States tries to keep the government inside that framework.
From the irrelevant to the erroneous is a short step for Mr. Stengel. He says, "If the Constitution was intended to limit the federal government, it certainly doesn't say so."
Apparently Mr. Stengel has not read the Tenth Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

Perhaps Richard Stengel should follow the advice of another Stengel -- Casey Stengel, who said on a number of occasions, "You could look it up."

Does the Constitution matter?

If it doesn't, then your Freedom doesn't matter.

Thomas Sowell

06-25-11 TS Soc. Sec. - The Missing Money

Someone needs to say to those who want Social Security and Medicare to continue on unchanged: "Don't you understand? The money is not there any more."

Many retired people remember the money that was taken out of their paychecks for years and feel that they are now entitled to receive Social Security benefits as a right. But the way Social Security was set up was so financially shaky that anyone who set up a similar retirement scheme in the private sector could be sent to federal prison for fraud.
But you can't send a whole Congress to prison, however much they may deserve it.

They (retirees) want their Social Security and their Medicare to stay the way they are --

Their anger should be directed instead against those politicians who were irresponsible enough to set up these costly programs without putting aside enough money to pay for the promises that were made -- promises that now cannot be kept, regardless of which political party controls the government.

But the long run doesn't count for most politicians, since elections are held in the short run. Politicians' election prospects are enhanced, the more goodies they can promise and the less taxes they collect to pay for them.
That is why welfare states in Europe as well as here are facing bitter public protests as the chickens come home to roost.

Many retired people remember the money that was taken out of their paychecks for years and feel that they are now entitled to receive Social Security benefits as a right. But the way Social Security was set up was so financially shaky that anyone who set up a similar retirement scheme in the private sector could be sent to federal prison for fraud.

Since the law does not allow private pension plans to be set up in the financially irresponsible way Social Security is, that is where young people's money should be put, if they ever want to see that money again when they reach retirement age.

Free Speech - Geert Wilders

The Freeing Of Geert Wilders

Posted 06/23/2011 03:58 PM ET

Right-wing Dutch politician Geert Wilders appears in an Amsterdam court Thursday to hear he is acquitted of charges that his statements about Muslims... View Enlarged Image

Political Correctness: The acquittal, on hate-speech charges, of the Dutch politician who spoke the truth about Islamofascism is a victory for freedom and free speech. The truth may yet keep us free.
Somewhere Voltaire is smiling, for he would have defended to the death the Dutch politician's right to speak his mind about militant Islam and immigration and the threats he felt both posed to his country and democracy at large.
Geert Wilders is a leader in the Dutch Freedom Party who has been a thorn in the side of politically correct Europeans cowered by their increasing Muslim populations into accepting the creeping Islamization of Europe, or Eurabia, as some, including ourselves, have dubbed it.
In March 2008, Wilders posted a film about the Koran, "Fitna," on the Internet. It equated Islam with violence and the Koran with Adolf Hitler's "Mein Kampf," at least in the sense of the advocacy of obscene violence against humanity and as a blueprint of things to come.
The opening scenes of "Fitna," a Koranic term sometimes translated as "strife," shows a copy of the Koran followed by footage of the attacks on the U.S. on 9/11, followed by London in July 2005 and Madrid in March 2004. Subtle he is not. But neither is he a criminal.
It did not help that Wilders included in the film a scene showing Muslim protesters holding signs reading "God Bless Hitler" that would tend to lend credence to Wilders' thesis. Mention of Hitler and Nazism in any context is a touchy subject in Europe to this day, as is criticism of anything Muslim.
In 2009, the Dutch Court of Appeals ordered a criminal prosecution of Wilders, a member of the Dutch Parliament. "The Amsterdam appeals court has ordered the prosecution of Member of Parliament Geert Wilders for inciting hatred and discrimination, based on comments by him in various media on Muslims and their beliefs," the court said in a statement.
The case began last Oct. 4, but it collapsed after three weeks when a special legal panel ruled the judges may have shown partiality after a string of legal blunders. New judges were then sworn in, and the case was heard again this year.

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One of those blunders was allowing only three of 18 requested defense witnesses to testify, including academics critical of militant Islam. Among the requested defense witnesses was Mohammed Bouyeri, the convicted murderer of Dutch filmmaker Theo van Gogh. The defense wanted to prove Wilders' criticisms were true and therefore not an incitement.
Van Gogh, the great-great-grandson of the famous artist, was shot and his throat slit on an Amsterdam street after making the film "Submission." It criticized, many would say accurately, the Islamic world for its harsh treatment of women. But strangely, it was not considered a hate crime.
The presiding judge of the new trial said on Thursday that Wilders' remarks were sometimes "hurtful, shocking (and) offensive," but that they were made in the context of a public debate about Muslim integration and multiculturalism, and therefore not a criminal act. Amen to that.
As Wilders' film shows, his "hate speech" largely amounted to quoting the Koran accurately and reporting the statements of Muslim organizations and their supporters, many of which cannot be repeated here.
Wilders is in fact guilty of nothing but resisting the Islamization of Europe and the attempt to impose Shariah law on the West. Suppressing all criticism of and debate about Islam is part of that move. Free speech and Shariah law are incompatible.
Columnist Mark Steyn felt Wilders' pain in 2008 when he went on trial for "Islamophobia" in Canada. As with Wilders, this consisted largely of quoting Muslim speakers verbatim and then drawing some obvious conclusions. Steyn ultimately prevailed, without civil libertarians warning of any "chilling effect" on public discourse from the experience.
Geert Wilders is once again free to speak his mind. We look forward to his next speeches and films.

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New Hampshire GOP Debate

Politicians and the media may want a candidate with verbal fireworks, but the people want jobs. 

As Pawlenty put it: 

"Fluffy promises of hope and change don't buy our groceries, make our mortgage payments, put gas in our cars, or pay for our children's clothes."