An Obsession With Corporate Jets

By Andrew Cline on 6.30.11 @ 6:09AM

Who knew that straw men could fly jets?

To justify his destructive economic policies over the past two years, President Obama has set fields full of straw men aflame. Not surprisingly, the economy continues to struggle. Burning political props, it turns out, doesn't create jobs. Alas, the president has not noticed.

During his press conference yesterday, the president presented his newest straw man: the tax-escaping corporate jet owner. The tax-escaping corporate jet owner is such a bad person that President Obama mentioned him six times during his press conference. He portrayed these people as "millionaires and billionaires" whose big tax breaks stand in the way of Washington adequately funding college scholarships and child safety programs.

"I've said to some of the Republican leaders, 'You go talk to your constituents -- the Republican constituents -- and ask them," Obama said, "are they willing to compromise their kids' safety so that some corporate jet owner continues to get a tax break? And I'm pretty sure what the answer would be."

But how are corporate jets preventing Washington from keeping children safe?

Politics, of course. A few years ago, we had a president who wanted to pass some tax breaks in the name of stimulating the economy. He thought it would be a great idea to let corporations depreciate the cost of their company jets more quickly. Allowing a faster depreciation would help the companies as well as aircraft manufacturers, who were hurting for business. That president's name was Barack Obama.

In 2009, as part of the stimulus, Obama supported accelerated depreciation for many corporate assets, including jet aircraft. The Associated Press reported in 2009 that the accelerated depreciation for corporate jets was first used after 9/11 and, according to an industry study, increased sales by 43 percent. It was widely viewed two years ago, including by the administration, as a proven way to help the economy by stimulating purchases of American-made jets.

For a president who boasts constantly of all the taxes he has cut, it seems odd that Obama would advocate not just undoing one of his own stimulus-based tax changes, but would single it out as an unfair advantage for the super-rich. It seems odd until one realizes that this is President Obama we are talking about. This is the same man who campaigned in 2008 against a federal health insurance mandate, only to embrace the idea almost immediately after taking office. This is the man who promised that one of his first official acts as president would be to close the prison at Guantanamo Bay. More than two years into his presidency, it is still open.

These were not just campaign promises broken. They were telling signs of how this politician operates. Obama did not believe a word of what he said about the impracticality of Hillary Clinton's individual mandate. He simply deployed the argument he thought most effective against it. Likewise, Gitmo. If he really believed that the prison at Guantanamo Bay was a betrayal of America's core values, it would be closed by now. He is the commander in chief. It is a military prison. He could close it. But he never meant what he said. It was a straw man to use against President Bush.

And so are the evil corporate executives in their three-piece suits filling the cabins of their corporate jets with smoke from cigars they light from the corners of flaming $100 bills. They are not preventing Congress from funding child safety programs. Their tax advantage, which the president supported only two years ago, amounts to roughly $3 billion over 10 years. The federal debt rises by $3.9 billion a day. This is chump change by Washington standards. And the president knows it.

But that doesn't mean it is economically meaningless. In 1991, a 10 percent luxury tax on yachts took effect. This is how the Baltimore Sunreported on the effects of the tax just two years later:

The luxury tax was meant to soak the blue-blazer crowd when it went into effect in 1991. Instead, it slammed into the boating industry with the force of a northeaster, leaving the scattered debris of decreased sales and lost jobs.

Before the tax went into effect, there were 600,000 people employed in the marine industry nationwide. The recession cost 100,000 jobs, and the luxury tax resulted in the loss of another 25,000, the National Marine Manufacturers Association estimates. Boat sales nationally dropped 42 percent during the period, from $17 billion in 1989 to $10 billion in 1992.

While industry officials note that most of that downfall can be blamed on the nagging recession, they say the luxury tax helped make a bad situation worse.

Many businesses failed.

Throughout Maryland, as many as 300 of the state's estimated 1,500 marine-related businesses went under, leading to hundreds of layoffs, said David Morrow, president of the Marine Trades Association of Maryland. Mr. Morrow, an insurance agent, has seen his boat-related business drop about 20 percent.

The accelerated depreciation for corporate jets is not exactly the same as a luxury, but it provides tax relief that has reportedly produced significant sales for U.S. aircraft manufacturers. Obama wants to end it during this sputtering economy, just as the luxury tax on yachts hit the boat-building industry during a recession. The results are predictable: reduced sales and some job losses.

But Obama doesn't care. He has a straw man to burn.

American Air Plans Big Jet Purchase

By DANIEL MICHAELS And SUSAN CAREY

American Airlines is in active negotiations with Airbus and Boeing Co. to replace about 38% of its current fleet by purchasing at least 250 aircraft, said people familiar with the matter.

The roughly $15 billion order, if completed, would be one of the largest by any airline and have major implications for the archrivals. A loss for Boeing would threaten the lock it has had on American's business for decades. Even a partial win for Europe's Airbus would provide a big psychological victory.

Any purchase would be an important strategic move for AMR Corp.'s American, which has fallen to No. 3 world-wide from its perch as the world's largest carrier. It is trying to find a turnaround strategy that will deliver profits and restore its stature in the industry.

According to two people familiar with the talks, American first hashed out a tentative deal with Airbus several weeks ago, without telling Boeing the two were in talks. American then went to Boeing with the Airbus offer and asked the Chicago aerospace giant to make a counter offer.

The package Airbus offered included an outline of financing terms that were very appealing to American, one of these people said, putting additional pressure on Boeing to make an equally aggressive bid.

American, now an all-Boeing operator, is interested in both Airbus's single-aisle family of A320 airplanes and a new-engine A320 variant that will start flying in 2015, those people said. Airbus is a unit of the European Aeronautics Defence & Space Co.

American also is evaluating Boeing's 737 family of airplanes, which include the 737-700 and 737-900, types that aren't currently in American's vast fleet. American has 152 737-800s in its fleet and more on order.

The Fort Worth, Texas, airline deliberations set up a showdown between the world's two largest aircraft makers at a time when China and Brazil are emerging as significant new rivals.

A purchase would replace American's oldest single-aisle jets, some 220 MD-80s that have an average age of 20 years, and some of its Boeing 757s, with an average age of 16 years. Retiring those planes would save fuel, cut maintenance expenses and give passengers a quieter, more reliable new aircraft. The airline has trimmed its number of airplane types to five from 14 in the early 1990s to boost efficiency and cut training and spare-parts expenses.

American hopes to resolve terms of the huge order this summer, these people said. The idea is not just to quickly replace American's MD-80s and older 757s, but to build in opportunities to grow should the airline industry's fortunes improve.

Also, such orders would put the carrier in position to be able to source next-generation technology offered by Airbus and Boeing in the future.

It is unclear whether either manufacturer alone would be able to satisfy the airline's goals, especially in a speedy five-year time frame, given the orders they already must fulfill for other customers.

But American's size, as the third-largest U.S. airline, is enticing both to work hard to win the entire order or at least share it, these people said.

The potential deal or deals would feature "heavy financing" assistance from the manufacturers or leasing companies, these people said, as AMR's balance sheet and credit rating are dented by massive losses over the past decade.

Airbus is offering American significant discounts, creative financing terms and other incentives such as assistance with training pilots and mechanics, stocking spare parts and handling the fleet transition, according to the people familiar with the discussions. But even giving these major concessions, Airbus could benefit commercially.

For Airbus, signing American Airlines as a customer would rank as a major victory. Airbus won some U.S. customers in the 1970s but the victories were short-lived as those early customers, including Pan American World Airways and Eastern Airlines, disappeared. American and Delta Air Lines Inc. flew early Airbus models, but retired them in favor of Boeing planes. US Airways Group Inc. currently is Airbus's biggest U.S. customer.

Industry consolidation has given Airbus new opportunities at the two largest U.S. carriers. Delta, an all-Boeing customer, acquired Northwest Airlines, an Airbus operator. And United Airlines, a mixed operator, merged with Continental Airlines, another all-Boeing customer. American and Southwest Airlines Co. are the only remaining major U.S. carriers not to fly any Airbus planes.

Winning over American would further endorse Airbus's A320neo [for New Engine Option], a variant that will enter service in 2015 and is designed to burn 15% less fuel than current A320 planes. The plane stole the spotlight at the recent Paris Air Show, landing 667 orders and commitments at the trade event.

The A320neo's success is increasing pressure on Boeing to tell airlines and investors what it plans to do with the workhorse 737 model. Boeing already has updated 737 engines twice. Company executives have said they plan to decide by year's end whether to update its engines again or develop an entirely new model.

Boeing and American have long, close ties. In the late 1990s, Boeing gave American and a few other key customers the equivalent of "most favored nation status"—offering special financial and delivery terms—to preserve their loyalty after Airbus began making inroads with the A320.

The carrier's 620-plane fleet is entirely Boeing models, from the international twin-engine 777 to the oldest MD-80s used on domestic routes. American still has 54 737-800s slated to enter its fleet by 2013, has more 777s on order and is a customer for Boeing's much-delayed 787 Dreamliner aircraft.

As QE2 Sets Sail, Bond Rally Sinks

By MATT PHILLIPS And MIN ZENG

Just as the Federal Reserve is about to step away from the market, the months-long Treasurys rally is showing signs of pulling back.

The yield on the benchmark 10-year note reached 3.11%, its highest since May 25. Yields on the 10-year note have risen every day this week, adding about 0.24 percentage point since Friday and sparking speculation that the bull run in the bond market may have passed its peak.For the third consecutive session, Treasury investors on Wednesday balked at buying new bonds at a large government-debt auction, sending prices lower and yields higher.

The Treasurys on sale on Wednesday were $29 billion of seven-year notes. That followed sales of two- and five-year notes, all of them showing low levels of demand in the private sector and among foreign buyers.

The poorly received auctions raised eyebrows ahead of Thursday's official finish of the Federal Reserve's second bond-buying initiative, a $600 billion "quantitative easing" program widely known as QE2.

And some see signs that the 20 primary dealers, who trade directly with the Federal Reserve and are obligated to bid on Treasury bond auctions, are getting gun shy about bidding aggressively in auctions, knowing the Fed won't be there as a guaranteed buyer to take unwanted Treasurys off their hands.

And there will be plenty of extra supply to swallow."It's really the dealer community who, to some degree, is stuck absorbing that extra supply in Treasurys," said Fidelio Tata, head of U.S. interest-rate strategy at Société Générale in New York. "And they're not happy about it."

Since QE2 began, the Fed has bought about 85% of the net Treasury issuance over the past eight months or so, according to Morgan Stanley economists.

In each of the first six months of this year, the Fed bought all but $17 billion of the Treasurys sold by the government, J.P. Morgan estimates. Once QE2 ends, private buyers will be forced to soak up $94 billion a month.

"In order to get the private sector to absorb that supply, it's going to take a concession. It's going to take higher yields," said Terry Belton, global head of fixed income strategy at J.P. Morgan.

The Fed isn't taking the training wheels completely off just yet. The central bank will continue to buy Treasurys with the proceeds from repayments on the remaining mortgage-backed and Treasury debt it owns. With interest rates at current levels, Bank of America Merrill Lynch estimates that will result in about $15 billion worth of Fed buying a month. But that pales in comparison to the size of Fed purchasing in recent months.

In a speech in February, Brian Sack executive vice president of the markets group at the Federal Reserve Bank of New York, said that QE2 involved the Fed buying "more Treasury securities than the amount currently held by the entire U.S. commercial banking system."The Fed ends QE2 as a bigger holder of Treasurys than China, according to Treasury and Fed data, owning roughly 17% of U.S. marketable debt.

"The Fed was the largest source of duration demand since November last year, so it's extremely important," said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch. "The big question is: What is the buyer that steps in? And at what price?"

"But the Greek and the euro-zone debt problems are far from being solved,'' said Michael Franzese, head of Treasury trading at Wunderlich Securities in New York. "I am buying on 'dips' here. I don't think the bull run in Treasurys is over yet, though selling dominates in the short term in the overbought market."Besides the looming end of QE2, signs of Greece being able to avoid a default next month pushed many investors to unload safe-haven Treasurys in favor of stocks.

In late-afternoon trading, the benchmark 10-year note was down 18/32 points, pushing the yield up to 3.110%. The 30-year bond was down 21/32 to yield 4.372%. The two-year note was up 2/32 points to yield 0.469%.

U.S. ADDS ISRAEL TO ‘PROMOTER, PRODUCER, OR PROTECTOR’ OF TERRORISTS LIST

The Obama administration has added Israel to a list of 36 ‘specially designated’ countries that have ‘shown a tendency to promote, produce, or protect terrorist organizations or their members.’

The ‘specially designated country’ list is used by Immigrations and Customs Enforcement (ICE) to screen detained foreigners with an extra step, called a “Third Agency Check.” Overall, the countries on the list are unsurprising, with two exceptions this year. Israel was not on the  list in 2008, but now in 2011, it has been added. North Korea, on the other hand, was dropped from the list this year but was on it in 2008.

The Department of Homeland Security published the list of “specially designated countries”  as an appendix to a publicly released report on May 11 report entitled “Supervision of Aliens Commensurate With Risk.”

As reported by CNS News, ICE Spokeswoman Gillian Christensen claims the creation of the list began at least seven years ago during the Bush administration, and ICE was not responsible for creating it. According to a written statement by Christensen:

“The U.S. does not and never has considered Israel to have links to terrorism, but rather they are a partner in our efforts to combat global terrorism. Countries may have been included on the list because of the backgrounds of arrestees, not because of the country’s government itself.”

There are only five countries on the list that do not have majority Muslim populations, and those countries have had serious internal problems with radical Muslim terrorist groups or insurgencies.

Pakistan Ends U.S. Use Of Base For Drone Attacks

Pakistan ends U.S. use of base for drone attacks: report

By Sanjeev Miglani | Reuters

SINGAPORE (Reuters) - Pakistan has stopped the United States from using an air base in the southwest of the country to launch drone strikes against militant groups, the defense minister was quoted as saying, as ties remain strained between the two countries.

Pakistan has long publicly opposed the missile attacks as a violation of its sovereignty, but has in private given support including intelligence to help target members of al Qaeda and the Taliban in the northwest region along the Afghan border.

The Financial Times quoted Defense Minister Ahmed Mukhtar as saying that Pakistan had ended U.S. drone flights out of Shamsi base in the southwestern province of Baluchistan, long reported to have been used for the covert war against militants.

"No U.S. flights are taking place from Shamsi any longer. If there have to be flights from the base, it will only be Pakistani flights," Mukhtar told the newspaper.

Ties between the countries, strained since the killing of two Pakistanis by a CIA agent in January, suffered a further setback after U.S. SEALs killed al Qaeda leader Osama bin Laden in a secret raid last month that Pakistani officials said further breached its sovereignty.

Pakistan's army has drastically cut down the number of U.S. troops allowed in the country and set clear limits on intelligence sharing with the United States, reflecting its anger over what it sees as continuing U.S. interference in its affairs.

Washington had been asked to remove all its infrastructure from the Shamsi air base, the Financial Times cited an unidentified Pakistan official as saying. The official, though, said, no drone flights had taken off from the base since 2009.

Since U.S. President Barack Obama took office, drone strikes have been stepped up, focused on theWaziristan region in northwest Pakistan, a hub for militants from around the world.

These attacks have further intensified since bin Laden's killing which reinforced suspicion in the United States that elements of Pakistan's security establishment may have helped hide him.

Climate-Change Hysteria

A Nutshell History of Climate-Change Hysteria

By Anthony J. Sadar

At a time when the push is on to subject humanity to more crazy, shortsightedprogressive environmental programs (read carbon regulations) to "save the earth" from its human population, a brief look atprogressive airy predictions of the past is in order.

Enlightenment from the campus teach-ins of the 1960s and early 1970s slowly invaded conventional college classrooms so that the hippie-generation mentality of the time eventually became the hip academic norm.  But, excitement over such topics as the planet's imminent collapse from too many people and too much ice quickly waned when population increases yielded no global food fights and Mother Earth began to melt her once-advancing ice caps.

Up until at least the mid-1970s, the frenzy to rescue the planet from industrial chemicals, especially pesticides like DDT, was fueled by Rachel Carson's alluring book Silent Spring.  This work, published in 1962, sparked the modern environmental movement, providing activists with both a laudable goal (cleaning up the planet) and reprehensible ones (portraying industry and modern society as enemies).  Silent Spring made it rather obvious to some that the modern industrial society needed to be disarmed of its "weapons" (synthetic chemicals).  Regardless of the fact that it is the careless practices of industry and the wasteful excesses of society that should have been precisely targeted, not modernity per se, the battle to save the planet was on.

One battleground that soon became the main theater of the war was society's culpability to climate change.  But, early on, the conflict was quite different from what it is today.  In the 1970s, besides Vietnam, society was sensitized to a worldwide cooling trend.  In addition to cover stories in Time, Newsweek, and other popular magazines of the era, the cover of books like The Cooling by Lowell Ponte teased, "Has the next ice age already begun? Can we survive it?"  Inside the book, Mr. Ponte notes, "A handful of scientists denied evidence that Earth's climate was cooling until the 1970s, when bizarre weather throughout the world forced them to reconsider their views."

The cover of Our Changing Weather: Forecast of Disaster? by Claude Rose pondered "Will our fuel run out?  Will our food be destroyed?  Will we freeze?"  The back cover claimed: "Northern hemisphere temperatures have been falling steadily since the 1940s.  Glaciers are advancing once again.  Scientists no longer debate the coming of a new ice age: the question now is when?"  ("Scientists no longer debate..." sound familiar?)

Kids were prepped for the coming catastrophe with a brief book by Henry Gilfond called The New Ice Age, which boldly displayed on its dust jacket large thermometers with ominously dropping temperature levels.

In addition, society was informed at the time from another sector, but with a more hopeful approach.  A Christian tract by Walter Lang and Vic Lockman proclaimed: Need We Fear Another Ice Age?

And, of course, students were being properly taught to face the inevitable.  For instance, some learned that polar bears might roam New York City (which proved true, but luckily they've been captured in the Central Park Zoo).  Even future atmospheric scientists discovered the scientific foundations for the advancing ice in meteorology lectures at The Pennsylvania State University.

Well, as we all now know, the frights of the past were unfounded.  We were encouraged to be scared of the wrong things.  We have come to realize that it wasn't a "human volcano" of particles from an industrial society that would be chilling thermometers into the future, rather human-produced gases, primarily carbon dioxide, that would send the mercury soaring.

The current hype was officially kicked off with a proclamation by Dr. James Hansen of NASA in his testimony before Congress on June 23, 1988.  Dr. Hansen announced that "the greenhouse effect is here and is affecting our climate now."  With that statement, bolstered by a room purposefully made very warm and humid for the hearing and an unusually hot and dry summer in the eastern part of the U.S. that year, hothouse-earth hysteria was off and running.

In the late 90s, to support the new storyline, actual temperature measurements after 1900 were appended to proxy temperature data (e.g., using tree-ring analysis) from prior to 1900 to produce the infamous "hockey stick" graph.  This graph replaced the traditional temperature trend graph in the U.N. Intergovernmental Panel on Climate Change official global climate report for 2001.  The supplanted traditional graph had clearly, but inconveniently, displayed a "medieval warm period" from about the 10^th to 13^th centuries AD and "little ice age" generally from the 17^thcentury until the mid-1800s.  Furthermore, the hockey-stick graph was featured in Al Gore's filmAn Inconvenient Truth and unfortuately has replaced the traditional graph in a popular climatology textbook used to instruct a new generation of Penn State students.

The rising temperature trend experienced most recently (a trend currently leveling off) began in the mid- to late 1970s.  This trend was first referred to in the 1980s as the "greenhouse effect" (which is a generic descriptor of roughly -- very roughly -- how warming of the planet occurs), the popular term became "global warming" in the 1990s, and finally conveniently morphed into "climate change," just in time to hedge against weather variability (that continues to alert an increasingly incredulous public).

As it turns out, though, "all's well that ends well."  Fortunately for Mother Earth and her people, academic scientists have been laden with plenty of government funds to thoroughly research the atmosphere to arrive at confident conclusions.  These scientists are now finally able to assure us that climate calamity caused by industry and callous working-class culprits -- and definitely not, for instance, the sun -- can be declared with absolute total academic certainty, theoretically.  And, fortunately with enough dollars (billions upon billions of them) redistributed in the right way to correct our errant ways, the global village may yet experience its climate nirvana.

Federal Spending Over Time

Ten Lessons From Federal Spending

By Randall Hoven

One can learn quite a bit just from looking at federal spending over time.  The history of our relationship with our government can almost be summarized in a graph.

  

Data source: White House Office of Management and Budget, Table 1.2

Here is my take on that graph, using the bits of history that go along with it.

Lesson 1. We can survive as a country with a lot less federal spending.

The above chart shows that federal spending was 3.4% of GDP in 1930, and then shot up rather quickly.  What was spending before 1930 (before that OMB table kicks in)?  Dean Kalahar recently provided a summary of pre-1930 spending.

Research shows that from the founding of our nation, 1787-1849 (63 years) federal spending averaged 1.7% of GDP. For the next 51 years, 1850-1900 (including fighting the Civil War) spending averaged only 3.1%. From 1901 till 1930 (including fighting WWI) it never reached 8%, and averaged approximately 3.2%.

For more than the first 140 years of the country's existence, the federal government got by on about three cents out of every dollar.  Yet somehow it sustained an army and a navy.  We also had police, a judicial system, public education, roads, and railroads.  We even had trolley cars and libraries.  (I know the federal government did not pay for many of those government functions, but that is the point.  Federalism used to mean something.) 

And through that same time, the country prospered and grew.  Real GDP grew at an average annual rate of almost 4% from 1790 to 1930, despite a Civil War, a World War, and several lesser wars in that time frame.  Foreigners flocked to our shores.  We became a world power, both economically and militarily.

Compare the three cents the federal government took for those 140 years, to the 25 cents it is taking in 2011.  Why does the federal government need to be more than eight times bigger than it was for the first 140 years of its history?

(The discussion here is only about federal government spending.  According to the IMF, government spending at all levels in the US is about 41% of GDP now, or more than that of the Asian Tigers like Singapore and Korea, more than Australia and New Zealand, and more than Switzerland and Luxembourg.  The US is not a "small government" nation by any means.) 

Lesson 2. Herbert Hoover grew the federal government more than FDR did during the Great Depression.

Federal government spending grew from 3.4% of GDP in 1930 to 8.0% in 1933, well over doubling the size of the federal government in just three years.  Hoover did that.  Spending would peak at 10.7% of GDP in 1934.  The federal government approximately tripled in size over the 1930s, and all by 1934. 

While FDR did solidify the newer, bigger federal government prior to World War II, most of the initial growth occurred under Hoover.  Any notions that Hoover sat on his hands during the worst of the Depression or that he was a "limited government" or free-market conservative are totally false.

Lesson 3. The Great Depression and World War II changed everything. 

The 1930-50 era in the US was a revolution just as much as the Russian Revolution or the Chinese Revolution (in terms of results rather than bloodshed).  Federal spending exploded, going from a 3% level to a 20% level of GDP.  That spending came along with a host of new federal powers, agencies, and programs, including Social Security.  Also during that time the Constitution was reinterpreted to eliminate most limitations on the federal government to regulate interstate commerce or spend for the general welfare.

The country after 1950 is simply not the same as the one before 1930. 

Lesson 4. Ronald Reagan really did cut government spending, and in fact reversed its trend from one of expansion to one of shrinkage. 

The chart below shows federal spending since 1960.  See that spending was trending up prior to 1983 and then trended down from 1983 through the end of the century.  What happened in 1983?  Reagan's first round of tax cuts became fully effective.

 

The chart below makes these trends more apparent.  The dashed lines represent the trends (linear regression) over periods starting/ending in 1960, 1983, 2000, and 2012.

  

Prior to Reagan, the trend was federal government growth of about 2% of GDP per decade (about $300 billion in today's dollars, or about what the federal government spends on unemployment compensationand housing and food assistance, combined).  After Reagan, the trend was about minus 2.5% of GDP per decade.  Reagan started a trend of shrinking federal government that would last through the turn of the century. 

Lesson 5. President Clinton presided over a continuation of the trend of shrinking federal spending that Reagan started.

Regardless of who gets credit (President Clinton, the first Republican Congress in forty years, and/or the peace dividend resulting from Reagan winning the Cold War), the federal government was spending only 18.2% of GDP by 2000.  That was the lowest level since 1966, and a drop of over 5% of GDP (about $800 billion in today's dollars, or more than the entire Social Security program) from 1983. 

Lesson 6. "Austerity" is not deadly.

Federal spending dropped by 5% of GDP from 1983 to 2000.  An analogy would be a 200-pound man losing over 40 pounds.  How did we do over those "austerity" years?  Real GDP growth averaged over 3.7% per year from 1982 to 2000 (4^th quarter to 4^th quarter).  Over 40 million net jobs were created, an average of about 2.4 million new jobs each year, for 18 years. 

Lesson 7. The level of federal spending under President George W. Bush was below the postwar average, but he did reverse the trend.

Federal spending over the Bush years (2001-08) averaged 19.6% of GDP.  That was below the pre-Bush (1950-2000) average of 19.8%.  But Bush reversed the shrinking-budget trend he inherited: federal spending grew from 18.2% of GDP in 2000 to 20.7% in 2008. 

Lesson 8. The recent explosion in federal spending occurred under budgets written by a Democrat-led Congress and signed by President Obama.

The chart below shows federal spending since 2000.  Look at that chart and know that a Democrat-led Congress wrote every budget from 2008 onward, the exact years corresponding to the spending explosion.  (Also note that 2012 is an OMB estimate.  Don't become too sanguine over any downward trend due to the 2012 number; it might not be real.  There is no 2012 budget; the Democrat-led Senate refuses to pass one or even propose one.)

 

The 2007 federal budget was the last one written by a Republican-controlled Congress.  Spending that year was 19.6% of GDP, or below the post-WWII average, despite wars in both Iraq and Afghanistan.  In fact, it was the year of the "surge" in Iraq. 

The Democrats have been on a spending binge ever since: an $814-billion stimulus one month intoObama's term, followed shortly by a $410-B omnibus bill.  Obama asked for the second half of TARP ($350 B) even before taking the oath of office, and then spent much of it on buying car companies.  ObamaCare added several hundred billion dollars of spending over the next decade, even if you believe its proposed half-trillion cut in Medicare will happen.

Obama cannot blame his spending on fighting the recession.  The recession ended in 2009, as he is wont to remind us.  But according to the Congressional Budget Office, federal spending would still be over 24% of GDP in 2020 and beyond under his plan, despite very rosy economic assumptions.

The following question should be asked of every Democrat: Why can't you spend less than Bush did?

Lesson 9. There is nothing "radical" about Republican spending plans.  The CBO scored Paul Ryan'sPath to Prosperity.  Federal spending under Ryan's Path would be 20.3% of GDP in 2022.  That is exactlythe average over the 1960-2000 period.  Republicans are proposing to simply return to average post-WWII spending levels, rather than the unprecedented levels reached under Obama and the Reid/Pelosi Democrats.  Bush lived with less spending than that.  So did Clinton.  How radical can spending cuts be if the result is to spend more than both Clinton and Bush did?  Democrats, on the other hand, are insisting on levels of federal spending unprecedented in peacetime.  They are the radicals.  Obama is spending 25.3% of GDP in 2011, or two years after the recession ended.  That is more than any year in our country's history, except for 1943-45, the peak of World War II spending.World War II spending stopped with the war. Obama's spending never stops.  No Republican is calling for pre-1960 levels of spending, much less pre-1930 levels.  (Wouldn't that be lovely.)  In fact, Ryan's plan saves Medicare, a Great Society program.  Ryan's plan would spend more on "Major Mandatory Health Care Programs" through 2040 than was spent in 2010, as a percentage of GDP.  Current Republican plans are not radical.  They are responsible.  They are actuarially sound ways of preserving the New Deal and Great Society.

Lesson 10. Obama, the Democrats, and most media mislead on a daily basis.

President Obama recently said, "But we can't simply cut our way to prosperity."  Why not?  That's what Presidents Reagan and Clinton did.

Obama also said, "I won't return to the failed theories of the last eight years." If he meant Bush's theory of compassionate conservatism that led to government spending growth, Obama not only returned to that, he doubled down and doubled down again.  Why didn't he imitate Clinton instead of Bush?  Anyone who says we must spend 24% of GDP or more, or else we all die, hopes you will ignore all our history prior to Obama.  Anyone who says if we try to cut spending, it will kill us, hopes you will ignore the 1983-2000 period of our history.  That period of "austerity" happened under Presidents and Congresses of both parties, and resulted in the greatest sustained period of economic growth since the Great Depression. Anyone who says we live in some kind of laissez-faire free-market economy hopes you ignore the first 140 years of our country's history and the 700% growth in government (as a fraction of the economy) since 1930.  Anyone who says current Republican spending plans are radical and even immoral, or that they eviscerate the safety net, has it exactly backwards.  Republican plans are moderate; they preserve both the New Deal and Great Society programs.

Democrats like to accuse Republicans of wanting to "set back the clock."  They are right; Republicans want to set it back to 2007 or so, when federal spending was under 20% of GDP, deficits were under 2% of GDP, the unemployment rate was under 5%, real GDP grew about 3% per year or better, and one to two million net new jobs were being created every year.

I think I understand what Democrats mean when they talk about "moving forward": more for them; less for you.  But I dare not call it socialism.