Gregg Easterbrook

Jun 17, 2010 18:08 UTC


*“We need additional federal relief because our state constitution requires a balanced budget.” Governors often say this as a way of rationalizing giveaway demands. In effect they are saying – because my rules forbid me to be responsible for my bills, you must pay for me. I think I’ll try this argument with the waiter next time I’m out to dinner!

*Unlike the U.S. Constitution, which is structured to be hard to amend, state constitutions are a snap to alter. The Texas state constitution has been amended 467 times, the Maryland constitution amended 198 times – versus 27 amendments for the U.S. constitution. In many states, a simple vote of the legislature amends the state constitution. Because of this, most states could amend their constitutions to drop budget-balancing. It’s just that states don’t want to, because pretending their constitutions are etched on stone tablets and cannot be altered is a way of shifting the burden to the federal level – as well as exempting  governors from criticism for deficit spending.

*Many state and local governments already borrow using municipal bonds and the new Build America Bonds, which are federally subsidized. Steven Malanga reports in the City Journal that muni bond debt has increased from $1.7 trillion in 2000 (stated in today’s dollars) to $2.2 trillion today. So if borrowing your way out of difficulties is smart – this is what local governments tell Washington when they demand extra money – why don’t state and local governments do their own borrowing, and make their own repayments?

*There’s a strong argument that well-to-do parts of the country should assist low-income states such as Alabama, Mississippi and West Virginia. But the last few years of the bailout-a-rama have not been structured as progressive income redistribution. Instead, big federal checks have gone to California, New York, New Jersey and other prosperous states, while boom towns such as Austin and Seattle get funny-money obtained by adding to the federal debt. The billions in recent bailout money to state and local governments has been doled out roughly in proportion to population, not according to need or merit. Here, Julie Creswell reports fully a third of the Build America Bonds subsidy has gone to California and New York.

*Many states are in poor fiscal shape because they’ve cut property taxes, the bête noir of senior-citizen lobbies, while raising top-rate income taxes, which most seniors don’t care about. California has the nation’s worst budget mess, and barely taxes real estate, while imposing a whopping 10.5 percent top rate on income. Since 1972, property taxes have declined to 16 percent from 26 percent of state revenues, as a succession of candidates in multiple states has appealed to seniors – the most reliable voting bloc – by cutting or limiting property taxes.

Stop bailing out the states

Jun 17, 2010 13:56 UTC

Most states’ fiscal years are ending, accompanied by what is becoming an annual ritual – demands that Washington bail out state and local deficits.  In 2008 and 2009, federal taxpayers covered for the featherbedding and corruption at the local level by awarding state and local governments a total of about $275 billion in bonus payments. Right now on Capitol Hill, state and local governments are demanding a fresh $50 billion round of bailout checks.

Set aside that when states refuse to pay their own bills, they hand the debt to federal taxpayers – all of whom live in states.

Set aside that the states’ claims they must be subsidized because “we are required by law to balance our budgets” is a total political fiction – more on that below. Set aside that governors refuse to make hard budget choices, demand bailouts for their states — then campaign by denouncing the big spenders in Washington.

Congress’ “emergency” spending is out of control

Jun 10, 2010 15:21 UTC

After listening to President Barack Obama call for fiscal restraint in his State of the Union Address this January, the United States Senate imposed the “paygo” rule on itself – no new expenditures unless offset by an equal amount of spending cuts or raised taxes. In the five months since vowing no new spending based on debt, the United States Senate has also voted for $400 billion in new spending that was added to the federal debt. Right now the Senate is debating adding another $80 billion or so in new spending based on borrowing.

As political flaming hypocrisy goes, that’s nothing! The House imposed paygo on itself in January 2007, and since has voted for $5.1 trillion in additions to the federal debt. House leaders support the next $80 billion in borrowing the Senate may approve.

How can the chambers of Congress formally pledge not to increase the debt, then merrily add to the debt as fast as zeroes can be printed? By stamping the word “emergency” on bills. Paygo, you see, not only does not apply to spending for entitlements, defense and interest on the national debt – these categories alone representing the lion’s share of federal expenditures. Paygo also does not apply to any bill classified as “emergency” legislation. And since paygo went into force, nearly all spending bills have been “emergency” bills.

Slimmer wallets, richer lives?

Jun 2, 2010 21:21 UTC

For at least a generation, commentators have declared that Americans buy too much and borrow too much, chaining themselves on a stressful treadmill of work-and-spend. Wouldn’t it be nice, this thinking went, if we learned to buy a little less and save a little more. Maybe then we’d be happy.

We are about to find out – because hidden in economic data is a mild decline in the American obsession with spending money. People are spending somewhat less, even when unemployment isn’t an issue. Americans are paying down credit-card debt, the worst kind of debt, while saving somewhat more. As growth rebounds, we may awaken to a new economic reality in which consumer demand mildly slackens on a long-term basis. This is exactly what social philosophers said would be good for us!


–According to Federal Reserve figures, household debt in the United States dropped slightly in 2009, the first drop since 1945. Some of the decline was keyed to housing foreclosure (which can eliminate mortgage debt), but even taking this into account, household debt went down. Credit is tight – but maybe, as well, Americans are beginning to learn to resist that urge to buy like crazy right now.
–The Bureau of Economic Analysis reports that personal saving as a percent of disposable income hit 3.6 percent in April, the highest such figure since 1998. In April, Americans saved $399 billion – money they might have spent, but didn’t. This seems significant because it is the employed who have extra income they decided not to spend.
–The mean amount a household owes in credit-card debt is now $3,900, down from $4,900 a year ago, according to this Associated Press-GfK Poll. This suggests that Americans are becoming cautious about credit-card use – which is not only smart personal finances, but likely to reduce money stress.
–Since 2007, retail sales are down about 6 percent; household income is down about 1.6 percent in the same period, so retail sales have fallen more than income. Prior to the decline that began in 2008, retail sales had risen 27 consecutive years.
–Last November, the typical Black Friday shopper spent $330, versus $390 (in today’s dollars) in the peak year of 2006.
–Electricity consumption declined from 2007 to 2009, though has risen slightly this year. Unlike gasoline demand, which trends up or down roughly in sync with larger economic movements, electricity demand had been rising steadily since World War II ended. The recent decline in electric power demand began before the 2008 financial-sector meltdown. Now the Energy Information Administration projects – see the table on page 5 — that per-capita U.S. energy use will remain in shallow decline for at least the next two decades.

Exploiting the spill

May 27, 2010 15:07 UTC

The oil spill in the Gulf of Mexico is a serious problem, and could get worse if the capping maneuver being attempted by BP fails. But the spill is not “Obama’s Katrina” (Rush Limbaugh) or “destroying North America” (Chris Mathews) or “a national tragedy” (Robert Redford). Except for the 11 workers who died, and their families, is the spill even a “disaster,” as is being said by practically everyone?

The recent history of serious environmental events is that as they occur, their significance is drastically exaggerated in media and political commentary: then little attention is paid when supposedly “destroyed” areas recover rapidly. When Mount Saint Helen’s exploded in 1980, many scientists said the local biosphere would require centuries to return to life; pundits said this would never happen.

Instead it took the area about 10 years for most wildlife and plant life (except mature trees, of course) to recover. When the Exxon Valdez spilled about 11 million gallons of oil into Prince William Sound in 1989, commentators called that an unprecedented calamity. Considerable harm was done, and some residual problems remain to this day. But aquatic and intertidal life were mainly back to normal in less than a decade.

The Founding Fathers v. the Supreme Court

May 19, 2010 20:09 UTC

The Founding Fathers would be outraged about the nomination of Elena Kagan to the Supreme Court. Not because of her personally – Kagan is eminently qualified. They would be outraged that Kagan soon may be awarded 20 years, or 30 years, or an even longer period of lording it over the republic as an unelected demigod answerable to no one. The Framers would be outraged at all recent appointments to the Supreme Court, owing to the evolution of the Court into an institution that vests tremendous power to unaccountable individuals for extremely long periods.

There’s a simple solution to this problem – a solution that would reduce contemporary stress, anxiety and political fist-shaking regarding high-court nominees of any background or party. The solution is Supreme Court term limits. Via Constitutional amendment, place a 10-year ceiling on the period a justice may serve on the Supreme Court.

The United States is the sole developed nation that confers lifelong status to its topmost court: all other countries have a tenure limit, or mandatory retirement age, or both. In the U.K., Supreme Court judges cannot serve past age 75; in Australia, the maximum High Court age is 70, and the longest-serving current member, William Gummow, is entering his 15th year. Contrast that to the United States, where Justice John Paul Stevens is stepping down at age 90 after 35 years of unelected, unchecked power over his fellow citizens.

Greek rescue more than everyday political monkey-business

May 13, 2010 05:00 UTC

Poof – above Europe, a trillion dollars just popped out of the air! The Greece bailout is even more impressive than the $700 billion that popped out of the air in September 2008, for the U.S. Wall Street bailout. It’s not just that politicians delight in distributing money like candy, knowing the invoice won’t come due until after they have left office. When gasp-inducing amounts of money pop out of the air, something more than everyday political monkey-business is at hand.

European Union nations decided they have an extra $1 trillion to spend because the Greek debt meltdown threatens not just Greece, but money itself. Currency, at heart, is a Ponzi scheme. Money has no inherent value. You can’t eat it or wear it: money is only good to the extent someone will trade you something for it. Nowadays most money can’t even be held in the hand, rather, exists entirely as numbers on electronic ledgers. If Greece failed financially, why should anybody believe government statements about money? That’s what had European governments spooked.

No gold ingots were offered to Greece, no satchels of unmarked bills — only some zeroes. “Your money problems are solved because we assigned you a bunch of zeroes:” that was the essence of Monday’s statement to Greece by the European Central Bank. The award to favored businesses of a bunch of zeroes was likewise the essence of the 2008 Wall Street bailout. Only by drawing ever-more people into an arrangement this nebulous can nations keep alive the notion that currency – digits on ledgers – holds great value. This is a Ponzi scheme on a scale that would make Charles Ponzi blush.

We cry over spilled oil, yet subsidize the production of ultra-polluting cars

May 5, 2010 21:33 UTC

The oil spill in the Gulf of Mexico, coupled to the recent rebound in auto sales, remind us of something that even Republican oilman George W. Bush often said: the United States uses too much petroleum. Why then is the federal government forcing taxpayers to subsidize the manufacture of a 556-horsepower luxury car that gets 14 miles per gallon?

The public owns about 60 percent of General Motors, with around $52 billion forcibly extracted from taxpayers’ pockets to subsidize the company. General Motors builds the Cadillac CTS-V, a rich person’s plaything that retails for $62,020, does zero-to-60 in a racetrack-caliber 4.3 seconds – that is faster than a Corvette of the 1960s muscle-car era — has an outrageous 556-horsepower motor and posts a miserable 14 MPG. (Mileage references in this column will be the EPA “combined” figure that blends city and highway driving.) To boot, the CTS-V emits 13.3 tons per year of carbon dioxide, the primary greenhouse gas. That’s far more than a typical car.

At the very time we are reminded of the fragility and environmental consequences of U.S. petroleum consumption, at the very time President Barack Obama and many in Congress want regulation of greenhouse gases, federally subsidized General Motors is using taxpayer funds to build an extremely wasteful, ultra-polluting car. The gas mileage of the CTS-V is so awful, it would have qualified – right off the assembly line – for destruction as a clunker under last summer’s “cash for clunkers” program. Manufactured and then immediately junked: the ultimate government program. Except these Cadillacs aren’t going to the shredder, they are on the street wasting gasoline and pumping out greenhouse gases, courtesy the taxpayer.

For real progress against greenhouse gases, drop the bureaucracy

Apr 28, 2010 22:00 UTC

International negotiations on global-warming accords continue to be an expensive exercise in pointlessness, while the leading anti-greenhouse-gas legislation in the United States Senate, shepherded by John Kerry of Massachusetts, is said to be so lengthy it may make the recent health-care bill seem like a Post-It note. Release of Kerry’s proposal was delayed Tuesday when its sole Republican cosponsor, Lindsey Graham of South Carolina, developed cold feet. Some Senate action on the proposal is expected this spring.

Ideally, both the international negotiations and the Kerry bill will collapse under the weight of their own complexity. That would be ideal if you favor progress against greenhouse gases! The threat of artificially triggered climate change is all too real: see more on that below. But new thinking – not more top-down bureaucracy – is the best hope to reduce greenhouse gas accumulation.

Both the international proposals, and Kerry’s bill, seek to create ultra-elaborate regulatory regimes that would guarantee cushy jobs for bureaucrats and big paydays for lobbyists, but not necessarily much reform. Both reflect what many hate about government – prescriptive top-down regulation combined with ample opportunities for insiders to direct giveaways to themselves. Among Washington insiders, especially the think-tank set, there’s a sense of delight that a mega-elaborate greenhouse-gas regulatory hierarchy is coming. Thousands of lobbying pressure-points will be created, while some gigantic Department of Atmospheric Administration will result, top heavy with senior-grade functionaries who spend their days infighting about whose signature goes on memos. Elites in Washington and Brussels surely will benefit from the complex approach to greenhouse regulation. Will anybody else?

What will Iran do with nuclear weapons? Probably nothing

Apr 22, 2010 05:00 UTC

Gregg Easterbrook is a Reuters columnist. Any views expressed are his own.

World leaders meeting in Washington last week engaged in a competition to see which could make the strongest remark about Iran not getting an atomic bomb. President Barack Obama has asked Russia, China and other nations to form a united front against the Iranian atomic program. Vice-president Joe Biden recently said, “The United States is determined to prevent Iran from acquiring nuclear weapons, period.”

The comments seem eerily similar to those made by presidents George H. W. Bush, Bill Clinton and George W. Bush, plus other world leaders, about preventing North Korea from acquiring the bomb. This happened anyway. Current anti-Tehran blustering and posing will be about as effective. Soon Iran will become an atomic power. The world community must prepare for this moment.

The simple reality is that other nations cannot prevent Iran from fashioning an atomic device. Cannot, except perhaps by an all-out nuclear first strike that obliterates much of the country, or invasion and permanent occupation of a nation substantially larger than Iraq and Afghanistan combined. Conventional aerial attack might slow but cannot stop an atomic program using underground facilities – or conventional aerial attack would have been used against North Korea. (See details below on the reasons conventional airstrikes aren’t the answer regarding the Iranian program.)