When Barack Obama was re-elected to the presidency last November, House Speaker John Boehner observed, "the American people have spoken. They have re-elected President Obama. And they have again elected a Republican majority in the House of Representatives." Republican House Minority Leader Mitch McConnell noted that the voters, "have simply given [Obama] more time to finish the job they asked him to do together with a Congress that restored balance to Washington after two years of one-party control." President Obama was re-elected with nearly 5 million more votes than Mitt Romney. Democrats deepened their grip on the Senate by capturing two additional seats. Democrats also gained 8 seats in the House, but were far from recapturing it.Read more
The United States budget can be broken into two groups, DISCRETIONARY spending and MANDATORY spending. About 7% of the budget is interest paid on our debt – which will only increase, but should also be considered mandatory as defaulting is not an option.
As you can probably guess mandatory spending is outside of the President’s control and is regulated by established laws in place. Mandatory spending includes Social Security, Medicare, Welfare, Food Stamps, etc. The last major bump in Mandatory spending came in 2003 under Medicare Part D which approved an additional $17 trillion in additional spending across the upcoming 50-60 years. The only change that has been made to mandatory spending under President Obama, is Obamacare. However, the CBO calculated the program is deficit neutral due to mandate penalties offsetting increased spending. So when you hear that Obama is responsible for the record recipients on welfare and food stamps, it’s a completely bogus claim as this spending is mandated by laws already in place.
[caption id="attachment_365" align="alignleft" width="300"] Here is the breakdown of mandatory spending:[/caption]
Discretionary spending makes up 31% of our total federal spend but represents the majority of our budget conversations (you can sense my frustration). The discretionary budget is subject to annual appropriations in which the Congress and President have to agree each year. Have you heard the saying that Congress controls the purse? They do – but only for bills that have not yet been signed into law. If a new budget is not passed, continuing resolutions can be approved by congress allowing discretionary spending to continue at historical levels (which is happening currently). The largest part of discretionary spending is military which makes up 57% of the entire discretionary budget. If you take away military the remaining discretionary spend includes education, international support, governmental employees, transportation (PBS, Planned Parenthood, Big Bird, etc, etc) and make up 13% of our total Federal budget. This meager 13% is what our President truly controls and can pull annual levers to grow or shrink.
[caption id="attachment_366" align="alignright" width="300"] Here is a breakdown of discretionary spending:[/caption]
Now (here’s where I get on my soap box), when people call President Obama a big spender or big government, I immediately assume they have no idea what drives our budget or do not understand the budgetary process. Besides the one year spike of stimulus spend (2009 – the vast majority being used to shore up state budgets), President Obama has been remarkable in keeping discretionary spending in check. Discretionary spending has only grown 10% (it's actually declining if you take into account the sequester cuts) in four years but compared to any president since Eisenhower – this is strong. Just to give a point of reference, a 10% increase in discretionary spending only attributes to 4% of total federal spending growth. If we want to hold President Obama responsible for 4% spending growth these past four years, this is a reasonable accusation.
Two of the worst presidents controlling total discretionary spending in the past 30 years? Presidents Ronald Reagan and George W. Bush.
[caption id="attachment_367" align="alignleft" width="300"] Budgetary history of Non-Defense discretionary spending:[/caption]
Now one can make the point that President Obama should be held responsible for not working with Congress to tackle mandatory spending (70% of our total budget) and that’s a fair statement. However, with such backlash around Obamacare – which used marketplace principles to drive down costs modeled after conservative think-tank ideas of the 90’s – there is no way Republicans were going to let anything pass that would be a political win. To overcome any type of political posturing Democrats would need 60 votes from the Senate to beat any filibuster making any legislative fix to mandatory spending near impossible.
If the fiscal cliff is not solved, and tax revenues increase, we do not need laws in place that regulate the added income. Any law governing spending would be placed into the mandatory bucket and would be difficult to modify. Increased revenue will be applied to the total budgetary deficit as any incremental discretionary spending will need to be agreed upon by Congress and the President (which it wont). Given President Obama’s track record with discretionary spending, I am confident the money will be used to close the budgetary gap. Now one can argue that legislation could be signed to cap spending and I think that’s a fair conversation. But once again, the problem is our budget issues are being driven by mandatory spending.
One more thought – history does not necessarily mean more tax revenue equals more spending. Under President Clinton, tax revenues jumped and spending was kept relatively in check which is why he left office with a budget surplus. Plus, as I have pointed out our budget problems have more to do with military and mandatory spending and less about the growth of non-defense discretionary spending which the President and Congress control.
Now I know some of these claims fly in the face of widespread perception of President Obama’s fabricated runaway spending habits (and Democrats for that matter). The beauty of everything claimed in this post is that it can be fact-checked and I encourage all to do so. Too much miss-information is driven by media outlets which makes budget conversations more about regurgitated talking points than actual numbers.
(I wrote this in email to a friend about what happens to the increased tax receipts if the fiscal cliff is ignored)
Well, yesterday we learned pretty much nothing new about Mitt Romney. Well, we learned that Harry Reid wasn't so far off when he questioned Mr. Romney's tax history (although we still haven't seen convincing evidence that Romney didn't paid any taxes in recent years). We learned that Mr. Romney's vast wealth is still mostly untouched by taxes. We also learned a new acronym, the one for the special vehicle into which Romney put quite a bit of financial resources: the Charitable Remainder Unitrust, or CRUT.
For those of you who don't know what a CRUT is, join the club. Even after this Bloomberg article on the Romneys' CRUT, I still don't quite understand what it is, other than a way that really rich people are able to basically stash their money in a charity and yet keep on earning tax free interest on it, and often--but not always--leaving a little something for the charity. In this case, Mr. Romney stashed his funds in the LDS Church, and it's looking like somewhere between 0% and 8% of the original value will be left over for the Church after Romney officially turns it over to them. But, in all honesty, and other than the CRUT details, we've known that all before today.
This is a helpful reminder of the reason we have taxes in the first place, and the reason we need them. Remember, conservatives always argue that if we just had lower taxes on the wealthy, those wealthy would be able to spend that money on some wise charitable project. The idea that if the rich (or 'job creators') had more money then they'd create more jobs, also flies in the face of the fact that Wall-Street has completely recovered under Obama. The more people complain about unemployment under Obama, during which time Wall-Street performed exceptionally well, the more they prove that 'trickle-down' economics are simply a thinly veiled excuse to benefit the rich at the expense of the poor. Lower taxes on the rich doesn't produce more jobs or give a dramatic increase in charity. Mitt Romney is a master at lowering his own taxes--legally, of course--and it doesn't really seem like the conservative prediction held true. Instead, with his pocketed tax dollars, he purchased a couple of Cadillacs, three houses valued at around $20 million, and a car elevator.
Now, let me be clear here. I'm not criticizing those purchases. I've certainly spent money on personal stuff that I could have given to charity, and I think most of us have. And the Book of Mormon teaches that we should help people achieve their wants as well as their needs (Mosiah 18:29, D&C 51:3, Alma 35:9, and D&C 82:17). I have no business criticizing their wants (just like conservatives have no business criticizing the wants of the poor among us). I'm just pointing out that the conservative prediction--lower their taxes and they'll be able to give more money to charity--doesn't seem to hold.
In this sense, it doesn't matter what the Romney's money went to, just that it didn't go to charity. And it clearly didn't. And, in fact, some of what did go to charity didn't really. It's hidden in a CRUT, which I will work into this post as many times as I can because it is such a delightful acronym. Again, I only learned of CRUTs recently, but the whole idea of tax havens just seems a little out of sync with the brunt of Mormon scriptural teachings about wealth. There's Jacob 2:17, for example:
Think of your brethren like unto yourselves, and be familiar with all and free with your substance, that they may be rich like unto you.
And Doctrine and Covenants 49:20:
But it is not given that one man should possess that which is above another, wherefore the world lieth in sin.
And he looked up, and saw the rich men casting their gifts into the treasury. And he saw also a certain poor widow casting in thither two mites. And he said, Of a truth I say unto you, that this poor widow hath cast in more than they all: For all these have of their abundance cast in unto the offerings of God: but she of her penury hath cast in all the living that she had.
Finally, it seems that some like to argue something along the lines of "Mr. Romney is just a harder worker and a smarter man than the rest, so it follows that he's richer than they are." This line of argument bothers me as well, because lifting the rich onto a high pedestal is roundly discouraged in the Book of Mormon. For example, in Helaman 7:26, Helaman's son Nephi denounces such a practice:
Yea, wo shall come unto you because of that pride which ye have suffered to enter your hearts, which has lifted you up beyond that which is good because of your exceedingly great riches!
You can also see Jacob 2:13, Mosiah 4:17, and 3 Nephi 6:12 on the dangers of thinking that the rich are better than the poor in some way (for summaries of contemporary conservatives making this "richer=better" argument, see here, here, and here). But back to CRUTs and Mr. Romney. Here's the extent of the response from the Romney camp:
“The trust has operated in accordance with the law,” Michele Davis, a campaign spokeswoman, said in an e-mail.
And after ye have obtained a hope in Christ ye shall obtain riches, if ye seek them; and ye will seek them for the intent to do good—to clothe the naked, and to feed the hungry, and to liberate the captive, and administer relief to the sick and the afflicted. (Jacob 2:19)
When President Barack Obama took the oath of office on January 20, 2009, the U.S. economy was in free fall. During the preceding year and half, some of the nation’s largest and most important financial institutions went bankrupt, including Bear Stearns, Countrywide, and Lehman Brothers, as risky loans and other investments failed. Many other large banks were on the verge of collapse. The downfall of the financial sector had been preceded by a spectacular end to a massive speculative housing bubble that almost instantly wiped out trillions of dollars of Americans’ net worth. When Lehman Brothers and AIG went into bankruptcy during the same weekend in September 2008, panic ensued all across the economy. It felt like 1929 all over again. The Troubled Asset Relief Program (TARP), which was signed into law by President George W. Bush and was implemented by President Obama, stopped the bleeding in the financial sector, but the damage to the broader economy had already been done as other sectors of the economy continued to rapidly deteriorate. The stock markets plummeted, losing more than half of their peak market capitalization just six weeks after Obama took office. Many retirees and workers nearing retirement saw their investment portfolio lose much of its value. Millions of people lost their jobs due to no fault of their own after the U.S. entered a recession in December 2007. Over 1.2 million Americans were laid off between the election and Obama’s inauguration. All told, the Bureau of Labor Statistics estimates that 8.7 million jobs were lost due to the Great Recession. No president since Franklin D. Roosevelt has begun their tenure in the White House under such dire circumstances. An evaluation of each segment of the economy around the time Obama took office compared to now shows that we are definitely better off four years later.Read more
Mitt Romney’s nomination as the 2012 Republican candidate for President is an important and historical moment for me and many other members of the Church of Jesus Christ of Latter-day Saints across the U.S. and the world. A thick glass ceiling was shattered when Romney, a prominent member of my faith, overcame anti-Mormon bigotry prevalent in parts of the Republican primary electorate to clinch the GOP nomination. During the past twelve years we have been witnesses to a triumph over a wide array of social prejudices in American politics with the nomination of Senator Joseph Lieberman, who is Jewish, as the Democratic Party’s vice presidential candidate in 2000, Hillary Rodham Clinton’s historic run as the first serious female contender for the White House in 2008, and Barack Obama’s election as the country’s first African-American president. We may very well have a Mormon as our President starting next January. While I admire Romney’s dedicated unpaid service in my church as a bishop and stake president, believe that he is a good family man who also cares deeply about our country, and am thrilled by Romney’s ascension to the GOP nomination in this Mormon moment, I am confident that he is the wrong person for the job of President of the United States.
Remarks that Mitt Romney made to wealthy donors back in May 2012, have put Romney in an awkward position. Romney denigrated nearly half of the population of the U.S. and erroneously claimed that Obama supporters were all dependent on government assistance. After receiving a question about how Romney would be able to win the election, Romney remarked:
There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That's an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax… My job is not to worry about those people. I'll never convince them that they should take personal responsibility and care for their lives.Read more
After losing the South Carolina Primary to Newt Gingrich, possibly in part due to his waffling at the pre-Primary debates about releasing his tax returns, Mitt Romney released his tax returns for the past two years, which show that he paid about 14% in federal taxes on income of nearly $43 million. The timing of Romney's tax return release was impeccable- for Democrats. For months, President Obama and Democrats have been attacking Republicans for wanting to maintain tax breaks and loopholes for the super-wealthy. Last August, Warren Buffet pointed out in an op-ed that he paid a lower federal tax rate than his secretary in 2010. He paid about 17.4%, whereas his office staff paid an average of 36%. Buffet rightly pointed out that this simply isn't fair. He added, "it’s time for our government to get serious about shared sacrifice."Read more
Conservatives often invoke our country's Founding Fathers as well as prominent historical figures like economist Adam Smith, whose ideas about the "invisible hand" of free markets helped form the theoretical foundation of modern capitalism, when they advocate far-right economic policies. Lately, there has been a lot of talk by GOP presidential candidates about creating a flat tax system in the U.S., particularly from Texas Governor Rick Perry and Godfather's Pizza founder Herman Cain. Ironically, you'll never hear a conservative pundit or politician point out that Adam Smith and Thomas Jefferson, among other historical figures, were strongly in favor of progressive taxation.Read more
I've intended since the spring to write about our country's current fiscal situation and how we arrived here. For months, Congressional Republicans have been asserting that our federal government does not have a revenue problem, it has a spending problem, and have argued for draconian spending cuts largely aimed at programs that benefit the middle class. And President Obama and many Democrats have largely conceded to the GOP on the issue, allowing them frame the debate about our economic woes as being the result of a large federal debt and ongoing budget deficit. Polling shows that a large majority of Americans blame our country's budget woes on wasteful government spending. However, it is critical to examine our country's fiscal policy during the past decade, to fully understand why our deficit and debt have become so large. The data show that the current budget deficit is primarily the result of 3 factors:Read more