Monday, October 7, 2013

Two Americas: one works, the other doesn't

Glenn Reynolds, AKA Instapundit, AKA the grandaddy of all bloggers, and arguably one of the most prolific and valuable contributors to the internet, has written an outstanding op-ed in today's USA Today. Here's the first part, but be sure to read it all:

There are two Americas, all right. There's one that works -- where new and creative things happen, where mistakes are corrected, and where excellence is rewarded. Then there's Washington, where everything is pretty much the opposite. That has been particularly evident over the past week or so. One America can launch rockets. The other America can't even launch a website. 

The silver lining to the Obamacare cloud (whose failure to launch after three years and billions of dollars of preparation makes Apple's iOS 7 "glitch" seem laughably insignificant) and to the federal government shutdown is that maybe, if we're lucky, the voters are going to take notice. Government can't do things nearly as well as the private sector can, and anyway, the government shouldn't even try. Perhaps more importantly, we are finding out that our economic life goes on just fine without the daily ministrations of the many millions of federal employees that are now officially considered to be non-essential. We should all be asking ourselves—just days after the 100th anniversary of the ratification of the 16th Amendment authorized the income tax—whether our federal government is really worth one-fifth of our collective incomes, even though it almost cost us one-fourth just four years ago.

If we're lucky, Obamacare may prove to be the "tipping point" that finally marks the end of Big Government as we know it. Republicans are probably doing us a disservice by insisting that Obamacare be de-funded or postponed. Instead, they should just let it happen and let it fail spectacularly, because it is guaranteed to fail no matter what. Government of the size we have today has reached the limits of its effectiveness. Government is now too vast to be efficient, too vast to be controlled, and too vast to achieve all the many objectives of its constituents. Republicans would be wise to wait until the Democrats beg to have Obamacare postponed. Then perhaps we can have a proper dialogue on the subject.

If you don't read Glenn on a daily basis, you should.


William said...

Not a bad suggestion. Failing to pass a clean CR certainly hasn't de-funded Obamacare.

It was a wacky suggestion and fruitless political ploy to begin with and has taken the focus off what is happening with Obamacare applicants right now

Kurt said...

But as I understand it, the Republicans are not asking that Obamacare be defunded, just that the American people all get the same breaks that the fat-cat unions and Obama capitalist cronies are enjoying: a delay in having to suffer from it.

But quite apart from that, there are other, less tangible benefits of the current standoff, such as revealing more of the intent of the Democrats (eg. Reed's admission that he doesn't care about the welfare of kids with cancer); that it is perhaps possible to break the chokehold of the progressives on our freedoms; and that just maybe the Democrats can be held to account, e.g. forcing them to actually perform their Constitutional duties and actually pass a $@&# budget, which they haven't done since Obama took office. Even though I am one of those gov't workers subject to furlough, I think this is worth it.

Hans said...

Let the Repubcos stand up for the people whom voted them in..I am tired of them always throwing in the towel..

Yes, their brave effort will indeed fail but so too shall CommieCare..

However, in the meanwhile, millions of unwanting American will pay a steep price waiting for this Socialist program to collapse..

America grows more feeble each and every day...

William McKibbin said...

The government should simply mail everyone a Medicare card in place of the affordable care act -- said another way, if the government is determined to deliver universal health care, then Medicare is already built...

Benjamin said...

The federal government runs the VA, lock, stock and barrel. Not only funds the VA, but then hires the doctors and nurses directly, administers the VA directly, and even houses the facilities. Totally paid for by taxes levied on income tax payers, with zero contributions from beneficiaries.

Paul Ryan in his famous budget, said two programs were exempt from cuts: The VA and Defense.

Paul Ryan never even hinted that the VA should be privatized, or vouchered, or cut, or that the private sector could do a better job for less money. 22 million Americans qualify for VA benefits, it is huge program.

It is a $150 billion program, and exploding, set to double in just 10 years.

The right-wing and the GOP might have some credibility if they applied free-market principles consistently.

I see no reason why entitled VA beneficiaries could not receive a cash voucher, to use as they see fit. This does not appeal to the GOP. It probably appeals to Milton Friedman, but not the GOP.

So the GOP obviously believes the federal government can do a great job running huge federal health programs. Lock, stock and barrel.

For that matter, the federal government runs Medicare, and people seem satisfied with that, and I read that it has lower operating costs than private-sector insurance. (I find that hard to believe, but that is what I read and it seems to be uncontested).

Someday maybe the GOP will have some backbone when it comes to true classical economic principles. So far, I do not see it. The explosion of federal spending and aggrandizement in 2000-2008 is not something that convinces me the GOP wants smaller government.

Ethanol, the occupation of two whole nations, the skyrocketing VA budget, Medicare Part B, the NSA, even Congress holding a special session to try to intrude on the decision of husband of Terri Schiavo, the brain-dead woman artificially kept "alive" in Florida. How do you like those apples: You want to ease your wife into the next world (an incredibly wrenching decision, I am sure), but the GOP Congress won't let you.

Oh sure, the GOP believes in small government.

Add on GOP positions on private matters such as drug use, abortion, sexual orientation etc.

Remember it was AG Ed Meese who waged war on...pornography.

No, I won't for the Donks either, but people are dreaming if they think the GOP spells small government.

steve said...

the only viable future of the GOP is libertarian. otherwise they're a clone of the dems. agree with scott, GOP is shooting itself in the foot politically and should let Ocare go. if it sucks it will fail and then GOP can clean up in '14. as it is, they're going to get blamed for shutdown and Ocare ultimately will still move forward. just NO planning on GOP's part.

William McKibbin said...

The latest from the press suggests that Senate Republicans are considering the advantages of a technical default -- such a default would force Pres Obama to triage spending in order to fit future spending into current tax revenues -- more at:

Truthfully, I see some merit to this approach -- not raising the debt ceiling would force the government to spend only what it collects in current tax revenues -- in other words, government spending would be cut 40% immediately, which has been my goal all along -- of course, the cuts would somehow hit both guns and butter in some combination -- but yes, not raising the debt-ceiling would require that the government pay the interest on the national debt first (according to the Constitution), and then allocate the remaining revenues to programs and discretionary spending -- sound like a plan with merit to me.

William McKibbin said...

PS: After reading the article linked above, I am more convinced than ever that the Republicans will not raise the debt-ceiling -- the question will then become how to allocate spending between guns and butter -- nevertheless, I can now see how the US could survive capping the debt ceiling at current levels leading to 40% spending cuts in order to contain spending at current tax revenue levels...

William McKibbin said...

PPS: Of course, capping the debt ceiling as outlined in the above article would properly force an immediate economic recession or even depression -- however, the Republicans could then blame that on Pres Obama and pickup the pieces in 2016 -- good chance this is the GOP plan and strategy.

William McKibbin said...

Here's the Wall Street argument against the Senate Republican considered approach:

What the counter argument seems to highlight is that capping the debt ceiling would drive the economy into recession immediately.

Nevertheless, those who are interested in balancing the budget will have to be attracted to the notion of capping the debt ceiling at current levels -- government spending would drop by 40% instantly in order to fit spending into current tax revenues.

William McKibbin said...

PPPS: Of course, Pres Obama could respond to capping the debt ceiling by reexecuting something akin to Executive Order 11110 (1963) and begin printing United States Notes to sustain current spending levels -- more at:

Hans said...

Ben Jamin, I agree completely with your post..

It is important to remember, that many of the Repubcos are not Conservatives but status quo politicians..

Ryan and many other Repubcos fit the description above because they are afraid to the political fallout..

They love their political position more than the principals they should stand on...

Hans said...

Frozen in the North said...

Comment to Bill McGibbins

The debt ceiling is not about the increasing the credit card limit its about paying the interest on the credit card. BTW how do you think the treasury will "choose" who to pay and who not to pay.

Finally, since you think the Federal Government is so incompetent how do you think they will be able to select between those that get paid and those that don't. How about we start with your pension fund...

Hans said...

The Federal Nanny is like growing plants in the frozen north...

William said...

Ed Yardini on 14th Amendment

It’s a sad day when Beijing has to tell Washington to get its fiscal act together. That’s exactly what happened yesterday when a Chinese official said “the clock is ticking” and urged US officials to “ensure the safety of the Chinese investments.” Of course, if the fiscal stalemate continues and the debt ceiling isn’t raised, there are more than enough tax revenues to cover the interest payments on the federal debt. As I noted yesterday, a section of the 14th Amendment of the Constitution says that the public debt of the US “shall not be questioned.”

The current statutory debt limit is $16.7 trillion and must be raised by October 17, according to US Treasury Secretary Jack Lew. Over the past 12 months through August, net interest paid by the US federal government totaled $219.5 billion. Over the same period, tax receipts totaled $2.7 trillion.

Let’s for expository purposes assume that the debt ceiling isn’t raised over the next 12 months and that tax receipts and interest payments remain the same over the next 12 months. That would leave $2.5 trillion in tax receipts after interest is paid. Outlays, at $3.4 trillion over the past 12 months, would have to be cut by nearly a trillion dollars to match revenues after interest payments. That would still cover all federal entitlements spending, but would leave us literally defenseless, and park-less.

If the President decides to default on the federal debt rather than cut other outlays, he would be violating the 14th Amendment. These may be extreme times, but such an extreme measure is highly unlikely. The President could also interpret the Amendment as giving him the power to unilaterally raise the debt ceiling. So the Chinese can rest assured that their investment in US debt is safe.

More here:

William said...

Some Wise Comments from "Calculated Risk Blog":

First, on the deficit. In 2000 the U.S. had a unified surplus of 2.4% of GDP. Then through a series of bad policy choices (all of which I opposed), the Federal government incurred a large structural deficit - and then with the housing bubble and bust - piled a large cyclical deficit on top of the structural deficit. In the fiscal year starting in October 2008 (Bush's last budget), the U.S. deficit had reached 10.1% of GDP.

Since then, the deficit has declined from 10.1% to 4.0% of GDP in fiscal 2013. If anything, the deficit has declined too quickly slowing economic growth.

Based on current policy, the deficit should continue to fall over the next couple of years, and remain in the 2% range for several years. This suggests we don't need any more fiscal tightening right now or for the next couple of years. However we need a longer term plan to primarily address rising healthcare costs.

Shutting down the government just adds to short term costs. Dumb. Smart policy would be to eliminate the so-called "debt ceiling" (which is about paying bills already occurred), and pass the Continuing Resolution (CR) that was agreed to by both parties except the House added an absurd policy rider. Smart policy would be to think of ways to address the long term issues. This isn't pressing and damaging the economy now is not the answer.

And on deadbeats and defaults: There are certain politicians who think it is OK to not pay its bills as long as the U.S. makes interest and principal payments on the debt. This is crazy talk. There is a name for people who don't pay their bills: deadbeats. If politicians don't pay their personal bills, they are deadbeats. But if they stop the government from paying the bills, we are all deadbeats. And there will be serious economic consequences for not paying the bills on time. The consequences will build over time, but by November not "paying the bills" will ripple through the entire economy.

How does that reduce the deficit (the apparent goal)? It doesn't.

It is time to end the shutdown and agree to pay-the-bills.