U.S. Congressman Kenny Marchant

Proudly Serving the 24th District of Texas
Posted by on October 20, 2011

In Memory of Staff Sergeant Taylor 

The 24th District of Texas has lost one of our own in the Global War on Terror. Staff Sergeant Houston M. Taylor of Hurst died on October 13th in Afghanistan while supporting Operation Enduring Freedom.

Taylor served with the 2nd Battalion, 27th Infantry regiment, 25th Infantry Division. He was married to his childhood sweetheart and a father of two children.

I am deeply saddened to learn of the passing of Staff Sergeant Taylor. There are no words to do justice to the honor with which he served his country. He made the ultimate sacrifice for our nation. My thoughts and prayers are with his family and friends in this time of loss.




Posted by on October 12, 2011

Marchant: Trade deals should be on a fast track to passage

By Kenny Marchant
Special to Star-Telegram

Last week President Barack Obama sent Congress the long-delayed trade deals with South Korea, Colombia and Panama. The trade agreements will provide the U.S. -- and Texas in particular -- bold solutions to economic recovery.

There is an excellent case for the trade deals to pass. Simply put, the trade agreements create more jobs, increase exports and broaden economic growth.


At a time when U.S. unemployment hovers above 9 percent -- including 8.5 percent in Texas -- engines of job growth are needed. As the independent International Trade Commission points out, the three trade agreements would increase U.S. exports by $13 billion. Such growth could create approximately 250,000 new jobs in America, according to the president's measure.

While more jobs are good news for the country as a whole, Texas in particular stands to benefit from increased trade. In today's globalized economy, Texas depends more than ever on world markets.

Exports of manufactured goods alone support an estimated 732,000 jobs in Texas, according to the U.S. Department of Commerce. The trade deals are expected to boost jobs in Texas powerhouse industries such as manufacturing, agriculture and chemicals, to name a few.

Businesses in the Dallas-Fort Worth area are positioned for big gains. DFW Airport, one of the world's leading trade gateways, already handles almost 65 percent of all international air cargo in Texas. The trade agreements would increase shipments of goods from DFW to some of the most lucrative Latin American and Asian markets.


Trade benefits all shapes and sizes of businesses. In 2008, for example, 22,294 export firms in Texas were small and medium-sized enterprises with fewer than 500 employees. That translates to the fourth highest number of export firms in the country. With enhanced capacity to sell goods and services to Colombia, Panama and South Korea, the number of small and medium-sized businesses -- the backbone of America's economy -- should only increase.

No matter the business size, open markets make the United States a significantly more competitive trading partner. As the trade deals languished in Washington over the last several years, global competitors raced ahead: the European Union struck a trade deal with South Korea, a Canada-Colombia pact took force, and emerging economies -- notably Brazil, China and India -- aggressively courted new markets. If Congress fails to pass the trade agreements, America risks being left behind as other countries strike new trade alliances.

Economic growth

Lessons from history make plain that economic isolationism inflicts serious damage to our domestic economy and severely disrupts the global economic system. Look no further than the Smoot-Hawley tariff of the 1930s, which increased trade barriers in a particularly fragile economy, and led to disastrous results and contributed to the Great Depression. Protectionism, whether in the form of high tariffs or stalled trade deals, is a false comfort that not only fails to spur economic growth, but in fact sets us backward.

It may be tempting to look inward during periods of economic slowness, but it is during such periods that countries benefit most from economic boosts available through trade. The International Trade Commission estimates that the three trade pacts will increase U.S. gross domestic product by nearly $10 billion. The beneficial impact will be particularly relevant to Dallas-Fort Worth, one of the nation's leading commercial hubs.

While the trade agreements are no silver bullet to fix the economy, they put America on the right path. I applaud those who have long pushed for the agreements, notably Ways and Means Chairman Dave Camp, Rep. Kevin Brady of Texas and former Dallas Mayor and current U.S. Trade Representative Ron Kirk. But unless Congress quickly passes the trade deals, America will be senselessly deprived of a proven path toward economic recovery.

Read more: http://www.star-telegram.com/2011/10/11/3437069/marchant-trade-deals-should-be.html#ixzz1aZXqP6GT
Posted by on October 07, 2011

Probe Sought Into Disability Delays
Wall Street Journal

By: Damian Paletta

Republicans on the House Ways and Means Committee on Thursday called for the Social Security Administration's inspector general to investigate whether the agency's managers recently ordered judges and other employees to delay disability benefits so they could meet bureaucratic goals.

The subcommittee's request came in response to a Sept. 30 Wall Street Journal article saying that managers had instructed administrative law judges and others not to close any cases between Sept. 26 and Sept. 30. The agency wouldn't count cases closed that week toward the goals because of a quirk in the federal calendar.

Hitting the goals is important for managers as they can determine bonuses and promotions. The delay meant that thousands of Americans who had applied for disability assistance would have to wait at least an additional week for their benefits.

"If this intentional work slowdown story is true, this behavior is an abuse of the taxpayer dollars that support the program, a neglect of the Americans that depend on these critical benefits, and raises serious questions about those charged with leading this important program," the Republicans wrote in a letter to Social Security Administration inspector general Patrick O'Carroll.

A Social Security Administration spokesman said the agency was likely to change its policy and no longer have isolated weeks that didn't factor into the fiscal calendar. It also planned to cooperate fully with the investigation, the spokesman said.

The Social Security Disability Insurance system has more than 10 million beneficiaries. Applications are up sharply in recent years because of high unemployment and an aging population. More than 3 million people are projected to apply this year and nearly 750,000 have applied and await a decision.

The letter was signed by 22 Republicans, including House Ways and Means Committee chairman Dave Camp (R., Mich.) and House Budget Committee Chairman Paul Ryan (R., Wis.).

They asked Mr. O'Carroll to investigate management oversight in seven states mentioned in the article and to check for a pattern of managers instructing "employees to manipulate work loads for personal gains."

Last week, a Social Security Administration spokesman said that "based on available data, it does appear some judges are holding cases...which is counter to our policy. We regret this occurrence."

But several judges said they were ordered to hold cases by managers, and other Social Security Administration employees said they were given similar directives by superiors.


Posted by on September 22, 2011

The Spend Now, Tax Later Jobs Bill
Wall Street Journal

By Alan Reynolds

The president's "Plan for Economic Growth and Deficit Reduction" mainly hinges on persuading Congress to trade $447 billion in temporary payroll tax cuts and spending increases—the "jobs plan"—for permanent income-tax increases of $150 billion a year. Mr. Obama also calls on the 12-member congressional super committee to undertake "comprehensive tax reform," which he defines in peculiar fashion as trading lower deductions for higher rates.

According to the Sept. 19 White House fact sheet, "The President calls on [the super committee] to undertake comprehensive tax reform, and lays out five principles for it to follow: 1) lower tax rates; 2) cut wasteful loopholes and tax breaks; 3) reduce the deficit by $1.5 trillion; 4) boost job creation and growth; and 5) comport with the "Buffett Rule" that people making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay."

But the administration's tax plan violates these principles. It raises rather than lowers tax rates, shrinks tax deductions to pay for more spending, makes no believable contribution to economic growth, has nothing specific to say about the Buffett Rule, and allocates a third of the proposed $1.5 trillion tax increase over the next decade to such miscellany as the temporary payroll tax break, more subsidies for state and local government jobs, and prolonged unemployment benefits.  

Nearly all of Mr. Obama's new tax increases are identical to those in his failed budgets of 2011 and 2012. But the repackaging of stale ideas is partly concealed by intermingling the phasing-out of deductions and exemptions with allowing the Bush tax rates to expire, thus increasing the top two tax rates to 36% and 39.6% from 33% and 35%. This intermingling gives the false impression that $866 billion in projected additional revenue comes from raising the top tax rates alone.

The Treasury Department's more candid explanation of these same proposals in the 2011 budget estimated that raising the top two tax rates would bring in only an extra $36.4 billion a year from 2011 to 2020, which adds up to little more than $400 billion from 2012 to 2021. The administration's 2011 proposal to raise the tax rate on capital gains and dividends to 20% from 15% on upper incomes was estimated to raise an even punier $10.5 billion a year. But the 3.8% surtax in ObamaCare already raised those tax rates to 18.8% to finance health-insurance subsidies, leaving no meaningful revenue from that source.

In other words, most of that large, $866 billion 10-year tax hike comes from phasing out personal exemptions and deductions. These are not "tax breaks that small businesses and middle-class families don't get," as the president claimed on Monday in his Rose Garden remarks. The phase-outs apply to the same exemptions and deductions enjoyed by those earning less than $250,000, including deductions for mortgage interest, charitable contributions, and state income taxes.

Mr. Obama's second biggest tax increase, supposedly worth $410 billion over 10 years according to the fact sheet, comes from further reducing "the value of itemized deductions and other tax preferences to 28% for those with high income." The phasing out itemized deductions for upper-income taxpayers would shrink those deductions by as much as 80%, so this additional cap would limit any remaining deductions to 28 cents on the dollar. The combination would be severe. Ask any charity.

As for corporate taxes, Mr. Obama said in the Rose Garden that "We can lower the corporate rate if we get rid of all these special deals." But his plan does not include a lower corporate rate. Instead it earmarks the revenue from eliminating any loopholes and "special deals" to pay for the $447 billion jobs bill.

This brings us to the president's puzzling remarks about "the Buffett Plan," which has no clear connection to anything in his own plan. Mr. Obama has said that anyone who thinks "somebody who's making $50 million a year in the financial markets [i.e., Warren Buffett] should be paying 15 percent on their taxes, when a teacher making $50,000 a year is paying more than that" should "have to defend that unfairness. . . . They ought to have to answer for it."

Warren Buffett's large capital gains (mostly unrealized) and token $100,000 salary are by no means typical. IRS statistics show those earning more than $1 million paid 28.9% in federal income taxes in 2009, compared with 24.6% for those earning from $200,000 to $500,000 and 11.6% for those earning from $50,000 to $75,000.

However, if Mr. Obama is seriously suggesting that marginal tax rates should be the same for the working teacher's salary as for the retired teacher's capital gain, then he may be flirting with a rerun of George McGovern's 1972 presidential campaign theme that, "Money made by money should be taxed at the same rate as money made by men."

Unlike Mr. McGovern, though, Mr. Obama has not yet proposed a capital gains or dividend tax higher than 20%. If the rhetorical Buffett Rule has any meaning at all, it appears to be nothing more than a presidential hint to the congressional super committee that he would like them to propose (as he has not) that incomes above $1 million face a 28% tax on capital gains and dividends.

The trouble is that such a Buffett Rule would quite certainly reduce rather than enlarge federal revenue. That's because we know from experience that a 28% tax on selling stock or property greatly reduces the amount offered for sale. Wealthy people then sit on more unrealized capital gains rather than subjecting themselves to a stiff tax penalty on selling those assets. The 28% tax on long-term capital gains brought in only $36.9 billion a year from 1987 to 1997, according to the Treasury Department, while the 15% tax brought in $96.8 billion a year from 2004 to 2007.

Putting aside the seemingly empty threat of a Buffett Plan tax on capital gains, the president's new-old plan to raise income taxes on families and small businesses earning more than $250,000—to pay for temporary tax gimmicks and extra spending—is just stale wine in a new bottle.

Any plan that would impose permanently higher tax rates on income to pay for temporarily lower tax rates on payrolls is no stimulus or jobs plan under any sort of economics. Neither is a tax-financed extension of unemployment benefits. It's a tax-and-spend plan, and a bad one.

Mr. Reynolds, a senior fellow with the Cato Institute, is the author of "Income and Wealth" (Greenwood, Press 2006).

Posted by on September 14, 2011

How Do Taxes Generate Jobs?
Investor's Business Daily Editorial

Government spending failed on jobs, so the president has shifted to Plan T: taxes, including limiting mortgage interest and other deductions — plus still more spending. His unlikely-to-pass plan is 100% politics.

When an angry Barack Obama repeatedly demanded at a joint session of Congress last week that lawmakers "pass this jobs bill," he knew their answer would be no. But at the time, no one outside the White House knew the game the president was playing.

In one of the most deceitful ploys ever attempted against the American people, President Obama kept it to himself that he was planning a full-frontal assault on tax deductions to "pay for" nearly $450 billion in new stimulus.

Individuals earning more than $200,000 annually and married couples taking in more than $250,000 would see restrictions on itemized deductions for mortgage interest, charitable giving, and state and local taxes. Coming out of the blue as a high-unemployment economy threatens a double-dip recession, these tax increases define the term "nonstarter."

Obama also wants to tax "carried interest" at the rate of ordinary income instead of at the lower capital gains rate — a class warfare attack on the profits of venture capitalists, private equity specialists and other investors that raises just $18 billion, a fraction of the cost of the bill. The president obviously attributes no value to such investors in the private jobs sector.

Club for Growth executive director David Keating tells IBD of "some remarkable conference calls in recent months with CEOs" he's listened in on. "They see job creators being viewed as just targets, sources of government revenues," Keating relates. "And so, their money is frozen on the sidelines."

Obama also smacks the oil and gas industry with $40 billion in new taxes over a decade through drilling deduction restrictions. As a Wood Mackenzie study commissioned last year by the oil industry warned, $5 billion in annual tax increases would reduce domestic oil production by 400,000 barrels a day, destroy 170,000 American jobs by 2014 and lose $128 billion in government revenues over about 15 years.

House Majority Leader Eric Cantor, R-Va., rejected the Obama tax increases, but expressed hope that Congress could "peel off the things that we can actually agree on," like payroll tax cuts.

Democratic talking points say "no way": House Minority Leader Nancy Pelosi roared that the Obama bill should not be voted on in pieces; White House political adviser David Axelrod told ABC News the legislation is "not an a la carte menu" open to negotiation.

What's more, the president's speech itself was delivered as a gruff ultimatum, with its harsh, repeated insistence that Congress "pass this bill," arguing that it was already a compromise.

Big tax increases clearly will not pass with the economy in the doldrums. But this collection of job-killing new taxes and yet-more stimulus spending is designed not to pass, but to hoodwink 2012 voters into thinking obstructionist Republicans — not a big-government president and his party — are to blame for the economy.



Posted by on August 22, 2011

How Not to Grow an Economy
Wall Street Journal

Financial markets are in turmoil, investors are fleeing to safe havens, and the chances of another recession are rising. This would seem to be a moment when government should be especially careful to do no harm, to talk and walk softly, and to reassure business that Washington wants more private investment and hiring.

But this is not how our current government behaves. Day after day brings headlines of another legislative, regulatory or enforcement action that gives CEOs and investors reason to hunker down, retain as much cash as possible and ride out whatever storms are ahead. This is not the way to nurture an already fragile recovery, much less help the economy to endure shocks from Europe, natural disasters or a big bank failure.

Consider the headlines only from last week, a slow week by Washington standards, with Congress out of session and President Obama campaigning for three days before going on vacation. Even in the dog days of August, your government was hard at work undermining economic confidence.

• Monday: "Warren Buffett right about taxes, says Obama." The week began with a one-two tax punch from Warren Buffett and President Obama. The Omaha stock-picker wrote an op-ed begging Congress to raise taxes on millions of Americans who make less than he does, and the President used the first stop of his bus tour, in Cannon Falls, Minnesota, to agree.

The week began with a one-two tax punch from Warren Buffett and President Obama. The Omaha stock-picker wrote an op-ed begging Congress to raise taxes on millions of Americans who make less than he does, and the President used the first stop of his bus tour, in Cannon Falls, Minnesota, to agree.

"I put a deal before the Speaker of the House, John Boehner, that would have solved this problem," Mr. Obama said, "and he walked away because his belief was we can't ask anything of millionaires and billionaires and big corporations in order to close our deficit." So America's main job creators are still on notice that a tax increase is in their future in 2013, if not sooner.

• Tuesday: "Federal mortgage role to be preserved: Obama is working to develop new housing policy." A Washington Post story reported that Mr. Obama has directed a White House team to develop a housing plan that would keep the feds deeply involved in mortgage markets, with subsidies and loan guarantees, perhaps even preserving Fannie Mae and Freddie Mac.

A Washington Post story reported that Mr. Obama has directed a White House team to develop a housing plan that would keep the feds deeply involved in mortgage markets, with subsidies and loan guarantees, perhaps even preserving Fannie Mae and Freddie Mac.

This contradicts the Treasury's February white paper recommending a much smaller government role in housing without Fan and Fred. A Treasury official responded that the white paper is still guiding policy, but private investors who might want to get into housing finance know the Post story came from someone in authority and have another reason to stay on the sidelines.

• Thursday: "Justice Inquiry Is Said to Focus on S.&P. Ratings." Barely two weeks after Standard & Poor's downgraded U.S. debt over White House protests, we learn that the feds are going after the firm for its ratings on mortgage securities before the financial crisis. The feds say the probe was underway before the downgrade, but the credit rater's mortgage mistakes have been known for years. And why not Moody's or Fitch?

Barely two weeks after Standard & Poor's downgraded U.S. debt over White House protests, we learn that the feds are going after the firm for its ratings on mortgage securities before the financial crisis. The feds say the probe was underway before the downgrade, but the credit rater's mortgage mistakes have been known for years. And why not Moody's or Fitch?

The message: If you disagree with this Administration, you'd better lawyer-up.

• Thursday: "Exxon, U.S. Government Duel Over Huge Oil Find." Exxon has made the biggest oil discoveries ever in the Gulf of Mexico at some one billion barrels, but the feds have taken the extraordinary action of denying the oil company what had long been routine oil lease extensions. So Exxon and a Norwegian firm are suing the feds to be able to drill on the leases, spending money on lawyers for permission to create jobs and increase domestic oil production.

Exxon has made the biggest oil discoveries ever in the Gulf of Mexico at some one billion barrels, but the feds have taken the extraordinary action of denying the oil company what had long been routine oil lease extensions. So Exxon and a Norwegian firm are suing the feds to be able to drill on the leases, spending money on lawyers for permission to create jobs and increase domestic oil production.

• Thursday: "Fed Eyes European Banks: Regulators Scrutinize Ability of Institutions' U.S. Units to Fund Themselves." The Wall Street Journal quotes Federal Reserve Bank of New York officials as saying they're worried about the condition of European banks and are on the job making sure that any problems don't damage American banks. It's nice to know U.S. regulators are earning their pay, but the spectacle of regulators publicly broadcasting troubles at European banks does nothing to calm already jittery interbank markets.

The Wall Street Journal quotes Federal Reserve Bank of New York officials as saying they're worried about the condition of European banks and are on the job making sure that any problems don't damage American banks. It's nice to know U.S. regulators are earning their pay, but the spectacle of regulators publicly broadcasting troubles at European banks does nothing to calm already jittery interbank markets.

• Thursday: "Obama to push stimulus plan." The President signals more government fiscal action, to be unveiled after Labor Day. Ideas on the table: New spending on roads and a tax credit for companies that hire workers.

The President signals more government fiscal action, to be unveiled after Labor Day. Ideas on the table: New spending on roads and a tax credit for companies that hire workers.

The thinking, say aides, is to pressure Republicans to pass these proposals or look indifferent to high unemployment. So even as he proposes to reduce deficits far into the future in ways that will depend on decisions by future Congresses, the President will fight to increase spending immediately. Americans may conclude they've heard this cognitive dissonance before.

None of these stories by themselves—or even a week of them—is enough to undermine a recovery. But the cascade of such stories day after day—about new regulations, new prosecutions or fines against business, new obstacles to investment, more spending and higher taxes—contributes to the larger lack of business and consumer confidence.

It's impossible to quantify the impact of such policies on lost GDP or lost job creation, but everyone in the real economy understands how such signals work. The great tragedy of the Obama nonrecovery is that this Administration still doesn't realize the damage it is doing.


Posted by on August 19, 2011

2011 Transportation Summit

I recently had the privilege of participating in the 14th Annual Transportation and Infrastructure Summit presented by the City of Irving and the Greater Irving-Las Colinas Chamber of Commerce. Every year this conference brings together policy makers, private sector leaders, and trade associations to discuss our nation’s current transportation projects.

Below is a list of transportation projects I wanted to bring to your attention that affect the 24th Congressional District:  

  • DART Green Line – Completed in December 2010, the Green Line consists of 20 stations beginning in Farmers Branch and Carrollton running down to Southeast Dallas.

  • DART Orange Line – With an estimated 2012 completion date, this North Texas line will travel through the heart of Irving to the DFW Airport. Both the Orange and Green lines will provide numerous opportunities for economic growth in our cities.

  • DFW Connector – To accommodate the rapid growth in Northeast Tarrant County, this project is focused on improving mobility at the north end of the DFW International Airport along highways 114, 121, and 360.

  • LBJ-635 Project – This five-year project covers the north and east portions of the Lyndon B. Johnson Freeway. The project will add 13 miles of new express lanes to relieve traffic congestion for North Texas commuters.




Posted by on August 12, 2011

A New Strategy for Economic Growth
Wall Street Journal


As the economy continues to struggle, we are reminded of a course offered at Yale University titled "Grand Strategy." Drawing on a weighty curriculum of history and philosophy, the course seeks to train future policy makers to tackle the complex challenges of statecraft in a comprehensive, systematic way. Clearly, U.S. economic policy is sorely lacking an effective grand strategy, and we are likely to endure high unemployment, weak economic performance and trying financial markets until such a strategy is articulated and pursued.

Policy makers should cease the barrage of ad hoc, short-term policy initiatives. Is increased federal spending across government agencies a grand strategy? How about checks in the mail to spur spending? Cash for clunkers to move auto inventories? Fast trains and faster Internet? Mortgage modification programs and fleeting tax credits to re-stoke home ownership?

Inducing consumers to do today what they would otherwise do tomorrow is hardly a grand strategy. Hundreds of billions in "stimulus" spending has stimulated little but more debt. Forty-eight months have passed since the onset of the financial crisis, 26 months since the recession technically ended. Yet job creation remains remarkably weak, and markets deeply uneasy.

We can't go on like this.

The debt-limit debate caused policy makers to recognize what citizens already knew: We must put our fiscal house in order. Cutting spending is essential. But we will never cut our way to prosperity.

So, what should be the economic grand strategy? In a word: growth.

Stability has replaced growth as the foremost objective of economic policy. But growth over the next 10 years is more consequential to our well-being than any new regulations promulgated by the Financial Stability Oversight Council or cost-cutting considered by the new congressional super committee. Absent strong growth, any projected improvements in the country's fiscal position won't materialize.

The grand strategy is sector-neutral. It doesn't have favored industries or political parties. It does not seek to curry favor with special interests. The grand strategy fights statism everywhere.

The grand strategy goes out of its way to ensure that big companies are not advantaged at the expense of smaller, entrepreneurial competitors. If banks are "too big to fail," they are too big. They must be allowed to succeed or fail on their own merit, without any hint of government support. The failed behemoths at the core of housing finance, Fannie Mae and Freddie Mac, should be wound down. Robust, dynamic competition is a far better way to allocate credit.

The grand strategy need not—and should not—be grandiose. It should avoid overpromising. Fiscal and monetary policies can help mitigate the effects of shocks to the economy, but they run grave risks if their goal is to target asset prices. When investors' perceptions of Treasury securities change rapidly, they tend to be far less sure about the price of riskier assets, like stocks. The resulting volatility in financial markets harms growth.

A pro-growth strategy is decidedly long term in orientation. It aims for higher standards of living five, 10 and 20 years out, long past the next election cycle. It replaces the false promise made to the next generation of entitlement-program recipients with a solvent, dependable model that encourages work and savings. Reforming Social Security before costs multiply and uncertainties spread is both fairer and more growth-oriented. And enacting consumer-driven health-care policies represents the best way to control costs and improve patient care.

An effective growth strategy confronts tough challenges before they become intractable. The strategy is a threat to those who take refuge in our burdensome tax code, and it is a great source of encouragement to those who seek higher rates of return on physical and human capital. Hence, fundamental tax reform—dramatically lowering tax rates for individuals and companies while eliminating loopholes, deductions and credits—is critical to economic growth.

Achieving strong growth requires the free flow of capital, goods and ideas. We have world-class products and services to sell to the growing middle class in emerging markets. We must find our voice to resist the rising tide of economic protectionism and recognize the job-creating benefits of our pending free trade agreements with South Korea, Colombia and Panama.

The growth strategy also demands an abiding respect for the rule of law, and stable, cost-effective rules of the road from regulators. A constantly changing regulatory regime kills investment and limits economic growth. The strategy also demands investing in our own natural resources, such as shale gas and the commensurate infrastructure to re-industrialize our country, creating jobs here in the U.S. rather than shipping hundreds of billions of dollars abroad.

Finally it means ensuring that the opportunities presented by a growing economy are matched by the skills of the next generation. We need to transform our education system through higher standards, merit-based teacher compensation and school choice. No grand strategy will prevail unless far more of our high-school graduates are college or career ready.

Stronger economic growth is not just about economics. Growth unleashes human potential. It turns personal aspirations into positive achievements. And it lays the predicate for a better, stronger, more prosperous and opportunity-filled America. Our weak economic recovery has dashed the hopes and dimmed the prospects of too many of our citizens. And it has put America's place in the world at risk.

We should resist the temptation to wrangle with the green eyeshade folks who question our prospects. Instead, we must take actions that demonstrate our resolve and resiliency. We must restore our faith in growth economics and reform our policies accordingly. This will bring strength to our markets and reaffirm our place in the world.

Mr. Warsh, a former Federal Reserve governor, is a distinguished visiting fellow at Stanford University's Hoover Institution. Mr. Bush, governor of Florida from 1999-2007, is president of Jeb Bush and Associates, LLC.


Posted by on August 11, 2011

A Tea Party Triumph - Wall Street Journal Editorial

If a good political compromise is one that has something for everyone to hate, then last night's bipartisan debt-ceiling deal is a triumph. The bargain is nonetheless better than what seemed achievable in recent days, especially given the revolt of some GOP conservatives that gave the White House and Democrats more political leverage.


The big picture is that the deal is a victory for the cause of smaller government, arguably the biggest since welfare reform in 1996. Most bipartisan budget deals trade tax increases that are immediate for spending cuts that turn out to be fictional. This one includes no immediate tax increases, despite President Obama's demand as recently as last Monday. The immediate spending cuts are real, if smaller than we'd prefer, and the longer-term cuts could be real if Republicans hold Congress and continue to enforce the deal's spending caps.

The framework (we haven't seen all the details) calls for an initial step of some $900 billion in domestic discretionary cuts over 10 years from the Congressional Budget Office (CBO) baseline puffed up by recent spending. If the cuts hold, this would go some way to erasing the fiscal damage from the Obama-Nancy Pelosi stimulus. This is no small achievement considering that Republicans control neither the Senate nor the White House, and it underscores how much the GOP victory in November has reshaped the U.S. fiscal debate.

No wonder liberals are howling. They have come to believe in the upward spending ratchet, under which all spending increases are permanent. Not any more.

The second phase of the deal is less clear cut, though it also could turn out to shrink Leviathan. Party leaders in both houses of Congress will each appoint three Members to a special committee that will recommend another round of deficit reduction of between $1.2 trillion and $1.5 trillion, also over 10 years. Their mandate is broad, and we're told very little is off the table, but at least seven of the 12 Members would have to agree on a package to force an up-or-down vote in Congress.

If the committee can't agree on enough deficit reduction, then automatic spending cuts would ensue to make up the difference to reach the $1.2 trillion minimum deficit-reduction target. One key point is that the committee's failure to agree would not automatically "trigger" (in Beltway parlance) revenue increases, as the White House was insisting on as recently as this weekend. That would have guaranteed that Democrats would never agree to enough cuts, and Republicans were right to resist.

Instead the automatic cuts would be divided equally between defense and nondefense. So, for example, if the committee agrees to deficit reduction of only $600 billion, then another $300 billion would be cut automatically from defense and domestic accounts (excluding Medicare beneficiaries) to reach at least $1.2 trillion.

This trigger is intended to be an incentive for committee Members of both parties to agree on more cuts, but defense cuts of this magnitude would do far more harm to national security than they would to domestic accounts that have been fattened by stimulus. This is the worst part of the deal, and Mr. Obama's political goal will be to press Republicans to choose between tax increases and destructive defense cuts. The GOP will have to fight back and make the choice between domestic cuts and harm to our troops fighting multiple wars.

While the "trigger" includes no revenue increases, the committee itself could agree to raise taxes to meet the $1.2 trillion deficit reduction target. This means GOP leaders Mitch McConnell and John Boehner have to be especially careful in their choice of appointees. No one from the Senate Gang of Six, who proposed tax increases, need apply. The GOP choices should start with Arizona Senator Jon Kyl and House Budget Chairman Paul Ryan, adding four others who will follow their lead.

One reason to think tax increases are unlikely, however, is that the 12-Member committee will operate from CBO's baseline that assumes that the Bush tax rates expire in 2013. CBO assumes that taxes will rise by $3.5 trillion over the next decade, including huge increases for middle-class earners. Since any elimination of those tax increases would increase the deficit under CBO's math, the strong incentive for the Members will be to avoid the tax issue. This increases the political incentive for deficit reduction to come from spending cuts.

Mr. Obama's biggest gain in the deal is that he gets his highest priority of not having to repeat this debt-limit fight again before the 2012 election. The deal stipulates that the debt ceiling will rise automatically by $900 billion this year, and at least $1.2 trillion next year, unless two-thirds of Congress disapproves it. Congress will not do so.

Given how much the current debate has damaged the public perception of Mr. Obama's leadership, this will be a relief at the White House. This is part of the negotiating price that Mr. Boehner had to pay because of the back-bench revolt that showed he couldn't guarantee a debt-limit increase with only GOP votes. This gave Democrats more leverage.


The same supposedly conservative Republicans and their talk radio minders may denounce this deal as a sellout, but we'll be charitable and assume they've climbed so far out on the political ledge they don't know how to climb back without admitting they were wrong. They're right that this deal doesn't "solve" our fiscal crisis, but no such deal is possible as long as liberals run the Senate and White House.

The debt ceiling is a political hostage the GOP could never afford to shoot, and this deal is about the best Republicans could have hoped for given that the limit had to be raised. The Jim DeMint-Michele Bachmann-Sean Hannity alternative of refusing to raise the debt limit without a balanced-budget amendment and betting that Mr. Obama would get all the blame vanishes upon contact with any thought. Sooner or later the GOP had to give up the hostage.

The tea partiers pride themselves on adhering to the Constitution, which was intended to make political change difficult. Yet in this deal they've forced both parties to make the biggest spending cuts in 15 years, with more cuts likely next year. The U.S. is engaged in an epic debate over the size and scope of government that will play out over several years, and the most important battle comes in the election of 2012.

Tea partiers will do more for their cause by applauding this victory and working toward the next, rather than diminishing what they've accomplished because it didn't solve every fiscal problem in one impossible swoop.

Wall Street Journal Editorial -- "Tea Party Triumph" -- August 1, 2011