Sunday, February 19, 2012

Michigan Primary Issues


With the Michigan more-or-less open primary coming in about a week [you have to select a party ballot, but you don't have to be a member of the party], it would be good to look at the issues as seen by the candidates.  Rick Santorum is making the biggest splash right now in the GOP field, so it reasonable to see what he says.  Here are his positions on the financial issues... from the Rick Santorum website.

I've highlighted those bullet-point PROPOSALS where I believe there are real opportunities for improving government within the next four years and dimmed those that I think are merely symbolic or horse-before-the-cart points.  Those that need more consideration are left as is.  Some are a combination of these.

Spending Core Principles
  • Live within our means so that America, our families, and our future generations will have a brighter future unburdened with oppressive debt and high taxation.
  • Prioritize our national security and defense
  • Refocus the federal government on constitutional priorities and parameters
  • Consolidate duplicative programs and agencies
  • Promote competition for provision of essential services
  • Eliminate outdated, ineffective, and wasteful programs
  • Empower State and Local Governments through partnership, block grants, and reserving functions for the States
  • Reform and Modernize Medicare since reducing healthcare costs is a prerequisite for our long term success and economic strength
  • Reforming Social Security which is essential for solvency, sustainability, and real retirement security
  • Commit to cut $5 trillion of federal spending within 5 2 years. [REAL, NOT PROPOSED OR BUDGETED SPENDING]
  • Implement Strong America Now reform through Lean Six Sigma management process as a key engine for cutting government waste and improving efficiency.
  • Immediately reduce federal (non-defense discretionary spending) to 2008 levels through across the board spending cuts.
  • Freeze defense spending levels for 5 years and reject automatic cuts.
  • Freeze spending levels for social programs for 5 years such as Medicaid, Housing, Education, Job Training, and Food Stamps, time limit restrictions, and block grant to the States like in Welfare Reform.
  • Repeal and Replace ObamaCare with market based healthcare innovation and competition to improve America’s and Americans health, control costs, improve quality and access, and to keep and create jobs which provide resources for healthcare.
  • Pass a Balanced Budget Amendment to the Constitution capping government spending at 18% of GDP so that Congress and the President will need to balance the budget like Governors are required to do.
  • Pass legislation to reform the Congressional Budget Process and support legislation to require Congress to pass constitutionally required spending bills on time or not get paid the next fiscal year. 
  • Implement Medicare Reforms and Innovation proposed by Congressman Paul Ryan and speed up their implementation to control healthcare costs and improve quality.
  • Reform Social Security and place on a sustainable path by a combination of reforms such as addressing adjusting CPI, dependent benefits and disability income benefits reforms, moving back the retirement age for younger workers, means testing benefits, annual adjustments as needed, and dedicating Social Security payroll taxes to Social Security.
  • Implement reforms and cost savings of up to $100 billion in March 2011 GAO report requested by Senator Coburn listing 34 areas of duplication and waste.
  • Stop implementation of any remaining federal stimulus spending.
  • Freeze pay for non-defense related federal employees for four years, cut workforce by 10% with no compensatory increase in contract workforce, and phase out defined benefit plans for newer workers.
  • Eliminate all energy subsidies and most agriculture subsidies within four years. [distinguish between "subsidies" and normal tax accounting rules]
  • Eliminate funding for Planned Parenthood   [... and other tax-exempt organizations] and use half of the dollars to support adoption instead.
  • Cut EPA resources for job killing regulations and return focus to commonsense conservation and safe and clean air and water.
  • Cut in half the number of State Department USAID employees and US funding for United Nations programs.
  • Eliminate funding for implementation of Dodd/Frank regulatory burdens.
  • Eliminate funding for implementation of ObamaCare.
  • Cut funding for National Labor Relations Board for decision preventing airplane factory in South Carolina.
  • Eliminating funding for United Nations’ agencies which oppose America’s interests and promote abortion and cut the US contribution to the UN in half.
  • Phase out Fannie Mae and Freddie Mac within five years.
  • Sell unproductive and wasteful federal properties.
  • Transition Team will review all spending cut proposals and restructuring reforms of the Heritage Foundation, CATO Institute, American Enterprise Institute, and the Simpson-Bowles Commission for additional savings.
A large part of the tax/spending cycle is that the federal government legislates and then worries about funding... or presumes funding will be available... or uses bogus funding assumptions.  Each piece of new legislation that requires resources should have the funding rational included... and verified by independent accounting [CBO, GAO, and private accounting firms].

Spending cuts should focus first on administration costs and then on core costs.  Administration would include the federal bureaucracy established for the program.  More resources should be allocated for auditing; less for bureaucracy.  Individuals, businesses, and states all use borrowing as necessary for avoiding wasteful disruptions to operations when there are economic problems.  But borrowing should be the exception rather than the standard practice.

Waste and fraud should be the initial primary targets for auditing.  A protected-whistle-blower program that rewards 5% up to $10 million of eliminated waste and fraud should be established.  Whistle-blowers cannot be program administrators.  Retaliation against whistle-blowers would be a felony unless it can be shown that the whistle-blower was lying.

Federal grants and loan guarantees of more than $10 million should be required to have congressional approval... individually, not as part of a jumbo authorization bill.

The point is that all government spending should be subject to ongoing checks and balances... not simply authorized.  Slash and burn spending cuts sound appealing, but usually are counter-productive as was the case in the post-Vietnam military cuts.

In fiscal year 2010, the Centers for Medicare & Medicaid Services (CMS)--the agency that administers Medicare and Medicaid--estimated that these programs made a total of over $70 billion in improper payments. [Government Accounting Office]
One further point: Rick Santorum has stated elsewhere that he would not let his views on abortion color his judgment as President. Several points above refer to targeting funding for abortions.  While I agree in principle, such targeting distracts from the central points of responsible government and sets up strawmen for opposition arguments.

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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
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Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)