Senate Says No

The Obama strategy of bipartisanship is starting to make itself a little more clear. The President wants the GOP to be no where near a room where decisions are made on what he thinks will be popular programs and initiatives, but if it's going to be something unpopular, or require an unpopular action, he'd like the cover of bipartisan support.

That was the idea behind the Deficit Reduction Task force. It was to be made up of a group of Senators and Congressmen from both parties, slightly weight to the Democrats and their majority. The group would come up with a list of budget fixing ideas, vote on them with a bare majority needed to pass the group, then present them to Congress as a "bipartisan fix".

The reason for the task force is easy, the Democrats, specifically the President, want the cover of bipartisanship before they present a laundry list of tax increases they believe are necessary to fix the budget.

The President's problem is that the Senate Republicans saw through that smokescreen and said no, and probably shockingly to the President, the left is balking also. It seems they don't want the GOP involved in any negotiations on how to fix Social Security and Medicare, which have to be on the table to fix the budget.

Welcome to reality Mr. President, and your lack of gravitas in the Congressional arena is beginning to show. It appears that the reality that you can't freeze discretionary spending and balance a budget that's off by a trillion bucks has set in. Now, faced with a tough choice on how to do it, instead of making a decision and presenting it, you've once again tried to defer to others, this time though, they aren't so willing to do your bidding.

The truth is health care reform is going to seem like a walk in the park compared to fixing the structural imbalance in our budgets. While Pelosi and Reid are more than happy to be your point folks on health care, that's because that project can be spun as a positive, even with it's tax increases.

Fixing the budget, though, can't be spun that way. Tough cuts have to happen, and tax increases, especially the payroll taxes for Medicare and Social Security, will probably have to be part of the equation. Along with them is a likely cut of some sort in benefits. Pelosi and Reid can already see the commercials come election time, and don't like them, so they won't be giving you the cover you want.

So what should the President do? Well, Wednesday he's got the bully pulpit of his State of the Union address. That would be a good place to challenge Congress to come up with a plan for fixing the budget. His proposed freezes starting in 2011 are a nice gesture, but they aren't enough to do any real good. He should propose a few specific cuts in the budget as places to start.

My guess is he won't. Mr. Obama has proven one thing his first year in office, when it comes to talking he's got a huge game. When it comes to leading, making decisions, and getting the ball rolling in the right direction, he can't do it, and won't be pushed into it.

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Good Health Care Reform Reading

Need some good reading on health care reform? Try the Director of the Congressional Budget Office's blog. That's right, the director of the CBO has a blog.

Here's his preliminary analysis of the House proposal. Cheaper health care is going to increase the deficit over a trillion dollars? So much for President Obama's "revenue neutral" promise.

Here's the Director's letter to Charlie Rangel, explaining the budget consequences of just the insurance mandates in the bill. Just this portion increases deficits by a trillion dollars over 10 years!

Want to be scared? Here's his long term budget outlook. Keep in mind, it's based on current programs, not including the proposed legislation on health care. As he points out, current mandatory program spending (Social Security, Medicare, etc) is unsustainable. Now we want to add a hundred or so billion to that unsustainable trajectory each year.

A few things about the CBO, it's a non-partisan office. Congress in the past has agreed to use CBO estimates; not congressional staff estimates; when deciding what something will cost. The Democrats have tossed that idea out the window on health care reform. They don't want you to get someone elses numbers.

One of the problems with CBO scoring is that it uses "static" numbers to do it's calculations. It's almost always overestimated the effect of a tax increase, and the amount of deficit added by tax breaks.

In the case of health care, their trillion dollar increase in the deficit is based on the idea that none of the folks getting hit with a surtax on their income will adjust their income to reduce that tax burden. History shows us the vast majority of them will, and the amount of taxes collected will be considerably lower than what's projected.

Before you believe what your Congressman, Senator or President are telling you about the health care reform, check out those links. Then ask yourself, are you willing to pass that much deficit on to your children and grandchildren, since they'll be the one's paying for it.

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Mind Your Helm

Many years ago I learned how to steer a ship. Not a boat, a ship. And I didn't get to cut my teeth on a small one, instead it was 54,000 tons of prime US steel named USS New Jersey.

I got that experience at probably the worst time you could learn to drive something large and lumbering, when it was moving slowly, and had a lot of restrictions on what you could do.

At 25 knots New Jersey steered like a dream, 15 degrees of rudder was probably too much for most turns. But try driving something almost 900 feet long, drawing 30 some feet of water at 5 knots, and all of the sudden 15 degrees of rudder was needed just to correct your course. Turn off a few of the propellers to save fuel and then all of the sudden maybe 20 degrees or more was needed.

Where am I going with this? Our President, of course. It seems that like me, he didn't start to learn to steer on anything small, say a Senate Committee or governorship. He decided he wanted to drive a big ship right away (I didn't get a choice). Much like my early turns on the helm, the President seems to be given to over use of his rudder, sending things turning wildly. The problem is that it takes much more work to correct for oversteering than the initial mistake.

I was lucky, I was surrounded by results oriented people as I learned to drive a big ship. Their goal was to teach me how to do it right, and safely. Unfortunately for Mr. Obama, he's surrounded himself with agenda oriented people, who don't seem to care about the results, as long as they include their agenda item.

I was lucky to have people who would tell me to check my rudder, and mind my helm when I started drifting. Mr. Obama seems to have people that don't really care how far he swings the ship, as long as they hit their course eventually.

I do, however, understand the politics of what they are doing. There is a reason that a 3.6 trillion dollar budget was tossed out their for this year. Trying to push his expansion of government next year, with primaries for everyone in the House and a third of the Senate wouldn't work. They'd get eaten alive. So do it now, while you can. And, because once a social program is started it's nearly impossible to kill, better to try starting them when you have the best chance.

I will say this, I never had enough balls to tell the Officer of the Deck my rudder was at 15 degrees when it was at 25. Why? He had a repeater in front of him and could see what I was doing. The American people have one too, the press, the CBO, OMB, and they've all said we will be running huge deficits, TRILLION DOLLAR plus deficits most of the next 10 years. Yet Mr. Obama had the balls to tell us all on TV and in his online chat today that his budget gets us back to fiscal responsibility. When? Sorry, Mr. President, you are a bald faced liar, your own 10 year budget plan proves it.

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Why Not Just Cut Taxes?

President Elect Obama has decided that the $175 billion "economic stimulus" he suggested during the campaign may not be enough to get the economy rolling again. So now, he's discussing a plan somewhere between $500 and $700 billion dollars. (GPO linked XL spread sheet. Cell BI)

To put this in perspective, that's between 40 and 60 percent of all personal income tax revenue estimated to be collected for FY 2008. If you do the low end of it, $500 billion, that would be every bit of tax income paid by the bottom 95% of tax payers; folks with an income under $153,000 in 2006. (Tax Foundation Table).

This begs the question, why not just eliminate the income tax on the lower 95% of the population for the next year or so? That seems to be the simple solution to getting that money out there. But there is are political reasons it won't be done.

Simply put, Mom and Pop feel better about getting a check from Uncle Sugar than they do about seeing their paycheck go up a few bucks. Over 40% of tax payers complain about their income tax, yet don't actually pay any. They see the money come out of their check, but then come April, get a refund with tax credits that is more than they paid in. They like that check, and seeing taxes deducted over the course of a year gives them something to bitch about, and politicians a way to claim the little guy is being screwed.

The second reason is that by cutting taxes directly, you aren't able to pay off the lobbies and interest groups that got you elected. If instead you send that $175 billion back to tax payers, and spend the other $325 billion on infrastructure projects, you can make a lot of folks in a lot of industries that invested in you happy.

For those not familiar with this method, it's known as the Chicago way. Our state leaders; the mentors of Barack Obama; have become the national experts at buying votes from interest groups with OPM (other peoples money). It was a trend started in Chicago (hence the name) to keep the Original Mayor Daley in power, and has spread to our state capital in a big way. Big enough to have the last Governor in prison and the current one under investigation by the feds.

If you think you need help from road builders, get a federal grant and spend a billion or so, spread among the 10 biggest, and redo every major freeway in Chicago, at once. Want help from health care providers, expand the state health care system to pay for just about anyone, then let the judges say it's illegal. It's how we do business here in Illinois.

President Obama would like to carry this quaint midwest tradition to the White House, deficit be damned. And, great for his union buddies, The Davis Bacon Act makes sure that all that infrastructure money gets funneled through them.

Yes, a tax cut would get the money back to the people in the most efficient manner, but let's not get confused here. The purpose of the economic stimulus expansion has much less to do with you, the tax payer getting something than it does with paying back political backers.

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Associated Press Reality Check

The AP, in a flagrent act of journalism, put out an article called "Democrat's Vision Will Collide With Reality". Five AP writers put together a laundry list of Obama and Democratic promises this year, and then check them against both the fiscal reality of a $482 billion dollar deficit, and the reality of the world.

I will say that I have one issue with the article. They took the easy way out on the tax plans of both Obama and McCain and used static numbers to determine what their plans would mean. That method of calculation has been completely discredited over the last 28 years, since income went up, not down, when Reagan cut taxes.

It's not pretty. Even with his tax increase ideas, Obama's plans come out costing hundreds of billions per year, and as they point out, many of the promises are either too vague to know the exact cost, or unlikely to get past congress.

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