Bush's Fiscal Constraint

"In restraining spending in the 2006 Budget, the Administration was guided by three major criteria,"

What happens if we test the Iraq war spending against those criteria?

"First: Does the program meet the Nation’s priorities?"

I know many of you have a quick answer for this one, but let's take it slow. First we need to consider whether a war in Iraq is one of the "Nation's Priorities". How do we do that? polls, surveys, recent elections, the constitution? Or is it just what Commander and Chief wishes? ("I'm the decider"). I argue that for something to be construed as a National Priority, there has to be some majority or plurality feeling on the issue from the people. One way is election cycle polls. What do voters expect their elected leaders to get done on the national level. Given the Iraq situation, those against the war would say there is a clear majority sentiment to disengage from the conflict and bring troops home. However, fighting terrorism and national security frequently rank somewhere as national priorities, so those who support the current administration will continue to justify Iraq under that heading. However, I think the former trumps the latter. By expressing dissaporval of our President and his handling of Iraq (see Washington Post ABC Poll), including the build-up to the war, I think the American people have clearly stated that they understand the Iraq quagmire has little to do with any domestic security or war on terror. If Iraq is a National Priority now, it's because people are pissed at how we got there and want out. So, I have to say that hundreds of billions of dollars spent on destabilizing a country and killing civilians and our brave men and women certainly was never a "national priority".

"Second: Does the program meet the President’s principles for appropriate use of taxpayer resources? "

Bush's stated principles have been fiscal restraint, small government and putting money back in the taxpayers pockets, because 'Americans know what to do with it better than Washington Bureaucrats'. I would think a fair indicator of a "smaller government" would include a decrease in federal expenditures as a percent of GDP. Well that figure has gone up by almost 10% since Bush took office. source Folks would argue that he has cut taxes...but cutting taxes, as Bush has exhibited, has nothing to do with shrinking government if all you do is increase spending by increasing the national debt. How about all the civil liberties that have been threatened by the Patriot Act and other "war on terror" justifications? So the Iraq war, has done absolutely nothing to put money back in my pockets or shrink government and therefore, this "program" does not even fit into his own principles. Plus..the guy is supposed to be a Christian...they have some principles right?

"Third: Does the program produce the intended results?"

Talk about saving the easiest for last...do I even need to elaborate on this... The answer is no.

So, once again the President is talking about one thing and doing another.

The Race to Bankrupt our Country: the insanity of competing subsidies

Attention Taxpayers..even if you agree we should support alternative energy..wouldn't it make more sense to eliminate fossil fuel subsidies from the tax code first and then work from there? Instead we have just created competing subsidy progams.

By the end of this entry you will see that oil production subsidies paid for with our tax dollars are very real. We also know from recent new that biodiesel, solar and ethanol incentives are very real too, especially as of late. As taxpayers, perhaps we even support the idea that we are helping encourage alternative energy. Better for national security, the environment etc.. But imagine you are a policy maker..lets call them "Mr. and Mrs. Government"
How might that thought process go? (the following are real numbers, although rounded and spun into my cute little dialogue format):

Mr. Government: we would like to encourage alternative energy, we have some extra revenue, or at least we can print more money, what shall we do?
Mrs. Government: Well, we gave over $3 billion to the Big Oil over the last 5 years, so we will want to top that for the ethanol producers right? ...lets raise taxes or increase our debt and give $12 billion to Big Ethanol. That way they will be $9 billion ahead!
Mrs. Government: Brilliant! and if we can't raise taxes we will just sell more Debt to China!
Mr. Government: I love you, i'm so glad we are helping save the world together.
Mrs. Government: Me too, we are so smart!

Taxpayer: Uh...hold on there..can we do a math and logic check? The total taxpayer cost there is $15 billion and results in a $9 billion dollar alternative energy lead. Couldn't we just eliminate the $3 billion to oil, and give $9 billion to alternative energy, resulting in a $6 billion savings, with equal relative advantage to alternative energy?

Mr. and Mrs. Government: Equal realtive...huh? Um hold on, we need to check our campaign finances first.....we'll get back to you on that.

I'm sorry, yes that example was arbitrary and capricious, and probably wasn't how the incentives all developed. But at any point in time, we could pull a move like "Taxpayer" suggests and save some cash right?

Hey blogger...you didn't answer the question...are oil subsidies real?

Oh yes, and here I will discuss just one of them.

As a young accountant I remember studying tax code, doing tax returns and finding certain things kind of peculier. One thing that stuck in my head years ago was "percentage depletion" for oil producers, it may have even been on my CPA exam? I filed it in the old cranium and it keeps popping back into my conciousness every time I hear energy policy and taxation dicussed in politics and media. I decided to do some research and see if it is still around...yup. This MIT paper explains it very well, but here is a basic summary:

If you own a farm and you sell $100K worth of milk, it's taxable revenue right. But you also bought a tractor, and paid employees etc... Those real cash costs actually turn out to be $80K. Nice deduction...your taxable income is now ony $20K. "Percentage depletion" allows fossil fuel producers to deduct on their income taxes a set percentage of their revenue instead of their real costs. The kicker is, there is no relationship to the real cash costs incurred by that company. It's like the farmer getting a deduction of 90 cents on every dollar he makes, even though he only spent 80 cents on deductible expenses. In the oil industry, this excess of deduction over real costs is estimated at over $600 million/year. And that is just one of the many breaks fossil fuel producers get.

Percentage depletion for the oil industry, tax credits and subsidies for biodiesel and ethanol. The best way to support alternative energy, may just be to end all subsidies across the board! With billions annually going to percentage depletion, farm subsidies galore, direct subsidy and tax credits for solar, biofuels..how the hell is anyone supposed to really know what the true cost of a gallon of ethanol or a gallon of unleaded really is? And if we factor in or account for the Externalized costs of oil(great subject), perhaps alternative energy doesn't even need subsidies at all?

Morality in the Libertarian ideal

There is some fundamental truth in a Walter Williams article, that speaks of the moral high ground offered by libertarianism and our free market system. In the article, Williams explains that our markets morally distribute goods and services, and that government taxation is in-fact highly immoral in comparison. This is convenient to spur debate, however let us not forget that things are rarely that simple, and people who refuse to see the gray areas are frequently idealists and fundamentalist, who conveniently ignore reality. So how do we handle those who present us with black and white solutions to complex problems? I say, introduce some complexity into the argument and see whether it holds up. Sometimes they do...
Here is an example of one source of a "gray area" that make stylized examples like Walter's falter: Externalities. In his article, a Dude got $30 for mowing the lawn, so Walter says he has earned the right for $30 of groceries. He claims that this is an example of how efficient and moral our capitalist system is. The system was moral in that it rewarded Dude (with beer and steak) at a level commensurate with his contribution to Society (his lawn mowing). I agree, we have a great system and I do love it and enjoy it for the most part.
But wait..what if, in the process of mowing the lawn, Dude was unaware that he caused a rock to fly out of his mower and severely injure a nearby child, and he was not held accountable. Dude was unaware that this had happened, and nobody knew the source of the injury when the toddler ran into the home crying. This can be seen as a negative externality (loosely defined) to Dude's lawn mowing business. Say now, that the child is uninsured and the family lacks the resources to stitch that wound. Now we have a morality problem..do we not? A less direct and less costly externality of his business is his 2 cycle lawn mower, which is old, leaks, and has emmissions hundreds of times worse per gallon than a modern car. The price of his gas (which is passed through to his customer) does not properly include all the costs associated with burning that gas. Costs such as environmental, public health, past current and future military action associated with securing oil, etc...The free market has failed at pricing those costs and appropriately assigning them to Dudes business and the oil industry(and pricing structure).
Government tries (and admittedly fails some of the time) to recognize positive and negative externalities and remedy them through tarrifs, taxes, incentives etc.. I am not saying this is the always the right approach, but simply want to point out that the libertarian ideal will always suffer from the unavoidable fact that our markets fail to take into account (by pricing properly) the true costs and true benefits of many products. We see this in the ridiculously low cost of non-renewable and polluting energy, or chemicals, which rarely carry the full cost burden in the price to account for the society wide destruction they cause. Like the unidentified rock that wounded the child, when we all get cancer and the company that sold us the chemical is bankrupt, don't we all look to gov't to help us out? And is this really that unreasonable for a civilized society? to expect that we all share the burden of this type of event, as a kind of insurance against the free market's externalities. The solution is not always more taxes. The solution is to use the power of government to help identify and incorporate these costs into the market as best as we can. Carbon trading and caps are an example. Nobody was taxed, but a maximum level was set by the Government and the free market then priced and traded credits accordingly.
Simplified libertarian or free-market examples lead us to believe that if only government would stay out of our way, the "invisible hand" will sort everything out. There is a brilliant elegance to the free market and the benefits it produces, but we must recognise that we don't live in a vacuum and can never achieve a perfect market that would cure all ills. There will always be information asymetry, conspiracy, monopoly, unaccounted for positive and negative externalitiess and more such problems that need to be addressed.
That being said, I think federal government intrusion has gone too far...and would like to see a reduction in Washington's influence in exchange for greater autonomy and power at the State level. Federal government is so big, it actually muddles the market so much that it creates some serious externalities of sorts. We have so many energy subsidies its ridiculous and determining the true cost of ethanol or petroleum is an even greater challenge.

Iraqis are better off? is that relevant?

Do I want Iraqis to be safe and happy: yes. Do I believe their happiness is relevant to the debate on the Iraq invasion and occupation? no. and that is exactly the point, because at this moment people are arguing about the truth and importance of a March 18,2007 article that indicates Iraqis are better off. Hawks are saying that this is evidence that the war was right, and that the mission is working. Opponents of the war are trying to discredit the study, which is a ridiculous waste of time, because if you are arguing about that war, whether or not Iraqis are better off is irrelevant. Here is my comment to that article:
I could blow up pakistan and more than half of Indians would say they were better off...doesn't make dropping the big one on Pakistan the right thing to do. This is all really interesting..and I don't doubt the truth of it, but whether or not Iraqis, the Middle East or anyone is better off without Sadaam isn't and never was the question. Remember how this conflict was marketed: WMD's, Al Qaida, 9/11, Terrorism. Arguing about the conclusions of this article is a waste of time. Remember, this war was packaged as anti-terrorism, 9-11 response, al-qaeda, WMD's related. It was not sold to us as a humanitarian effort to help out the Iraqis, if it was, then this article would be highly relevant and important, but as it stands now, it is just a distraction and a trap for the iraq war opposition to fall into.

Evolution of Environmentalism

What happens when previously radical or minority held views on the environment become main stream? Well you are seeing it happen right now. Let me start by admitting that his post is short on answers and full of observations. Environmental groups do everything in their power to bring their issues of choice into the spotlight. They hope for widespread attention to the issue and political action. But doesn't it seem like whenever this goal is achieved, the result seems to fall far short of what the initial goal was? By the time an issue makes it to the mainstream, it is simplified and packaged into a neat little press release. The complexity of the issue is lost, and any political action that follows is likely a band-aid. Is this strategic? Is that the only way to get anything done in our current system? dumb it down and make it look pretty and hope for the best? A "little steps" approach ? Perhaps if it were not for the simplification process, no progress would be made on the environmental front? I don't know. Environmentalists are accused of strategies like saving the old growth by finding an endangered species (spotted owl) as a tool. While the whole issue was divided into pro-logger or pro-spotted owl, many conservationists were more interested in all the old growth that was in play and many local loggers and communities were interested in the issue of long term economic stability of the timber industry if old growth forest management continued at this unsustainable rate of harvest. But not many people looked at the issue in those terms..it was easier to just be pro-job or pro-owl. So, the spotted owl basically won, but now half the country thinks the debate was actually about an owl vs. a job (simplification), when really it was a complex tug of war between short and long term economic issues, wilderness and ecology, with a dash of owl thrown in for drama. Every environmental issue has the opportunity to teach the uninformed and uninterested that there are no black and white issues and no easy answers, that when you hear owl vs. job...chances are that that is the tip of the iceberg, that sometimes saving an owl can create more or better jobs etc.. Instead, we end up with the polarized, black and white debate, with 10% of the folks engaged in the debate understanding the details, the ripple effect, the true economic effect etc. Look at global warming, in the last few years it's gone from periphery to front and center. In true American tradition, we will hit it hard in the press, put some compact fluorescent light bulbs in our house, maybe increase our nationwide mpg by 10%, and then we'll all forget about it, until we all clearly see 4 or 5 convincingly warmer seasons in a row...then..panic. Or maybe it will be the farmers who speak up? We always have a weak spot for the distressed farmer. Like I said, just observations here, I am void of answers on this issue...got any?

Ditch your political party

I enjoy when people try to label my political views and fail. Given the hypocritical positions held by the two major parties, I wonder how anyone feels comfortable calling themselves a Democrat or Republican. I agree that one can be a party member without agreeing with the whole spectrum of positions held by that party. Many rational and intelligent Dems and Reps are mavericks, hoping to help pull their party in a certain direction. This is laudable, but I think we are beyond that, certainly at the national level things are just so mixed up I really don't think the labels mean much anymore. It's almost as if it is designed to make Americans think we have a real choice. We need more independents, to force voters to look at the issues and look at where a particular candidate stands on issues that matter. I don't think anyone would doubt that Americans are not paying enough attention to what their Government is doing to them. They pick a party based on some platitudes offered by that party that strikes a nerve with them, and then they are sold. Democrats are soft on crime and love to tax and spend, so I'll be a Republican. Republicans just favor big business and exploit the environment, so i will be a Democrat. The result of this simplistic thinking is exactly what we have today, a detached population and a bunch of rulers all to willing to think short term and look for easy, marketable solutions. So ditch your party, and vote for someone (party affiliated or not) who is flexible, able to criticize and differ with their own party, and willing to rock the boat!

Washington has usurped local power

"The United States - a federal system in which the citizens of each individual state are sovereign - has been replaced, over time, by a unitary and imperious federal government that is daily becoming more intrusive. As a consequence we are rapidly losing touch with our democracy, for deciding issues of political significance on a human scale - where both the causes and the consequences of collective action are within ordinary citizens' grasp - is the oxygen of democracy"
Prof. Frank Bryan, UVM Professor of Political Science

Damn, that rings true doesn't it. Prof. Bryan has been quite supportive of a long standing Vermont movement to secede from the union. Vermont was once an independant republic, prior to becoming a state. Only Texas shares that unique claim to fame. Think about it, when you really get down to the heart of most any political debate, the idea of more localized government seems to be at least part of the solution, sometimes all of it. Pick a hot topic: health care, welfare, taxes, education. Now...wouldn't it be easier to find a workable solution to the problem at hand if the scope was just your municipality or state? Yes, is the answer i come up with 90% of the time. Furthermore, there is a legitimate body of thought that believes this is exactly what the founding fathers intended. Certainly in some cases, it makes sense to let Washington handle the problem (Defense, certain business regulation etc..) There do exist efficiencies and practical reasons to leave something up to the Feds. I am not quite sold on the idea of secession, but taking the middle road: I propose two tests before handing a responsibility or task to any governement entity, particularly to Washington:

1. Government should be the "solution of last resort"
Does the government really need to be doing this? Is the free market failing in this function. Are non-profits, business, communities, families etc.. proving to be unable to achieve a goal that the majority of voters believe should be achieved. Too often, I hear politicians rationalizing the need for new government program or regulation simply based on the presence of a problem. But just because a problem exists..it certainly doesn't mean that the solution should be the responsibility of government. There are many ways to solve a problem...lets not forget. But We the People are so susceptible to instant gratification, that when a politician says they are going to take care of everything, we are too ready to abide. There are no easy solutions. Just like the fraud awareness public service announcements: "If it sounds too good to be true, it probably is"

2. At what level of Government does the best fit soultion lie?
So let's say we passed the first test and we agree that we have an issue that is most efficiently handled by government. Don't just allow Washington to deal with at a federal level, passing one law or regulation that applies to Arkansas and Alaska, East L.A. and Liberty, Vermont. Start local and move on up until the best fit is found. I have worked in government, and can see that adding laws, employees, departments etc.. is largely a one way street. Hiring someone and starting a new governmental program is easily done once the public is behind the goal. But when it fails to deliver, trying to shrink government is a monumnetal task. So, let's not add to the beast unless we are darn sure it's a good deal for all. Lets take our time. Do it for the children!