The 2013 budget being released Monday will propose public works spending while seeking tax increases on the wealthy and corporations to claim progress on the federal deficit in his upcoming budget. The spending plan projects a deficit for this year of $1.3 trillion, the fourth straight year of $1 trillion-plus deficits, and $901 billion next year.

Jacob Lew, the president’s chief of staff, said the new budget would put the country on track to achieve $4 trillion in deficit reductions over the next 10 years, achieved by raising taxes on the wealthy and trimming government spending. Lew said the president’s budget would cut spending by $2.50 for every $1 it raises in new taxes.

“In the long run, we need to get the deficit under control in a way that builds the economy,” Lew said during appearances on the Sunday talk shows. “We do it in a way that’s consistent with American values so that everyone pays a fair share.”

The release of Obama’s spending plan for the budget year that begins Oct. 1 marks the official start to an election-year budget battle over taxes and spending as the nation’s debt tops $15 trillion.

Read more at the Associated Press

Present at the Creation: Adam Hasner, with Marco Rubio Against the Florida GOP Establishment

“A day in politics is like an eternity. A lot of recent events have altered the political landscape,” Adam Hasner told me by phone. Until last week was running for the U.S. Senate, but he is now running for the congressional seat vacated by Allen West.

Though Hasner hesitates to compare himself to West, the two have a lot in common. They are both principled, “minorities of minorities” who have to make  the case to groups not necessarily receptive to the conservative message. “When you are a black Republican or a Jewish Republican, you have to be even more firm in your beliefs and more principled,” Hasner explains.

The past year Hasner, the former majority leader of the Florida House of Representatives, has been running in a crowded primary to unseat Bill Nelson, the senior U.S. Senator from the Sunshine State.

Though Hasner was endorsed by talk show host, Mark Levin, the Family Research Council, and won the Florida straw poll, Hasner struggled to get the attention he needed. He blames the presidential race for “sucking all of the attention out of the room.” There were 350 articles about the Rubio-Crist race in 2010, but less than fifty about the 2012 contest. Hasner had been leading in the polls against George LeMieux, who Governor Charlie Crist appointed before deciding to run in the Senate contest only to lose to Marco Rubio, but Hasner’s lead collapsed when Rep. Connie Mack joined the race in late October and was endorsed by Mitt Romney.

Now Hasner’s hoping to be Allen West’s reinforcement, not replacement, in Congress. Hasner, who raised $1.3 million in his bid for U.S. Senate still has $666,000 cash on hand and has West’s support. West, in turns, plans to run in a friendlier Palm Beach County-based congressional seat after redistricting made his swing district much more Democratic. All within forty-eight hours, Rep. Tom Rooney moved to a new district in the west; West moved to Rooney’s old district up north.

The son of two New York teacher union members and liberal Democrats, Hasner came of age during the Age of Reagan. ”I didn’t inherit conservatism in the bloodstream,” he says, but he paid attention, becoming a lifelong Republican at age 18. “I grew up during the Morning in America. That’s where my politics were shaped.”

Hasner’s bona fides among Jewish conservatives are the genuine article. He likes to joke that he is married into the Jewish conservative movement. His wife, Jillian, worked for the Palm Beach chapter of the Republican Jewish Coalition.

Though the district has gotten more Democratic in redistricting, Hasner is confident that he can win in November. “Every election that I won, I over performed,” says Hasner, the first Jewish majority leader of the Florida house of Representatives. “When John Kerry got 51% I got 58%. I got 60% of the vote, Obama got 52%.”  He adds: “The district I represented [in the Florida House of Representatives] is compromised in the new district. I know this people, people know me, where I lived my whole life.” Hasner, running in one of the most Jewish congressional districts in the country, might be buttressed by a new poll by the Pew Forum on Religion and Life showing that Jewish-Americans are turning from the Democratic Party. Jewish identification with the Democrats slipped from 72 to 65% between 2008 to 2011.

Hasner’s likely opponent is Lois Frankel, the former mayor of West Palm Beach. She is, for all intents and purposes, a morph of Debbie Wasserman Schultz, the leader of the Democratic National Committee. Wasserman Schultz was Frankel’s protégé.

Hasner understands his role clearly.  ”This is going to be a battleground seat in the sense,” he promises. “Whoever is running for president, whoever is running for U.S. Senate, well, the way you a state election is just don’t get too badly beaten in Palm Beach and Breyer County,” he promises.

Hasner made a name for himself in Tallahassee, Florida. “You are constantly outnumbered and being challeneged by the status quo and what everybody expects you to believe. I’ve proven that that’s the type of individual I am. I’ve called out the Republicans as many times as I’ve called out the Democrats.” He took on Charlie Crist. Hasner pushed to eliminate property taxes; Crist opposed it. Crist wanted to take stimulus money; Hasner opposed it. Crist supported Cap and Trade; Hasner opposed it with Marco Rubio, then Speaker of the Florida State House.

Hasner promises to take on the Republicans in Washington, too. He rattles off the issues where the GOP establishment has been disappointing, among them  ”our debt and the payroll tax cut.” ”What people are looking for are candidates and representatives that are going to work hard, tell it like it is. I’m unafraid to do things when it doesn’t poll well.”

You can get a sense of Hasner’s leadership from this video, taken on April 16, 2011.

“We want our leaders to tell it like it is. And if you’re not going to get the job done, we are going to find somebody else who will.  We need to tell them: cut the spending, stop the borrowing, balance the budget, and attack the debt. And we sent that message in 2010, but it was only the beginning. In 2012, we need to send principled, conservative reinforcements to Washington D.C. to get the job done.”

It’s up to the voters of Palm Beach to decide what seems evidence: Adam Hasner is Marco Rubio’s and Allen West’s conservative reinforcement.

Contrasting an America that can versus an America that can’t, Gingrich compared America’s speed and might in winning WWII versus her current inability to seal its own border. In a lighter moment, the former Speaker contrasted the efficiency of package tracking by Federal Express with the government’s inability to track illegal immigrants, suggesting sending each one a package may be the best way to apprehend the latter.

He also mentioned repealing Obamacare, Dodd Frank, and Sarbanes Oxley on his first day in office. He stated his desire to be a “paycheck president” versus a “food stamp president,” a term he used to denigrate Barack Obama.

Calling for a Fall campaign focused on substance, Gingrich also mentioned eliminating the Capital Gains tax and implementing 100% expensing for all new equipment written off in one year to help get the economy growing. Additionally, he called for a modernization of the workforce, proposing that unemployment compensation be linked to business training programs to avoid paying people for 99 weeks “for doing nothing.”

The solutions were bold but would obviously involve more than giving one speech. He called for the elimination of the EPA, replacing it with a new agency that would take economics and business interests into account in all decision-making. On tax policy, Gingrich called for a 12.5% corporate tax rate, abolishing the death tax, and the option of a 15% flat tax for individuals he called a tax cut.

Citing the need to shrink spending to meet revenue levels and the replacement of the current Civil Service system with a new modern personnel management system, his remarks appeared to be well received. Gingrich also cited abolishing the Dept of Energy (DOE) and a task forced to be headed by Texas Governor Rick Perry focused on the 10th amendment to return power to the states, as appropriate.

Gingrich also called for an audit of the Federal Reserve and an end to Ben Bernanke’s term as Chair of the Federal Reserve. The former Speaker also called for a more honest foreign policy, one acknowledging the dangers of radical Islamists intent on doing America and Americans harm.

And when I discuss my work on the economic impact of government spending, I often get the same reaction.

This is why it’s important that a growing number of establishment outfits are slowly but surely coming around to the same point of view.

• The European Central Bank published a study showing “…a significant negative effect of the size of government on growth.”
• A study by two Harvard economists found that “large adjustments in fiscal policy, if based on well-targeted spending cuts, have often led to expansions.”
• The Organization for Economic Cooperation and Development noted in recent research that welfare programs are economically destructive because they lure people into dependency because “net disposable income would increase despite putting in fewer hours.”
• A study from the International Monetary Fund concluded that “Cuts to pension and health entitlements had the most beneficial effect on economic growth.”

This is remarkable. It’s beginning to look like the entire world has figured out that there’s an inverse relationship between big government and economic performance.

That’s an exaggeration, of course. There are still holdouts pushing for more statism in Pyongyang, Paris, Havana, and parts of Washington, DC.

But maybe they’ll be convinced by new research from the World Bank, which just produced a major report on the outlook for Europe. In chapter 7, the authors explain some of the ways that big government can undermine prosperity.

There are good reasons to suspect that big government is bad for growth. Taxation is perhaps the most obvious (Bergh and Henrekson 2010). Governments have to tax the private sector in order to spend, but taxes distort the allocation of resources in the economy. Producers and consumers change their behavior to reduce their tax payments. Hence certain activities that would have taken place without taxes, do not. Workers may work fewer hours, moderate their career plans, or show less interest in acquiring new skills. Enterprises may scale down production, reduce investments, or turn down opportunities to innovate. …Over time, big governments can also create sclerotic bureaucracies that crowd out private sector employment and lead to a dependency on public transfers and public wages. The larger the group of people reliant on public wages or benefits, the stronger the political demand for public programs and the higher the excess burden of taxes. Slowing the economy, such a trend could increase the share of the population relying on government transfers, leading to a vicious cycle (Alesina and Wacziarg 1998). Large public administrations can also give rise to organized interest groups keener on exploiting their powers for their own benefit rather than facilitating a prosperous private sector (Olson 1982).

In other words, government spending undermines growth, and the damage is magnified by poorly designed tax policies.

The authors then put forth a theoretical hypothesis.

…economic models argue that the excess burden of tax increases disproportionately with the tax rate—in fact, roughly proportional to its tax rate squared (Auerbach 1985). Likewise, the scope for self-interested bureaucracies becomes larger as the government channels more resources. At the same time, the core functions of government, such as enforcing property rights, rule of law and economic openness, can be accomplished by small governments. All this suggests that as government gets bigger, it becomes more likely that the negative impact of government might dominate its positive impact. Ultimately, this issue has to be settled empirically. So what do the data say?

These are important insights, showing that class-warfare tax increases are especially destructive and that government spending undermines growth unless the public sector is limited to core functions.

Then the authors report their results.

Figure 7.9 groups annual observations in four categories according to the share of government spending in GDP during that year. Both samples show a negative relationship between government size and growth, though the reduction in growth as government becomes bigger is far more pronounced in Europe, particularly when government size exceeds 40 percent of GDP. …we provide new econometric evidence on the impact of government size on growth using a panel of advanced and emerging economies since 1995. As estimates can be biased due to problems of omitted variables, endogeneity, or measurement errors, it is necessary to rely on a broad range of estimators. …They suggest that a 10 percentage point increase in initial government spending as a share of GDP in Europe is associated with a reduction in annual real per capita GDP growth of around 0.6–0.9 percentage points a year (table A7.2). The estimates are roughly in line with those from panel regressions on advanced economies in the EU15 and OECD countries for periods from 1960 or 1970 to 1995 or 2005 (Bergh and Henrekson 2010 and 2011).

These results aren’t good news for Europe, but they also are a warning sign for the United States. The burden of government spending has jumped by about eight percentage points of GDP since Bill Clinton left office, so this could be the explanation for why growth in America is so sluggish.

Last but not least, they report that social welfare spending does the most damage.

Governments are big in Europe mainly due to high social transfers, and big governments are a drag on growth. The question is whether this is because of high social transfers? The answer seems to be that it is. The regression results for Europe, using the same approach as outlined earlier, show a consistently negative effect of social transfers on growth, even though the coefficients vary in size and significance (table A7.4). The result is confirmed through BACE regressions. High social transfers might well be the negative link from government size to growth in Europe.

The last point in this passage needs to be emphasized. It is redistribution spending that does the greatest damage. In other words, it’s almost as if Obama (and his counterparts in places such as France and Greece) are trying to do the greatest possible damage to the economy.

In reality, of course, these politicians are simply trying to buy votes. But they need to understand that this shallow behavior imposes very high costs in terms of foregone growth.

To elaborate, this video discusses the Rahn Curve, which augments the data in the World Bank study.

As I argue in the video, even though most of the research shows that economic growth is maximized when government spending is about 20 percent of GDP, I think the real answer is that prosperity is maximized when the public sector consumes less than 10 percent of GDP.

But since government in the United States is now consuming more than 40 percent of GDP (about as much as Spain!), the first priority is to figure out some way of moving back in the right direction by restraining government so it grows slower than the private sector.

The Pelosi Visa IPO revelation made headlines when Breitbart editor Peter Schweizer published the evidence in his New York Times bestselling book, Throw Them All Out.  CBS News’s 60 Minutes did a subsequent report based on Schweizer’s book that sparked a media firestorm.

In early 2008, Nancy Pelosi and her real estate developer husband, Paul, were given an opportunity to buy into a Visa IPO.  Despite Rep. Pelosi’s consistent railing against credit card companies, on March 18, 2008, the Pelosis bought between $1 million and $5 million (politicians do not have to report the exact amounts, only ranges) worth of Visa stock at the IPO price of $44 per share. Two days later, the stock price rocketed to $65 per share, yielding a 50% profit. The Pelosis then bought Visa twice more. By their third purchase on June 4, 2008, Visa was worth $85 per share.

The “Pelosi Provision” would prevent members of Congress from leveraging their insider status to land the kinds of lucrative IPO deals that Nancy and Paul Pelosi did.

As one senior House Republican aide explained:

The Pelosi provision prohibits members of Congress, executive branch officials and their staffs from receiving special access to initial public offerings because of their position.

According to the Chicago Tribune, Rep. Pelosi’s spokesman, Drew Hammill declined to comment on the Pelosi provision:

Pelosi spokesman Drew Hammill declined comment until the House changes to the insider trading bill are released. “We look forward to reviewing to the text of the bill Leader Cantor is writing in secret,” he added.

But Pelosi aides said that her husband, Paul, did not gain any special access to the IPO. He purchased them through his existing broker at Wells Fargo, one of the 41 banks that were underwriters in the $17.9 billion IPO, the largest in U.S. history.

A House vote on the STOCK Act, which was passed in the Senate on a bipartisan 96-3 vote, is expected to take place this Thursday.

Except they’re not.  Today, according to the AP, the Center for Disease Control and Prevention told Americans that they eat too much bread and rolls, and that such foods account “for more than twice as much sodium as salty junk food like potato chips.”  No wonder we’re fat.

Unfortunately, the federal government that now tells us that we eat too much bread is the same government that originally told us to stuff our pieholes with … bread.  Remember the original food pyramid?

I remember this pyramid – I grew up learning about it in my vaunted public school.  Notice how the bottom section is enormous, and suggests 6-11 bread, cereal, rice and pasta servings each day.  Why did the government originally mandate that?  According to Harvard Medical School’s Eat, Drink and Be Healthy (Simon & Schuster, August 2001), the government was attempting to help out farmers via the Department of Agriculture’s recommendations.

Dr. Walter Willett of Harvard Medical School says that the original pyramid blatantly ignored the evidence against grains.  “There’s an inherent problem with the USDA creating the pyramid,” Willett said.  “The economic interests are so strong …. It’s very difficult for them to be objective, so it’s probably the worst possible agency to do the pyramid.”  As anybody who has ever tried to lose weight by eating bagels can tell you, the food pyramid is a dramatic failure.

The last time the government tried to make everybody skinny, in other words, it made everybody fat instead.  Now the government’s trying to make everybody healthy – by telling us we don’t need early mammograms.  Do you trust them?

The Post says the revelation was uncovered by Breitbart editor Peter Schweizer’s blockbuster bestseller, Throw Them All Out:

Over the past decade, the House minority leader helped secure $50 million in earmarks toward a light-rail project that provides direct access to San Francisco’s Union Square and Chinatown for neighborhoods south of Market Street. Pelosi’s husband owns a four-story commercial building blocks from Union Square. These earmarks were reported in the book “Throw Them All Out.” A Pelosi spokesman said the project was requested by community leaders and that the new stations on the line will be farther away from the building than those on the existing line.

In response, Rep. Nancy Pelosi’s spokesperson, Drew Hammill, had this to say:

The entire city of San Francisco is 47 square miles and is one of the most densely populated cities in the country. The property in question is located right off of the Market Street rail line
and the closest new station will be considerably further away.

As many community groups have noted this rail line connects heavily populated areas in San Francisco, which have been underserved in the past and this project will help
alleviate serious congestion problems. The idea for this project originated in the community, specifically Chinatown and South of Market, and these community leaders came to their elected
officials in Washington for help.

According to the Washington Post, Hammill also claimed that two existing stations are presently located closer to Pelosi’s property than where the new stations will be located.