Bush Approves Transfer: America Adds $8 Billion in Debt

From the AP (via Forbes):

The bill transfers $8 billion from the Treasury’s general fund to shore up the financially teetering highway trust fund, which supports road and bridge projects around the country. In July, the White House threatened a veto, saying taking money from the general fund was “both a gimmick and a dangerous precedent that shifts costs from users to taxpayers at large.”

Supporters of the transfer argued that the Treasury was merely returning $8 billion it took from the then-prospering trust fund in 1998 for deficit reduction.

So basically, to cover “paying off the deficit” back in the 1990’s, lawmakers took money out of the highway trust fund (the checking account where all the gas tax revenues go). Which is funny because I thought the budget surplus was from income tax revenues, but I guess everything gets included in this. So now that the Schumer hits the fan (I swiped that from www.survivalblog.com, which I think is a great euphemism for the actual phrase, if not accurate), the money gets “loaned” back. Of course, this just means that whatever “debt reduction” is done is actually just been eliminated. Awesome accounting guys.

But this also means that the states get their precious highway money, construction companies’ political contributions and lobbying did not go in vain, and whatever useless highway projects that this money is being spent on can continue. At least until next year.

What I also found interesting is that one proposal floated by the Bush administration was to reduce the MASS TRANSIT portion of the trust fund. Motorists, you’ll be happy to know that your gas taxes are going toward those empty regional transit buses you’re stuck behind on the road. Of course, the Democrats wanted nothing to do with that, being that they love mass transit, even if it is cross-subsidized by motorists.

And the same thing has already happened with Social Security. The government has been using the money in the SS trust fund to pay for the usual stuff. So in about 2020, when the trust fund starts to run out, the government will just “get the money back” from the Treasury, since it was already “loaned out”. So don’t worry, Social Security WILL BE SAVED. You’ll just end up paying 50-80% income taxes to do it.

Government: The largest legal Ponzi scheme ever created.

Obama half-right, half-wrong

The last day or so has had alot of people jumping on Barack Obama for his “we can save enough energy by keeping our tires inflated and engines tuned to prevent drilling off-shore” comment. I, for one, applaud Obama, as a free market conservative, for suggesting that people can save money by reducing their own consumption. This isn’t the same as telling people not to drive or what to drive (ie his people can’t drive SUVs because the world hates them comment). It cuts waste, which isn’t a bad thing. The same thing with driving slower, having more aerodynamically efficient cars, and the like.

But that choice is for the consumer to make, not for the government to make. Which is where Obama then goes off the deep end, trying to use government policies to drive consumption patterns. But consumption of gas often flies in the face of what a politician wants to have done.

It seems that in the course of Obama’s Ivy League education, he never learned about the incidence of taxation. This basic part of public economics states: the tax burden of a tax on a commodity will fall on the group that responds less to price.

(Guess who that is for gasoline?)

Congress Considers Punishing Drivers for Politicians Mistakes

Call it the law of unintended consequences. Call it massive ignorance of cause and effect. Call it whatever you want, but Congress is getting ready to not cut the gas tax in the face of rising costs.

They would increase it.

According to multiple sources, Congress has not only rejected the gas tax holiday proposed by Sen. John McCain and others, but is now getting ready to INCREASE the gas tax.

The reason is that Congress’ eyes are starting to get too big for their stomach. Congress and their buddies in the road construction business are beginning to realize that there is actually a limit on how much pork they can hand out for roads. And after doing to budget crunching on the gas tax holiday, the government now realizes that they can’t keep handing out the goodies without something to back it up.

This is somewhat ironic in a government that has lived off of deficit spending for most of the 20th century and continuing into the 21st. By law, Congress is limited in their spending by the amount of money in what is called the Highway Trust Fund (hey, it’s like the Social Security Trust Fund!). Once the US completed the Interstate Highway system in the late 1980s. Money continued to flow from the gas tax as consumption increased, but highway construction came to a standstill. So with all this money to play with, Congress did what Congress does best: spend like it’s their last day on the job.

Of course, at the same time, under the guise of… something, Congress started putting fuel economy standards on cars. So people started to use less gasoline for their cars. For a while, the increase in the amount of drivers offset the decrease in the amount of gasoline purchased, so income grew (Again, like Social Security). But so did spending out of the Trust Fund (I’m seeing a parallel here). Now, revenues are decreasing, but Congress and their pork-addicted campaign contributors in the construction industry still want to spend more money (Somebody stop with the analogy to social security…).

So now they’re at a crossroads: they want to keep spending, but they won’t have the money to do so. Right now, this is where the comparison stops with social security, because SS will still have a surplus for the next 10 years or so. But the Highway Fund is about to run out of money. Congress, since they don’t have to pay for these things out of their own pockets, will do the honorable thing:

Increase taxes.

Instead of cutting the pork, they’ll make prices even more expensive for drivers in the months ahead. Instead of putting the money to good use, they’ll keep funneling other people’s money to their campaign contributors. Instead of weaning themselves off an unsustainable path, Congress will just keep enabling their behavior without consequences. (Ok, that’s more like social security again).

So what can be done about it? Since people don’t like voting out incumbents very much (thank you gerrymandering and campaign finance laws), we’re stuck with the same people. But if you speak up to your representative or senator, there is just maybe a chance that they’ll think they have a shot at losing an election. And that fear will scuttle any type of pork raising on the part of Congress. But they have to fearful of losing their privileged position before anything can be done.

So tell Congress to get their priorities in gear and stop making drivers pay for the politicians shortsighted policies.