Obama has been on a Spending Binge

Rex Nutting of the financial website MarketWatch recently published a column titled, “Obama Spending Binge Never Happened.”  In it, Nutting analyzed the spending practices of presidential administrations going back to Dwight Eisenhower in the 1950s.  His findings indicate that Obama, who everyone believes is a reckless appropriator of federal funds, has actually presided over the smallest increase in federal spending since President Eisenhower ended the Korean War in the early 1950s.  Using George W. Bush’s last federal budget of $3.52 trillion as a baseline and projecting Obama’s fourth and final budget of his first term to be $3.58 trillion, Nutting figures that the annualized growth of federal spending under Obama will increase by 1.4 percent in his first term.  Compare that to Reagan ‘82-85 – 8.7 percent, Bush II ’02-05 – 7.3 percent, and Bush II ’06-09 – 8.1 percent and Obama looks like a frugal fellow.

And don’t think that Obama isn’t going to use the analysis to clear his name and further his reelection chances.  In fact, at a campaign stop last week the president boasted, “Since I’ve been president, federal spending has risen at the lowest pace in nearly 60 years. Think about that.”  Now that is an interesting comment.  Obama has never wanted to be known as a spendthrift, but he sure doesn’t want to be known as the Herbert Hoover of this financial crisis either.  The same Herbert Hoover who is much maligned by Paul Krugman and other Keynesians for not spending enough to prevent the Great Depression from happening.  Funny thing is that under Hoover real government spending rose by 12.3 percent per year and we still had the Great Depression.  According to Keynesian logic, with Obama’s paltry spending increase we should already be in another Great Depression.

The bottom line is that Obama can’t have it both ways.  He can’t claim his spending has kept us out of depression while at the same time claim that his spending has been meager by comparison to other administrations.

Obama is a big spender because, Nutting’s irrelevant analysis aside, he is still outspending his big spending predecessor.  Just because the rate of spending increase under Obama is small does not make him a responsible custodian of the federal purse strings.  Not only has he maintained Bush’s spending spree but he has slightly enlarged it.  So Keynesians can rest easy that Obama is one of them.

And of course they will claim that his fiscal policies have kept us from another depression.  I don’t disagree, but Obama has borrowed more than five trillion dollars from future generations of Americans in order to do it.  He essentially has traded a much needed economic correction for temporary serenity.  The economy is not improving.  Analysts have been warning about a double dip recession for years now.  In order to maintain the charade Obama must continue to spend lavishly or the economy will collapse.  At some point our current rate of spending will become unsustainable.  Given that we will be many more trillions in debt and have a lot more mal-investment in our economy, the next crisis will make the last look like a walk in the park.

Article first published as Obama Has Been on a Spending Binge. on Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina

The Welfare State has Destroyed California’s Economy

California is back in the news. On Saturday, Governor Jerry Brown announced that the state’s budget deficit would exceed the original estimate he made in January of $9.2 billion. The new deficit is projected to be a remarkable $16 billion. With state spending still through the roof, unemployment at 11 percent, and poverty on the rise in the Golden State, hope is diminishing that California’s finances will ever return to normal with anything short of a declaration of bankruptcy.

So how did California get in this ugly predicament? The same way the federal government did; by interfering with free market forces by erecting a massive welfare leviathan. The only difference between the caretakers in Sacramento and the caretakers in D.C. is that the latter have the political luxury of printing money to forestall the inevitable day of reckoning. Sacramento does not have that same luxury and unless something drastic happens, it faces insolvency right now.

The five features of the welfare state that have brought the current financial calamity upon California are overregulation, bureaucracy, high taxes, social welfare programs, and unionization.

Overregulation and bureaucracy go together. It has been said that the fastest-growing entity in California is government and its biggest products are bureaucracy and regulation. California’s environmental regulations have always been legendary, but little noticed is the enormous bureaucracy built to regulate most other areas of life. Maintaining these ever growing monstrosities costs a fortune. Additionally, their onerous regulations are one reason that for the seventh year in a row Chief Executive Magazine’s survey of 500 chief executives ranked California as the nation’s worst state to do business in.

Besides regulations chasing business from the Golden State, there are also high taxes. Statists claim that California’s budget deficits have been caused by an ever-shrinking tax base. This is the old chicken before the egg argument.

The reason the tax base continues to shrink is precisely because taxes are so high. California has the 48th worst business tax climate. Workers who earn more than $48,000 a year pay a top income tax rate of 9.3 percent, which is higher than what millionaires pay in 47 states. Its sales tax is one of the highest in the nation, at 8.25 percent. Rounding out the levies that rank among the highest in the country are its capital gains taxes, gasoline tax, and vehicle license taxes. High taxes are a big reason why the state has seen a net loss of four million citizens to other states in just the last two decades. When government raises taxes, the astute find ways to avoid them. The industrious cut back their enterprises and in the case of California, many simply left for lower tax states.

Lastly, Californians have voted for and built a huge social welfare system that puts an enormous strain on the state treasury. The state has about 13 percent of the country’s population but 33 percent of its welfare recipients. Add to that the union contracts of state workers and it is no wonder California is a sinking financial ship. Her prison guards and public school teachers are the highest paid in the country. As of 2009, the average pay and benefits package for a firefighter was $175,000 per year.

California is not alone. For decades, the United States, Greece, and Spain have created welfare states that have choked the lifeblood out of the free market. All face grave financial circumstances today. The free market’s great revenge is that welfare states cannot last forever. Their inevitable collapse comes because they are not self-sustaining. They grow by feeding off the labor of hard working citizens either through higher taxes or inflation. At some point either those sources dry up or the social programs become so large that no amount of money could ever be raised to keep the scheme going. Like Spain and Greece, California is facing immediate financial insolvency. The only thing keeping the United States from the brink is Bernanke’s printing press.

Article first published as The Welfare State has Destroyed California’s Economyon Blogcritics.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina.

Privatizing Marriage Would Settle the Issue

Statists claim that the purpose of licensure laws is to protect people and produce quality results.  They would say that through licensing, states can guarantee that whether you are educating your children, insuring your life, or getting a haircut you can be assured that the provider of those services has been through a state sanctioned training program and thus will render services with at least a minimal standard of performance required to ensure the health and vitality of society.

But, what about marriage licenses?  Are they intended to guarantee a minimal quality of family life?  Apparently they were first intended to do just that.  In the United States, by the early 1920s, marriage license laws in at least 38 states made it a crime for whites to marry blacks, “mulattos,” Japanese, Chinese, Indians, “Mongolians,” “Malays” or Filipinos.  It doesn’t make it right and these laws seem totally reprehensible to us today, but they did reflect the social mores of that time period.

So, what does it say about our time period that voters are still supporting similarly repugnant laws?  I speak of course about the voters of North Carolina recent approval of an amendment to the state constitution making anything other than a union between one man and one woman an invalid relationship under state law.  The amendment passed with the support of 61 percent of the electorate!  What’s worse is that North Carolina became the 30^th state to amend its constitution to prohibit marriage between same-sex couples.  Whatever happened to the principle that constitutions are meant to limit the scope of government and protect individual rights?  It apparently has been thrown out the window, into the street, and run over by traffic time and time again just like other time tested principles of constitutionalism.

And like all laws dealing with personal matters, the number of unintended consequences once this law goes into effect will be huge.  An ACLU analysis of the new constitutional mandate indicates that domestic violence laws could be undermined for folks in unmarried relationships; parents that aren’t married to each other could no longer have the same child custody and visitation rights as married parents; end-of-life arrangements like wills could be altered; and lastly, agreements between unmarried life partners could be determined null and void.

In the final analysis, government has no jurisdiction over who can marry whom.  We are talking about private relationships between consenting adults.  It has no more right to interfere in this area of life than it does to tell people where they can live within the country or how many children they can have.

When you think about it, why do you need a license to marry, but not to have children?  Are children, who are completely dependent on their mothers and fathers, not a more intense responsibility than caring for a spouse who is a self-sustaining adult?

Isn’t marriage, like child rearing, a very personal matter that should be left in private hands?  Individuals should be free to consummate their commitment as they see fit.  Instead of or in addition to vows, a legal contract could bind the parties together. Pre-nuptial agreements already exist so the idea is not far-fetched.  Government could intervene like it does in other contractual matters – to adjudicate a dispute under the marriage contract.  Privatizing the institution of marriage eliminates the controversy of same-sex marriage.  States without same-sex marriage would not be required under the full faith and credit clause of the Constitution to recognize gay marriage granted in another state.  Divorce rights, the partitioning of assets, child custody, and next of kin status would be mandated in the marriage contract.  It is possible that businesses could deny same-sex couples the same employment benefits enjoyed by heterosexual couples, but those companies would do it at their own peril by risking the loss of top quality applicants to fill important positions.

At the end of the day, licensing laws are a means for government to control society.  Within the institution of marriage they have been/are being used to place value on one kind of relationship over another.  They are anti-democratic, intolerant, and infringe upon the liberty of individuals.  By making marriage a totally private institution, a controversial issue that divides America would be laid to rest.   As a nation, we could tackle the pressing issues facing our people – the loss of civil liberties, endless wars, and an unsound monetary policy.  People would be free to live as the Founders intended and the age of bigotry with regard to marriage would finally end.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina