How things work in DC

Given the president’s campaign promise to “drain the swamp,” it would be nice to report progress in SAFE’s quest for smaller, more focused, less costly government. Unfortunately, some political corollary of Gresham’s law (“cheap money drives dear money out of circulation”) seems applicable – as has proven true time and again.

The overarching problem that our group follows has gotten worse over the past two decades. Time flies, SAFE newsletter,
fall 2017.

Not so very long ago, the national debt was $5 trillion, or about “$19,000 for every man, woman and child in the U.S.” SAFE newsletter, Spring 1996. The debt is now over $20 trillion ($61,000 per person) and rising some $0.5 trillion per year.

If the government keeps spending more than it takes in, the debt will necessarily continue growing. Accordingly, our political leaders should agree that the budget must and will be balanced. And this goal should be pursued with a sense of urgency, not projected as happening ten years hence if nothing comes up to prevent it.

Balancing the budget would entail some painful decisions, so politicians are prone to paint a rosy picture, suggest solutions that will appeal to their respective donors and political supporters, and attempt to block action if they can’t get their own way. The typical result is gridlock – ugh!

Bipartisan action is no guarantee of policy merit, however, and deeply flawed proposals get approved at times. Gridlock would be better in such cases.

By way of illustration, this entry will compare how issues in three policy areas (economic stimulus, healthcare & energy policy) were addressed during the previous administration to what’s happening currently. Truly, as the French adage goes, “The more things change, the more they remain the same.”

A. Economic stimulus – Conservatives were on the run during the early months of the Obama administration with a solid Democratic majority in both houses of Congress. Here’s how we perceived the situation at the time. Happytalk blossoms in the nation’s capital, 7/6/09.

A huge government program is proposed to deal with a problem (whether current or forecast). The purported benefits are touted relentlessly, without discussion of drawbacks or costs. There is such a rush to enact legislation that members of Congress may not have time or inclination to read the final bill before voting. And anyone who complains runs the risk of being labeled a diehard extremist.

Thus, a huge package of spending increases and temporary tax cuts was rammed through as the antidote for the “Great Recession.” Politicians who voted for this legislation were quick to claim credit for the anticipated benefits, but said virtually nothing about the consequences of running up the government’s deficits and debt to unprecedented peacetime levels. Here is an example:

Senator Tom Carper (D-DE): Delawareans will see benefits from this bill in the form of jobs and tax cuts. Over the coming weeks, I look forward to sharing the ways in which Delaware families and businesses will receive badly needed assistance with the passage of this legislation.

Despite all this fiscal stimulus, which would result in the national debt nearly doubling in 8 years, the economic recovery was tepid. A Survey of the US Economy, SAFE,
August 2013.

Screen Shot 2017-10-01 at 2.45.30 PM

The economy finally seems to be picking up in this country (and also globally). Thus, the US economic growth rate in the 2nd quarter of 2017 was the fastest in over two years, although a slowdown is expected in the 3rd quarter (due to hurricane damage). US economic growth revised up to 3.1 percent in Q2, Martin Crutsinger, newsmax.com, 9/28/17.

Yet the Trump administration is now pressing for “the largest tax cut in our [country’s] history” to boost the economy. President’s remarks at tax reform event, Indianapolis, Indiana,
9/27/17.

For several months, my administration has been working closely with Congress to develop a framework for tax reform.  Over the next few months, the House and Senate will build on this [tax reform] framework and produce legislation that will deliver more jobs, higher pay, and lower taxes for middle-class families -- for the working man and woman -- and for businesses of all sizes. 

Perhaps this tax plan has merit, we’ll reserve judgment until further details become available, but tax cuts for the “forgotten” middle class (who would probably use the resulting benefits primarily to boost consumption) don’t necessarily justify it. And if the idea is truly to jump-start the economy, why not reduce taxes for everyone? Providing tax relief for affluent (who might reinvest some of their savings) was a major feature of the Kennedy and Reagan tax cuts, but apparently isn’t intended this time.

Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected.  They can call me all they want.  It’s not going to help. 

Furthermore, claims that the loss of tax revenue would be fully offset by faster US economic growth should be taken with “a grain of salt.” [Treasury Secretary] Steven Mnuchin, GOP tax reform will cut deficits by $1 trillion, Joseph Lawler, Washington Examiner,
9/28/17.

"We think this tax plan will cut down the deficits by a trillion dollars," Mnuchin said in an interview on Fox Business. [He] boasted that the tax plan would accelerate the rate of economic growth to above 3 percent. That rate is "a moderate aspiration, and we can do higher than that.”

In sum, the case being made for a big tax cut is quite one-sided, as was the sales pitch for the economic stimulus bill in 2009. Once again, balancing the budget is seemingly being viewed as an unwelcome duty that can be tackled later. The fiscal results are likely to be similar.

B. Healthcare - The proposals that led to the Affordable Care Act were described in glowing terms. Those who do not have healthcare insurance should be enabled to get it, the president stated at a Forum on Health[care] Reform (White House, 3/5/09), while those who are satisfied with their healthcare insurance can keep it and pay less. Moreover, his version of healthcare reform was “one of the best ways, in fact maybe the only way” to “get our federal budget under control.” Happytalk blossoms in the nation’s capital, 7/6/09.

SAFE and others questioned these conclusions and sought a meaningful debate including consideration of alternative approaches.

First, there been more than enough Happytalk. Let’s have a realistic discussion of what should be done (if anything) about healthcare, and whether the country can afford it.

Second, all reasonable viewpoints (including
ours) should be considered. There is no compelling reason that the job must be concluded in 2009.

There was no serious discussion of alternatives before the ACA was enacted (in the spring of 2010). Judging from the results, however, conservative criticism of this legislation was on target.

As GovCare was implemented, it became clear that the program wouldn’t live up to the promises. Healthcare insurance (HCI) coverage would be expanded, all right, but only by dint of mandating coverage and providing federal subsidies (or “free” coverage for patients participating in the Medicaid expansion program) to encourage compliance. The website is fixable, but GovCare has deeper problems,
11/4/13.

Time will tell how Americans take to the new HCI policies, but people will probably make their decisions based on perceived self-interest versus the “general good.”  Thus, older & sicker Americans will sign up.  The invincibles will hold back unless they qualify for a big enough subsidy to make the coverage attractive on a net basis.  There may be more enrollment in Medicaid than was expected in those states that have agreed to liberalize eligibility requirements.  And the federal government, which will be on the hook for the HCI subsidies and most of the cost of Medicaid expansion, stands to be the big loser.

Republicans repeatedly vowed to “repeal and replace” the ACA when they had the votes to do so, which condition was satisfied by the 2016 election results, but they had trouble uniting behind any specific replacement legislation. Their latest effort was the Graham-Cassidy bill, which would have repealed the individual and employer mandates of the ACA and diverted substantial healthcare funding to the states. The meandering path of healthcare legislation,
9/25/17.

Democrats were unified in their opposition to GC (as they had been to every other Republican healthcare bill), and the GOP majority in the Senate is slim (52-48). Graham-Cassidy was doomed by the avowed opposition of three Senate Republicans (Susan Collins, John McCain and Rand Paul). Accordingly, the scheduled vote was canceled and the Senate turned to other matters.

Some people blame the impasse on healthcare legislation to partisan rivalry; the issues could be readily resolved, they reason, if the two parties would just take them up in a bipartisan manner. This was, for example, the stated basis for Senator McCain’s opposition to GC. Why John McCain opposes the Graham-Cassidy Obamacare overhaul, Robert King, Washington Examiner,
9/25/17.

“As I have repeatedly stressed, healthcare reform legislation ought to be the product of regular order in the Senate. Committees of jurisdiction should mark-up legislation with input from all committee members and send their bill to the floor for debate and amendment. That is the only way we might achieve bipartisan consensus on lasting reform," he said in the statement announcing his decision.

Opinions differ, however, as to whether this was the true basis for McCain’s opposition to GC (and before that to the “skinny repeal bill” in July). The never-Trump triumvirate, Kimberly Strassel, Wall Street Journal,
9/28/17.

Mr. McCain, who is gravely ill with brain cancer, has decided his final legacy will be a return to the contrarian “straight talk” persona of old, which wins him liberal media plaudits. The Arizonan has never gotten over losing the presidency, and it clearly irks him that Mr. Trump succeeded where he failed. His personal disdain for the president is obvious, and his implausible excuses for opposing the Graham-Cassidy health-care reform are proof that this is personal.

Irrespective of McCain’s state of mind, it isn’t clear that Democrats would be willing to support any changes to GovCare other than “Band-Aid” fixes to keep the system afloat until they regain ascendancy. Republicans should reject “bipartisan” solutions for Obmacare, David Harsanyi, townhall.com,
9/29/17.

Democrats have shown zero inclination to compromise on any substantive changes other than perhaps adding more spending or regulatory controls on consumer choice. Liberals have trillions of ideas on how to expand the welfare state, and not a single one on how to save people from it.

Republicans will resurrect this issue next year, it’s said, but the president might talk with Democrats in the meantime. (He did recently reach an understanding with them, after all, on how long to suspend the debt limit.) Trump says Republicans plan to take up healthcare next year, Sally Persons, Washington Times,
9/28/17.

In sum, Democrats made a one-sided pitch for GovCare in 2009 and managed to ram it through Congress. Their victory was unfortunate from a policy standpoint, and it also demonstrated a troubling degree of public apathy. The website is fixable,
11/4/13.

Judging from the GovCare saga, Americans have reached the point of accepting “feel good” proposals for government action without asking obvious questions or considering opposing opinions.  They know better; they simply don’t bother to get involved.  Unless things change, all of us will pay a heavy price for this!

Perhaps part of the damage that has been done will eventually be reversed, but the haphazard approach of Republicans and the president’s lack of interest in the matter (he wants a deal, never mind the details) do not augur for a constructive outcome.

Meanwhile, on the Democratic side, there is more “happy talk” about proposals to double down on GovCare by transitioning to a single payer system (full government control of the healthcare system). Healthcare is a right, so why should anyone worry about how such a system would be paid for. Six United States senators are ALL IN for socialized medicine, Chris Panodolfo, conservativereview.com,
9/12/17.

C. Energy policy – A “cap and trade” proposal to reduce carbon emissions from burning fossil fuels and thereby supposedly save the world from the perils of manmade global warming was passed by the House in June 2009 but ultimately blocked in the Senate (reflecting a split in the Democratic caucus on this issue).

As opposition to the proposal stiffened, proponents attempted to defuse the opposition by shifting from warnings about catastrophic global warming to a more positive sales pitch. Consider, for example, the lengthy statement that then Rep. Mike Castle (R-DE) released to explain his vote for the House cap and trade bill.

“Global warming” is not mentioned, and there is only one reference (in a quote) to “climate change.” It seems that the legislation is primarily about strengthening the economy by driving advancements in industry and new business growth. As for costs, a study is cited to the effect that Delawareans might have to pay an extra $3 per month on their electric bills. That sounds low to us, and the estimate is certainly out of line with the results of other studies.

For similar reasons, global warming alarmists rebranded their issue as “climate change,” a label that was poll-tested and would be harder to disprove than global warming – even though no change in substance was intended. Happytalk blossoms in the nation’s capital,
7/6/09.

After cap and trade legislation failed, the Obama administration continued to push for reduced use of fossil fuels through regulations and executive action – with considerable success. Many of these actions are now being reversed by the Trump administration, however, which can be accomplished without getting legislation passed by Congress. Regulatory rollback: energy policy,
7/31/17.

Disagreement about the use of fossil fuels continues, and some politicians are working hard to preserve policies based on the manmade global warming theory and/or replicate them at the state and local level. As was true in 2009, the pitch features a combination of scary talk (rising levels of atmospheric CO2 could cause catastrophic global warming) and happy talk (“green jobs” will be created by switching to clean and renewable energy).

Here’s an example. [Delaware] Governor [John Carney] launches effort [appoints a 17-member task force] to explore offshore wind power, Scott Goss, News Journal,
8/29/17.

The rationale for supporting offshore wind development is twofold: (1) create new jobs, and (2) provide a source of "renewable energy" to reduce carbon emissions into the atmosphere and thereby "address global climate change."  It seems to be recognized in the article that offshore wind power would be very expensive and require even higher subsidies than solar and onshore wind power (which already require subsidies to compete with conventional power sources). 

The governor’s
order emphasizes purported benefits of offshore wind power, while only obliquely referring to cost considerations. And the task force seems to be charged with developing a plan for offshore wind projects, not determining whether such projects might be desirable from an economic standpoint.

No later than December 15, 2017, the Working Group shall submit a report to the Governor that includes at least the following: (a) Report on the relevant laws, regulations, benefits, costs, barriers and opportunities for developing offshore wind to serve Delaware; (b) Recommendations for shorter- and longer-term strategies for procuring offshore wind power to serve Delaware; (c) Recommendations for plans to develop job opportunities for Delaware in the offshore wind industry; and (d) A draft of any necessary implementing legislation including possible amendments to Delaware’s Renewable Energy Portfolio Standards Act.

Summing up, the arguments in favor of government programs to promote (or require) the use of “renewable” energy sources didn’t seem very strong in 2009, and they are no more convincing today. Further discussion is called for, even though global warming alarmists might prefer to avoid it on grounds that “the time for debate is over.”
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