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Did someone move the 2012 election to June 1? We ask because President Obama's extraordinary response to Paul Ryan's budget yesterday—with its blistering partisanship and multiple distortions—was the kind Presidents usually outsource to some junior lieutenant. Mr. Obama's fundamentally political document would have been unusual even for a Vice President in the fervor of a campaign.
The immediate political goal was to inoculate the White House from criticism that it is not serious about the fiscal crisis, after ignoring its own deficit commission last year and tossing off a $3.73 trillion budget in February that increased spending amid a record deficit of $1.65 trillion. Mr. Obama was chased to George Washington University yesterday because Mr. Ryan and the Republicans outflanked him on fiscal discipline and are now setting the national political agenda.
Mr. Obama did not deign to propose an alternative to rival Mr. Ryan's plan, even as he categorically rejected all its reform ideas, repeatedly vilifying them as essentially un-American. "Their vision is less about reducing the deficit than it is about changing the basic social compact in America," he said, supposedly pitting "children with autism or Down's syndrome" against "every millionaire and billionaire in our society." The President was not attempting to join the debate Mr. Ryan has started, but to close it off just as it begins and banish House GOP ideas to political Siberia.
Mr. Obama then packaged his poison in the rhetoric of bipartisanship—which "starts," he said, "by being honest about what's causing our deficit." The speech he chose to deliver was dishonest even by modern political standards.
The great political challenge of the moment is how to update the 20th-century entitlement state so that it is affordable. With incremental change, Mr. Ryan is trying maintain a social safety net and the economic growth necessary to finance it. Mr. Obama presented what some might call the false choice of merely preserving the government we have with no realistic plan for doing so, aside from proposing $4 trillion in phantom deficit reduction over a gimmicky 12-year budget window that makes that reduction seem larger than it would be over the normal 10-year window.
Mr. Obama said that the typical political proposal to rationalize Medicare's gargantuan liabilities is that it is "just a matter of eliminating waste and abuse." His own plan is to double down on the program's price controls and central planning. All Medicare decisions will be turned over to and routed through an unelected commission created by ObamaCare—which will supposedly ferret out "unnecessary spending." Is that the same as "waste and abuse"?
Fifteen members will serve on the Independent Payment Advisory Board, all appointed by the President and confirmed by the Senate. If per capita costs grow by more than GDP plus 0.5%, this board would get more power, including an automatic budget sequester to enforce its rulings. So 15 sages sitting in a room with the power of the purse will evidently find ways to control Medicare spending that no one has ever thought of before and that supposedly won't harm seniors' care, even as the largest cohort of the baby boom generation retires and starts to collect benefits.
Mr. Obama really went off on Mr. Ryan's plan to increase health-care competition and give consumers more control, barely stopping short of calling it murderous. It's hardly beyond criticism or debate, but the Ryan plan is neither Big Rock Candy Mountain nor some radical departure from American norms.
Mr. Obama came out for further cuts in the defense budget, but where? His plan is to ask Defense Secretary Bob Gates and Joint Chiefs Chairman Mike Mullen "to find additional savings," whatever those might be, after a "fundamental review." These mystery cuts would follow two separate, recent rounds of deep cuts that were supposed to stave off further Pentagon triage amid several wars and escalating national security threats.
Mr. Obama rallied the left with a summons for major tax increases on "the rich." Every U.S. fiscal trouble, he claimed, flows from the Bush tax cuts "for the wealthiest 2%," conveniently passing over what he euphemistically called his own "series of emergency steps that saved millions of jobs." Apparently he means the $814 billion stimulus that failed and a new multitrillion-dollar entitlement in ObamaCare that harmed job creation.
Under the Obama tax plan, the Bush rates would be repealed for the top brackets. Yet the "cost" of extending all the Bush rates in 2011 over 10 years was about $3.7 trillion. Some $3 trillion of that was for everything but the top brackets—and Mr. Obama says he wants to extend those rates forever. According to Internal Revenue Service data, the entire taxable income of everyone earning over $100,000 in 2008 was about $1.582 trillion. Even if all these Americans—most of whom are far from wealthy—were taxed at 100%, it wouldn't cover Mr. Obama's deficit for this year.
Mr. Obama sought more tax-hike cover under his deficit commission, seeming to embrace its proposal to limit tax deductions and other loopholes. But the commission wanted to do so in order to lower rates for a more efficient and competitive code with a broader base. Mr. Obama wants to pocket the tax increase and devote the revenues to deficit reduction and therefore more spending. So that's three significant tax increases—via higher top brackets, the tax hikes in ObamaCare and fewer tax deductions.
Lastly, Mr. Obama came out for a debt "failsafe," which will require the White House and Congress to hash out a deal if by 2014 projected debt is not declining as a share of the economy. But under his plan any deal must exclude Social Security, Medicare or low-income programs. So that means more tax increases or else "making government smarter, leaner and more effective." Which, now that he mentioned it, sounds a lot like cutting "waste and abuse."
Mr. Obama ludicrously claimed that Mr. Ryan favors "a fundamentally different America than the one we've known throughout most of our history." Nothing is likelier to bring that future about than the President's political indifference in the midst of a fiscal crisis.
More Americans work for the government than in manufacturing, farming, fishing, forestry, mining and utilities combined..
If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.
It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?
Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods. Consider California, which has the highest budget deficit in the history of the states. The not-so Golden State now has an incredible 2.4 million government employees—twice as many as people at work in manufacturing. New Jersey has just under two-and-a-half as many government employees as manufacturers. Florida's ratio is more than 3 to 1. So is New York's.
Even Michigan, at one time the auto capital of the world, and Pennsylvania, once the steel capital, have more government bureaucrats than people making things. The leaders in government hiring are Wyoming and New Mexico, which have hired more than six government workers for every manufacturing worker.
Now it is certainly true that many states have not typically been home to traditional manufacturing operations. Iowa and Nebraska are farm states, for example. But in those states, there are at least five times more government workers than farmers. West Virginia is the mining capital of the world, yet it has at least three times more government workers than miners. New York is the financial capital of the world—at least for now. That sector employs roughly 670,000 New Yorkers. That's less than half of the state's 1.48 million government employees.
Don't expect a reversal of this trend anytime soon. Surveys of college graduates are finding that more and more of our top minds want to work for the government. Why? Because in recent years only government agencies have been hiring, and because the offer of near lifetime security is highly valued in these times of economic turbulence. When 23-year-olds aren't willing to take career risks, we have a real problem on our hands. Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles.
The employment trends described here are explained in part by hugely beneficial productivity improvements in such traditional industries as farming, manufacturing, financial services and telecommunications. These produce far more output per worker than in the past. The typical farmer, for example, is today at least three times more productive than in 1950.
Where are the productivity gains in government? Consider a core function of state and local governments: schools. Over the period 1970-2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington. That is what economists call negative productivity.
But education is an industry where we measure performance backwards: We gauge school performance not by outputs, but by inputs. If quality falls, we say we didn't pay teachers enough or we need smaller class sizes or newer schools. If education had undergone the same productivity revolution that manufacturing has, we would have half as many educators, smaller school budgets, and higher graduation rates and test scores.
The same is true of almost all other government services. Mass transit spends more and more every year and yet a much smaller share of Americans use trains and buses today than in past decades. One way that private companies spur productivity is by firing underperforming employees and rewarding excellence. In government employment, tenure for teachers and near lifetime employment for other civil servants shields workers from this basic system of reward and punishment. It is a system that breeds mediocrity, which is what we've gotten.
Most reasonable steps to restrain public-sector employment costs are smothered by the unions. Study after study has shown that states and cities could shave 20% to 40% off the cost of many services—fire fighting, public transportation, garbage collection, administrative functions, even prison operations—through competitive contracting to private providers. But unions have blocked many of those efforts. Public employees maintain that they are underpaid relative to equally qualified private-sector workers, yet they are deathly afraid of competitive bidding for government services.
President Obama says we have to retool our economy to "win the future." The only way to do that is to grow the economy that makes things, not the sector that takes things.
Mr. Moore is senior economics writer for The Wall Street Journal editorial page.
Just over four years ago I wrote in this space that Democrats not only didn’t have to worry about losing their Senate majority in ’08, they needed to set their sights on 60 seats in 2010 because a “filibuster-proof majority would change the rules of the game on Capitol Hill.”
Well, Democrats did get to 60 seats, but they did it well before I thought that was likely. Pennsylvania Sen. Arlen Specter’s party switch in April 2009 and Sen. Al Franken’s (D-Minn.) seating in July of that year ensured Democrats would hit the magic 60 mark, giving the party six months of a supermajority that Congressional leaders and the White House used to pass health care reform.
Now, the tables have turned.
Republican won 24 of the 37 Senate contests last year, giving them a head start not only on winning a Senate majority in 2012 but possibly winning a 60-seat supermajority two years later.
They will need to net 26 or 27 of the remaining 67 contests over the next two cycles to win a majority in 2014, or 36 of the next 67 to get to 60 seats during the next midterm elections.
The Senate is always a different kind of numbers game than the House. With unbalanced classes, Senate control — to say nothing about a filibuster-proof majority — hinges on which party has more seats up for election in a particular election cycle.
When one of the political parties has a huge election night, as Republicans did last year, it automatically gives that party an opportunity to take over the Senate, whether two years later or four.
The 2012 Senate class includes 23 Democrats and only 10 Republicans, and the stunning imbalance means that Democrats will be on the defensive throughout the cycle unless the political environment shifts dramatically to their party.
That’s possible, of course, especially if the proposed budget offered by House Budget Chairman Paul Ryan (Wis.) alienates swing voters and seniors, putting GOP House and Senate candidates on the defensive for the rest of the cycle. But, at least early in this election cycle, the raw numbers look very challenging for Democratic Senate strategists.
At this point, at least five Democratic Senate seats are at great risk. Retiring Sen. Kent Conrad’s North Dakota seat is as good as gone. Ben Nelson’s Nebraska seat is more competitive, of course, but Democratic chances of retaining it in 2012 may depend on a nasty GOP primary producing a weak Republican nominee.
The Montana race, pitting incumbent Democrat Jon Tester against Republican Rep. Denny Rehberg, looks no better than even money for Tester, who won narrowly because of the huge Democratic wave in 2006.
Rising Obama popularity would help Tester’s chances, but Democrats probably need to be successful in their effort to paint Rehberg as an ethics basket case if they are to retain the seat next year.
The Missouri Senate race has changed significantly in the past few weeks. Sen. Claire McCaskill once appeared to be a savvy, well-positioned Democrat who was likely to have a competitive race simply because of the competitiveness of her state.
But recent revelations about a possible conflict of interest and unpaid taxes — issues that she used to attack a former primary opponent and that undermine her message of transparency and integrity — increase her vulnerability greatly.
Democrats note that one of McCaskill’s possible general election opponents, former state Treasurer Sarah Steelman (R), has her own problems, but the possible candidacy of Rep. Todd Akin (R) adds another dose of uncertainty to McCaskill’s prospects.
Virginia surely is a tossup, featuring two middleweight candidates — former Gov. Tim Kaine (D) and former Sen. George Allen (R) — who a few years ago would have been classified as political heavyweights.
Other than Massachusetts, where special election winner Sen. Scott Brown (R) will face a test because of his party, the Democrats’ best chance for a Senate takeover is Nevada, an open seat that looked more vulnerable when incumbent John Ensign (R) was still in the contest.
Even now, a GOP gain of 2 to 4 seats looks likely, with larger gains possible if Florida, New Mexico, Michigan, Ohio or others come into play.
Like this cycle’s Senate class, the 2014 class is also seriously unbalanced, with 20 Democratic seats and only 13 Republicans slated to be up that year.
Even worse for Democrats, the geography of that class is a particular problem, with Democratic Senators from South Dakota (Tim Johnson), Montana (Max Baucus), Louisiana (Mary Landrieu), Alaska (Mark Begich), New Hampshire (Jeanne Shaheen) and North Carolina (Kay Hagan) scheduled to face voters then.
For those Democrats, the re-election of President Barack Obama in 2012 would be a mixed blessing. It would keep a Democrat, with a veto pen, in the White House for four more years, but it would also create a so-called Six-Year Itch election in 2014, increasing the risk for Democratic Senators up for re-election then.
Second midterm elections are not always a disaster for a sitting president’s party — the Senate was a draw in 1998 and Democrats gained a handful of House seats in Bill Clinton’s second midterm — but they more often than not result in considerable gains for the party not holding the White House.
Recent Six-Year Itch losses include six Senate seats and 30 House seats by Republicans in 2006 (George W. Bush), eight Senate seats but only five House seats in 1986 (Ronald Reagan) and thirteen Senate seats and 47 House seats in 1958 (Dwight Eisenhower).
All of this means both short-term and longer-term concern for Senate Democrats, who will need a mood change in the electorate to feel more secure in 2012 and even 2014.
