Deficit Cutting Commission Gets It Wrong

Posted: Dec 06, 2010 12:01 AM

The Bowles Simpson deficit cutting commission is more Washington theater. Another show with an impressive cast designed to give the appearance of being serious.

This kind of theater, unfortunately, not only accomplishes little or nothing, but it makes things worse. Under the guise of doing something, it obfuscates our real problems.

Our federal budget did not explode over a few short years to sucking up a quarter of our economy because we didn't have politicos with green eyeshades looking at it.

It exploded because we have government in Washington that can do practically anything it wants.

Without clarity about the role of government and meaningful law enforcing it, we're never going to get spending and debt under control. And this is what Americans need to wise up to and get resigned about.

Here's a few things sticking in my craw from just over the last week that speak to the reality of government with no constitutional constraint.

General Motors, now 61 percent owned by US taxpayers, is running an ad thanking us for bailing them out.

The slickly produced ad shows a series of incidents of failure and then says: "We all fall down. Thank you for helping us get back up."

The American people did not support politicians writing a $50 billion check on our account to bail out GM. A Gallup poll shortly after the bailout showed that 55 percent disapproved against 41 percent who approved.

The GM bailout wasn't our decision. It was decided by a small team in the White House and that's whom they should be thanking.

I hope it's not impolite on our part that instead of saying "you're welcome", we fired 25 percent of the Democrats in Congress and our president's approval rating is 20 points lower now than where it was before the bailout.

Moving along, Peter Wallison and Edward Pinto of the American Enterprise Institute write that little has happened to fix what caused the great collapse in our financial markets.

Fannie Mae and Freddie Mac, the taxpayer backed mortgage behemoths, carried out their government mandate to expand homeownership by pushing a flood of subprime mortgages into the market and laid the groundwork for the collapse. They can no longer do this now that both have been bailed out by taxpayers to the tune of hundreds of billions of dollars.

But this doesn't mean that Washington is now deterred from promoting home ownership by using taxpayers to back unsound mortgages.

Now it's just being done through the Federal Housing Administration.

According to Wallison and Pinto, this mission has shifted to FHA, who "... now accounts for 60 percent of all US home purchase mortgage originations," and, "FHA just announced its intention to push almost half of its home purchase volume into subprime territory by 2014-2017."

But perhaps the week's prize for taxpayer abuse must go to former VP Al Gore.

Gore, as reported by the Wall Street Journal, admitted to a group of college students that government subsidies of ethanol are a bad idea.

The energy and environmental benefits of ethanol are "trivial," he said, but "It's hard once such a program is put in place to deal with the lobbies that keep it going." Then he added that his own support for these subsidies was driven by his presidential ambitions.

We're drowning in spending and debt because theft is legal in Washington. This is our problem and the Bowles Simpson commission totally ignores it.

Similarly, it ignores that taxation should not be a political tool for social policy. It should be a mechanism, kept as simple as possible, to raise the funds to pay for the legitimate functions of the federal government.

Hopefully, the Tea Party movement was about getting real in Washington. We'll find out over time how serious it all is.