>Myth Number One: The money tied up in federal earmarks could pay for just about everything.
Not so. First, there really isn’t all that much funding tied up in earmarks, $15,932,261,848.00 to be exact for the FY 2010 federal budget. Secondly, some of those funds are designated for Army Corp of Engineers’ projects. [GovExec] (pdf file) Third, of the top three Senators in the “earmark department” two are members of the GOP, Senator Thad Cochran (R-MS) and Senator Roger Wicker (R-MS), others are Democratic senators. On a philosophical note: It doesn’t do to attack a Senator such as Harry Reid (D-NV) as a “porker” for his 162 earmarked items for Nevada contractors and other businesses, and then turn about and say that he’s not “done” anything for the state — like get funding for Nevada projects which support Nevada employment. One doesn’t get to have it both ways. Finally, the total FY 2010 federal budget includes approximately $3.5 trillion in spending, with mandatory spending at $2.184 trillion and discretionary spending at $$1.386 trillion. Thus earmarks constitute approximately 0.7% of the total discretionary spending. [link]
Myth Number Two: If we’d cut off foreign aid we could pay for everything we want. The total budget for the U.S. State Department in FY 2010 is $51.7 billion. That was about 1.46% of the total FY 2010 budget. [link] Approximately $13,320,000 in FY 2011 is allocated for State Department administration (ambassadorial and consular services and international relations), the economic support fund was allocated $8.164 million, and the global health initiative received $7.829 million. The category encompassing international organization and peace keeping received $3.808 million in FY 2011. [OMB pdf]
Then there is the problem of precisely what “foreign aid” one would like to cut. Would advocates of foreign aid reduction like to see aid for foreign military financing cut? That would lop off some $5,473 million in costs, but would hit our allies rather hard not to mention our own defense industry economic sector. How about cutting the proposed $1,200 million for the Pakistani Counterinsurgency Capability Fund? Well, maybe not if we intend for the Pakistani government to assist with our operations along the Afghan-Pakistan border. Perhaps we’d like to cut the $2,136 million in international narcotics law enforcement? We should cut the $2,957 million set aside for international “multi-lateral development banks?” Perhaps not, at least not if it’s not in our own best interest to have international economic growth, and create new markets for our products and services. Before we get too stingy about our own investments, we might want to remember that we get to celebrate this 4th of July in part because some Dutch bankers decided the struggling colonies were a good bet, and ought to be supported. [NPR]
There’s always the “get the U.S. out of the U.N.” crowd, but we need to remember that the entire FY2010-2011 budget for all United Nations regular operations is approximately $5.6 billion, retaining the current dues assessment formula. [UNGA] The FY 2011 budget calls for approximately $1.595 billion for United States’ membership in the United Nations, UN specialized agencies, and other multilateral organizations. Of that total, about $516.3 million is reserved for United Nations regular budget activities. [USUN] By comparison, one single Nimitz Class Aircraft Carrier costs $6.2 billion.
Myth Number Three: Unemployment benefits cause people to be lazy and remain jobless. Nevada senatorial candidate Sharron Angle is fond of this one. The exchange went like this: RALSTON: How would you have voted on that bill to extend unemployment benefits? ANGLE: I would have voted no, because the truth about it is that they keep extending these unemployment benefits to the point where people are afraid to go out and get a job because the job doesn’t pay as much as the unemployment benefit does. And what we really need to do is put people back to work. [TNR] However, in order for this argument to make any sense at all it ought to be demonstrated that as soon as the benefits run out people will return to the work force. Right? Wrong.
They don’t. What they do is stop reporting their employment status, because “why bother if reporting doesn’t yield any benefit?” [TNR] But how about that 1970’s study (Katz) conservative think tanks are fond of quoting that supposedly demonstrated the conservative contentions? The author doesn’t think it’s applicable to our current economic situation. Politifact interviewed Katz: “When we asked Katz about the discrepency between his remarks then and now, he explained that labor markets in the late 1970s and early 1980s were significantly different from today. Back then, it was common for companies making layoffs to later recall workers, and often workers accepted those jobs right as their benefits were coming to an end. Today, recalls rarely happen, and with the job market so tight, a job search can prove fruitless for many months. Most unemployed workers don’t have the luxury of timing when they accept a job. For that reason, Katz told us in an interview, “I strongly favor extensions of UI benefits when the labor market is weak and the ratio of job seekers to job openings is very high” – in other words, like the situation is right now.” (emphasis added)
In March, 2010, we had 5.4 workers for every job available. [EPI] If anything, the “jobs” bills enacted by Congress to date have been too small. Not that creating 250,000 jobs is anything to sneeze on, but with 14.6 million unemployed we need more drops in the bucket.
Myth Number Four: We are saddling our grandchildren with unconscionable debt.
This newly discovered concern for the offspring is touching. Rather more to the point is that indebtedness creates some more immediate potential problems having little to do with the progeny. As several nations have come to understand the hard way, major banks and their holding companies have pursued a policy of “selling” the notion that indebtedness is good, and then turning the tables, launching “attacks” on the nation’s currency in international trade. Labeled the “Hong Kong Double Play” after the Asian money crises of the last decade, the trick is to encumber a government with debt and then threaten to call in the markers lest a sell off in currency be initiated. Heads they win, tails they win. A bit more control over the excessive enthusiasm of the Debt Manufacturers might mitigate the attractiveness of the Olde Double Play. The double play might become thoroughly distasteful should one nation or another decide to bite the bullet and tell the Debt Manufacturers to figuratively drop dead, extortion being a highly undesirable human activity.
We may be saddling our progeny with even more serious economic problems if we don’t take actions necessary to secure the economic well being of their parents. The mythology of the Supply Side Hoax promoted the welfare of the elite. We’ve been told time and time again that if the rich are given tax breaks, and corporations could off-shore their accounts, then the riches gained thereby would trickle down in the form of jobs for the masses. It was, and remains, a theory in search of evidence, because the evidence shows otherwise.
The Reagan Growth “Miracle” was based on credit: “The overall rate of growth was very good. A 3.85 percent median quarterly rate of GDP growth is a very good number. 2) But the economy was grown on credit. And the rate of growth in total government debt was very high. 3) The high growth rate in total government debt outstanding was caused by a continuing increase in government spending at a rate higher than government revenues. 4) After adjusting for inflation, the growth in receipts in personal income taxes isn’t that impressive.” [Stewart] And, about that increase in personal earnings?
“According to the Congressional Budget Office’s historical budget data, tax receipts from individuals totaled $297 billion in 1982 and $466.9 billion in 1990. That’s an increase of 57.20 percent. Over the same period of time the GDP price deflator increased from 63.866 to 82.053, or an increase of 28.476 percent. In other words, the increase of tax revenue from individuals really isn’t that impressive after adjusting for inflation.” [Stewart] Thus, when all the factors are inspected, the so-called Supply Side Theory produced precious little in terms of increasing personal income. If the “rising tide” of earnings by the top 2% in the country was supposed to raise all boats — it didn’t. Most income earners were left floundering in the water.
For better or worse, some 2/3rds of our economy is based on consumer spending, and if consumers don’t have (a) a job or, (b) unemployment benefits to tide them over between jobs, they do the obvious — they stop spending. A decrease in spending yields a decrease in demand. Declining demand pushes more layoffs, and the cycle becomes a whirlpool of deflation. If economists are fearful of inflation, they get even more restive at the prospect of deflation which creates (politely speaking) recessions, or (impolitely speaking) depressions.
You can take your pick of what might have caused the “Roosevelt Recession of 1937,” it might have been the tightening of the money supply by the Federal Reserve (the monetarists’ choice/Friedman) or it could have been the cuts in government spending and tax increases on middle and lower income workers (Keynesian position), either way it wiped out the gains of the early New Deal period. For that matter, it might have been a bit of both. What we do know is that the more restrictive the monetary policies, and the more “liquidationist” (Let Banks Fail) the Treasury philosophy, the deeper and longer the depression. [Bernanke]
Another interesting element in this debate is that evidently “some debt is better than others.” Little will sail through Congress faster than bills for Defense Department spending, and one of the better bookkeeping maneuvers of the last 10 years was President George W. Bush’s decision to take the wars in Iraq and Afghanistan “off the books.” The current Administration’s decision to put the expenses involved in these two theaters of operation back on the books created Sticker Shock in some quarters. OMG! Look at the deficit now! Think of the children! However, this was not the major concern during budget hearings in 2009, here’s an example from Republican Representative John McHugh:
John McHugh, had told Reuters that the Gates proposal would amount to an $8 billion slash in spending. But the numbers tell a different story: Not counting supplementals, Congress last year appropriated $513 billion to the Pentagon. This year, Gates is asking for $534 billion. If he gets everything he asks for, that’s an increase of $21 billion, and Congress could always increase the total beyond that. I asked McHugh’s staff where the notion of an overall spending cut came from, and, when pressed, they had a hard time standing by the idea of a decrease in total dollars.
“In terms of total dollars, you’re right,” said an aide. “But there will be $8 billion in funding cuts for some programs.” Gates was pretty clear, though, that many programs would indeed be cut, while others would be expanded. McHugh’s staff did say that the $8 billion figure originated at the Pentagon. According to a committee spokesperson, it “came from conversation our staff on the Armed Services Committee had with DOD officials. They asked them ‘what’s the delta going to be?’ And they said $8 billion.”
And, of course, an $8 billion “slash” would put the nation at risk! McHughes’ voice wasn’t a solo. Republican J. Randy Forbes chimed in. Republicans Todd Akin (R-MO), Doug Lamborn (R-CO), and Mary Fallin (R-OK), added their concern that cutting defense spending in any way would jeopardize the nation’s security. In other words, a modest decrease of $8 billion in some Pentagon programs out of a $663.7 billion (+12.7% YoY) request sent members of the Republican Party into the vapors, but speak of $30 billion to extend unemployment benefits and “The Republic Is In Grave Danger.” [Klein]
Further, Representative Shelley Berkley (D-NV) had some observations to make about the Republicans’ newly found concerns about budget deficits and debts last month: “The Republicans in the Senate are once again doing everything they can to destroy Medicare for millions of seniors by blocking legislation that will stop the 21% cut in payments to doctors who care for our elderly citizens. They say they’re worried about the deficit and paying the docs will add to the deficit. Excuse me. We are fighting two wars not paid for. We have homeland security needs not paid for. Medicare part D, not paid for. Not a word from the Senate Republicans. But they’re drawing a line on paying the doctors who treat Medicare patients: ‘this is going to add to the deficit.’ Let’s stop playing politics with Medicare. Pay the doctors, and provide health care for millions and millions of our senior citizens.” [Berkley] (emphasis added)
Evidently, the grandchildren will only be “saddled” by debts created to pay for social safety net programs, but will be “secured” by indebtedness racked up to pay for two wars, homeland security programs, and legislation beneficial to the pharmaceutical industry.
Perhaps we ought to also acknowledge on this Fourth of July that Washington did not chop down a cherry tree, nor was he at all likely to have tossed a dollar across the Potomac River, Lincoln did not write the Gettysburg Address on the back of an envelope, and William Howard Taft was probably not the originator of the Seventh Inning Stretch.