It’s a Drag

Everywhere you turn these days, liberals are bemoaning the harm caused by “austerity.” The left-wing Center for American Progress claims spending cuts will cost 2 million jobs over the next seven years. The Brookings Institution says they’ve already cost 2 million.

Former Obama Treasury Secretary Larry Summers complained last week that austerity postponed “the acceleration of recovery . . . more than it needed.” Democratic National Committee communications director Brad Woodhouse took to Twitter to wonder “what our economy would be doing if not for #GOPSequester, GOP refusal to make needed investments.”

The press has swallowed this and routinely blames bad economic news on “Washington’s austerity drive.”

The liberals’ mantra is understandable, since it supports their belief in an endlessly increasing federal government while blaming any bad economic news at Republicans who have been pushing spending cuts.

But researchers at the Federal Reserve Bank of San Francisco looked at the data and came to a completely different conclusion. They find that it’s not the modest spending restraint pushed by Republicans that’s harming growth prospects, it’s the massive tax cuts Obama has engineered — tax hikes that liberals and the mainstream press ignore when they whine about austerity.

The researchers compared recent and projected spending and taxes to the historic norms at similar points in a business cycle. They found while deficits have fallen of late, spending is still higher, and tax receipts lower, than the norm at this point in a recovery. Fiscal policy, they say, has held back the recovery only “slightly to date.”

Over the next three years, however, the fiscal drag on the economy is “much bigger” — cutting projected growth by about 1 percentage point. But that’s not because of sequester-forced spending cuts.

“Despite all the attention federal spending cuts and sequestration have received, our calculations suggest they are not the main contributors to this projected drag,” they wrote. Even with the sequester, they found, outlays will stay above historic norms over the next three years.

Instead, the researchers found, “the excess fiscal drag on the horizon comes almost entirely from raising taxes.”

Taxes as a share of GDP are on track to rise well above historic averages and well above rates at comparable periods in previous recoveries.

And what explains this “super-cyclical” rise in taxes?

Well, let’s see. Obama forced through a $600 billion tax hike on upper-income families at the start of this year in the name of “fairness.”

Before that, he and his fellow Democrats imposed $1 trillion of new taxes for ObamaCare, taxes that are just now hitting the economy.

As a result, federal tax revenues as a share of GDP will hit 19.3% of GDP by 2015, a level reached just six times since World War II and well above the 17.9% average over the previous 40 years.

We’d only add that Obama’s other economic policies — an out-of-control regulatory state, the looming disaster known as ObamaCare, various attempts at industrial policy among them — have also weakened what should have been a robust recovery. (IBD)

But since it all fits The Agenda, it’s good. 🙂

After years of ignoring increasingly dire warnings, America is now facing a debilitating disability crisis — one draining tax dollars (and workers) from our economy.

Yet rather than reforming our broken entitlement programs, policymakers continue turning a blind eye to the root problems associated with these unsustainable behemoths: liberally defined benefits, lax bureaucrats, rubberstamping judges and rampant overpayments.

According to Cornell University’s latest “Disability Status Report,” 37.3 million Americans (or 12.1% of our population) claimed a disability in 2011. Many of these were legitimate ailments afflicting older retirees — but America’s disability epidemic cannot be chalked up exclusively to an aging population.

According to the U.S. Social Security Administration, 10.9 million working age Americans (and family members) received disability insurance payments in February — while another 8.2 million received supplemental security income payments.

Over the course of the year the total tab for these benefits could exceed $180 billion, an ongoing explosion of disability-related dependency that has pushed this program to the brink of insolvency.

That’s not hyperbole, either. A year ago the Social Security Board of Trustees announced the disability trust fund would be exhausted in 2016 — two years earlier than the previous estimate.

Open Definition

How did we arrive at this point? Well, after remaining relatively flat during the late 1970s and 1980s, the number of disability dependents spiked by 84% from 1990-2003 while the costs associated with the program climbed from $38 billion to $77 billion annually.

The last five years have seen even more unsustainable growth as the number of workers receiving disability payments jumped from 7.1 million in December 2007 to 8.8 million in February 2013 — a 22.5% increase. Meanwhile, annual applications for disability benefits nearly doubled over the last decade — from 1.5 million in 2001 to 2.8 million a year ago.

The primary driver of this unchecked expansion is government’s ever-expanding definition of “disability” — with mitigating factor presumptions, combinations of non-severe impairments (such as “persistent anxiety” and “chronic fatigue”) and liberal interpretation standards making it much easier for individuals to claim a “total disability.”

Government even takes into account external factors such as the job market in reaching its determination.

“If there are not a ‘significant number’ of jobs available, then a claimant … is deemed to be ‘disabled’ even though he or she is still capable of competitive work, albeit at a reduced level of performance,” an article in the Cato Institute’s Regulation Magazine noted.

The impact of downwardly defining “disability” can be seen in a recent analysis of government data conducted by reporter Chana Joffe-Walt of NPR. According to Joffe-Walt’s report, there has been a fundamental shift in the nature of disability claims — away from serious and easily provable conditions and toward more dubious ailments.

In 1961 heart disease, stroke and related ailments made up the largest category of disability recipients (25.7%) — while a much smaller group (8.3%) cited harder-to-prove “back pain and other musculoskeletal problems.”

Flawed System

As of 2011, however, the heart disease and stroke category shrank to 10.6% of the dependent population while the back pain group exploded to 33.8%. Meanwhile, mental illness — another harder-to-prove category — saw its share of the disability population climb from 9.6% to 19.2%.

Last September, Sen. Tom Coburn, R-Okla., — a medical doctor — exposed several other major problems with the system when he conducted an investigation into disability benefit award decisions. According to his report, more than a quarter of disability cases analyzed by his committee “failed to properly address insufficient, contradictory or incomplete evidence.”

Coburn’s probe also found disability examiners and Social Security administrative law judges authorizing benefits “without citing adequate, objective medical evidence to support the finding; without explaining the medical basis for the decision; without showing how the claimant met basic listing elements; or at times without taking into account or explaining contradictory evidence.”

Poor hearing practices, late and insufficient evidence, misuse of medical listings and woefully outdated job listings for claimants with limited disabilities were also among the problems uncovered by Coburn’s investigation.

Taxpayers should not be forced to continue subsidizing such an inherently flawed, financially unsustainable system.

Unless action is taken now, bailout demands will likely overwhelm politicians of both parties who ignored the oncoming default all these years.

Unfortunately, with the exception of a handful of leaders such as Coburn, there remains virtually no appetite in Washington, D.C., to substantively address either the disability problem or our government’s broader entitlement addiction.

Gotta kiss up tio the dependent. They vote for politician to feed their drug habits. And politicians want them to feed their power addiction.

Michael Ramirez Cartoon

Political Cartoons by Gary McCoy

Political Cartoons by Gary McCoy