What spending cuts? (UPDATED)

Given some of the news coverage you might think the US houses of Congress have reached agreement to cut spending in the US Federal Government.

The Daily Telegraph says there are US$1 trillion in spending cuts over 10 years.

The Washington Post called them "severe cuts".

Spendaholic Paul Krugman in the New York Times says it is "slashing government spending" and even says it calls the whole system of government into question!

The New York Times editorial calls it "nearly complete capitulation to the hostage-taking demands of Republican extremists"

You'd think I'd support it, but really it isn't what it seems.  Chris Edwards at the Cato Institute points this out in the following graph.   The US$917 billion "cut" over 10 years is not a cut in real or nominal terms, but a cut from a baseline of even faster increases.

So what does it actually mean? Well Edwards says:

"The federal government will still run a deficit of $1 trillion next year. This deal will “cut” the 2012 budget of $3.6 trillion by just $22 billion, or less than 1 percent."

That's what is provoking a hysterical reaction among the left in the Democrat Party.  Spending isn't being cut in real terms, spending is being cut by part of the amount they wanted it to grow.

As I've mentioned before, a relatively unambitious plan from the Cato Institute would cut spending by US$1 trillion annually through to 2021, it would balance the budget by that year.  It would cut government spending as a proportion of GDP from a projected 24% to 18% (the same it was in 2000).  It would look like the graph below.   You can figure out the current plan is closer to Obama's plan than to the Cato plan.

However, because it plays with so much pork (everything from agricultural subsidies to Amtrak to public broadcasting to the Department of Education (don't worry the states do most of that anyway) to Medicaid, it would be difficult for many Republicans (who are frankly half responsible for the current mess) and virtually all Democrats to accept.

Yet it should be the bare minimum to get the USA back on track to growth, by pulling back from the crowding out of the private sector, by keeping taxes at their current level and eliminating vast amounts of distorting and damaging subsidies and government programmes.

Oh, by the way, Obama once opposed raising the debt ceiling as well:


"The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

That is Senator Obama, 20 March 2006.

Thanks to Allister Heath at City AM for tweeting this and National Review for publishing it.

Just another politician isn't he?

Watch Syria, for that's the future

It shouldn't surprise anyone that Bashar el-Assad has turned the army on protestors and has shown little hesitation to create rivers of blood among his subjects.  Tanks firing on civilians, sniper taking out protestors, blocking hospitals to stop protestors entering according to a report from The Independent.   With reports of heavy machine gun fire, tanks shelling buildings and electricity and water being cut off from the city of Hama (where Assad's bloodthirsty father had massacred reportedly over 10,000 in 1982), it appears the regime will stop at nothing to remain in power.  Another report talks of tanks running over people.   Some claim over 1,600 have been killed by the regime since protests started in March, whilst this is likely to be somewhat exagerrated there can be little doubt the regime has been engaging on a spree of oppression.

It did try in recent years to put on a more moderate face.  Some thought that as Bashar Assad had been trained as an opthamologist and had not originally been seen as the successor to his father (his far more ruthless and "Uday Hussein" like brother Basil had been, before he died in a car crash), he would be more moderate, and there had been signs of a loosening of the totalitarian state his father Hafez had instituted, but it would be more like moving from Stalin to Khrushchev.   It didn't stop Vogue writing a gushing piece about Bashar's wife late last year (which it wisely has removed from its website). 

However, the truth is out.  Bashar wants to retain absolute authority and power, like his father.  He has the support of the armed forces, and the brutal Ba'athist socialist legacy of the ruling party continues.

President Obama has rightly condemned what has been going on, as have other Western leaders.  The regime's response has been to sponsor attacks against the US and French embassies.   Meanwhile you'll notice two major differences between the foreign reaction to Syria and the reactions to Libya, Serbia and other examples of what is typically referred to as "humanitarian intervention".

Firstly, the Western world is financially and politically exhausted as regards "saving the world" from the brutality of dictatorships.  Barack Obama has no appetite or inclination to do anything to intervene in Syria, not least because of the cost, but also because he firmly believes that it is for the UN Security Council to authorise any such action.  Is he pushing for this?  Well no, because he knows it wont be politically popular, he knows he'd struggle to pay for it and as he didn't support the overthrow of Saddam Hussein (and was subdued on Libya) he doesn't believe the US should project itself militarily, in order to save the lives of others.  Meanwhile, as the UK and France effectively lead the continued presence over Libya, they are not so inclined to go into Syria either, because of money.  Germany opposed intervention in Libya at all.   Of course neither Russia nor China are in any way inclined to support intervention against a government that turns on its own people, given that both are quite adept murderers of their own domestic populations.

So the post-Cold War age of humanitarian intervention, which has had mixed results including the former Yugoslavia, Somalia, Liberia and Libya (I count Afghanistan as being action against those that harboured an aggressor and Iraq as action against a proven threat to international peace and security), is now over.

You'll have to get used to watching TV coverage or hearing/reading reports of governments massacring their own people.  For the US and European powers are no longer willing to save them.  That is, in part, because they have nearly bankrupted their own economies through many years of overspending on bribing voters and interest groups with future taxpayers' money. It is also because the cost in lives and money of such interventions (and the organised forces against them from the left) have made it politically more difficult to support.   The UK was embarrassed about its previous sycophancy for the proven mass murderer Muammar Gaddafi, so could not stand by as he used helicopters to take out civilian protestors.  However, Syria has never been a friend of the West, so the guilt isn't there.

All of this should please the so-called peace movement and human rights advocates from the left who opposed the Allied invasion of Iraq and overthrow of that Ba'athist dictatorship, as well as the smaller group who thought the Taliban should have been left alone in Afghanistan, to keep harbouring Al Qaeda and enforce a dark ages Islamist year zero ultra-patriarchy.   The same people have been relatively quiet over Libya, except the usual tiresome claim that its only about oil.  

You see, the so-called peace movement have long held up Afghanistan, Iraq and even Libya as of late as being "the fault of the West".  This is a line whereby all NATO members and Western allies of military intervention in all these cases, must carry the blame for the actions of previous western governments in the Cold War.  Never ever is the finger pointed at Russia or the governments of the former Warsaw Pact countries and the like.

Afghanistan was the fault of the West supporting the Mujahideen against the brutal Soviet backed Najibullah regime.  The Soviet invasion of Afghanistan was, after all, supported by Keith Locke of all people.   It takes a peculiar contortion of one's belief in human rights, womens' rights and freedom of speech to oppose the overthrow of the Taliban, but that is what the far left did (it would have been ok had the Afghan people done it on their own efforts though - like how it would have been good if the Jews had overthrown the Nazis in Germany).  Support for the Islamists in Afghanistan was a mistake, but it doesn't mean one cannot rectify it when they not only have proven to be brutally sadistic, but harbouring those who attack you.

Iraq was also the fault of the West, for the support Saddam Hussein got against the Iranian Islamists.  That piece of realpolitik (your enemy's enemy is your friend) was an appalling miscalculation, which was eventually figured out in the late 1980s when the West stopped arming and supporting Hussein (though one shouldn't forget the French help for Hussein's first attempt at building a nuclear reactor, which Israel swiftly dealt to).   Of course, the USSR and Warsaw Pact countries also extensively armed and assisted Saddam, but Russia and its former allies are forgiven, somehow.  However, that doesn't matter now, for notwithstanding Saddam's use of chemical weapons against his own people, his invasion and occupation of a neighbouring state (for oil) and his extended oppression and brutality against anyone who opposed him, he was deemed protected by international law by the so-called peace movement.  Invasion against this dictatorship was "illegal" and "unjustified" as the borders of a dictatorship are considered inviolable.  The left considered Saddam's regime as having at least enough moral authority for the actions to overthrow him to be considered less justifiable than letting him be.  

This Ba'athist hereditory dictatorship in Syria has so many hallmarks of being abominable it should be more surprising that it didn't long ago raise anger and activism among the legions of self-styled human rights protestors in Western countries.  You know, the ones who will raise a flotilla for the Gaza Strip, or rally against apartheid, or protest against the Chinese one-party state.

However, Syria's past can't be easily blamed on the West.  It gained independence in 1946, but between then and 1956 was marked by multiple military coups.  In 1956 it became explicitly allied with the USSR, and merged with Egypt in the ill-fated "United Arab Republic" of Nasser in 1958, before withdrawing in 1961.  A 1963 coup led by the socialist Ba'ath Party set the stage for the future of the country.  With Hafez Assad staging his own coup within the regime in 1970, he held power for 30 years, with an iron fist and a personality cult to match, with Bashar taking on the legacy in 2000.  Throughout the entire period since 1956, Syria has been allied with the USSR, and subsequently maintained warm relationships with Russia, Iran, North Korea and other regimes with an overtly anti-Western stance.

So for now, you can watch Syria's regime massacring its own people.  In the knowledge that the Western advocates of peace and human rights are rather quiet on it all, expressing concern, but not at all supporting intervention (how could they).  They will be quiet about a regime they have ignored for decades, because it never had Western support and was always antagonistic towards Israel (although Israel has for some years sought a peace treaty based on progressively handing back the Golan Heights, but Syria wont make peace until the Palestinian situation has been resolved).  

Meanwhile, with Obama in the White House, and largely uninterested in international affairs.  With Western leadership dependent on a fairly wet British Prime Minister who is in coalition with anti-interventionists, it may be up the the French (given Syria was a French colony) to seek action.   Yet, as China and Russia have no inclination to support it (and since few dare to ignore the UN Security Council nowadays), expect to see more blood flowing in Syria with no intervention.

It is, after all, the consequence of a policy of non-intervention and what the so-called peace movement and human rights movements want as a response.

The "radical" plan Obama is rejecting

The Cato Institute has reviewed the latest Republican plan to stop the US overspending slow down the growth in US government spending, it isn't impressed:

The plan is to cap discretionary spending over 10 years to achieve $1.2 trillion in savings; have (another) bipartisan group of policymakers come up with $1.8 trillion in “deficit reductions” over ten years; and get a vote on a balanced budget amendment. In exchange, the president would get to increase the deficit by $900 billion this year and by another $1.6 trillion next year.

That means:

• Under the Congressional Budget Office’s optimistic spending baseline, the federal government will spend $46 trillion over the next ten years. Obviously, reducing spending by $1.2 trillion oven ten years is relatively small.

• The same dysfunctional congress that treats entitlement programs like lit sticks of dynamite is supposed to come up with $1.6 trillion in “deficit reduction.” Note that we’re not even talking specifically about spending cuts here, so that figure would likely include tax increases assuming they’re able to even come up with something.

• Under the Boehner plan, spending and debt will continue to rise. At the most, the plan would produce an average of $300 billion a year in cuts in exchange for increasing the debt ceiling by $2.5 trillion over the next two years.

• Boehner’s bill includes language that tightens up the definition of what constitutes “emergency” spending. Congress regularly slaps the “emergency” designation on all sort of non-emergency spending bills.

• Where are the immediate spending cuts? Once again, we have the promise of cuts but no specifics. Even if the discretionary caps hold the line on that portion of spending, total federal spending (and debt) will continue its unsustainable upward climb. Entitlement spending is the biggest driver of our long-term budgetary problems but entitlement spending isn’t capped under the Boehner plan.

Obama is rejecting this, because he wants more taxes and wants the issue resolved so it looks like he managed to chaperone a compromise that will outlast his Presidential term.  Of course, some Democrats want tax increases to be a major component of the deficit reduction strategy, because they want to entrench the growth in government that has been the legacy of Obama and Bush before him.   Tea Party aligned Republicans want deficit reduction to be entirely about spending cuts, and I agree.

Even the Cato Institute's own rather meek plan, by Chris Edwards, to cut spending would be a vast improvement, because a balanced budget would still be a decade away, but so much wasteful spending would be addressed.  It would cut the Federal budget to 18% of GDP, down from Obama's projected 24%.

It is about competing visions for the USA.  Some Democrats (and likely Obama himself) want the US to be more like Europe, and to have an activist state involved in health, education, welfare and economic development more than now.  Tea Party Republicans want to keep a sizeable gap between the European size of the state and the US, and want to balance the books by getting spending down, and then address the debt bubble.   However, I suspect most congressmen and women from both parties just want to get elected, be loved and popular, and to convince people that they are just the right ones to solve their problems.  The deficit being something most have spent little time thinking about.

For now, it is a game of chicken.  Obama does not want a deal that needs to be replicated next year during the election season, he wants to look like the honest broker who saved the country from bankruptcy (or at least convinces his core voters that he is in charge and competent).  The recently elected Republicans don't want a deal that includes any tax rises, because they campaigned against that, and they want a balanced budget constitutional amendment so that there is a legal requirement to eliminate the deficit over time (and avoid the risk of this ever happening again).   Both Obama and the Republicans fear being blamed for a default.  Obama bears the bigger risk, because he is President and more people think he is in charge than Congress.  All the Republicans can say is they reject any tax increases, and want to cut waste.  Yet, they also don't want to be seen as being incapable of compromise.

Two visions of the USA - will one win, or will a lily livered half arsed middle ground be found that does barely enough to get past this hurdle.

100% result in DPRK election

North Korea held its local, municipal and provincial elections.

It had 99.97% turnout (disgraceful yes, but it was noted that some were working on oceans or abroad - haven't they heard of absentee ballots?)

and 100% of those who turned out voted for the single candidate.

Even the ephebophile, megalomaniacal, pathological liar.

Meanwhile, there are still tens of thousands in gulags, including hundreds of children, and Amnesty International still has no campaign on the place, oh and Reverend Don Borrie of Porirua still remains Kim Jong Il's useful idiot in New Zealand.

Debunking the "building roads causes congestion" myth

For some time now transport policy has been influenced (and in some countries dominated) by an ideological branch of the sector which could best be called "planning environmentalists".  This group has the following set of views, which are based more on philosophy and politics, and rather less on evidence:

- The problem with transport is people driving;

- Helping cars move is a negative because cars kill, cars pollute and cars take up a lot of space;

- Building new roads magically induces more car trips, so roads shouldn't be built, in fact in some cases they should be closed (the busiest ones);

- People are "dependent" on their cars, rather like drugs, but they would rather not be, they would rather use public transport if only the choice was there;

- Travel by public transport is good, the more the better;

- Travel by rail is almost nirvana, it is the safest, least pollution, can carry the most number of people, can be easily powered by electricity.  The more of this, the better we will be;

- Where railways can't even start to remotely seem sensible, light rail (trams) are the next best thing.  Cheap trains at street level.  People love them, the more the better;

- When even light rail is insanely expensive, buses are ok, but they are only ever a stopgap (after all they have diesel motors, use rubber tyres and um roads);

- Cyclists are important too, except when they disagree with light rail;

- Walking is important, but please don't talk about people who walk or bike who might be attracted to highly subsidised public transport - because that can't ever be a bad thing;

- Freight movement in cities is largely ignored because despite the best will in the world, it can't be moved by rail in any great volume.  Freight benefits from public transport though;

- Public transport relieves congestion, except it doesn't, but actually what we mean is it doesn't actually matter.  Congestion is a good thing, it is a tool to encourage people to use public transport (A Green Party policy advisor told me this himself);

- Road pricing is fabulous, but only to penalise cars.  All the money collected should go to subsidise public transport;

- Road users should pay the full costs of their infrastructure and externalities and pay for public transport subsidies, public transport users should pay a small fraction of the operating costs of their services, or even nothing at all, for they do us good by riding around on those trains;

- Public transport would be more viable if cities were higher density, like Prague, Moscow, Zurich, Barcelona, London.  People should live in high density housing more, less in suburbs.  Planning rules should enforce this, then people could live in tighter communities, travelling by rail, which of course, is what they really want, if only they knew better.

A key part of the dogma behind this, which is wholly embraced by the Green Party, is the notion that if a new road is built, it will become congested within a few years, making the whole construction futile.  It is the only sector where a claim is made that when something is popular, it is a bad thing.  It always ignores whether the road has been priced properly of course.

The Washington Examiner has an excellent article summarising the history behind the claim that building road causes congestion, and the countervailing evidence.  A good example is Phoenix, Arizona:

in the real world, adding highway capacity can prove quite helpful. The Texas Transportation Institute’s annual Mobility Report, for instance, demonstrates an uncanny correlation between capacity and traffic congestion: Areas that add capacity tend to have lower levels of congestion. And induced demand doesn’t always -materialize. Take, for example, the city of Phoenix, a town built with almost no freeway system.

As a result, the Phoenix metro area historically had some of the worst congestion in the nation. Between 1982 and 2007, Phoenix decided to build the highways it should have had in the first place.

They added so much asphalt that, according to the research firm Demographia, the city’s highway-lane-miles per capita grew by 205 percent. During that period, highway-vehicle-miles-traveled per capita increased by only 12 percent. And, like magic, traffic congestion plummeted.

Now what is true for Phoenix may not be true for Philadelphia. And building highways almost certainly induces some demand.

In New Zealand you can see the same, with plenty of examples to prove that building roads need not lead to congestion.  In Auckland, Te Irirangi Drive was built some years ago and has yet to be even close to capacity.  The south eastern highway from the Southern Motorway to the Pakuranga Motorway likewise (despite being built on the cheap).  In Tauranga, toll road Route K is now locally infamous for losing money because of lack of demand, and the related route J north isn't remotely congested.   Wellington's motorway bypassed Tawa  in the 1950s, and neither the motorway nor Tawa are congested.  Upper Hutt has also been bypassed with a sustained reduction in congestion through that city (and on the highway).  Lambton Quay used to be gridlocked at peak times with cars in the 1970s, until the motorway provided a bypass to south of the city.  Nelson's Stoke Bypass has not resulted in congestion in Stoke or on the highway.  

Now when a new road opens up a previously inaccessible, but desirable location, then it will have rapidly increased demand.  New crossings can do this, like the Auckland Harbour Bridge which needed a duplication of capacity within a couple of years of opening.  Tauranga Harbour Bridge was similar, but only when the toll was removed (which moderated demand).   In addition, piecemeal upgrades to a road that eliminates one bottleneck, but doesn't deal with one further along the route can exacerbate congestion at the further bottlenecks (but doesn't destroy the case for relieving congestion for those who do not go that far).

Modern cities throughout the world have used road building as part of their strategy to meet transport demand.  Where they have failed is in unfettered construction that means a subsidy from those who don't use the road for those who do.  In short, without using the market tool of pricing, building new roads can simply be just another subsidy.  

In New Zealand at the moment there isn't any appreciable use of pricing to manage demand to meet supply, but there is a major road building programme - one that does involve a considerable subsidy to road users in particular parts of the country (Auckland and Wellington mainly).    A more commercial approach may not build so much, and certainly not so fast.   Sadly, the main choices in policy offered to voters are to embark on grand Think Big road projects (e.g. Transmission Gully and the Puhoi-Wellsford motorway), or to embark on grand Think Big rail projects (e.g. Auckland underground rail loop and Auckland airport railway).   Actually letting users decide with their dollars seems something neither the Nats or the Greens can get to grips with.