Category archives: Economics

Debt and Liberty

by Family Research Council

September 5, 2012

Debt is a major problem in America. Ballooning governmental and individual debt threaten our financial stability. Debt undermines one of the inalienable rights of our Declaration of Independence, liberty. The Scripture says in Proverbs 22:7 that the borrower is a slave to the lender. This connection between debt and slavery is important, though regularly overlooked in public policy and personal pocketbook decisions. Owing money to a financial institution is not nearly the same as slavery but there are parallels.

When individuals exchange freedom for temporary comfort it is a sacrifice of their liberty. Sadly many exchange financial freedom for what they consider to be indispensable luxuries such as televisions, automobiles, degrees, and clothing. These things are purchased by the borrower with a promise that he will work for the lender in the future to pay back the debt. Often times this promise has dire consequences for not just the borrower but for his family as well. Many marriages are harmed due to financial strains. And many people suffer a lower quality of life due to unwise or impulsive purchases.

One of the most costly sources of debt is college education. It has even received special attention as a separate category in FRCs recent Social Conservative Review. Many people begin new jobs and new families with high debt loads due to their education. At some of the most vulnerable points in their life they are burdened by creditors. Some say a college education is the path to get a good paying job which will then make you a happy and productive citizen. If someone cant afford college, then loan agencies (often the Federal Government) will be more than happy to help. Some students live at home or even go on government aid programs to help with the expenses. Unfortunately, in todays economy, students finish four or five years of college only to struggle to locate a full-time job after graduation. Regardless of the job they do eventually find, many graduates must then allocate a large portion of their take-home pay to cover their debt, or else pay it off over many years. As graduates feel the pressure of their debt, they bypass opportunities to gain valuable experience in their chosen field through an entrylevel job, because they must find a job any job- that will pay more.

Having gone to college as well as graduate school I am well aware of the temptation and the burden of debt. Thankfully my wife and I are currently debt-free although we have taken some careful measures to get there. Freedom from debt has allowed me to pursue my calling from the Lord to work as salt and light in our nations public policy arena. Having things immediately at the cost of enslavement by debt is not worth the price when compared to the value of liberty. I can give to my church or another charity, work at an entry level position in a field I enjoy, and slowly save for special purchases, without the constant burden of debt on my shoulders.

Being debt free means living differently than many of my peers, eating a sack lunch every day, driving older cars, and living in a very small apartment. But I still have one possession for which our founders pledged their lives, their fortunes and their sacred honor. Freedom. And that is worth more than anything a loan could buy.

Unemployment, Families, and the Child Tax Credit

by Rob Schwarzwalder

June 7, 2012

The Congressional Budget Office reports that the “amount of federal debt held by the public is projected later this year to surpass 70 percent of the nation’s annual economic output.” This comes on the heels of a very weak Bureau of Labor Statistics job report, which notes that for the month of April, “the unemployment rate was essentially unchanged at 8.2 percent.”

This unpleasantly abiding statistic likely is much too low. FRC’s Chris Gacek, an economics graduate of the prestigious Wharton School of Finance at the University of Pennsylvania, recently noted an Investor’s Business Daily article showing that when all the data are evaluated, actual unemployment stands at over 11 percent.

And consider this: “According to federal statistics, the unemployment rate of 18-29 year olds reached 12.1 percent in May and when those who have given up looking for work are added in, the rate skyrockets to 16.9 percent.” In tandem with explosive college debt, it is little wonder so many young Americans especially those without the benefit of college - have grave doubts about their future.

What can be done? Clearly, the federal government taxes, spends, and regulates too much. But for American families, relief is needed now practical financial help to make raising children, our greatest economic resource, a bit easier.

Thats why FRC is calling for the President and Congress to make the Child Tax Credit permanent and to increase it to $5,000 per child for every household. The data makes clear that strong families are the true engine of the economy, and letting Moms and Dads keep more of what they earn so their children can enjoy a higher quality of life makes both immediate and long-term sense.

In the short term, an expanded Child Tax Credit means families will spend more for their needs and wants, which itself stimulates the economy and fosters both higher growth and a larger, more rapid influx of federal revenues. Longer term, as the costs of having children become more affordable, the number of Americas children might also become more plentiful an especially significant economic benefit, as human capital is the single greatest contributor to Americas economy.

Alan Viard of the American Enterprise Institute and former senior economist at the Federal Reserve Bank of Dallashas written, The child care credit is not just another middle-income tax break. It plays an important role in encouraging work by providing tax relief for expenses that are closely linked to work. An improved and expanded credit can help offset the work disincentives of the income tax and boost economic growth.

Well said. Now, its up to policymakers to act.

Where Are the Dads? How Richmond, VA and FRC Are Working to Restore the Family

by Rob Schwarzwalder

June 5, 2012

Christianity Todays This Is Our City site is devoted to showcasing how Christians are helping to transform the lives of their fellow citizens in several cities around the nation. As the site notes, This Is Our City … seeks to spotlight in reporting, essays, and documentary video how … Christians are responding to their cities’ particular challenges with excellence, biblical faith, and hope.

As the articles in This Is Our City demonstrate, many of our cultures needs derive from the breakdown of the family. Recently, in Where Are the Dads? Treating Richmond’s Fatherless Epidemic, Katelyn Beaty writes about how believers in Virginias capital are building human capital through public health—one man at a time.

According to Beaty, The Richmond Family and Fatherhood Initiative (RFFI) uses ad campaigns, legislation, and partnerships with Richmond’s sizable Christian community to reach its goal: Decrease the nonmarital birthrate, reconnect fathers to their children, and foster strong two-parent families—all for the future health of Richmond.

The article quotes Danny Avula, the citys deputy health director, as saying, “If you look at health, education, and poverty indicators, people in stable families with a married mother and father have higher high-school graduation rates and income. It’s not only about the theological basis for the design of a man and a woman. When you look at outcomes, it’s a no-brainer.”

Mr. Avula sounds like hes been reading reports on fatherhood, marriage, and children found on FRCs Marriage and Religion Research Institute (MARRI) website. As Dr. Pat Fagan, MARRIs esteemed director, has written, the intact married family that worships weekly is the greatest generator of human and social positive outcomes and thus it is the core strength of the United States.

To learn more about the importance of fathers to children and of strong families to the economic, social, and moral well-being of our country go to the MARRI Web site and read some of the leading-edge research produced by Dr. Fagan and his team.

Two paths diverge in a partisan town

by Family Research Council

April 11, 2012

The poet Robert Frost once wrote of two paths diverging in a yellow wood. After pondering the merits of each way, he makes a choice.

While our Federal city isnt much of a yellow wood, there are two fiscal paths that diverge in front of our lawmakers. Based on projections from the Congressional Budget Office, President Obama’s budgetary path would substantially increase Federal social benefits as a share of GDPfrom about 16.7 in 2010 to 23.1 percent of GDP in 2085.

In contrast, the path proposed by House Budget Chairman Paul Ryan (R-WI) would prevent such an increase by fundamentally reforming Federal health care programs.

In a recent interview with the Christian Broadcasting Networks David Brody, Chairman Ryan articulated the differences:

We want to restore the American dream for everybody in American society so that every person has a chance at equal opportunity to make the most of their lives. The presidents vision, I believe, is to equalize the outcome of peoples lives - not to promote natural rights and equal opportunity, but new government granted rights and equality of outcome. Its a very different vision of what it used to be, and I really think thats where the president is trying to take this country.

While we can assume that the President intends no personal malice towards the American dream, his budget threatens to curtail and redefine it.

Economist and author, John D. Mueller has crunched the numbers on the Presidents budget and compared it to Chairman Ryans alternative. He projects that the U.S. birth rate will fall significantly under current law, from about 2.1 to about 1.75 children per couple in 2085. He further projects that would remain almost exactly at the replacement rate of 2.1 under the proposed Ryan budget, approximating the Social Security Trustees’ Intermediate Assumptions.

Join us today for a lunchtime lecture as Mueller releases his original research and why these birthrate projections even matter.

Two budgetary paths diverge in a partisan town. Taking the one less traveled by might make all the difference.

Register here for the live event, or to attend by webcast.

What is a Reagan Conservative?

by Family Research Council

February 1, 2012

Everyones grabbing at the Reagan mantle these days.

Under the Wikipedia entry What would Reagan do? one can find the following summary:

The phrase on occasion has been used by iconoclastic conservatives to claim the mantle of Reagan as they criticize mainline conservatives, by some liberal commentators as a way of chastising Republicans whom also they believe fall short of Reagan’s ideals and also by non-partisan public policy organizations that seek to emulate aspects of Reagan’s leadership.

But one Reagan historian doesnt find that surprising at all. Professor and author Paul Kengor notes that Reagan won the presidency in 1980 by defeating an incumbent in a landslide, winning 44 of 50 states, and then got reelected in 1984 by sweeping 49 of 50 states. Few presidents enjoyed such decisive success at the ballot box and, more broadly, in changingAmerica and the world for the better.

Tomorrow, Dr. Paul Kengor will address the question, What did Ronald Reagan believe? Or, even more specific: What would Reagan do if he were president right now?

Dr. Kengor will lay out the underlying thinking that formed the basis of Ronald Reagan’s political philosophy and the policies (foreign and domestic) that he pursued. Dr. Kengor will share what he calls his “Reagan Seven;” that is, seven beliefs that undergirded Reagan’s actions as president and as a public figure. These core principles get us closer to the crux of what Ronald Reagan’s conservatism was about, and what his GOP emulators today might take to heart.

To RSVP for tomorrows event, click here: What is a Reagan Conservative?

Demography Is Economic Destiny

by Rob Schwarzwalder

September 28, 2011

The cost for businesses to buy health coverage for workers rose the most this year since 2005 and may reach $32,175 for a family in 2021, according to a survey of private and public employers. So reports Bloomberg News.

This is not news any family wants to read. The last thing our recession-bound country needs are rising health care costs, particularly when we know these costs will be augmented dramatically should the Obama health care plan go into effect.

Buried within the Bloomberg article is a story that is underreported but finally seeping-out into the mainstream press: Contributing to the rise in premiums are … fewer young and healthy people in the insurance pool. This assertion is being made by the respected insurance association president Karen Ignagni, but it is verified by cold data. The Federal Bureau of Labor Statistics projects the following:

… by the end of the 2004 to 2014 period, most of the baby boomers will have turned fifty-five. Consequently, the age fifty-five and older segment of the labor force is expected to grow most rapidly, increasing by 11.3 million, or 49.1 percent. Because of the aging of the American population, this segment of the labor force will increase at almost five times the rate of the overall labor force (10 percent). The numbers of those twenty-five to fifty-four years of age in the labor force will grow by only 3.4 percent, a significantly lower growth than in the previous decade (8.8 percent). The growth rate of the youth labor force, workers between the ages of sixteen and twenty-four, will actually decrease between 2004 and 2014 by 0.5 percent.

What does this blizzard of mathematical factoids mean? Simply that we have a shrinking number of people entering the laborforce, one that cannot sustain our so-called entitlement programs (Social Security, Medicare, Medicaid) and that is too small to infuse the insurance pool with enough youth and health to keep it fiscally viable.

My colleagues Pat Fagan, Henry Potrykus and I have explained this in detail in Our Fiscal Crisis: We Cannot Tax, Spend, and Borrow Enough to Substitute for Marriage. We argue that our current economic slowdown, coupled with the increased numbers of dependent citizens, makes closing the deficit impossible for President Obama or anyone else who uses the present welfare state as the economic model to be sustained. It cannot be. This reality arises from two facts: 1) We have proportionately fewer children … (and) up to 20 percent of these children are unequipped to compete in the modern economy because of a lack of essential skills formed within the intact married family.

Whats the bottom line? Husbands and wives need to have more children and truly parent those children if our economy is going to thrive. However substantial our technology-driven productivity gains, they will not compensate for a steadily declining supply of capable, teachable young men and women.

According to the U.S. Census Bureau, the rate of population growth, referred to as the average annual percent change, is projected to decrease during the next six decades by about 50 percent, from 1.10 between 1990 and 1995 to 0.54 between 2040 and 2050. The decrease in the rate of growth is predominantly due to the aging of the population and, consequently, a dramatic increase in the number of deaths. In other words, we will have a larger population, but the rate of growth will slow to the point that existing citizens will live longer, not because of the size of our families.

For more on the crisis of Americas population and how it is grounded in the erosion of the family unit, visit the Marriage and Religion Research Institute at http://www.marri.frc.org/. Families are more critical to our nations economy, more than education or technology. As families fail, so fails our country.

Articles of Faith

by Rob Schwarzwalder

June 14, 2011

Barack Obama and his colleagues in the enterprise to manage the American free enterprise system believe that government knows better than the private sector how to create jobs. This is an article of faith with the Left. As the President said in an interview on “The Today Show:”

What we have to do now, what this Jobs Council is all about, is identifying where the jobs of the future are going to be. How do we make sure there’s a match between what people are getting trained for and the jobs that exist, how do we make sure that capital is flowing into those places with the greatest opportunity? We are on the right track. The key is figuring out how do we accelerate it.

No: Government doesn’t have to figure this out —- those who create jobs do. Government needs to remove itself substantially from the equation and allow open markets to determine whom to hire, for how much compensation and benefits, and what kinds of goods and services to produce. This is the very essence of the American economic experiment, one that has led to greater benefits for more people than any other system of finance, production, and income in history.

Mr. Obama also spoke of technological changes that have cost jobs, e.g., the replacement by airport check-in kiosks of counter assistants. Does he not realize that if those kiosks are made in the U.S., they create better paying jobs for well-trained shop-floor workers than a counter job ever could? Creative destruction, ala Joseph Shumpeter, is what makes capitalism vibrant. It is endlessly discomfiting but also continuously productive and financially rewarding.

During the same interview, Mr. Obama was asked about the debt ceiling and Republican demands that any increase in the ceiling be accompanied by significant federal spending reductions. “There is a way of solving this problem,” he said, “that doesn’t require any big, radical changes. What it does require is everybody makes some sacrifices.”

This is false and, in fairness to Mr. Obama, is a classic politician’s answer: We can solve the problem without any noticeable costs or losses to those affected by them. This is silliness. In the context of the federal budget, this is sort of like saying one can perform open heart surgery without cutting the skin. Of course “solving the problem” requires radical change —- change that can be meted-out in such a way that the pain is modest, such as a graduated change to private investment accounts in the Social Security system, but if we are to remedy our serious fiscal crisis in anything resembling a serious manner, we must act boldly —- even radically —- to transform the size, scope, and costs of the federal government. This will involve a disruption in the federal welfare state many have come to know and, if not love, rely on heavily.

Mr. Obama, while in North Carolina yesterday, also acknowledged that there were far fewer “shovel ready” infrastructure projects than he had thought. This is really quite remarkable: He was a U.S. Senator for four years, and surely during the annual appropriations processes, as he tried to get funding for state projects, he must have realized how difficult getting EPA approval for construction is. Or perhaps not —- he must have been so removed from this system that he was oblivious to it.

We increase job growth by shrinking the public sector and its vast costs, comprehensive entitlement program reform, tax simplification and reduction, and streamlining and downsizing the federal regulatory process. This is common sense.

What it is not is consistent with Mr. Obama’s vision of an expansive federal state, one that can do everything from demand the firing of an auto company executive to requiring every American to purchase a health insurance plan (one approved by Uncle Sam, of course). Having an invasive, insistent, and comprehensive tax and regulatory structure is a matter of faith for Mr. Obama. He does not believe in the wisdom of private choices made in a marketplace characterized by ordered liberty, but in the genius of benign bureaucratic management from on high. This is, perhaps, grounded in his profound and even hostile skepticism of the private sector, which he seems to see as intrinsically greedy and avaricious. Such perspectives are rooted in the belief that a massive government is needed to protect against the oppression of poor and middle-income by the ignoble rich. This, too, is an article of liberal faith.

Under the just laws envisioned by our Founders (e.g., theft and deception should be punishable by law), free enterprise can thrive in an ethical manner without government intervention or attempts at, in Mr. Obama’s term, “acceleration.” The irony is that such thriving can only happen if Mr. Obama abandons his economic philosophy, which ultimately grows out of a particular kind of view of human nature and the role of government. That this is unlikely is essentially axiomatic and also bodes poorly for the economic future of our country.

Deficit Deception: Don’t Bank on Social Security: A Primer in the Manifest Phoniness of the Social Security System

by Rob Schwarzwalder

April 12, 2011

According to the Congressional Budget Office (CBO), the fiscal year 2010 deficit was $1.3 trillion. If the roughly $700 billion from Social Security had been kept in its own so-called Trust Fund and, as a result, subtracted from federal general revenues, the deficit would have been more than $2 trillion.

Instead, as economics writer James Pethokoukis observes, monies supposedly dedicated to Social Security are used as part of a fiduciary shell game” to “mask the true depth of the budget deficit.

How can Social Security and the federal government get away with this?

To answer that, a few foundational facts are needed.

For one thing, there is no Social Security Trust Fund. The Fund is an accounting device that’s used to hide the true size of the federal deficit.

The monies collected from taxpayers are, in an act of accounting sleight-of-hand, put into the Trust Fund for about a millisecond and are then replaced by “special-issue securities,” Treasury notes that the Social Security Administration (SSA) itself admits are “available only to the trust funds.”

In other words, the federal government takes money out of Social Security to pay for all kinds of things, including payments to retirees. It issues itself Treasury bonds to repay its loan from the Social Security Trust Fund but they are bonds only Social Security itself can buy. This is known, in stuffy bureaucracy-speak, as an intragovernmental loan.

SSA itself clarifies, “Tax income is deposited on a daily basis and is invested in ‘special-issue’ securities. The cash exchanged for the securities goes into the general fund of the Treasury and is indistinguishable from other cash in the general fund.” Invested, indeed keep reading.

So, the money that the federal treasury siphons-out of the erstwhile “trust fund goes to cover general revenues of all kinds: From the common federal budget pot, the monies are used to pay for freeway projects in Iowa and aircraft carriers to U.S. Postal System delivery trucks. Oh, yes, and payments to Social Security recipients, or beneficiaries, as well.

Here’s how Stephen Ohlemacher of the Associated Press explains it:

The money in the trust funds has been spent over the years to help fund other government programs. In return, the Treasury Department issued bonds to Social Security, which earn interest and are backed by the government, just like bonds sold in public debt markets. When Social Security runs a deficit, it redeems its bonds with the Treasury Department to cover the red ink. But Treasury gets the money to pay Social Security the same places the government gets all its money: either from taxes and other revenues or by borrowing it. Last year, the government borrowed 37 cents of every dollar it spent. This year it’s borrowing 43 cents of every dollar.”

The interest earned is merely a designed percentage payment Uncle Sam adds onto the amount of the loan derived not from any kind of profitable investment itself, but from the printing presses of the federal treasury. The interest is merely added out of fiat-drenched thin air.

Why does the government do this? Very simply: If Social Security designated funds - the money that comes out of all of our paychecks to pay Social Security income to seniors were not used for general revenue, the deficit would be shown to be even more gigantic than it is, as noted above.

How much money are we talking about? As indicated in the first graph of this piece, the CBO says that Social Security contributed $706 billion to the federal budget in FY 2010. Thats about one-fifth of the total budget.

Some argue that since beneficiaries are getting paid, whats the big deal?

Last year, the pay-out total to retirees was $41 billion more than what was taken in through Social Security taxes. For the first time in roughly 30 years, the SSA ran a deficit one larger, in itself, that all but a handful of the countries in the world.

Second, the false assurance that the trust funds dollars are invested is a lie pure and simple. This investment is actually nothing more than a credit slip that says, in as many words, that the money will be put back in by the Treasury with a certain percentage of interest, interest not derived from anywhere but balance side of a phony federal ledger.

Third, were the money actually invested in interest-bearing accounts, using historic rates of return, the SSA would not be facing the historic crisis it faces in the next quarter-century. Consider: Over the course of its history, the stock market with all the dips, depressions, recessions, wars, etc. we have faced has had an inflation adjusted return of between six and seven percent.

Given the monies poured into the Social Security system since its inception in the 1930s, such a return would have prevented the current, and future, profound shortfalls we are facing.

Fourth, and perhaps most ominously, is the dearth of workers who pay into the system. That number has shrunk from 16 employees per beneficiary to slightly under 3 workers per beneficiary today. As Americas population ages, that ratio will shrink, to our profound fiscal danger, more and more.

Charles Krauthammer notes that should the debt continue to build like a throbbing volcano, the full faith and credit of the federal government wont mean much and not just Social Security, but the whole economy, will be at grave risk:

In judging the creditworthiness of the United States, the world doesnt care what the left hand owes the right. Its all one entity. It cares only what that one entity owes the world … (W)hat would happen to financial markets if the Treasury stopped honoring the special issue bonds in the Social Security trust fund? A lot of angry grumbling at home for sure. But externally? Nothing. This default would simply be the Treasury telling the Social Security Administration that henceforth it would have to fend for itself in covering its annual shortfall.

The other alternative: Treasury tells SSA no such thing and simply pays back, using not real assets but accredited and/or printed monies from Treasurys printing presses, what it owes SSA: The money will, at some point, stop holding much, if any, value. At that point, the world will care a lot, because it will indicate the Weimar-esque quality of the U.S. greenback.

There are a number of ways to correct the problem before Social Security runs completely out of money in about 26 years.

Former FRC scholar and current Howard Center director Alan Carlson argues convincingly, as Americans have more children, we will remedy at least much of the crisis by having more workers to pay into the Social Security system itself. House Speaker John Boehner and others argue for raising the full retirement age from 65 to, say 67 or even 70, which more accurately reflects growing longevity and work patterns and would save large amounts annually.

House Budget Committee Chairman Paul Ryan is among the leading advocates of allowing younger income-earners to invest at least a graduated/growing portion of their Social Security dollars into private retirement accounts, not unlike the federal employees Thrift Savings Plan (TSP).

This could be done directly, from the employees paycheck, and be directed into one or more of several fund-types managed independently, just as TSP funds are.

What is clear is that the current system is neither sustainable nor honest. While no one expects President Obama to advance the reforms necessary, the next President should.

If Social Security is not just to survive but refrain from being a fiscal anvil around the national neck, the next President must.

Formerly chief of staff to two Members of Congress and a presidential appointee in the George W. Bush Administration, Schwarzwalder is senior vice-president of the Family Research Council.

Portrait of an Abortion Zealot: Glimpse of Obama in the NYT

by Cathy Ruse

April 11, 2011

In the midst of the budget debate last week an important premise was planted: That President Obama is willing to risk a lot, and lose a lot, in order to keep the federal spigot open and tax dollars flowing to Planned Parenthood.

The New York Times report on the budget negotiations included this gem:

At one crucial moment in the game of chicken over a looming shutdown of the United States government, President Obama and the House speaker, John A. Boehner, faced off in the Oval Office. Mr. Boehner, a Republican heavily outnumbered in the room by Democrats, was demanding a provision to restrict financing to Planned Parenthood and other groups that provide abortions. Mr. Obama would not budge.

Nope. Zero, the president said to the speaker. Mr. Boehner tried again. Nope. Zero, Mr. Obama repeated. John, this is it. A long silence followed, said one participant in the meeting. It was just like an awkward, O.K., well, what do you do now?

That meeting broke without an agreement. But while Mr. Obama may have held tough on the abortion provision, he and the Senate majority leader, Harry Reid, had already made a broader concession agreeing to tens of billions of dollars in spending cuts that would have been unthinkable had Republicans not captured control of the House from Democrats in midterm elections last year.

Keep in mind, Mr. Obama wasnt protecting a right to abortion, but something even more radical: the right of Americas largest abortion provider to reach into our pockets!

Planned Parenthood has almost one billion dollars in net assets and $737 million in reported revenues, not counting the $363 million from taxpayers. Isnt that a special favor for Big Business?

And what a business. From its most recent report we learn that Planned Parenthood clinics aborted 332,278 American children, about the same number of people who populate the city of Cincinnati. (For more important facts on Planned Parenthood, see this wonderful piece by Susan Wills)

The budget negotiations revealed, again, President Obamas abortion zealotry. We have the Republicans congressional leaders to thank for that. As my colleague Tom McClusky asks: Who is the hard liner on abortion?

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