Thursday, September 29, 2011
Two cheers for Obama’s review of regulations

By Gretchen Hamel

Talk to any backyard gardener and they’ll tell you about the importance of weed control for a healthy garden. Weeds, allowed to grow unchecked, will soak up nutrients from the soil and block much needed sunlight from reaching your plants—choking off the bountiful growth of produce and flowers you hope to achieve.

 The U.S. economy is a lot like a garden. Unfortunately, the explosive growth of harmful federal regulations and red tape over the last few decades has had the same effect on our economy that weeds have on your garden—they’re choking off the growth we need to increase productivity and create jobs for working Americans.

 That’s why I was encouraged by the Obama administration’s announcement last month that, following an eight-month review, hundreds of existing federal regulations that weigh as a burden on business and drag down economic growth would be eliminated or revised. The estimated savings for business is around $10 billion, according to the administration.

 In the August 23 Wall Street Journal, the president’s “regulatory czar” Cass Sunstein pointed to more than 500 reforms in the Environmental Protection Agency, the Internal Revenue Service, and the Departments of Labor, Transportation, and Health and Human Services, among others. These reforms would have the salutary effect of reducing paperwork, simplifying reporting processes and eliminating redundancy.

 Importantly, Sunstein also emphasized that we could expect more changes to come, stating that “the regulatory look-back is not a one-time endeavor.” He writes that the government “will continue to revisit existing rules, asking whether they should be updated, streamlined or repealed.” That’s welcome news, and long overdue.

 Regulations may seem like an abstraction, but they have real consequences: higher compliance costs for business result in higher prices for consumers in virtually every area. Americans instinctively understand this: In our recent poll, 74 percent of Americans—almost three-quarters—said they believe that U.S. business and consumers are too heavily regulated, and that more regulations drive up costs.

 It’s important to note that we didn’t get here overnight. Today’s jungle of red tape and regulations has flourished under successive presidencies and Congresses, under both Democratic and Republican leadership. President Obama should be commended for opening up an approach to clearing a path through that jungle.

 Many business leaders and Republican elected officials dismissed the announcement, arguing that the $10 billion in savings is just a drop in the bucket (which is true) and that the scope of the review is too limited, leaving countless equally harmful regulations untouched while new regulations continue to be enacted (also true.)

 But the fact is, every journey starts with a single step, so if you support American business and free enterprise, you should cheer this development as a step in the right direction. A reassuring follow-up to Sunstein’s announcement was the administration’s decision to halt planned regulations aimed at tightening ozone standards, which business and labor leaders warned would result in up to 250,000 lost jobs.

 I’ve been critical of the president and both parties in Congress for their lack of leadership on the national debt (now at $14.7 trillion) and their addiction to deficit spending (estimated this year at $1.3 trillion, according to the Congressional Budget Office). That’s because I know that debt and runaway spending are hampering economic growth and destroying our nation’s fiscal future.

 So when the president takes steps to open up greater possibilities for job creation and economic growth, we should applaud that development—and make it clear that we expect him to deliver more of the same.

 Key to that effort will be holding the Obama administration accountable for building upon this initial progress. Too often in Washington, efforts at reform are announced with a flourish and then quietly fade away. Let’s not let that happen: we should hold the president to account and encourage him to follow through on this worthy beginning by delivering further reforms to ease the regulatory burden on job creators.

 Here’s hoping this $10 billion in savings through regulatory reform will get the ball rolling so that in another eight months we might see additional reforms leading to, say, $100 billion or even more.

 Is that too much to hope for? Perhaps. Ensuring that the administration follows through on this early promise will be the key thing. But for now, let’s give credit where credit is due, and encourage President Obama and his team to keep going. More regulatory reform will serve to cut business costs, spur entrepreneurship and create American jobs—the “healthy garden” that we want our economy to be.

 So keep pulling those weeds, Mr. President. You’re on the right track. 

Gretchen Hamel is Executive Director of Public Notice, an independent, nonpartisan, non-profit dedicated to providing facts and insight on the economy and how government policy affects Americans’ financial well being.

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Tuesday, September 6, 2011
GOP Debate Watch: Hold candidates to account on spending question
By Gretchen Hamel

If you’re still not over the 2010 election, it may be hard to believe the next presidential race is already in gear. In just the last few weeks, we’ve seen President Obama embark on a bus tour to promote his economic policies, and Republicans sparring it out in the Iowa Straw Poll. The next benchmark is September 7, when the GOP hopefuls debate at the Ronald Reagan presidential library in California.
When these candidates take the stage, two questions should dominate: First, how do you plan to get the economy moving again? And second, what are you going to do to get federal spending under control?
These are related questions, because the nation’s debt and deficit spending are feeding into a climate of serious uncertainty about the economy. And the sad fact is that our political class has let us down when it comes to managing both the economy and the federal budget. Our gargantuan national debt ($14.7 trillion and counting) and runaway deficit spending (estimated at $1.3 trillion for this year alone by the nonpartisan Congressional Budget Office) stand as monuments to the fecklessness of our nation’s leadership.
The good news is that things may be changing, as both Democrats and Republicans have begun talking up the merits of getting the budget under control, in the aftermath of the impasse over raising the debt ceiling that almost led our nation into default.
Though it’s early in the campaign, a consistent theme has emerged as all the candidates emphasize the need for fiscal responsibility and reining in the growth of the federal government. Based on the tone the candidates are striking when speaking of the national debt and the deficit, you might be encouraged. “At last!” you might think. “The Republicans get it!”
But not so fast—let’s not let them off the hook quite so easily. While Republican candidates might sound the right notes in their talk about cutting spending, we need to consider the facts of how elected Republicans have managed the federal budget in recent years.
And the facts aren’t pretty:
  • While Republicans have been aggressive in challenging President Obama and Congressional Democrats on earmarks and discretionary spending, they’ve been slow to tackle cuts to defense spending and Social Security, which are drivers behind federal spending, and all of which are in desperate need of reform.
Simply put, both parties have a lot to answer for when it comes to our nation’s current budget troubles. And GOP primary voters, 80 percent of whom say they “worry ‘a great deal’ about federal spending” according to a recent Gallup poll, should keep that in mind as presidential candidates talk up their commitment to fiscal responsibility. Taxpayers need to make sure they hold to that commitment if they should get elected.

It’s a sad truth that many Republican officeholders are as addicted to spending taxpayer dollars as their Democratic counterparts. These spendthrifts are simply mouthing their devotion to fiscal responsibility.

When the Republican presidential hopefuls debate on September 7, pay close attention to their answers about how they intend to tackle federal spending, reduce the national debt and get the economy moving again. We intend to hold all officeholders—Democrats and Republicans— accountable when it comes to getting the nation’s fiscal house in order. Candidates from every party, whatever office they’re running for, should get that message.

Gretchen Hamel is Executive Director of Public Notice, an independent, nonpartisan, non-profit dedicated to providing facts and insight on the economy and how government policy affects Americans’ financial well being.
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Wednesday, August 17, 2011
Reality Check: How does government spend your tax dollars?
By Gretchen Hamel, Executive Director of Public Notice

How long does it take to rack up a trillion dollars in government debt?

What kind of critical scientific questions are federal research dollars being used to explore?

Should you consider quitting your job and getting certified as a lifeguard?

These are among the pressing questions posed in the second installment of Bankrupting America’s popular web video series, “
Real or Fake.” In this episode, our host hits the National Mall in Washington, D.C., to conduct on-the-spot interviews with Americans to determine how much they know about federal spending and debt.

Best of all, you can play along—just click “play” to test your knowledge of how your tax dollars are spent. (To view the first installment of “Real or Fake,” 
click here.)
Bankrupting America is a project of Public Notice, a nonprofit advocacy organization that’s been a leading voice in the push to bring real budget reform to the nation’s capital.

The “Real or Fake” series shines a light on where the money goes in a fun and lighthearted fashion—but we’re dead serious about the need to get the national debt and government spending under control.

That’s a timely message. With recent events in Washington like the debate over raising the debt ceiling and the S&P downgrade of U.S. government bonds, Americans are taking an increasingly critical look at exactly what they’re getting for their tax dollars. And they don’t like what they see.

“It’s pretty scary, especially when you have children that you know we’re leaving that debt to,” one interviewee says. The good news is it doesn’t have to be that way.

Learn more about how we can get the nation back on track through federal spending reform.

Gretchen Hamel is Executive Director of Public Notice, an independent, nonpartisan, non-profit dedicated to providing facts and insight on the economy and how government policy affects Americans’ financial well being.
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Friday, June 25, 2010
Take Prudent Action to Reduce the Debt or Pay More Later
By Gretchen Hamel
Procrastination isn't one of the seven deadly sins, but if one were making a list of deadly economic behaviors, it would surely be near the top of the list.  As the U.S. heads into the G-20 meeting, it should heed the advice it will receive from other countries regarding our fiscal fiasco.
Last week the world learned that European political leaders failed to act when they first became aware of the magnitude of the debt crisis.   As early as February, officials from the U.S. government and the International Monetary Fund (IMF) warned European leaders that the debt problems in countries like Greece had the potential to impact the world economy.  European leaders stalled, hoping that Greece's problems would be contained. 
Unfortunately, their problems became more severe.  
Analysts estimate that the cost of rescuing Greece from bankruptcy would have been $35 billion if measures had been taken when initial warnings were issued. Instead, Europe’s leaders fiddled while Athens burned and now the cost of bailing out Greece is $140 billion.  That additional $105 billion is just a small portion of the total cost of the delayed response to Greece's meltdown. 
Investor confidence in European debt has been profoundly shaken by the Greek crisis, leading to a precipitous drop in the value of the Euro currency, and contributing to stock market declines worldwide.  Europe and the IMF are now creating a $1 trillion fund that can be used to stabilize countries facing potential default. 
In retrospect, it seems obvious that the Greeks ought to have made changes long ago to bring their country's accounts closer to balance.  Similarly, European nations, whose economic futures are wedded to Greece's because of their shared currency and interlocking debt relationships, should have taken action to stabilize Greece before the problem became a crisis. 
Hindsight, as they say, is 20-20, but it seems like Congress is refusing to learn from the stark example Europe has provided. 
Last year, the Congressional Budget Office offered this bleak assessment of U.S. economic prospects:  “Under current law, the federal budget is on an unsustainable path—meaning that federal debt will continue to grow much faster than the economy over the long run.... CBO’s long-term budget projections raise fundamental questions about economic sustainability.” 
President Obama has heard this grim prognosis.  At a townhall meeting last summer, the President himself said: “We can’t keep on just borrowing from China...We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”  
Congress, like Europe, has been warmed.
But they’re fiddling while Washington, and all 50 of the U.S. states, burn. Congressional leaders are currently debating another stimulus, and the debate is about whether to spend $50 billion or a $100 billion, not whether any billions are needed, or, if they are, where to find cuts to make up for the new spending. 
Congress has decided to forgo the budget preparation entirely, with Majority Leader Hoyer explaining that it would be useless to try to budget without hearing the recommendations of the fiscal commission.  Yet one hardly needs a commission to know that the first solution to debt problems is to stop overspending immediately. 
The CBO now expects our debt to reach 90 percent of GDP (more than $20 trillion) by 2020. By then, our interest payments will have quadrupled.  By 2020—that's just ten years from now, when today's first graders are getting driver's licenses—interest payments and our entitlement programs, like Social Security and Medicare, will require 9 out of every 10 dollars in the federal budget.  
Policymakers know the numbers.  They have heard the warnings.  They know our present course is unsustainable.  The question is are they going to do anything about it before it's too late?
Gretchen Hamel is the executive director of Public Notice, an independent, bipartisan, non-profit organization dedicated to providing facts and insights on the effect public policy has on Americans’ financial well being. For more information please visit www.thepublicnotice.org.
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Wednesday, May 26, 2010
Will We Have the Resources to Fight?
By Gretchen Hamel

Memorial Day is an occasion to remember all of the brave men and women who gave their lives for our country.  Indeed, America has a proud history of defending freedom the world over.  Yet this weekend, Americans should also consider the future.  Will we have the resources to fight the next time our country is called to duty?
Fighting a war requires more than just heroes, of which the United States has an abundance.  It also requires money and resources.  During war times, the government steps up spending and consumes more of the economy.  Yet today, our government is expanding not in the cause of our nation's defense, but just because the government is assuming responsibilities that were once left to the people.  This growth of government means we will have less to invest in the military if we do confront a major future conflict. 
Consider this history.  In 1930, government spending accounted for just 3.4 percent of GDP.  During that decade, when the country faced the Great Depression and President Franklin Roosevelt rapidly expanded the federal government, spending grew to account for 9.8 percent of the economy.  It's worth noting that during that decade the economy actually shrank:  in 1930 GDP was $97.4 billion, while in 1940, GDP was just  $96.8, having dipped all the way down to $57.6 billion in 1933.
Yet shortly thereafter, as America committed to entering and winning World War II, government spending exploded.  The economy grew from less than one hundred billion in 1940 to $221.4 by 1945—that's more than doubling in just five years—but government grew even more rapidly.  Government went from consuming less than ten percent of the economy in 1940 to 43.6 percent in 1943, a level it stayed at until the war's end in 1945. 
After World War II, government appropriately contracted, though it never returned to its pre-war or pre-depression level.  By 1950, government accounted for 15.6 percent of GDP.  It slowly rose during the next decades.  Since that time spending has hovered around 20 percent of GDP, rising slightly above that level during the 1980s in response to the Cold War, and falling below 20 percent for most of the last two decades.
Today, Washington is permanently expanding the government's share of the economy.  Government's spending jumped to 24.7 in 2009 in reaction to the financial crisis and economic downturn.  Yet that financial crisis can't explain why the Congressional Budget Office estimates that in 2020, if the President's current budget proposal becomes law, the federal government will still consume 24.1 percent of GDP.
These estimates are likely to understand the severity of the crisis we face.  Consider that government spending per household doubled during the last 10 years, and is on course to double again in the next 10 years.  As a result, each American family's share of the debt will balloon from about $115,000 today to nearly $200,000 in ten years.  By that point our national debt will exceed $20 trillion and interest payments to service our debt will be four times higher than they are today. 
In 10 years, interest payments and entitlement programs alone will take up 90 percent of the federal government's revenue.  How will we pay for our military?  What will be left to spend if disaster strikes and our country is again called to fight for freedom? 
Americans have always risen to challenges in the past, and our brave men and women in the armed services stand out in their service to our country.  Today, we need Americans to rise to a challenge again.  This time it's not war, but the threat that we are permanently weakening our country by allowing Washington politicians to grow government and accumulate such a massive debt.  We need an army of citizen soldiers to honor the men and women who have defended the country in the past to stand up and send a message to our elected representatives:  we need to preserve and protect this country from a mountain of debt by cutting government spending now. 
Gretchen Hamel is the executive director of Public Notice, a independent, bipartisan, non-profit organization dedicated to providing facts and insights on the effect public policy has on Americans’ financial well being.  For more information please visit www.thepublicnotice.org.
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Friday, April 30, 2010
Facing Fiscal Crisis Head On: Lessons from New Jersey
By Gretchen Hamel

Ohio has major financial problems. Unemployment is 11 percent.  The state expects a shortfall of nearly $300 million this year and has unfunded pension liabilities of $26 billion. The Governor, legislature, and city councils are struggling to close budget gaps.  What should they do?

There are no easy answers, but policymakers can look to other states for lessons.  In particular, Ohio should pay attention to New Jersey for lessons good and bad.  While Ohio has problems, they are mole hills compared to New Jersey's mountains.  For fiscal year 2011, New Jersey faces a budget deficit of $10.7 billion—that's 36 percent of the previous year's budget (Ohio's current shortfall is about one percent of its total budget).  New Jersey already has the highest tax burden of any state in the nation.  With a per-person state and local tax burden of $6,610, raising taxes simply isn't a realistic option.

How did New Jersey get into this mess?  New Jersey, like every other state, lost tax revenue due to the economic down turn.  Total revenue for 2011 is expected to be 15 percent less (just under $5 billion less) than it was in 2008.

But revenue decline isn't the primary cause of the fiscal crisis: runaway government spending is.  New Jersey state spending increased nearly 60 percent between 2001 and 2008.  And so, even during flush economic times, New Jersey's debt ballooned from $16 billion in 2001 to nearly $52 billion in 2009.  As a result, New Jersey must use $2.5 billion of its budget just to service debt.    

New Jersey's situation is even worse than these numbers suggested.  In addition to the current deficit and explicit debt, New Jersey faces unfunded pension liabilities of $46 billion.  The state's pension crisis is another example of lawmakers' irresponsible spending habits:  liabilities doubled between 1999 and 2008, while the assets grew by little more than a third, leaving a serious financial hole.

New Jersey's new Governor, Chris Christie, has been clear about how he plans to tackle New Jersey's financial problems:  he is cutting spending, and cutting it a lot.  The Governor plans to reduce state expenditures by $10.1 billion in 2011.  He will reduce the number of state jobs; eliminate, streamline, and privatize programs; and root out waste wherever possible.  He will cut education spending—a necessity given that education consumes more than one third of New Jersey's budget—by $820 million.

Not surprisingly, these proposed cuts have created controversy.  The Governor urged teachers to accept a wage freeze, but unions are loath to make these concessions.  Yet this sometimes-ugly political tug-of-war has served an important purpose in educating the public about the budget crisis.

Few voters understood just how generous state worker benefits were until Gov. Christie laid it out:  A retired teacher who, while working, paid a total of $62,000 toward her pension and nothing for full medical coverage will receive $1.4 million in pension benefits and another $215,000 in health care benefits. Is this system really fair to taxpayers who have to foot the bill?

These cuts are just a first step in getting the state's fiscal house in order.  Pension reform must come next.  Christie's budget forgoes more than $3 billion in contribution to the state pension retirement system.  This helps the immediate budget crisis, but exacerbates the long-term problem of unfunded pension liabilities.  

The Governor has already begun the difficult process of reforming the pension system.  Last month he signed laws that modestly scaled back benefits by increasing employee contributions to healthcare, limiting payouts for unused leave time, and eliminating recent benefit increases. More pension reforms are needed and, thankfully, being proposed. 

New Jersey and Ohio aren't alone in facing the uncomfortable task of having to reduce public pension liabilities.  The Manhattan Institute found nationwide all 59 pension funds dedicated to public school teachers face shortfalls, with total unfunded liabilities as high as $933 billion.  With liabilities so high, and taxpayers already stretched so thin, states are going to have to face these pension issues or face financial ruin.

It's too soon to tell what the outcome of this looming crisis will be.  But it’s good governors and state lawmakers are having these conversations.  Ohio voters should encourage straight talk and tough choices from their state officials because, ultimately, it's the citizens who pay the price of government's runaway spending.

Gretchen Hamel is the executive director of Public Notice, a new independent, bipartisan, non-profit organization dedicated to providing facts and insights on the effect public policy has on Americans’ financial well being. For more information please visit www.thepublicnotice.org
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