Bipartisan Consensus? Taxpayers Beware
This column, Other People's Money, is written by CNET's Declan McCullagh. It will appear each Wednesday on CBSNews.com.
If you're an American taxpayer, the most worrisome seven words in the English language may be "a bipartisan consensus has emerged in Washington."
That's what seems to be happening with $300 billion of proposed stimulus spending that congressional Democrats have championed. They got a boost this week when Fed Chairman Ben Bernanke said it was "appropriate" for Congress to consider the plan.
House Speaker Nancy Pelosi invoked that endorsement to pressure the White House. "I call on President Bush and congressional Republicans to once again heed Chairman Bernanke's advice and ... work with Democrats in Congress to enact a targeted, timely, and fiscally responsible economic recovery and job creation package," Pelosi said. (See related video on CBSNews.com.)
President Bush and other Republicans had been skeptical of another round of bailout-related spending. But after Bernanke's remarks, Bush's press secretary told reporters the president might be open to such a proposal.
Details of the plan are still unclear. Some likely components include more public works spending, more unemployment benefits, more Medicare spending, more food stamps, and more "stimulus checks" akin to checks mailed earlier this year to some taxpayers.
It's not clear that another $300 billion of more deficit spending - more than six times the size of the Department of Homeland Security's 2009 budget request - is wise or necessary.
Washington's current bipartisan consensus says that deficits don't matter. The size of the national debt supposedly doesn't matter. Neither does the cost of the Iraq war, which one book puts at $3 trillion. Or the price tag on any bailouts.
In reality, though, U.S. taxpayers will be forced to pick up the tab one way or another, either through taxes to pay for interest on government bonds, or through higher inflation (a regressive tax that harms the poor more than the affluent).
At the dawn of Bill Clinton's presidency, government debt was $4.3 trillion, and increased by only $1.4 trillion in eight years. Now, thanks to the bipartisan enthusiasm for spending in Congress, the debt limit has been lifted to $11.3 trillion -- and the debt itself has ballooned to over$10.3 trillion, not counting future Social Security and Medicare payments.
The price of this whopping government debt is that taxpayers have been paying over $450 billion a year in interest. Soon that will exceed $500 billion.
If politicians had not run up the nation's credit card, income taxes could be almost 40 percent lower. Eliminating congressional pork and other pet spending projects could slice taxes even further. (The IRS collects $1.37 trillion a year in individual income taxes; only $860 billion would be required without interest payments.)
That's approximately as likely as the New York Times endorsing John McCain and Sarah Palin.
Because Democrats hope to enact their $300 billion spending bill soon after the November 4 election, Bush enjoys some temporary leverage. If he and other Republicans can't defeat the bill, they should insist on preventative measures that would reduce the odds of a second financial calamity.
One option is to gradually privatize Fannie Mae and Freddie Mac and eliminate any implicit or explicit taxpayer subsidy. That's been contemplated by the Congressional Budget Office and endorsed by the American Enterprise Institute. A 2006 study published by the Federal Reserve Bank of Boston found "no evidence" that Fannie and Freddie's existence helped low-income and first-time homebuyers.
In the past, opposition from Fannie and Freddie executives and their allies on Capitol Hill would have thwarted privatization. This is the best chance for reform in a generation.
Another option is to fix regulations that encourage banks to divvy up mortgages through a process called "securitization."
Arnold Kling, a Freddie Mac senior economist turned blogger, notes the perverse incentives that created such a securitization frenzy. The FDIC allows a bank to hold less capital against (that is, take more risks with) low-down payment subprime mortgages that it bought from someone else than it can with high-down-payment mortgages that bank employees sold to longtime, trusted customers.
Any post-election bailout or "stimulus" bill should include real reforms. We'll soon see if Washington's bipartisan consensus is up to the task.
Declan McCullagh is the chief political correspondent for CNET. He previously was Wired's Washington bureau chief and a reporter for Time.com and Time magazine in Washington, D.C. He has taught journalism, public policy, and First Amendment law. He is an occasional programmer, avid analog and digital photographer, and lives in the San Francisco Bay area. His e-mail address is declan.mccullagh@cnet.com
By Declan McCullagh
Copyright 2009 CBS. All rights reserved. If you're an American taxpayer, the most worrisome seven words in the English language may be "a bipartisan consensus has emerged in Washington."
That's what seems to be happening with $300 billion of proposed stimulus spending that congressional Democrats have championed. They got a boost this week when Fed Chairman Ben Bernanke said it was "appropriate" for Congress to consider the plan.
House Speaker Nancy Pelosi invoked that endorsement to pressure the White House. "I call on President Bush and congressional Republicans to once again heed Chairman Bernanke's advice and ... work with Democrats in Congress to enact a targeted, timely, and fiscally responsible economic recovery and job creation package," Pelosi said. (See related video on CBSNews.com.)
President Bush and other Republicans had been skeptical of another round of bailout-related spending. But after Bernanke's remarks, Bush's press secretary told reporters the president might be open to such a proposal.
Details of the plan are still unclear. Some likely components include more public works spending, more unemployment benefits, more Medicare spending, more food stamps, and more "stimulus checks" akin to checks mailed earlier this year to some taxpayers.
It's not clear that another $300 billion of more deficit spending - more than six times the size of the Department of Homeland Security's 2009 budget request - is wise or necessary.
Washington's current bipartisan consensus says that deficits don't matter. The size of the national debt supposedly doesn't matter. Neither does the cost of the Iraq war, which one book puts at $3 trillion. Or the price tag on any bailouts.
In reality, though, U.S. taxpayers will be forced to pick up the tab one way or another, either through taxes to pay for interest on government bonds, or through higher inflation (a regressive tax that harms the poor more than the affluent).
At the dawn of Bill Clinton's presidency, government debt was $4.3 trillion, and increased by only $1.4 trillion in eight years. Now, thanks to the bipartisan enthusiasm for spending in Congress, the debt limit has been lifted to $11.3 trillion -- and the debt itself has ballooned to over$10.3 trillion, not counting future Social Security and Medicare payments.
The price of this whopping government debt is that taxpayers have been paying over $450 billion a year in interest. Soon that will exceed $500 billion.
If politicians had not run up the nation's credit card, income taxes could be almost 40 percent lower. Eliminating congressional pork and other pet spending projects could slice taxes even further. (The IRS collects $1.37 trillion a year in individual income taxes; only $860 billion would be required without interest payments.)
That's approximately as likely as the New York Times endorsing John McCain and Sarah Palin.
Because Democrats hope to enact their $300 billion spending bill soon after the November 4 election, Bush enjoys some temporary leverage. If he and other Republicans can't defeat the bill, they should insist on preventative measures that would reduce the odds of a second financial calamity.
One option is to gradually privatize Fannie Mae and Freddie Mac and eliminate any implicit or explicit taxpayer subsidy. That's been contemplated by the Congressional Budget Office and endorsed by the American Enterprise Institute. A 2006 study published by the Federal Reserve Bank of Boston found "no evidence" that Fannie and Freddie's existence helped low-income and first-time homebuyers.
In the past, opposition from Fannie and Freddie executives and their allies on Capitol Hill would have thwarted privatization. This is the best chance for reform in a generation.
Another option is to fix regulations that encourage banks to divvy up mortgages through a process called "securitization."
Arnold Kling, a Freddie Mac senior economist turned blogger, notes the perverse incentives that created such a securitization frenzy. The FDIC allows a bank to hold less capital against (that is, take more risks with) low-down payment subprime mortgages that it bought from someone else than it can with high-down-payment mortgages that bank employees sold to longtime, trusted customers.
Any post-election bailout or "stimulus" bill should include real reforms. We'll soon see if Washington's bipartisan consensus is up to the task.
Declan McCullagh is the chief political correspondent for CNET. He previously was Wired's Washington bureau chief and a reporter for Time.com and Time magazine in Washington, D.C. He has taught journalism, public policy, and First Amendment law. He is an occasional programmer, avid analog and digital photographer, and lives in the San Francisco Bay area. His e-mail address is declan.mccullagh@cnet.com
By Declan McCullagh
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Now, why is a certain group people still stuck on the same two parties, I believe we all need a new party in the White House. Having the same last two parties has just gotten too old -- just by looking at their campaign ads, them two just can''t get along together.
The first step is to TAKE IT AWAY from the crooks who have it now.
VOTE THEM OUT!
VOTE THEM *ALL* OUT!!
EVERY SINGLE ONE!!!
We are better off when there is partisan division and conflict, because then one party stops the other one from doing what it wants.
But when they start agreeing, we''re in trouble.
THE BEST GOVERNMENT MAY BE NO GOVERNMENT AT ALL, when we have leaders like these.
VOTE THEM ALL OUT!!!
All we are going to have is heart-ache if he gets in the Office of President.
GOD HELP US ALL
Posted by gotravel1 at 09:28 PM : Oct 22, 2008
Bill Clinton started the WMD lie.
Throughout his presidency, whenever he was feeling unpopular, he launched an airstrike against some small, distant nation. He learned from he predecessor that being a warrior president does wonders for your popularity polls.
So, just days before his scheduled impeachment vote, Slick Willy attacked Iraq with - guess what - an AIRSTRIKE (ooh, what a surprise). He made a televised speech explaining that it was because Saddam had WMD''s.
Funny how NOBODY called him a liar when HE said it. Even though NO WMD''s had been found in Iraq during his time in office.
But when George W Bush said THE SAME THING, all the libtards jumped all over it and called him a liar.
You see, Slick Willy is a better liar than Dubya. Slick Willy knows NOT TO PROVE YOUR LIE IS A LIE. Slick Willy only waged a quickie war and pulled out. Dubya went in FOR THE DURATION and OCCUPIED THE TERRITORY - and FAILED TO FIND ANY WMD.
What are the chances there WERE WMD when Clinton said so and NOT when Bush said so? Do you REALLY believe that Clinton''s airstrike against SUSPECTED WMD sites COMPLETELY DESTROYED ALL WMD without a trace, even though the location of any possible WMD was NOT KNOWN for certain???
Colin Powell convinced the UN that there were WMD in Iraqi that committed us to the war,and now Bushes man has endorsed Obama.How ironic!Remember how the country felt after 9/11;we were dumbfounded that such an attack could happen in America.Why should I trust Obama,who is naive on foreign affairs,when Biden warns us of an inevitable attack,and "we''ll need to trust them because it may not be apparant that they''re right".Bringing up Obama''s friends is not an insignificant point because that says alot about his beliefs,and supporting Raila Odinga shows very distorted judgment.Obama is succeeding in convincing you that all that matters is the economy so you won''t focus on his other weaknesses.By the way,what makes him such an authority on the economy?What has he done in Chicago?Now because he can sit at a table and discuss the issues makes him an expert."WORDS" are cheap,but Obama has nothing to back them up.EMPTY WORDS!
That''s a split infinitive.
Pelosi can''t even SPEAK ENGLISH properly.
Posted by maxify55 at 05:11 PM : Oct 22, 2008
When? ELECTION DAY. It''s coming next month.
More importantly, WHO?
That would be YOU, when YOU vote against the current Congress.