Friday, July 29, 2011

Reagan the Statesman - Rich Lowry

> As for raising taxes, Reagan acceded to a big tax increase in 1982 only after a historic, much larger cut in 1981. He gave a little back after finding a shift in the political climate on Capitol Hill too difficult to resist. (He later regretted surrendering, since the budget cuts promised in exchange for the tax hike never materialized.) With the Soviets, he negotiated only when he knew he had a position of strength. These moves were the zigs and the zags of Reagan pursuing his highest goals of fundamentally lower taxes, a freer economy, and the defeat of the Soviet Union.
>> Few on the left considered these goals reasonable at the time. They seem so commonsensical now because Reagan effected them, against the pitched resistance of his adversaries and the contempt of polite opinion. Reagan changed the definition of “reasonable.”
>> The liberals’ hankering for Reagan is only possible when they abstract him from the context of his times and focus on his pragmatic tactics to the exclusion of his fixed ideological goals. Some conservatives make the opposite mistake by ignoring Reagan’s adept maneuvering, as if the only ingredient to his success was maintaining the right convictions.
>> Both sides, then, tend to misunderstand the well-springs of Reagan’s achievement. Having grand goals is easy, if you don’t care much about reaching them. Cutting deals is easy, if you don’t care much about where they take you. Knowing how to accommodate reality, when to give way and when to stand firm, while never deviating from your ultimate purposes, is the stuff of statesmanship.

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The Great Debate: Candidate Obama Vs. President Obama

Both agree that it's all George Bush's fault!

Video from Breitbart at the link:

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Tuesday, July 26, 2011

Reagan’s Error - By Yuval Levin

Well, yes, those words were spoken by Ronald Reagan (in August of 1982) in reference to TEFRA—the Tax Equity and Fiscal Responsibility Act—which congressional Democrats promised would involve a ratio of $3 in spending cuts for every $1 in tax increases (which they said would consist only of closing loopholes). TEFRA passed later that year, and the tax increases certainly happened but, as Reagan later put it in his autobiography, “the Democrats reneged on their pledge and we never got those cuts.”

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Raise Taxes on the Poor?

Richard Epstein writes:

A sound flat tax policy will benefit people on all portions of the income spectrum. Unfortunately, Democrats think that progressive taxation has desirable redistributive effects with few adverse economic effects. But today’s profound fiscal malaise should offer them a wake-up call: their views on taxation hurt the constituency that they most want to help. If Democrats could learn that income redistribution has real limitations as a social strategy, and if Republicans could work hard to make sensible reforms to tax policy, then we would be well on our way to a sound budget deal. Until then, the road to true reform remains rocky even if the United States manages to avoid default this time around.

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Sunday, July 24, 2011

The Democrat Downgrade: Reality and Repercussions - By Kevin D. Williamson

The thing that has not been sufficiently understood,  I think, is this: The United States is not on a downgrade watch because the markets fear we won’t raise the debt ceiling in time to avoid a default; the United States is on a downgrade watch because the markets believe the debt-ceiling debate presents the last real opportunity for the government to enact a meaningful fiscal-reform program before it is well and truly too late to avoid a national crisis. The credit agencies, wisely or not, aren’t worried about the short-term political fight leading to an immediate default, but about the near- to medium-term fiscal situation, which is plainly unsustainable.

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Contrary to the President, Social Security Checks Are Not At Risk

Michael McConnell writes:

The Social Security trust fund holds about $2.4 trillion in U.S. Treasury bonds, which its trustees are legally entitled to redeem whenever Social Security is running a current account deficit. Thus, if we reach the debt ceiling (which I continue to think is a remote prospect, even if less remote than it seemed a week ago), this is what will happen. The Social Security trust fund will go to Treasury and cash in some of its securities, using the proceeds to send checks to recipients. Each dollar of debt that is redeemed will lower the outstanding public debt by a dollar. That enables the Treasury to borrow another dollar, without violating the debt ceiling. The debt ceiling is not a prohibition on borrowing new money; it is a prohibition on increasing the total level of public indebtedness. If Social Security cashes in some of its bonds, the Treasury can borrow that same amount of money from someone else.

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Friday, July 22, 2011

Greece defaults

The official statement from the IIF, which is representing private-sector creditors in this matter, is a little vague, but essentially if you’re a holder of Greek bonds right now, you have three [sic] choices.

• You can do nothing, and hope that Greece pays you in full and on time.
• You can extend your maturities out to 30 years, and accept a modest coupon of 4.5%; in return, your principal will be guaranteed with an embedded zero-coupon bond from an impeccable triple-A-rated EU institution, probably the EFSF.
• You can extend your maturities out to 30 years, take a 20% haircut, and get a higher coupon of 6.42%; again, the principal is guaranteed with zero-coupon collateral.
• You can extend your maturities out to 15 years, take a 20% haircut, get a coupon of 5.9%, and have only a partial principal guarantee through funds held in an escrow account.

The first option is by far the most interesting. No one has come out and said that Greece is going to default on bondholders who don’t exchange their bonds; instead, there’s just a lot of arm-twisting of big banks to do all this “voluntarily.” But that won’t stop the credit rating agencies giving Greece’s bonds a default rating — this is a coercive deal, which clearly reduces the value of banks’ Greek debt. (After all, just look at those haircuts.)

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Tuesday, July 19, 2011

A ‘Debt Limit’ Compromise

Richard A. Epstein writes:

> In grappling with these various government programs, we should not first ask how they should be to be funded—we should ask instead: what is the proper size of these programs? On this issue, it is clear that neither the Democrats nor the Republicans have kept faith with the key principle of sound government, which is the presumption that dollars used for ordinary goods and services go a lot further when the money is left in private hands.
>> The appalling waste of both the Bush and especially the Obama stimulus programs was based on the fatal Keynesian presumption that it makes sense for the government to make expenditures that everyone would deem wasteful, even farcical, if undertaken by private parties. It makes no sense for any private firm to hire workers first to dig holes and then to refill them. It makes no more sense to tax private firms an amount that allows government employees to undertake those same useless acts.

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Monday, July 18, 2011

How Khan Academy Is Changing the Rules of Education

Khan Academy is an educational website that, as its tagline puts it, aims to let anyone “learn almost anything—for free.” Students, or anyone interested enough to surf by, can watch some 2,400 videos in which the site’s founder, Salman Khan, chattily discusses principles of math, science, and economics (with a smattering of social science topics thrown in). The videos are decidedly lo-fi, even crude: Generally seven to 14 minutes long, they consist of a voice-over by Khan describing a mathematical concept or explaining how to solve a problem while his hand-scribbled formulas and diagrams appear onscreen. Like the Wizard of Oz, Khan never steps from behind the curtain to appear in a video himself; it’s just Khan’s voice and some scrawly equations. In addition to these videos, the website offers software that generates practice problems and rewards good performance with videogame-like badges—for answering a “streak” of questions correctly, say, or mastering a series of algebra levels.

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Understanding Cut, Cap, and Balance

Keith Hennessey explains H.R. 2560:

  1. Cut – The bill provides specific numbers to limit both discretionary and mandatory spending for FY12. These numbers would drive further Congressional action this year or else force a Presidential sequester. (I explain a sequester below.) The intent of this section is to force Congress and the President to cut spending immediately.
  2. Cap – The bill would establish a new enforceable limit on total federal spending as a share of the economy. The new caps are designed to phase federal spending down to just below 20% of GDP by FY17 and then hold it there through the end of a 10-year budget window in FY21. Put more simply, this is a new enforceable aggregate spending cap.
  3. Balance – The bill would increase the debt limit by $2.4 trillion after the House and Senate have passed a Balanced Budget Amendment (of a certain type).
Read the whole thing.

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Monday, July 11, 2011

Not Taking Other People’s Money

The problem with socialists, according to Margaret Thatcher, is that “they always run out of other people’s money.” 

My colleagues Kevin Hassett, Andrew Biggs, and Matt Jensen studied 21 developed countries that have attempted fiscal consolidation over the last 37 years. Some succeeded and returned to economic health; -others failed.

On average, failed attempts to close budget gaps relied 53 percent on tax increases and 47 percent on spending cuts. Successful consolidations averaged 85 percent spending cuts and 15 percent tax increases. Some of the most successful financial comebacks—like Finland’s in the late 1990s—involved more than 100 percent spending cuts, so that taxes could be lowered. The spending cuts by the successful countries centered on entitlements and government personnel.

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Sunday, July 10, 2011

TSA Agent Caught With Passenger's iPad in His Pants

While most Transportation Security Administration employees are busy groping people or taking naked pictures of them, the cops say one of those employees was putting fliers' electronics down his pants.

The Broward Sheriff's Office says 30-year-old Nelson Santiago stole around $50,000 worth of electronics over the past six months from Fort Lauderdale-Hollywood International Airport's Terminal 1.

Santiago -- a TSA officer since 2009 -- was caught earlier this week by a Continental Airlines employee taking an iPad out of someone's luggage and stuffing it into his pants, the cops say.

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Thursday, July 07, 2011

A Time for Leadership on Spending - By Ted Cruz

If the debt ceiling is not increased, the Treasury can — and should — continue to honor our debt in perpetuity. Instead of a default, what will be required is a substantial decrease in government spending (akin to a government “shutdown”) until the issue is resolved.

President Obama’s scare tactics, warning of a debt default and a global economic meltdown, are not productive. Instead, the president should listen to the voice of the people — expressed overwhelmingly at the ballot box in 2010.

Voters, quite rightly, are fed up with politicians spending more than we can afford, constantly expanding the size and power of the federal government. Voters instead want a return to limited government that lives within our means, protects our liberty, and honors the Constitution.

As a candidate for Senate, I have signed Senator DeMint’s Cut-Cap-Balance pledge, and I urge other candidates and current members of Congress to do the same.

The most important part of that pledge is the third element — not to raise the debt ceiling until Congress passes (not proposes, but actually passes) a strong balanced-budget amendment, which would include (1) a constitutional requirement that the budget be balanced, (2) a supermajority requirement to raise taxes, and (3) a spending cap, tied to a fixed percentage of GDP.

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Tuesday, July 05, 2011

US Ambassador skips Reagan Celebration in London

This weekend, as America celebrated Independence Day, a statue of President Ronald Reagan was unveiled in London.  Former Secretary of State Condoleezza Rice and others were on hand for the dedication.  The bronze statue sits in the same park as a statue dedicated to the memory of Former President Dwight D. Eisenhower, which was dedicated in 1989 by the Iron Lady herself, Margaret Thatcher.  The Reagan statue is part of the world-wide celebrations celebrating the centennial of Reagan’s birth.

That night, a dinner was held in honor of Reagan.  It capped a day of events that celebrated the life and extraordinary achievements of the 40th President of the United States.  Yet, missing from the dinner – clearly the biggest event of the day – was United States Ambassador Louis Susman.  While he did host a VIP breakfast that morning, Susman was absent from the grandest event, where speeches were given and the memory of Reagan was put forth – reminding everyone of his impact, and his legacy.

[W]hat could the Ambassador to England have on his schedule that is more important than attending a celebration and commemoration of a US president?  Isn’t this, in part, part of the job?

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