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Just like former President Jimmy Carter, President Obama is doing his best to gift the White House to the Republicans through misguided economic and foreign policies. Nothing from his State of the Union speech signals substantive change for the country.

An economy can grow through either increased productivity or increased government spending fueled by borrowed money. Since 2007, productivity in the U.S. has been growing at half of its historical rate. That means the modest economic gains we’ve experienced were fueled largely by an unprecedented increase in Federal government borrowing and by the printing of money by the Federal Reserve. And the piper will have to be paid in 2016.

Since 2007, the Federal government debt has increased 110% to almost $19 trillion. The debt outstanding has soared from 63% of GDP to 105%. Annually, the Federal government is currently spending around $1 trillion more than it takes in. The U.S. now ranks 11th highest in government debt to output among all the nations in the world.

The fiscal gap, the difference between the present value of all the Federal government’s projected financial obligations and its future tax receipts, now totals $230 trillion…or $721,000 per citizen. The fiscal gap includes such unfunded future obligations as Social Security, Medicare, and the food stamp program (now the Supplementary Nutrition Assistance Program). The fiscal gap is twelve times the national debt and to close the gap we would have to have either a 60% increase in Federal taxes or a permanent 40% cut in transfer payments.
Major nations are now dis-investing in U.S. government debt. So how has the debt spending been sustained? The U.S. treasury securities held by the Federal Reserve have gone from $800 billion in 2007 to $2.5 trillion today. The Federal Reserve has been printing money faster than a third-world dictator.

Where is the economy today?

Inflation adjusted median household and family income is down at least 8% from 2007, and more for blacks and Latinos. The individual poverty rate has climbed by 20% and household income inequality is growing nearly 40% faster since 2007 then in the preceding 7 years.

Transfer payments such as Social Security, Medicaid, food stamps and other welfare benefits are the fastest growing component of personal income. Half of the gain in personal consumption expenditures since 2007 has been funded by deficit-financed transfer payments.
The growth rates in both real per capita personal income and real GDP have fallen more than one-third since 2007.

The stock market has peaked and cracks are appearing. The margin debt is at an all-time high despite a rock-bottom volume of trading. The Schilling PE ratio is nearly 70% above normal and rising interest rates will stop companies from buying back their stock to inflate its value.
Labor force participation is falling and the number of discouraged workers rising. Real hourly wages have been flat since 2007. Home ownership has dropped to its lowest rate since 1965 and rising mortgage rates will do little to change this.

Rising interest rates, falling exports due to a strong dollar, weakening markets for Federal debt, deflating of commodity markets, and a stock market decline add up to a shaky U.S. economy going into the November elections.

The President offers no substantive answers to these challenges.
Dr. John E. Stapleford
Director,   CEPA

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The official posture of the De. State Government is that Delaware has a state-sponsored health insurance exchange, Chooseheathde.com. The Supreme Court and the federal Department of Health and Human Services (DHHS) say otherwise, that Delaware has a federal exchange. Why does this matter?

It matters to the 90% of the people who purchased their health insurance through the DE exchange and received a tax subsidy. It also matters to the other 5 million people in the US who did the same. If the Supreme Court decides FOR the plain language of the Affordable Care Act in the King v. Burwell case, which will be heard in March, and upholds the ACA, which is likely, then those aforementioned people lose their subsidy, and likely their insurance, and may have to refund the IRS in their next tax filing for 2014 and 2015. They would be retroactively declared in default of their policy and therefore responsible for their health care costs directly.

The case is very likely to be ruled in favor of the legislation as written, that on January 28th the House Committee on Energy and Commerce requested the contingency plan in writing for the expected ruling from the Supreme Court. The same question put to the office of the Insurance Commissioner and the state Department of Health and Social Services referred me to the Federal DHHS and Sylvia Burwell for answers. Whereas the federal government has a contingency plan should the Supreme Court rule in favor of the plaintiffs in King v. Burwell, Delaware does not have one.

The only possible interpretation of this is that Delaware does not have a state-sponsored exchange and therefore is financially vulnerable to the outcome of the Supreme Court case. The state government should be aggressively making contingency plans for this outcome which will affect not only the thousands of Delawareans who are relying on tax subsidies to cover the cost of insurance plans purchased through the state exchange, but also for our state’s budget, should the cost of health insurance be dumped onto Dover from Washington D.C.

Chris Casscells, M.D.

Director, Center for Healthcare Policy

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Just recently CRI began a campaign to keep Transparent Delaware, our government payroll and vendor contract data website, open to the public by asking people to donate towards our goal of $5,000.

https://www.indiegogo.com/projects/help-keep-government-spending-data-open-to-all/x/9753455

Our campaign pitch:

“We operate the website Transparent Delaware, which provides the public with open data on state payroll spending and state vendor payments. Want to know who the highest paid state employees are, by division or year? We have that. Want to see why an employee who was given a $60,000 base salary received $164,000 is overtime and “other” pay? We have that too.

We would like to obtain state pension data but we have been blocked multiple times in our efforts to find out how much the state spend on employee pensions. While we recognize that state workers are human beings too the fact is, it’s our money and we should know how it’s being spent. With extremely few exceptions government spending data should ALWAYS be open to the public.

What we need from you: It costs us about $5,000 a year to keep Transparent Delaware open to the public. All money collected for this campaign go to paying our web developer and host to keep the site up, or else we’ll have to shut it down :(. The exception is if you reach a donation threshold, we will send a small gift of thanks.

Even if we do not meet the $5,000, the more money we receive towards this goal, the more we can pay our web developer to keep the site open. They are great people but they have bills to pay too!”

As many before us have stated, “freedom isn’t free.” Now generally people who use this line are nearly always speaking about military service and the need for people to make some kind of meaningful sacrifice to keep our freedoms alive. But this axiom should apply as well to keeping information about our government available to the public.

We have to pay our web host and site developer, and while they may be awesome people they have bills to pay too. Understandably many people are used to internet content being free or “freemium” and the more successful web pages can place ads on the site to make money, but we are a non-profit and we cannot, and will not, rent our website space over to advertisers. Thus, we need the generous support of people like you to help us reach our goal and keep Delaware state payroll and vendor data available to the public.

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This week is National School Choice Week, a week where we draw attention to the need for parents and families to have School Choice as an option for all students.

No doubt this week is under fire from school choice opponents who worry school choice is a corporate, Koch-brother funded project to destroy public schools and, more importantly, public teacher’s unions,but those of us who believe in “free to choose” ask just one question:

1. “Who is more likely to make a better decision about a child’s future: That child’s legal guardian, or elected and unelected officials in state capitals and Washington D.C.?”

If you believe government officials, union leaders, school boards, superintendents, Department of Education employees, and politicians can all make a better decision about your child than you can, school choice is not something you will support. But if you believe schools should be run at the local level, with fewer mandates from above and more support for those who are there day-to-day, and if you believe students are unique human beings who should not be forced into “one-size-fits-all” based on their parents’ financial ability to find another school, then school choice week is for you.

If you believe there should be accountability for performance in our education system, without automatically blaming teachers and parents for poor performance, instead of the system which has been created, school choice is for you.

If you believe public schools who wish to have your child attend should have to work hard for your tax dollars, like every non-monopolized market in the private sector (i.e. sectors where companies use government to give themselves business or hurt competition), instead of requiring children whose parents aren’t rich to go to a school based only by their zip code, school choice is for you.

If the thought of stagnating academic performance, the rising number of students who enter college needing to take remedial classes, and the high drop-out rate for both high school and college bothers you, school choice is for you.

If you believe money spent on education, where Delaware spends to the tune of $13,000 per student per year and $16,500 if you include capital spending (refurbishing or building schools, source: DE DOE), ought to be spent efficiently and with the student’s best interest at heart, school choice is for you.

If you feel genuinely heartbroken every time you hear about another shooting in places like Wilmington, and know most of those young people get involved in drugs and gangs because they don’t have hope for a better future, school choice is for you.

If you are concerned about the values being spread in society at large, and would like to see your child(ren) be placed in a school setting which is closer to the values you wish the child to learn, school choice is for you.

If you believe America is a great nation with a lot of untapped talent among our youth, and want to see students use their talents in the best way possible, school choice is for you.

And lastly, If you believe a high-quality education is a fundamental right for each child to have, then school choice is for you.

If you believe school choice is something we can all work for together, then join the Caesar Rodney Institute in celebration of National School Choice Week, and let’s support #SchoolChoice!

Why do you support school choice?

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Earlier this week Business Insider UK published an article titled, “Conservatives will hate this: Proof That Government Spending Cuts Hurt Economic Growth”. From the article:

“… austerity subtracted about 0.76 percentage points off the real growth rate of the economy between the middle of 2010 and the middle of 2011. If real government spending had remained constant at mid-2010 levels and everything else stayed constant, (yes we know these are big assumptions) the US economy would now be about 1.2 per cent larger.

There’s a secondary conclusion, too: War is good (economically), it turns out.”

They provided a graph (created by Matt Klein of the Financial Times) with data from the U.S. Bureau of Economic Analysis (BEA) “proving” that Keynesianism works. Without public spending, the author argued, our economy can’t grow.

US govt spending growth contribution detail

Enter the Foundation for Economic Freedom, whose founder Leonard Reed once published the famous short story “I, Pencil.” You absolutely should read this, by the way. An economist named Robert Murphy points out the fallacy in the calculations made for the graph above:

“Edwards (the author of the Business Times UK article) seems to think that the above chart shows at least a correlation between government spending and economic growth. After all, he wrote that the BEA chart “seems to show that government has a pretty straightforward effect on GDP.” But… the chart does nothing of the kind.

Look carefully at the legend. The various colored rectangles are different components of government spending. Specifically, the rectangles indicate how the change in each component — positive or negative — relates to the change in overall GDP. The black line is not GDP growth, but is instead the sum of the various components of government spending… if we take the BEA’s word for how much each component of government spending contributed to GDP growth in each quarter, then we can stack those numbers on top of each other and even add them up! Contrary to Edwards, the FT chart doesn’t “show” anything at all, except that the BEA each quarter announces how much various components of government spending contributed to, or subtracted from, GDP growth.

After this discussion, we can see why pretty charts from the FT showcasing government spending’s “contribution to GDP growth” quarter by quarter don’t really mean anything. It’s the same for the ex post “empirical” analyses that concluded that the Obama stimulus package “saved or created” such-and-such million jobs. The underlying models that generate these estimates assume a Keynesian world, and thus cannot test whether the Keynesian model is correct.”

Even though the government prints and issues money, it’s the private sector (both businesses and consumers) who determine the value of a good or service. The government can only run on money taken from the private sector; printing into eternity is Quantitative Easing, which causes inflation if too much is printed. So they tax or borrow it from the people. If government spending really did save economies, both Delaware and America would have people making record amounts of money instead of seeing wages stagnate. The Federal Reserve would not have to continue holding interest rates low in order to convince people to buy things like homes or cars or take out student loans.

Check out CRI’s analysis here and here.

The bottom line is, Keynesianism does not work in the real world, despite efforts by its supporters to say it does. The less the government spends, the less the government needs. Even The News Journal noted that in a recent editorial.

As we approach 2015, here’s to more free markets and less government spending at all levels.

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