That great phrase was coined by the late Jack Kemp, who believed that growth and opportunity for all is the answer to poverty. In fact, Kemp believed it was the answer to all things economic. And he was right. The best anti-poverty program is the one that creates jobs. The answer to large budget deficits? Grow the economy, create jobs, watch incomes rise, and let the tax revenues come rolling in.

Partly from Jack Kemp’s work, and partly from his own experience, Ronald Reagan believed the same thing. He knew that growth is the single best solution for our economic ailments. And neither Reagan nor Kemp saw the world in terms of specific income classes or categories. They looked at the whole economy and realized that everyone is tied together. Dragging down the top earners will not help the middle class. And providing an ever larger safety net will not solve poverty. Reagan believed in the safety net, and maintained it. But he knew it was a stop-gap, not a solution.

Does Mitt Romney understand this?

The worry stems from Romney’s ill-advised statement this week. He said, “I’m not concerned about the very poor. We have a safety net there. If it needs repair, I’ll fix it.” That raises doubts as to whether he understands the Reagan-Kemp model. Perhaps he does. But he will have to tell us more.

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“When you look at government policies, there’s a massive transfer of wealth from the young and relatively poor members of society toward the old and relatively members of society,” says Veronique de Rugy, a Reason magazine columnist and economist at the Mercatus Center at George Mason University.

In 1970, de Rugy notes, transfers from the young to the old took up about 20 percent of the federal budget. In a few years, that figure will break the 50 percent barrier as the population ages and Social Security and Medicare ramp up. Those programs are paid for by payroll taxes that suck up around 15 percent of every dollar most workers will ever make.

Yet the #Occupy movement spends most of its energy railing against “the 1 Percent” richest Americans, whose wealth is not gained at the expense of the “99 Percent.” Rather, it comes from providing goods and services that people want to consume.

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Back in 2010, I crunched the numbers from the Congressional Budget Office and reported that the budget could be balanced in just 10 years if politicians exercised a modicum of fiscal discipline and limited annual spending increases to about 2 percent yearly.

When CBO issued new numbers early last year, I repeated the exercise and again found that the same modest level of budgetary restraint would eliminate red ink in about 10 years.

And when CBO issued their update last summer, I did the same thing and once again confirmed that deficits would disappear in a decade if politicians didn’t let the overall budget rise by faster than 2 percent each year.

Well, the new CBO 10-year forecast was released this morning. I’m going to give you three guesses about what I discovered when I looked at the numbers, and the first two don’t count.

Yes, you guessed it. As the chart illustrates (click to enlarge), balancing the budget doesn’t require any tax increases. Not does it require big spending cuts (though that would be a very good idea).

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This is the second installment of a multi-part series on suggested economic policies for the next government to consider.  These are meant to be long-term solutions.  Our current economic downturn has some short-term causes but a large part of the explanation lies in the worldview that governments of both parties have adopted, in small ways since maybe Abraham Lincoln but in significant ways since Franklin Roosevelt and in exaggerated extremes since Lyndon Johnson.  The federal deficit, the mess we call a tax code and so forth were created over a long time and while the solutions can be implemented with greater haste it will take some time for the transition and full effects to be felt and the returns to be realized.  The political class has seldom shown signs of long term thinking and the greater population seems less so, we can only pray and hope the message gets through.  My second installment is on federal spending.

The brilliant and humorous French politician and economics writer, Frederic Bastiat may have summed up how government works as well as anyone:

The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.

In line with Bastiat, the three largest expenditure categories in the federal budget are programs that transfer wealth from some people to other people. Federal expenditures (since there is no enacted budget) totals approximately $3.6 trillion.  Over half of that goes to the big three; Social Security, Medicaid/Medicare and income stability (welfare) programs.  Eliminate these three and the budget is in surplus, which is a fascinating statement since these three programs have parallels in the private sector that are profitable.

However, it is not reasonable to make extreme changes to programs people have on which people have counted and planned.  But, that reasoning cannot prevent the sort of long term changes that are needed.  There is no denying the budget math:

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The legal counsel of Governor Dannel Malloy (D-CT) has reported that “many” Connecticut state employees may be involved in food stamp fraud, and is urging heads of state departments to cooperate with investigators and prosecutors on both the state and federal levels.

During a rather abruptly organized press conference last Sunday, Gov. Malloy revealed that 800 of the 23,000 people who obtained federal disaster aid, following Tropical Storm Irene, were state employees, some of whom may actually qualify for the assistance. Thus far, 24 state employees appear to have fraudulently qualified for the disaster aid.

Andrew McDonald, the governor’s chief counsel, said, “We have credible information to suspect that many state employees who received the benefits did so by materially misrepresenting important information included in their applications” for food stamp benefits.”

Those who applied for the disaster funds, known as D-SNAP, received debit cards for as much as $1200, to replace food that had reportedly spoiled due to lack of electrical power during the period following the storm.

As was reported here on September 29, 2011, thousands of people waited in lines for days in the wake of Tropical Storm Irene, in front of Connecticut’s DSS buildings, some of them obtaining emergency funds even though they lived in areas, such as the capital city of Hartford, which had not lost power as a result of the storm. The state administered the $12.4 million in disaster aid funded by the federal government.

The ease with which many were able to obtain D-SNAP funds was discussed anecdotally on local radio talk shows. The chaotic hordes of people lining up to receive D-SNAP funds led conservative Republican state Sen. Joseph Markley to approach the state auditors and ask them to look into the situation. On a talk radio program, Sen. Markley said, “I think, during the course of their investigation, they started turning over some rocks, and it became obvious that there was wrongdoing involved, and some embarrassment. And I believe that’s what led the governor to get out ahead of the story, holding this extraordinary press conference on a Sunday afternoon.”

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From time immemorial—from Etienne de la Boitie to David Hume to Ludwig von Mises—political analysts have noted that because the number of those in the ruling elite amounts to only a small fraction of the number in the ruled masses, every regime lives or dies in accordance with “public opinion.” Unless the mass of the people, no matter how objectively abused and plundered they may appear to be, believe that the existing rulers are legitimate, the masses will not tolerate the regime’s continuation in power. Nor need they tolerate it, because they greatly outnumber the rulers, and hence whenever they become subjectively fed up, they have the power—which is to say, the overwhelming advantage of superior numbers—to oust the regime. Even if the regime possesses a great advantage of coercive power, its employment avails the rulers nothing if they must kill or imprison 90 percent of the population, because such massive violence would reduce them to the status of parasites without hosts.

This consideration long seemed to make sense as a critical element of political analysis, and even today one often encounters it. Something akin to it seems to motivate the current Occupy Wall Street movement and its spin-offs in other venues when they represent themselves as members of the (exploited) 99 percent, in opposition to the (exploiting) 1 percent.

Certain long-established trends in the welfare state, however, have progressively weakened the force of this analysis. The main element of these trends is the tremendous growth in the number of people (and in their proportion in the population) who are directly dependent on government benefits to a substantial degree. Researchers at the Heritage Foundation have been tracking this development for several years and have pushed their analysis back for several decades. An index of dependency based on this research increases from 19 in fiscal year 1962 to 272 in fiscal year 2009.

The Heritage index uses information on almost three dozen important federal programs on which Americans depend for cash income and other support—including housing assistance, Medicaid, Medicare, Social Security, unemployment insurance benefits, educational benefits, and farm-income supports—but it is scarcely a comprehensive measure, inasmuch as the total number of federal programs with dependents is gigantic at present. Of course, each such program has government employees and contractors who run it and hence depend on it to earn much, if not all, of their income. Government civilian and military retirees add millions more to the ranks.

The Heritage researchers found that in 1962, 21.7 million persons depended on the programs they included in their index for benefits. By 2009, the corresponding number of dependents had grown to 64.3 million. Adding dependents not included in the Heritage study might easily increase the number to more than 100 million, or to more than a third of the entire population. Thus, the parasites verge ever closer to outnumbering their hosts.

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Our nation will spend more than $40 trillion over the next ten years with at least $15 trillion in deficit spending, while Congress is arguing about how to reduce that deficit by all of 8% – really?  With this nonsense debate going on, Mr. Obama has abdicated his presidency and is now campaigning for reelection on a full-time basis.  The rest of the world, meanwhile, is simply falling apart.

The Muslim Brotherhood is coming to power in Egypt, Iran is moving deliberately toward nuclear armament and Europe is proving that socialist democracies will fall at their own hand.  In the midst of this turmoil, the media has our people focusing on why the top 1% paying 50% of all federal taxes falls short of “their fair share” and why entitlements and government needs to keep growing.  We are missing the point – eliminate the noise and the real debate is simply whether our children live free or for the benefit of the state?

Let’s forget all the facts and figures about our growing debt and the increasing involvement of government in our lives and focus on the fundamental definition of liberty: liberty is the freedom from arbitrary control; it is freedom to exercise the unalienable rights endowed upon us by our Creator; it is freedom from oppressive power exerted by government; and it is freedom from all forms of tyranny.  While people demand that their neighbors who may be better off economically should be ordered – by law – to share their success with them, what they are really promoting is the ascendancy of the state over the people.  What they are missing is that they are demanding the suppression of liberty for their neighbors, themselves and their own children.

The systematic destruction of our economic strength through increased regulation, increased taxation on the job creators, a 50% increase in the national debt in just the last three years and an equal increase in the dependency on foreign governments to fund our debt has turned our nation upside down.  We have gone from the world’s last hope to a sideshow and find our great country powerless to help prevent ally nations from economic decline and powerless to stop the rise of tyrannical regimes.

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From The Hill:

Supercommittee member Sen. Pat Toomey (R-Pa.) accused Democrats on Monday of torpedoing the deficit supercommittee because a success would have “stepped on” President Obama’s campaign narrative.

Speaking Monday on CNBC’s “Squawk Box,” Toomey said there’s “something to” suggestions that Democrats had an incentive to see the supercommittee fail.

“That goes to the asymmetry of the incentives and I think there was something to that,” Toomey said. “The president’s fundamental campaign message was to run against Congress — never mind the fact that half of Congress is controlled by the Democrats, but that’s his purpose, and certainly an agreement in this committee would have stepped on that narrative for the president.”

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It would be a great tragedy if a super tax hike came out of a supercommittee compromise deal. It would do great harm to the economy — just as much harm as President Obama’s various tax-hike threats. And on the Republican side, a super tax hike would irreparably split the GOP.

Okay. Here’s the good news. In a CNBC interview this week, I asked supercommittee co-chair Jeb Hensarling about an idea of the Democrats to raise taxes by $600 billion to $800 billion. About $300 billion of that might be up-front, with $500 billion later from some tax-reform overhaul. This would be an unmitigated economic disaster.

But Hensarling was blunt: “Not going to happen, Larry.” He said no such deal has been presented to him. And if it were, he and other Republicans on the supercommittee would not support it.

Hensarling then added, “We put $250 billion of what is known as static revenue on the table, but only if we can bring down rates. We believe we can bring the top individual rate down to 28, 29, maybe at most 30 percent, and bring the corporate rate down to the median of the EU, 25 percent.” For emphasis, he said, “We have gone as far as we feel we can go.”

The Texan was referring to the Sen. Pat Toomey plan, which would lower the personal tax rate to 28 percent and head down from there, while at the same time putting limits on personal deductions (such as mortgage interest) for upper-income taxpayers. In other words, flatten the rates and broaden the base.

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I’ve written about the fiscal implosion in Europe and warned that America faces the same fate if we don’t reform poorly designed entitlement programs such as Medicare and Medicaid.

But this new video from the Center for Freedom and Prosperity, narrated by an Italian student and former Cato Institute intern, may be the best explanation of what went wrong in Europe and what should happen in the United States to avoid a similar meltdown.

I particularly like the five lessons she identifies.

1. Higher taxes lead to higher spending, not lower deficits. Miss Morandotti looks at the evidence from Europe and shows that politicians almost always claim that higher taxes will be used to reduce red ink, but the inevitable result is bigger government. This is a lesson that gullible Republicans need to learn – especially since some of them want to acquiesce to a tax hike as part of the “Supercommitee” negotiations.

2. A value-added tax would be a disaster. This was music to my ears since I have repeatedly warned that the statists won’t be able to impose a European-style welfare state in the United States without first imposing this European-style money machine for big government.

3. A welfare state cripples the human spirit. This was the point eloquently made by Hadley Heath of the Independent Women’s Forum in a recent video.

4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing. Indeed, Miss Morandotti drew these two cartoons showing how the welfare state inevitably leads to fiscal collapse.

5. Bailouts don’t work. This also was a powerful lesson. Imagine how much better things would be in Europe if Greece never received an initial bailout. Much less money would have been flushed down the toilet and this tough-love approach would have sent a very positive message to nations such as Portugal, Italy, and Spain about the danger of continued excessive spending.

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Governor Perry made significant strides toward producing a pro-growth tax proposal with his announced “Cut, Balance, and Grow” economic plan. Unfortunately, his plan has some glaring deficiencies.

(1) It is NOT strictly a flat tax and will SHRINK the tax base. The $12,500 personal deduction per individual provides an enormous advantage to large households at all income levels. Further, if a Head of Household of a family of four makes $50,000, he would have NO federal income tax liability under Gov. Perry’s plan. This will dramatically shrink the federal tax base even more than it has under President Obama. If Gov. Perry wants to restore an ownership society where every individual is a taxpayer and has a stake in his or her government, this plan will not accomplish that.

(2) This plan is guaranteed to balloon the deficit in the short term. By allowing taxpayers to choose a tax regime, Gov Perry is guaranteeing every taxpayer a tax-break. As a taxpayer, I say “great”! Unfortunately, Gov Perry does not plan to balance the budget in the short term, and our creditors will want their money back eventually, so we will be piling on to a $16 trillion debt when Pres Obama leaves office.

(3) The reduction in the corporate rate is insufficient to stimulate growth substantially. While I applaud Gov. Perry for recognizing that the corporate tax rate needs to be reduced, most states add another 5%+ or so of state corporate income tax, making a corporation’s effective rate 25%+. That is not enough of a reduction to encourage US corporations to relocate operations from countries like Ireland where they are taxed at 12.5%. (more…)

From the Associated Press:

Protests against Wall Street entered their 18th day Tuesday as demonstrators across the country show their anger over the wobbly economy and what they see as corporate greed by marching on Federal Reserve banks and camping out in parks from Los Angeles to Portland, Maine.

Demonstrations are expected to continue throughout the week as more groups hold organizational meetings and air their concerns on websites and through streaming video.

In Manhattan on Monday, hundreds of protesters dressed as corporate zombies in white face paint lurched past the New York Stock Exchange clutching fistfuls of fake money. In Chicago, demonstrators pounded drums in the city’s financial district. Others pitched tents or waved protest signs at passing cars in Boston, St. Louis, Kansas City, Mo., and Los Angeles.

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The Center for Freedom and Prosperity has released another “Economics 101″ video, and this one has a very powerful message about the federal government’s so-called War on Poverty.

As explained by Hadley Heath of the Independent Women’s Forum, the various income redistribution schemes being imposed by Washington are bad for taxpayers – and bad for poor people.

The video has a plethora of useful information, but the data on the poverty rate is particularly compelling. Prior to the War on Poverty, the United States was getting more prosperous with each passing year and there were dramatic reductions in the level of destitution.

But once the federal government got involved in the mid-1960s, the good news evaporated. Indeed, the poverty rate has basically stagnated for the past 40-plus years, usually hovering around 13 percent depending on economic conditions.

Another remarkable finding in the video is that poor people in America rarely suffer from material deprivation. Indeed, they have wide access to consumer goods that used to be considered luxuries – and they also have more housing space than the average European (and with Europe falling apart, the comparisons presumably will become even more noteworthy).

The most important message of the video, however, is that small government and economic freedom are the best answers for poverty.

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On September 21, 2011, Sen. Tom Harkin (D-Iowa) spoke to a crowd gathered in Washington, D.C., outside of the Capitol and said, “We need some of you probably getting arrested for doing things you shouldn’t be doing” to save Medicaid.

Also, Sen. Bernie Sanders (D-Vermont), who is a self-avowed socialist, told MRCTV’s Joe Schoffstall he was at the rally to ’save’ Medicaid and that Republicans care more about representing the ‘wealthiest people in the country’, large campaign contributors and ‘hedge fund people’ than working and low-income families.

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From The Washington Post:

The latest Obama plan “doesn’t produce any more in realistic savings than the plan they offered in April,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget. “They’ve filled in details, repackaged it and replaced one gimmick with another. They don’t even stabilize the debt. This is just not enough.”

The most disheartening development, MacGuineas and others said, is Obama’s decision to count $1.1 trillion in savings from the drawdown of troops in Iraq and Afghanistan toward his debt-reduction total. Because Obama has no intention of continuing war spending at last year’s elevated levels, that $1.1 trillion would never have been spent.

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Demanding higher taxes on the “wealthy” and condemning Republican plans to reform entitlements, a crowd of protesting loudly gathered in the Cannon House Office Building on Capitol Hill this afternoon.   Protesters then streamed into Representative Dave Camp’s office.

As chants of “My Medicaid matters” echoed through the typically peaceful congressional halls, police officers warned the protesters such conduct fell outside the bounds of acceptable conduct and stood guard at the congressman’s door to prevent a security problem from developing.

Who organized this group of people to engage is such poor behavior?

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From the Associated Press:

Obama’s proposal comes amid Democratic demands that Obama take a tougher stance against Republicans. And while the plan stands little chance of passing Congress, its populist pitch is one that the White House believes the public can support.

The core of the president’s plan totals just over $2 trillion in deficit reduction over 10 years. It would let Bush-era tax cuts for upper income earners expire, limit deductions for wealthier filers and close loopholes and end some corporate tax breaks. It also would cut $580 billion from mandatory programs, including $248 billion from Medicare. It also targets subsidies to farmers and benefits programs for federal employees.

Under Obama’s plan, government spending would no longer add to the national debt starting in 2017.

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The Census Bureau has just released the 2010 poverty numbers, and the new data is terrible.

There are now a record number of poor people in America, and the poverty rate has jumped to 15.1 percent.

But I don’t really blame President Obama for these grim numbers. Yes, he’s increased the burden of government, which doubtlessly has hindered the economy’s performance and made things worse, but the White House crowd legitimately can argue that they inherited a crummy situation.

What’s really striking, if we look at the chart, is that the poverty rate in America was steadily declining. But then, once President Lyndon Johnson started a “War on Poverty,” that progress came to a halt.

As I’ve explained before, the so-called War on Poverty has undermined economic progress by trapping people in lives of dependency. And this certainly is consistent with the data in the chart, which show that the poverty rate no longer is falling and instead bumps around between 12 percent and 15 percent.

This is bad news for poor people, of course, but it’s also bad news for taxpayers. The federal government, which shouldn’t have any role in the field of income redistribution, has squandered trillions of dollars on dozens of means-tested programs. And they’ve arguably made matters worse.

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Tonight, CNN and Tea Party Express co-host a debate of GOP candidates in Tampa, FL, site of the upcoming GOP convention. I’m not really sure how the ‘tea party’ is going to be represented in this debate, since the moderators are pulled from CNN, but there is no way it can be any worse than the MSNBC/Politico forum last week. In that fiasco, John Harris and Brian Williams drew deeply from lefty activists like ThinkProgress to launch attacks on the GOP candidates. It was as if the DNC had done a mind-meld with Harris and Williams (redundant, I know!), and got 90+ minutes to prospect for material for negative campaign ads.

Color me naive, but CNN is not MSNBC. Liberal, sure. But, it at least tries not to seem totally in the tank for the left, unlike Politico and MSNBC. So, I don’t think the DNC will own the same real estate in Wolf Blitzer’s brain as it had in Harris/Williams. Then again, according to news reports today, it won’t have to. Amazingly, two leading candidates for the GOP nomination, Mitt Romney and Michele Bachmann, look set to take a page from the DNC and ThinkProgress playbook and attack Gov. Rick Perry for daring to speak the truth about Social Security. Below is a flier the Romney campaign is distributing in Florida.

And, yesterday, Bachmann’s campaign had this to say to Byron York:

“Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser. “Clearly she feels differently about the value of Social Security than Gov. Perry does. She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.” … “She strongly disagrees with his position on that…”

So let me get this straight; we now have TWO GOP candidates against any kind of entitlement reform? Really? We can’t begin to get out from under our overwhelming debt burden unless we tackle these auto-pilot programs. You could close every government agency and slash defense spending in half and we’re still screwed if we don’t reform Social Security, Medicare and Medicaid. How can Romney or Bachmann seek to be President if they don’t understand this basic fact? I mean, its not just a theory…its math.

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Governor Rick Perry of Texas is being attacked by two rivals in the GOP presidential race. His sin, if you can believe it, is that he told the truth (as acknowledged by everyone from Paul Krugman to Milton Friedman) about Social Security being a Ponzi scheme.

Here’s an excerpt from Philip Klein’s column in the Examiner, looking at how Mitt Romney is criticizing Perry.

Mitt Romney doubled down on his attack against Texas Gov. Rick Perry this afternoon, warning in an interview with Sean Hannity that his critique of Social Security amounted to “terrible politics” that would cost Republicans the election. Romney’s decision to pile on suggests that he’s willing to play the “granny card” against Perry if it will help him get elected, a tactic more becoming of the likes of DNC chairwoman Debbie Wasserman Schultz than a potential Republican nominee.

And here’s a Byron York column from the Examiner looking at how Michele Bachmann is taking the same approach.

…another Republican rival, Michele Bachmann, is preparing to hit Perry on the same issue. “Bernie Madoff deals with Ponzi schemes, not the grandparents of America,” says a Bachmann adviser.  “Clearly she feels differently about the value of Social Security than Gov. Perry does.  She believes Social Security needs to be saved, that it’s an important safety net for Americans who have paid into it all their lives.” … “She strongly disagrees with his position on that…”

Shame on Romney and Bachmann. With an inflation-adjusted long-run shortfall of about $28 trillion, Social Security is a Ponzi scheme on steroids.

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