By Peter Ferrara on 3.2.11 @ 6:08AM
As they resist budget restraint and Wisconsin’s reforms, their ideal becomes a crumbling city where government accounts for 40 percent of available jobs.
House Republicans have fulfilled their campaign pledge to cut $100 billion in spending in the first year, passing a continuing resolution (CR) on February 19 cutting that much for this year from President Obama’s 2011 budget, which was exactly their pledge. That involves a $61 billion cut for the rest of this year from the baseline of the CR that is now funding the government through March 4.
The deficit in President Obama’s 2011 budget is more than 16 times the size of that $100 billion cut at $1.645 trillion, according to the President’s own January budget report. Yet the Democrats are vociferously objecting even to that small down payment on the cuts that are necessary and still to come!
Government Spending = Prosperity, Not!
Rep. Chris Van Hollen (D-MD), ranking Democrat on the House Budget Committee, went on CBS’s Face the Nation on February 20 to argue that the Republicans’ draconian spending cuts equal to 2% of the 2011 budget, and 6% of the 2011 deficit, would destroy 800,000 jobs. The Wall Street Journal tracked down the foundation for that number, and found it was a fabrication put out by the Economic Policy Institute, a disreputable union front.
But Van Hollen was not off on a frolic of his own. His argument does reflect the thinking of the entire Democrat party, and of President Obama, reflected consistently in his State of the Union address. The Democrats are fully and firmly committed to the belief that increased government spending is the source of jobs, economic growth and prosperity.
That was the dominant Keynesian thinking in the period from the 1930s to the 1970s, when it crashed and burned among sentient folks in the hopeless inflation/recession cycles of the '70s decade. The fallacy is failure to recognize that the money for government spending must come from somewhere. If it comes from taxes, the money for the spending comes out of the economy, and the higher tax rates increase disincentives to growth. If it comes from more deficits and borrowing, the money also comes out of the economy, and it contributes less to growth in the public sector than in the private sector. Increased government spending, taxes, deficits and debt are all a drag on the economy rather than a boost.
But the liberal Democrats are stuck in that 1930s-1970s thinking, and that is why as soon as they were back in power, the Obama Administration went right back to that with its trillion dollar stimulus bill and Obamanomics. That was supposed to keep unemployment below 8%, with total employment by the end of 2010 projected at 137.6 million jobs as a result. In reality, by the end of 2010, we were 7.4 million jobs short of that deluded expectation, still another failure of Keynesian economics proving that thinking yet again disastrously wrong.
In today’s modern world, that 1930s-1970s Keynesian thinking can only be attributed to a poor education. What increases economic growth, jobs and prosperity is not government spending but increased production, which comes from increased incentives for production. That means lower tax rates and regulatory costs on production. That was the new, more modern, supply-side economics that President Reagan brought to Washington, resulting in a 25-year economic boom without inflation. The rest of the world watched and learned from Reaganomics, which is why countries like China, India, and Brazil have been growing steadily. America is starting to fall behind now because the Democrats are taking us back to the 1930s-1970s era, with their Rip Van Winkle economics pretending that everything since 1980 except the financial crisis of 2008 never happened.
The Republicans’ $100 billion spending cut is just a small down payment on what is necessary and what is coming in House Budget Committee Chairman Paul Ryan’s 2012 budget that will set spending on a different course for the next several years. If the Democrats cannot abide even a 2% cut for 2011, with a $1.645 trillion deficit, they will be on a different planet when it comes to Ryan’s 2012 budget.
What the Democrats are revealing on a daily basis right now is that they are at war even more with the Tea Party than with the Republican Party. Tea Party activists take note, the daily message of the Democrats right now is that the Republicans don’t want to spend enough. The Democrats are even saying now that smaller deficits and debt will be bad for the economy.
The awful truth is that the Democrats consider the Tea Party and its grassroots activists to be on another planet, and bitterly oppose everything they believe in. That is what was reflected in Rep. Barney Frank’s recent comment comparing the Tea Party to a meeting between the Mad Hatter and the White Rabbit.
With this political dynamic going on, Republicans would be foolish to be intimidated into backing down by the threat of a government shutdown. Dogging them is a widespread misreading even among conservatives over what happened in the 1995 government shutdown battle. Then House Speaker Newt Gingrich and the Republicans won the substance of that battle, as Clinton agreed to most of their spending cuts and tax cuts in the end. The result was a booming economy in the late 1990s, and the transformation of $200 billion budget deficits at the time into historic, unprecedented budget surpluses, peaking at a record $236 billion in 2000.
Nor did Gingrich and the Republicans lose the politics of that fight. In 1996, the House Republican majority was reelected, along with the Senate Republican majority, the first time that had happened in almost 70 years. What has been overlooked is that Clinton sailed to reelection not only because Dole was hopeless, but because the public was rewarding him for agreeing to the Republican spending and tax cuts.
As a matter of pure politics, that is the bigger danger for the Republicans in the looming budget battle, that Obama will revive his now hopeless prospects for reelection by in the end embracing the Republican budget agenda. We can already see the political possibilities in that with the public approval bubble Obama got from agreeing to extend the Bush tax cuts. The real lesson for Republicans is that they must drive a hard bargain before they come to agreement with the Democrats on the budget. Adding to that is that the Republicans will lose standing with Tea Party independents for any such budget deal they make caving in to more spending for the Democrats.
Democrats versus Democracy
Adding to the building Democrat war with the Tea Party is the Democrats’ disgraceful antidemocratic conduct in Wisconsin. What they are doing has not yet been rightly recognized in the public commentary. The fleeing of the 14 Democrat state senators out of the state, shutting down the legislature in the process for lack of a Senate quorum, amounts to refusing to abide by the results of last November’s elections.
In those elections, the voters gave the Republicans a 20-14 Senate majority, along with the Republican state house majority. The Democrat response has been to shut down the Senate by refusing to serve. The Democrats seem to think they have a right to limit what the people can vote for. If the voters go too far, what the Wisconsin state senators are telling us is that they have the right to nullify the election by shutting down the legislative process altogether.
What they are doing is not at all analogous to a filibuster. The filibuster rules in the U.S. Senate were adopted by the democratic process through a vote of the elected representatives of the people. Shutting down the Senate by refusing to show up is not authorized by the democratic process. It is directly counter to it.
Governor Scott Walker’s position on collective bargaining for state and local government workers is to the left of FDR and former AFL-CIO President George Meany. The pay and benefits of federal workers are not set by collective bargaining. They are set by Congress through the democratic process. Most fundamentally the reason for that is that unions do not have the right to sit at the bargaining table as equals with the democratic process and the will of the people. The unions are not an aristocratic fourth branch of government with the right to veto democracy and the will of the people. They are rightfully subject to democracy and the will of the people, like everyone else. That is why even President Obama could recently announce a freeze on the pay of federal employees, without collective bargaining over it.
Collective bargaining for state and local government workers inherently involves conflict of interest, bribery, and kickbacks. The government unions use the money they get from the taxpayers to put friendly politicians in office, who then negotiate sweetheart deals giving away pay and benefits to state and local workers far in excess of what the average taxpaying worker can earn in the private sector. The government unions even use the taxpayer funds they get from their political benefactors to finance commercials and campaign activities to promote tax increases, as they are doing right now in New York City, which already suffers literally the highest tax rates in the world, outside effectively of North Korea and Cuba.
Note that what the government unions are fighting hardest for in Wisconsin is not the pay and benefits of their workers. They have already given in on that to what Walker is asking for. What they are fighting for is the institutionalized corruption that empowers them to enjoy taxpayer funds for their political machine. It is Walker who is offering the real benefit to state and local workers, by empowering them to be free to choose whether or not to pay union dues, an effective tax cut of as much as a $1,000 a year, rather than having the government take that money from them and deliver it directly to the unions. This is the most important reform in the whole package, on which the Republicans must not compromise.
But those who are being exploited today are not the state and local government workers. It is the blue collar taxpayers in the private sector who are forced to pay for government worker pay and benefits far in excess of their own, through what amounts to institutionalized government corruption. Rush Limbaugh framed the issue correctly for the public yesterday. Do you want to pay higher taxes to finance pay and benefits for government bureaucrats that are far higher than what you can get in the private sector? Don’t tell me the public supports that, and Republicans would be crazy to allow the left-wing extremist media to delude them into that.
To the contrary, it is time for the Republicans in Wisconsin to put an end to the Democrat party’s revolt against democracy. The Wisconsin Senate Majority Leader must opine that from all appearances the seats of the 14 long missing Democrat state senators are vacant, and submit new Senate quorum rules for a vote based on the number of seats that are occupied. If the antidemocracy state senators hiding out of state who are refusing to serve do not like it, they can come back to object in accordance with the democratic process. Otherwise, the Wisconsin Senate should then just proceed with state business.
The Democrat/Government Union Detroit Model
Where the hard left government unions and their Democrat party benefactors would take America can already be seen in harsh reality in the experience of Detroit, where they have ruled without question for over 60 years.
In 1950, the population of Detroit stood at 1.8 million people, and the city enjoyed the highest median income of all major cities in America. Over the ensuing decades in which the city’s politics was a competition solely among the government unions and the most extreme left-wing of the Democrat party, working people, the middle class, businesses small and large, and capital investment increasingly fled the city and its high taxes, oppressive regulations, and poor services. Today the city is a shrunken, hallowed out shell of its former self, with less than half of its former population at 871,000 people. Moreover, its median household income now ranks 66th among major American cities.
The city government itself is the second largest employer in Detroit, right behind the city’s public school system. In fact, of the city’s 25 biggest employers, the state, county and city governments account for 40 percent of all jobs. The city employs one worker for every 50 city residents remaining, compared to Indianapolis which employs one worker for every 223 residents.
This municipal socialism is not working. In late 2010, unemployment in Detroit was stuck at 13.4%, 40% higher than the national average at the time. This reflected not a cyclical problem, but a long-term depression in Detroit. One-third of Detroit residents live in poverty.
Less than one-fourth of the public school students in Detroit graduate on time from high school, the lowest graduation rate in the country. Yet spending per pupil in Detroit public schools is higher than in wealthy Marin County, California, where the high school graduation rate is 97%. Indeed, for their performance, Detroit public school teachers enjoy the highest pay in the country among major metropolitan areas, at $47.28 per hour. Yet, citing supposed budget reductions, the Detroit public schools actually asked parents to provide toilet paper for the schools.
With Detroit’s dramatic loss in population over the decades, half the housing stock in the city is now vacant. Recent city government deliberations have considered just demolishing all this vacant housing. What this means is that over half a century of uniform governance by liberal/left politicians has led to the city now literally starting to disappear beneath their feet.
Yet the Democrats and the government unions comprising their political machine never learn. Their aristocratic attitude would reduce America to third world status if the Republicans, the Tea Party and the American people do not stop them.
Peter Ferrara is Director of Entitlement and Budget Policy at the Heartland Institute, General Counsel of the American Civil Rights Union, Senior Fellow at the National Center for Policy Analysis, and Senior Policy Advisor on Entitlements and Budget Policy at the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.
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